Exhibit 10.4
EXECUTION COPY
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made as of the 30th day of March,
2001, by VASCUTECH ACQUISITION LLC, a Delaware limited liability company
("Vascutech") in favor of IDEAS FOR MEDICINE, INC., a Florida corporation
(together with its successors, assigns and transferees, "IFM").
PRELIMINARY STATEMENT
This Agreement is made to secure all of the following (individually and
collectively the, "Indebtedness"):
Payment of the principal balance, together with interest, costs and all
other sums, to be paid according to that certain Subordinated Promissory Note
dated October 9, 2000, originally made by Horizon Medical Products, Inc.
("Horizon") in favor of IFM and assigned by Horizon to Vascutech pursuant to
that certain Assignment and Assumption Agreement dated as of even date herewith
among Horizon, IFM and Vascutech, together with any and all extensions,
renewals, modifications, amendments, restatements, substitutions or replacements
thereof (the "Note"); and the performance of the covenants and obligations of
Vascutech due or to become due to IFM under this Agreement and/or under any and
all other documents and instruments evidencing and/or securing payment of all
amounts due under the Note (collectively, the "Loan Documents"), and the
repayment of all costs, expenses, advances and other sums incurred and/or
expended by IFM in connection with performance of those covenants and
obligations.
In consideration of the above facts and the mutual promises of the parties,
and as security for the purposes stated above and elsewhere in this Agreement,
the parties agree as follows:
1. Grant of Security Interest. Vascutech hereby grants IFM a security
interest in the following described property (collectively, the "Collateral"):
(i) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Vascutech arising out
of the sale or lease of goods or the rendition of services by Vascutech,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Vascutech relating to any of the foregoing
(collectively, "Accounts");
(ii) present and future general intangibles and other personal
property (including choses or things in action, goodwill, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, monies due under any royalty or licensing
agreements, infringement claims, computer programs, computer discs,
computer tapes, literature, reports, catalogs deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other than (A) goods
and Accounts relating to any of the foregoing, or (B) patents, trade names,
trademarks, servicemarks, or copyrights (collectively, "General
Intangibles");
(iii) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents, leases,
and chattel paper relating to any of the foregoing (collectively,
"Negotiable Collateral");
(iv) present and future inventory in which Vascutech has any interest
including goods held for sale or lease or to be furnished under a contract
of service and all of Vascutech's present and future raw materials, work in
process, finished goods, and packing and shipping materials, wherever
located, and any documents of title representing any of the above, relating
to any of the foregoing (collectively, "Inventory");
(v) present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, dies, goods (other than consumer
goods or farm products), and any interest in any of the foregoing, and all
attachments, accessories, accessions, additions, and improvements to any of
the foregoing, wherever located (collectively, "Equipment");
(vi) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing (other than substitutions or
replacements of Equipment after the date hereof), including, but not
limited to, proceeds of insurance covering any of the foregoing, or any
portion thereof, and any and all Accounts, General Intangibles, Negotiable
Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the Accounts, General Intangibles, Negotiable Collateral,
Inventory, Equipment, or any portion thereof or interest therein and the
proceeds thereof.
Notwithstanding anything to the contrary contained herein, Vascutech's grant of
a security interest is only as to (i) the Accounts, Negotiable Collateral,
Inventory, and Equipment acquired pursuant to that certain Asset Purchase
Agreement between Vascutech and Horizon Medical Products, Inc. of even date
herewith and (ii) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing (other than substitutions or replacements
of Equipment after the date hereof) (the "Pledged Assets"). It is understood and
agreed by the parties hereto that IFM's security interest shall not attach to
any property of Vascutech other than the Pledged Assets, nor any of the assets
of Vascutech's 100% parent, Vascutech, Inc.
2. WARRANTIES AND REPRESENTATIONS. Vascutech warrants and covenants to IFM
as follows:
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(a) Payment of Indebtedness. Vascutech will pay the Indebtedness and
perform all obligations related to the Indebtedness when due, whether by
maturity, acceleration or otherwise.
(b) Authority. This Agreement is the valid and binding obligation of
Vascutech, enforceable in accordance with its terms except as limited by
creditors' rights and equity. Vascutech is organized and validly existing and in
good standing under the laws of the State of Delaware, and the execution,
delivery and performance of this Agreement has been duly authorized by all
necessary action of Vascutech's board of directors, and will not violate
Vascutech's governing instruments or other material agreements.
(c) Name, Address; Location of Collateral. Vascutech's name and
address and the location of the Collateral are accurately set forth on the
signature page of this Agreement.
(d) Title to Collateral. Vascutech has good and marketable title to
the Collateral. Vascutech will keep the Collateral free of all other liens,
encumbrances and security interests and will defend title to the Collateral
against all claims and demands of all persons at any time claiming any interest
in the Collateral except for the security interest associated with (i) the
indebtedness of Vascutech to Brown Brothers Harriman ("BBH") as set forth, and
subject to the limitations, in that certain Subordination Agreement dated as of
even date herewith, by and between BBH and IFM ("Subordination Agreement"), and
any future subordination agreements entered into in connection therewith and
(ii) any ordinary course equipment leases or purchase money security interests
(collectively, the "Security Interest").
(e) Priority of Security Interest. The execution and delivery of this
Agreement creates a valid security interest in the Collateral, and upon the
filing of a UCC-1 financing statement with (i) the Secretary of State of the
Commonwealth of Massachusetts and the Burlington Clerk's office and (ii) the
Secretary of State of the State of Florida, IFM will have a perfected second
security interest in the Collateral, subject to no other lien, encumbrance or
security interest except for the Security Interest to the extent one can perfect
by filing a financing statement under Article 9 of the UCC and except for rights
of the landlord under the Sublease or Florida law.
(f) Financing Statements. Vascutech will execute financing
statement(s) in form acceptable to IFM and will pay the cost of filing financing
statement(s) in all public offices wherever filing is deemed reasonably
necessary by IFM. A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the UCC and may be filed by
IFM in any filing office.
(g) Payment of Taxes and Insurance Premiums. Vascutech shall pay when
due and before any interest, collection fees or penalties accrue, all taxes,
expenses, assessments, liens or other charges (collectively, "Taxes") which may
now or hereafter be levied or assessed against the Collateral unless Vascutech
is contesting such Taxes in good faith and has maintained adequate reserves with
respect to the payment thereof Vascutech shall also obtain and pay for insurance
for the Collateral in an amount consistent with industry standards and/or
reasonably acceptable to IFM. Vascutech shall furnish proof of payment of taxes
or insurance upon request of IFM.
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(h) Maintenance of Collateral. Vascutech will maintain the Equipment
in good condition and repair, ordinary wear and tear excepted. Vascutech will
promptly inform IFM of any material loss or material diminution in value of the
Collateral.
3. PROHIBITION ON TRANSFER OR MODIFICATION. Vascutech shall not transfer,
sell, assign, lease or modify the Collateral or any interest therein, any part
thereof, without the prior written consent of IFM except in the ordinary course
of Vascutech's business and on customary terms and at usual prices.
4. PROHIBITION ON CHANGE OF NAME, ORGANIZATION OR LOCATION. Except as set
forth at the end of this Section 4, Vascutech shall not assume a different name,
conduct its business at any location other than as appears in this Agreement,
nor change the location of any of the Collateral without, in each instance,
obtaining the prior written consent of IFM thirty (30) days prior to any such
event. Vascutech agrees to execute any amendments to financing statement(s)
required in connection with this Section 4 in form acceptable to IFM, and will
pay the filing fees and costs actually incurred by IFM in connection with any
such amendments. The address of the head office of Vascutech is expected to be
changed in April, 2001 to 26 Ray Avenue, Burlington, MA 01803, however, neither
the location of the Collateral nor the name of Vascutech will change.
5. EXAMINATION OF RECORDS AND COLLATERAL. Vascutech shall keep full and
accurate records related to the Collateral, and such records shall be open to
inspection and duplication by IFM at all reasonable times upon reasonable prior
notice. Upon reasonable notice to Vascutech and at reasonable times, IFM may
enter upon any property owned by or in the possession of Vascutech to examine
and inspect the Collateral. Vascutech shall provide IFM as soon as practicable
with any information concerning the Collateral as IFM may reasonably request at
any time.
6. REIMBURSEMENT OF EXPENSES. Vascutech shall reimburse IFM for all
reasonable costs and expenses, including reasonable attorneys' fees, actually
incurred by IFM in enforcing the rights of IFM under this Agreement except for
inspection of records. All costs, expenses and fees of any nature for which
Vascutech is obligated to reimburse or indemnify IFM are part of the
Indebtedness secured by this Agreement and are payable upon demand, unless
expressly provided otherwise, with interest until repaid at the highest rate
charged on any of the Indebtedness (but not to exceed the maximum rate permitted
by law).
7. RIGHTS AND OBLIGATIONS OF IFM. In the event that Vascutech fails to pay
taxes, maintain insurance or perform any other obligation arising under this
Agreement, IFM may pay or perform such obligation(s) for the account of
Vascutech and the same shall be added to the Indebtedness and shall be
immediately due and payable together with interest at the highest rate charged
by IFM on any of the Indebtedness (but not to exceed the maximum rate permitted
by law). IFM shall not be liable for any loss to the Collateral nor shall such
loss reduce the balance due.
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8. INDEMNIFICATION. Vascutech shall indemnify and save IFM harmless from
all claims, obligations, costs, expenses, including attorneys' fees, and causes
of action or other rights asserted against IFM and relating to breach of this
Agreement by Vascutech.
9. EVENTS OF DEFAULT AND REMEDIES.
(a) Events of Default. Any of the following events shall, for purposes
of this Agreement, constitute an "Event of Default":
(i) Failure by Vascutech to pay any amount owing on or with respect to
the Indebtedness when due, whether by maturity, acceleration or otherwise,
which failure continues for ten (10) days after Vascutech receives written
notice from IFM of such failure.
(ii) Any failure by Vascutech to comply with, or breach by Vascutech
of, any of the non-monetary terms, provisions, warranties or covenants of
the Note, this Agreement or the other Loan Documents, or the
representations and warranties of Vascutech to IFM contained in that
certain Assignment and Assumption Agreement of even date herewith among
Horizon, Vascutech, IFM and (for the limited purpose of Paragraph D thereof
only) Vascutech, Inc., which failure continues for thirty (30) days after
the receipt by Vascutech (or any guarantor of the Note (a "Guarantor")) of
written notice from IFM of such failure.
(iii) The insolvency of Vascutech (or any Guarantor) or the admission
in writing of Vascutech's or any Guarantor's inability to pay debts as they
mature.
(iv) Institution of bankruptcy, reorganization, insolvency or other
similar proceedings by or against Vascutech or any Guarantor, unless the
same is dismissed within sixty (60) days of filing.
(v) The issuance or filing of any judgment, attachment, levy or
garnishment against the Collateral in which the amount of such judgment,
attachment, levy, garnishment or the amount in controversy in any such
related proceeding exceeds $250,000, which such judgment, attachment, levy
or garnishment shall continue undischarged or unstayed for 30 days.
(vi) Termination of Vascutech's existence by dissolution, merger or
consolidation in which Vascutech is not the surviving entity, or otherwise.
(vii) The default by Vascutech (after giving of any required notice
and expiration of any applicable cure period) under Section 11.1(a) of the
Sublease Agreement by and between IFM and Vascutech (as successor interest
to Horizon Medical Products, Inc.), dated as of October 9, 2000.
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(b) Remedies Upon Event of Default. Upon the occurrence of any Event
of Default, IFM shall have the following rights:
(i) Declare all or part of the Indebtedness immediately due and
payable.
(ii) Vascutech agrees, upon request of IFM, to assemble the Collateral
and make it available to IFM at any place which is reasonably convenient
for Vascutech and IFM. Vascutech grants IFM permission to enter upon any
premises owned or occupied by Vascutech for the purpose of taking,
possession of the Collateral.
(iii) Subject to the rights of BBH under the Subordination Agreement,
IFM shall have the right to take possession of the Collateral, with or
without demand, and with or without process of law. Subject to the rights
of BBH under the Subordination Agreement, IFM shall have the right to sell
and dispose of the Collateral and to distribute the proceeds according to
law. In connection with the right of IFM to take possession of the
Collateral, IFM may take possession of any other items of property in or on
the Collateral at the time of taking possession, and hold them for
Vascutech without liability on the part of IFM. If there is any statutory
requirement for notice, that requirement shall be met if IFM shall send
notice to Vascutech at least ten (10) days prior to the date of sale,
disposition or other event giving rise to the required notice. Vascutech
shall be liable for any deficiency remaining after disposition of the
Collateral.
(iv) IFM shall also have any one or more of the rights and remedies
under the UCC or at law or equity to enforce the payment of the
Indebtedness.
(c) Remedies Generally.
(i) All remedies provided for in Section 9(b) shall be available to
the extent not prohibited by law. Each remedy shall be cumulative and
additional to any other remedy of IFM at law, in equity or by statute. No
delay or omission to exercise any night or power accruing upon any default
or Event of Default shall impair any such right or power or shall be
construed to be a waiver of, or acquiescence in any such default or Event
of Default.
(ii) IFM may waive any Event of Default and may rescind any
declaration of maturity of payments on the Indebtedness. In case of such
waiver or rescission Vascutech and IFM shall be restored to their
respective former positions and rights under this Agreement. Any waiver by
IFM of any default or Event of Default shall be in writing and shall be
limited to the particular default waived and shall not be deemed to waive
any other default.
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(d) Application of Proceeds. Any proceeds received by IFM from the
exercise of remedies pursuant to Section 9(b) of this Agreement shall be applied
as follows:
(i) First, to pay all costs and expenses incidental to the leasing
foreclosure, sale or other disposition of the Collateral. These costs and
expenses shall include, without limit, any costs and expenses incurred by
IFM (including, without limit, attorneys' fees and disbursements actually
incurred), and any taxes and assessments or other liens and encumbrances
prior to the lien of this Agreement.
(ii) Second, to all sums expended or incurred by IFM, directly or
indirectly in carrying out any term, covenant or agreement under this
Agreement or any related document, together with interest as provided in
this Agreement.
(iii) Third, to the payment of the Indebtedness. If the proceeds are
insufficient to fully pay the Indebtedness, then application shall be made
first to late charges and interest accrued and unpaid, then to any
applicable prepayment premiums, and then to unpaid fees and other charges,
then to the outstanding principal balance.
(iv) Fourth, any surplus remaining shall be paid to Vascutech or to
whomsoever may be lawfully entitled.
(e) Further Actions. Promptly upon the reasonable request of IFM,
Vascutech shall execute, acknowledge and deliver any and all further documents,
security agreements, financing statements and assurances, and do or cause to be
done all further acts as IFM may reasonably require to confirm and protect the
lien of this Agreement or otherwise to accomplish the purposes of this
Agreement.
(f) Attorneys Fees. Any reference in this Agreement to attorneys' fees
shall refer to reasonable fees, charges, costs and expenses of outside attorneys
and paralegals actually incurred, whether or not a suit or proceeding is
instituted, and whether incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding, in consultation with counsel,
or otherwise.
10. TERMINATION OF FINANCING STATEMENTS. IFM shall execute and deliver to
Vascutech, within ten (10) business days after the written request of Vascutech,
UCC termination statements with respect to the Collateral secured hereunder,
provided that (a) Vascutech shall not be in default under any of the terms,
covenants or conditions of any document or instrument evidencing or securing the
Indebtedness; (b) the outstanding principal balance of the Note, together with
interest, premiums, costs and all other sums on that amount, shall be paid in
full; and (c) all termination statements shall be prepared by IFM at Vascutech's
expense. Upon the filing of such termination statements in accordance with the
applicable provisions of the UCC, this Agreement shall be terminated.
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11. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be construed according to the
laws of the State of New York.
(b) Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of Vascutech including, without limit, any trustee in
possession or trustee in bankruptcy for Vascutech, and the rights and privileges
of IFM under this Agreement shall inure to the benefit of its successors and
assigns. This shall not be deemed a consent by IFM to a conveyance by Vascutech
of all or any part of the Collateral or of any ownership interest in Vascutech.
(c) Notices. Notice from one party to another relating to this
Agreement shall be made pursuant to the Note.
(d) Entire Agreements; Amendments. This Agreement and the
Subordination Agreement state all rights and obligations of the parties and
supersede all other agreements (oral or written) with respect to the security
interests granted by this Agreement. Any amendment of this Agreement shall be in
writing and shall require the signature of Vascutech and IFM.
(e) Partial Invalidity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement.
(f) Inspections. Any inspection, audit, appraisal or examination by
IFM or its agents of the Collateral or of information or documents pertaining to
the Collateral is for the sole purpose of protecting IFM's interest under this
Agreement and is not for the benefit or protection of Vascutech or any third
party.
(g) Automatic Reinstatement. Notwithstanding any prior revocation,
termination, surrender or discharge of this Agreement, the effectiveness of this
Agreement shall automatically continue or be reinstated, as the case may be, in
the event that:
(i) Any payment received or credit given by IFM in respect of the
Indebtedness is determined to be a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise required to
be returned to Vascutech or any third party under any applicable state or
federal law, including, without limit, laws pertaining to bankruptcy or
insolvency, in which case this Agreement shall be enforceable as if any
such payment or credit had not been received or given, whether or not IFM
relied upon this payment or credit or changed its position as a consequence
of it.
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(ii) In the event of continuation or reinstatement of this Agreement,
Vascutech agrees upon demand by IFM to execute and deliver to IFM those
documents which IFM determines are appropriate to further evidence (in the
public records or otherwise) this continuation or reinstatement, although
the failure of Vascutech to do so shall not affect in any way the
reinstatement or continuation. If Vascutech does not execute and deliver to
IFM such documents upon demand, IFM and each officer of IFM is irrevocably
appointed (which appointment is coupled with an interest) the true and
lawful attorney of Vascutech (with full power of substitution) to execute
and deliver such documents in the name and on behalf of Vascutech.
(h) Assignment. This Agreement is freely assignable, in whole or in
part, by IFM. IFM agrees, however, that it shall give prompt written notice of
any such assignment to Vascutech. IFM shall be fully discharged from all
responsibility accruing hereunder from and after the effective date of any such
assignment. IFM's assignee shall, to the extent of the assignment, be vested
with all the powers and rights of IFM hereunder (including those granted under
Section 10 hereof or otherwise with respect to the Collateral), and to the
extent of such assignment the assignee may fully enforce such rights and powers
and all references to IFM shall mean and refer to such assignee. IFM shall
retain all rights and powers hereby given not so assigned, transferred and/or
delivered. Vascutech hereby waives all defenses which Vascutech may be entitled
to assert against IFM's assignee with respect to liability accruing hereunder
prior to the effective date of any assignment of IFM's interest herein.
Vascutech may not, in whole or in part, directly or indirectly, assign this
Agreement or its rights hereunder or delegate its duties hereunder without, in
each instance, the prior written consent of IFM.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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Vascutech has executed this Agreement on the day and year first above
written.
VASCUTECH:
VASCUTECH ACQUISITION CORP.
By: /s/ David B. Roberts
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Its: Chief Financial Officer
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Collateral
Vascutech's principal place of business is located in the County of
Middlesex, Commonwealth of Massachusetts.
Collateral is located at: 3101 37th Avenue North, St. Petersburg, Florida.
1358825v1