1
EXHIBIT 10.22
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of March 31, 1997. is made by
Abaxis, Inc. (the "Borrower"), a California corporation having its own principal
place of business and chief executive office at 0000 Xxxxxxxxxx Xxxxxxx,
Xxxxxxxxx, XX 00000, in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway II,
West Office Tower, 0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000.
WHEREAS, the Borrower has requested that the Lender make Loans
to it from time to time; and Security Agreement.
WHEREAS, the Lender has agreed to make such Loans on the terms
and conditions of this Security Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to extend credit, the Borrower hereby agrees with the Lender as
follows:
1. DEFINITIONS.
As used herein, the following terms shall have the following
meanings, and shall be equally applicable to both the singular and plural forms
of the terms defined:
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than Saturday, Sunday or public holiday or
the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgage waiver,
bailee letter or similar acknowledgment of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
54
2
GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Security Agreement and the
Notes.
Loan Documents shall mean, collectively, this Security Agreement, the Notes and
all other documents, agreements, certificates, instruments and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of such Person taken
as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of such Person taken
as a whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations and liabilities of the
Borrower under the Notes and under this Security Agreement, whether on account
of principal, interest, indemnities, fees (including without limitation,
attorney's fees, remarketing fees, origination fees, collection fees and all
other professionals' fees), costs, expenses, taxes or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) liens for taxes, assessments and other governmental charges or levies or the
claims or demands of landlords, carriers, warehousemen, mechanics, laborers,
materialmen and other like Persons arising by operation of law in the ordinary
course of business for sums which are not yet due and payable, or liens which
are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; and (d) attachment or judgment liens that do not constitute an Event
of Default.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and the successors, heirs and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.
Security Agreement shall mean this Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented or otherwise modified
from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
55
3
(a) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured:
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on any security interest in, all the Borrower's right, title and interest
in and to the collateral described in the next sentence (the "Collateral") to
secure the payment and performance of all the Obligations. The Collateral
consists of all equipment set forth on all the Schedules delivered from time to
time under the terms of this Security Agreement (the "Equipment"), together with
all present and future additions, parts, accessories, attachments,
substitutions, repairs, improvements and replacements thereof or thereto, and
any and all proceeds thereof, including without limitation, proceeds of
insurance and all manuals, blueprints, know-how, warranties and records in
connection therewith, all rights against suppliers, warrantors, manufacturers,
sellers or others in connection therewith, and together with all substitutes for
any of the foregoing.
3. THE CREDIT FACILITY.
3.1 BORROWINGS. Each Loan shall be in an amount not less
than $50,000.00, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in effect
from time to time. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the initial Loan and each other Loan only after the
Lender, in its sole discretion, determines that the applicable conditions for
borrowing contained in Section 3.3 and 3.4 are satisfied.
3.2 APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation or
upgrading of Equipment.
3.3 CONDITIONS OF INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject to
the Lender's receipt of the following, each dated the date of the initial Loan
or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing statements naming the
Borrower as debtor and all tax lien, judgment and litigation searches for the
Borrower as the Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form
UCC-1) duly executed by the Borrower (naming the Lender as secured party and the
Borrower as debtor and in form acceptable for filing in all jurisdictions that
the Lender deems necessary or desirable to perfect the security interests
granted to it hereunder) and, if applicable, termination statements or other
releases duly filed in all jurisdictions that the Lender deems necessary or
desirable to perfect and protect the priority of the security interests granted
to it hereunder in the Equipment related to such initial Loan;
56
4
(iii) a Note duly executed by the Borrower evidencing the
amount of such Loan;
(iv) a Collateral Access Agreement duly executed by the
lessor or mortgage, as the case may be, of each premises where the Equipment is
located;
(v) certificates of insurance required under Section 5.4
of this Security Agreement together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and as an additional insured;
(vi) a copy of the resolutions of the Board of Directors
of the Borrower (or a unanimous consent of directors in lieu thereof)
authorizing the execution, delivery and performance of this Security Agreement,
the other Loan Documents, and the transactions contemplated hereby and thereby,
attached to which is a certificate of the Secretary or an Assistant Secretary of
the Borrower certifying (A) that the copy of the resolutions is true, complete
and accurate, that such resolutions have not been amended or modified since the
date of such certification and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of the Borrower authorized
to sign the Loan Documents to which it is a party;
(vii) a duly executed warrant made by the Borrower in
favor of the Lender issued as of April 30, 1997; and
(viii) such other agreements and instruments as the
Lender deems necessary in its sole and absolute discretion in connection with
the transaction contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry or other action
(i) seeking an injunction or other restraining order, damages or other relief
with respect to the transactions contemplated by this Security Agreement or the
other Loan Documents or thereby or (ii) which affects or could affect the
business, prospects, operations, assets, liabilities or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required to be
paid by it to the Lender as of such date.
(d) The security interests granted in favor of the Lender under this
Security Agreement in the Equipment related to the initial Loan shall have been
duly perfected and shall constitute first priority liens;
3.4 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of
the Lender to make each Loan is subject to the satisfaction of the following
conditions precedent:
(a) the Lender shall have received the documents, agreements and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance satisfactory to the Lender and its counsel and each
dated the date of such Loan or as of any earlier date acceptable to the Lender;
(b) the security interests granted in favor of the Lender under this
Security Agreement in the Equipment related to such Loan shall have been duly
perfected and shall constitute first priority liens;
57
5
(c) all representations and warranties contained in this Security
Agreement and the other Loan Documents shall be true and correct on and as of
the date of such Loan as if then made, other than representations and warranties
that expressly relate solely to an earlier date, in which case they shall have
been true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and ratified
all security interests, liens and other encumbrances heretofore granted by the
Borrower to the Lender.
4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
4.1 GOOD STANDING; QUALIFIED TO DO BUSINESS. The Borrower
(a) is duly organized, validly existing and in good standing under the laws of
the State of its organization, (b) has the power and authority to own its
properties and assets and to transact the businesses in which it is presently,
or proposes to be, engaged and (c) is duly qualified and authorized to do
business and is in good standing in every jurisdiction in which the failure to
be so qualified could have a Material Adverse Effect on (i) the Borrower, (ii)
the Borrower's ability to perform its obligations under the Loan Documents or
(iii) the rights of the Lender hereunder.
4.2 DUE EXECUTION, ETC. The execution , delivery and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage or deed of trust or any material lease, agreement
or other instrument binding on the Borrower or any of its properties, or (c)
require the consent, authorization by or approval of or notice to or filing or
registration with any governmental authority or other Person. This Security
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity.
4.3 SOLVENCY; NO LIENS. The Borrower is Solvent and will
be Solvent upon the completion of all transactions contemplated to occur
hereunder (including. without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted Liens
and the security interests of Silicon Valley Bank ("SVB") which are junior to
the security interests of the Lender as more particularly described in the
Subordination Letter between SVB and the Lender; and the Borrower is, or will be
at the time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or liens in
favor of any other Person other than Permitted Liens and the security interests
of SVB which are junior to the security interests of the Lender.
4.4 NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened any litigation,
contested claim, or governmental proceedings by or against the Borrower except
judgments and pending or threatened litigation, contested claims and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
58
6
4.5 NO DEFAULTS. The Borrower is not in default or has
not received a notice of default under any contract, least, or commitment to
which it is a party or by which it is bound and which could have a Material
Adverse Effect on the Borrower. The Borrower knows of no dispute regarding any
contract, lease, or commitment which could have a Material Adverse Effect on the
Borrower.
4.6 COLLATERAL LOCATIONS. On the date hereof, each item
of the Collateral is located at the place of business specified in the
applicable Schedule.
4.7 NO EVENT OF DEFAULT. No Event of Default has occurred
and is continuing nor has any event occurred which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default.
4.8 NO LIMITATION ON LENDER'S RIGHTS. Except as permitted
herein and as set forth on Schedule B hereto as supplemented from time to time,
none of the Collateral is subject to contractual obligations that may restrict
or inhibit the Lender's rights or abilities to sell or dispose of the Collateral
or any part thereof after the occurrence of an Event of Default.
4.9 PERFECTION AND PRIORITY OF SECURITY INTEREST. This
Security Agreement creates a valid and, upon completion of all required filings
of financing statements, perfected first priority and exclusive security
interest in the Collateral (other than the security interest of SVB which are
junior to the security interests of the Lender), securing the payment of all the
Obligations.
4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth
the true and correct model number and serial number of each item of Equipment
that constitutes Collateral.
4.11 ACCURACY AND COMPLETENESS OF INFORMATION. All data,
reports and information heretofore, contemporaneously or hereafter furnished by
or on behalf of the Borrower in writing to the Lender or for purposes of or in
connection with this Security Agreement or any other Loan Document, or any
transaction contemplated hereby or thereby, are or will be true and accurate in
all material respects on the date as of which such data, reports and information
are dated or certified and not incomplete by omitting to state any material fact
the Borrower which individually or in aggregate would reasonably be expected to
have a Material Adverse Effect and which have not been specified herein, in the
Financial Statements, or in any certificate, opinion or other written statement
previously furnished by the Borrower to the Lender.
5. COVENANTS OF THE BORROWER.
5.1 EXISTENCE, ETC. The Borrower will maintain its
existence, its current yearly accounting cycle, and shall maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, shall continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it and shall comply with all applicable laws and regulations of any federal,
state or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
5.2 NOTICE TO THE LENDER. As soon as possible, and in any
event within five days after the Borrower learns of the following, the Borrower
will give written notice to the Lender of (a) any proceeding instituted or
threatened to be instituted by or against the Borrower in any federal, state,
local or foreign court or before any commission or other regulatory body
(federal, state, local or foreign) involving a sum, together with the sum
involved in all other similar proceedings, in excess of $50,000 in the
aggregate, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse
59
7
Change with respect to the Borrower and (d) the occurrence of any Event of
Default or event or condition which, with notice or lapse of time or both, would
constitute an Event of Default, together with a statement of the action which
the Borrower has taken or proposes to take with respect thereto.
5.3 MAINTENANCE OF BOOKS AND RECORDS. The Borrower will
maintain books and records pertaining to the Collateral in such detail, form and
scope as the Lender shall require in its commercially reasonable judgment. The
Borrower agrees that the Lender or its agents may enter upon the Borrower's
premises at any time and from time to time during normal business hours, and at
any time upon the occurrence and continuance of an Event of Default, for the
purpose of inspecting the Collateral and any and all records pertaining thereto.
5.4 INSURANCE. The Borrower will maintain insurance on
the Collateral under such policies of insurance, with such insurance companies,
in such amounts and covering such risks as are at all times satisfactory to the
Lender. All such policies shall be made payable to the Lender, in case of loss,
under a standard non-contributory "lender" or "secured party" clause and are to
contain such other provisions as the Lender may reasonably require to protect
the Lender's interests in the Collateral and to any payments to be made under
such policies. Certificates of insurance policies are to be delivered to the
Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty days' prior written notice to
the Lender, of any alteration or cancellation of coverage. If the Borrower fails
to maintain such insurance, the Lender may arrange for (at the Borrower's
expense and without any responsibility on the Lender's part for) obtaining the
insurance. Unless the Lender shall otherwise agree with the Borrower in writing,
the Lender shall have the sole right, in the name of the Lender or the Borrower,
to file claims under any insurance policies, to receive and give acquittance for
any payments that may be payable thereunder, and to execute any endorsements ,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies.
5.5 TAXES. The Borrower will pay, when due, all taxes,
assessments, claims and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
5.6 BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens and the security interests of SVB which are
junior to the security interests of the Lender. The Borrower shall promptly pay,
when payable, all transportation, storage and warehousing charges and license
fees, registration fees, assessments, charges, permit fees and taxes (municipal,
state and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale or use of the Collateral, other than taxes on
or measured by the Lender's income and fees, assessments, charges and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
5.7 NO CHANGE OF LOCATION, STRUCTURE OR IDENTITY. The
Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move or
permit the movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements
60
8
and instruments (all in form and substance satisfactory to the Lender) necessary
or, in the opinion of the Lender, desirable to perfect and maintain in favor of
the Lender a first priority security interest in the Collateral. Notwithstanding
anything to the contrary in the immediately preceding sentence, the Borrower may
keep any Collateral consisting of motor vehicles or rolling stock at any
location in the United States provided that the Lender's security interest in
any such Collateral is conspicuously marked on the certificate of title thereof
and the Borrower has complied with the provision of Section 5.9.
5.8 USE OF COLLATERAL; LICENSES; REPAIR. The Collateral
shall be operated by competent, qualified personnel in connection with the
Borrower's business purposes, for the purpose for which the Collateral was
designed and in accordance with applicable operating instructions, laws and
governmental regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals and consents required by federal,
state or local laws or by any governmental body, agency or authority in
connection with the delivery, installation, use and operation of the Collateral.
The Borrower shall keep all of the Equipment in a satisfactory state of repair
and satisfactory operating condition in accordance with industry standards, and
will make all repairs and replacements when and where necessary and practical.
The Borrower will not waste or destroy the Equipment or any part thereof, and
will not be negligent in the care or use thereof. The Equipment shall not be
annexed or affixed to or become part of any realty without the Lender's prior
written consent.
5.9 FURTHER ASSURANCES. The Borrower will, promptly upon
request by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgage waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages or other documents
(all in form and substance satisfactory to the Lender), xxxx any chattel paper,
deliver any chattel paper or instruments to the Lender, and take any other
actions that are necessary or, in the opinion of the Lender, desirable to
perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Security Agreement. The Borrower hereby authorizes the Lender to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without the signature of the Borrower where
permitted by law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law. To the
extent required under this Security Agreement, the Borrower will pay all costs
incurred in connection with any of the foregoing.
5.10 NO DISPOSITION OF COLLATERAL. The Borrower will not
in any way hypothecate or create or permit to exist any lien, security interest,
charge or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby, the security interests of SVB and
Permitted Liens which, in the case of SVB and Permitted Liens, are junior to the
lien and security interest of the Lender and judgments which have been stayed,
vacated, bonded, or discharged, and the Borrower will not sell, transfer,
assign, pledge, collaterally assign, exchange or otherwise dispose of any
Collateral. In the event the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of these
provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale, the
Borrower will transfer such proceeds to the Lender in kind.
5.11 NO LIMITATION ON LENDER'S RIGHTS. The Borrower will
not enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.
61
9
5.12 PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if no Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest or compromise any encumbrance, charge
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and expenses incurred under this Security
Agreement including fees, expenses and disbursements of attorneys and paralegals
(including the allocated costs of in-house counsel) acting for the Lender,
including any of the foregoing payments under, or acts taken to protect its
security interests in, any of the Collateral, which amounts shall be secured
under this Security Agreement, and agrees it shall be bound by any payment made
or act taken by the Lender hereunder absent the Lender's gross negligence or
willful misconduct. The Lender shall have no obligation to make any of the
foregoing payments or perform any of the foregoing acts.
5.13 DELIVERY OF ITEMS. The Borrower will promptly (but
in no event later than one Business Day) after its receipt thereof, deliver to
the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender.
5.14. SOLVENCY. The Borrower shall be and remain Solvent
at all times.
5.15. FUNDAMENTAL CHANGES. Without prior written consent
of the Lender, the Borrower shall not: (a) merge of consolidate into any other
person unless (i) the Borrower is the survivor of such merger of consolidation
and remains in compliance with all the terms and conditions of the Loan
Documents or any other survivor of such merger of consolidation assumes all the
Obligations, including without limitation, all of the Borrower's payment
obligations, pursuant to assignment documentation acceptable to the Lender in
its sole discretion, (ii) in the reasonable judgment of the Lender, the ability
of such surviving entity to perform its obligations hereunder is no worse than
that of the Borrower immediately before such merger or consolidation, and (iii)
such surviving entity delivers Uniform Commercial Code financing statements
(Form UCC-1) duly executed by the surviving entity (naming the Lender as secured
party and the surviving entity as debtor and in form acceptable for filing in
all jurisdictions that the Lender deems necessary or advisable to perfect the
security interests granted to it hereunder) and, if applicable, termination
statements, or other releases duly filed in all jurisdictions that the Lender
deems necessary or advisable to perfect and protect the priority of the security
interests granted by the Borrower hereunder), (b) amend or modify its name
(unless the Borrower delivers to the Lender thirty days prior to any such
proposed amendment or modification written notice of such proposal and within
ten days following such amendment or modification delivers executed Uniform
Commercial Code financing statements (in form and substance satisfactory to the
Lender) reflecting such amendment or modification), or (c) sell or otherwise
dispose of all or substantially all of its assets (unless the transferee
complies with all requirements imposed on the surviving entity in subsection (a)
of this Section 5.15).
5.16. ADDITIONAL REQUIREMENTS. The Borrower shall take
all such further actions and execute all such further documents and instruments
as the Lender may reasonably request.
6. FINANCIAL STATEMENTS. Until the payment and satisfaction
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available,
but not later than 120 days after the end of each fiscal year of the Borrower
and its consolidated subsidiaries, the consolidated balance sheet, income
statement and statements of cash flows and shareholders equity for the Borrower
62
10
and its consolidated subsidiaries (the "Financial Statements") for such year,
reported on by independent certified public accountants without an adverse
qualification; and
6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
7. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of
when due any amount required to be paid by the Borrower under or in connection
with any Note and this Security Agreement;
(b) any representation or warranty made or deemed made
by the Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i)
any of the terms, covenants or agreements contained in Section 5.4, 5.7, 5.10,
5.14 or 5.15 hereof or (ii) any other term, covenant or agreement contained in
any Loan Document (other than the other Events of Default specified in this
Section 7) and such failure remains unremedied for the later of thirty days from
(A) the date on which the Lender has given the Borrower written notice of such
failure and (B) the date on which the Borrower knew or should have known of such
failure;
(d) any provision of any Loan Document to which the
Borrower is a party shall for any reason cease to be valid and binding on the
Borrower and the invalidity or such provision may, in the sole opinion of the
Lender having Material Adverse Effect on the Borrower, or the Borrower shall
state that any provision of any Loan Document to which it is a party is no valid
of binding on the Borrower;
(e) dissolution, liquidation, winding up or cessation
of the Borrower's business, or the failure of the Borrower generally to pay its
debts as they mature; or the admission in writing by the Borrower of its
inability generally to pay its debts as they mature; or the calling of a meeting
of the Borrower's creditors for purposes of compromising any of the Borrower's
debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made
by the Borrower, whether voluntary or involuntary, or the appointment of a
trustee, custodian, receiver or similar official for the Borrower or for any
substantial property of the Borrower; or any action by the Borrower authorizing
any such proceeding;
(h) the Borrower shall (i) default in the payment of
principal or interest on any indebtedness in excess of $50,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such indebtedness or contained in any instrument or agreement relating thereto,
or any other event shall occur or condition
63
11
exist, the effect of which default or other event or condition is to cause, or
to permit the holder of such indebtedness to cause, with the giving of notice if
required, such indebtedness to become due prior to its stated maturity;
(i) the Borrower suffers or sustains a Material
Adverse Change;
(j) any tax lien, other than a Permitted Lien, is
filed of record against the Borrower and is not bonded or discharged within
twenty Business Days;
(k) any judgment which has had or could reasonably be
expected to have a material Adverse Effect on the Borrower and such judgment
shall not be stayed, vacated, bonded or discharged within sixty days; or
(l) any material covenant, agreement or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable or invalid, or are not given the priority contemplated by this
Security Agreement.
8. REMEDIES. If any Event of Default shall have occurred and
be continuing:
(a) The Lender may, without prejudice to any of its
other rights under any Loan Document or Applicable Law, declare all Obligations
to be immediately due and payable (except with respect to any Event of Default
set forth in Section 7(f) hereof, in which case all Obligations shall
automatically become immediately due and payable without necessity of any
declaration) without presentment, representation, demand of payment or protest,
which are hereby expressly waived.
(b) The Lender may take possession of the Collateral
and, for that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or may be
placed, and remove the same. The Lender agrees that prior to the disposition of
any Equipment the Borrower shall have a reasonable time, as determined solely by
the Lender, to remove software or information (so long as such software or
information does not constitute Collateral) stored on such Equipment. If the
Borrower fails to take such action in the time allotted by the Lender, in its
sole discretion, the Lender, either directly or through third parties and in any
case at the expense of the Borrower, may undertake such removal action. This
paragraph shall not limit in any manner the Lender's rights hereunder or under
Applicable Law to take possession of any Collateral, including, without
limitation, the Equipment.
(c) The obligation of the Lender, if any, to make
additional Loans or financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein (or in
any Loan Document) or otherwise available to it, all the rights and remedies of
a secured party under the applicable Uniform Commercial Code (the "Code")
whether or not the Code applies to the affected Collateral and also may (i)
require the Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available to the Lender at a
place to be designated by the Lender that is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Lender's offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Lender may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be
64
12
required by law, at least ten days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it is adjourned.
(e) All cash proceeds received by the Lender in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Lender, be held by the
Lender as collateral for, or then or at any time thereafter applied in whole or
in part by the Lender against, all or any part of the Obligations in such order
as the Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after the full and final payment of all the Obligations
shall be paid over to the Borrower or to such other Person to which the Lender
may be required under applicable law, or directed by a court of competent
jurisdiction, to make payment of such surplus.
9. MISCELLANEOUS PROVISIONS.
9.1 CONFIDENTIALITY. The Lender agrees to hold in
confidence any confidential information it receives from the Borrower pursuant
hereto, except for disclosure; (a) to legal counsel, accountants or any other
agent of the Lender or any assignee; (b) to regulatory officials having
jurisdiction over the Lender or any assignee; (d) as required by law or legal
process or in connection with any legal or administrative proceeding to which
the Lender (or any assignee) and the Borrower are adverse parties; and (e) in
connection with a disposition or proposed disposition in any or all of the
Lender's (or any assignee's) rights and benefits hereunder. For purposes of this
section, "confidential information" shall mean any information respecting the
Borrower and Person for whom Borrower has received information which is a trade
secret and is proprietary to the Borrower and shall not include, without
limitation, (x) information which is or becomes general available to the public
other than a result of a disclosure by the Lender or any assignee in violation
of this section; (y) information which becomes available to the Lender or any
assignee from any other source (other than the Borrower) which is not known by
the Lender or such assignee to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligations or confidentiality to the
Borrower with respect to the information made available; and (z) information
known by the Lender or any assuage on a non-confidential basis prior to its
disclosure to the Lender or the assignee by the Borrower. In no event the Lender
be obligated or required to return any materials furnished to it by the
Borrower.
9.2 NOTICES. Except as otherwise provided herein, all
notices, approvals, consents, correspondence or other communications required or
desired to be given hereunder shall be given in writing and shall be delivered
by overnight courier, hand delivery or certified or registered mail, postage
prepaid, if to the Lender, then to Technology Finance Division 00 Xxxxxxxxx Xxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxxxxx 00000, Attention: Assistant Vice President, Lease
Administration, with a copy to the Lender at Riverway II, West Office Tower,
0000 Xxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000, Attention: Legal Department or
such other address as shall be designated by the Lender to the Borrower in
accordance herewith, and if to the Borrower, then to Abaxis, Inc., 0000
Xxxxxxxxxx Xxxxxxx, Xxxxxxxxx, XX 00000, Attention: Xx. Xxxx Xx, Chief Financial
Officer, or such other address as shall be designated by the Borrower to the
Lender in accordance herewith. All such notices and correspondence shall be
effective when received.
9.3 HEADINGS. The headings in the Security Agreement are
for purposes of reference only and shall not affect the meaning or construction
of any provision of this Security Agreement.
9.4 ASSIGNMENTS. The Borrower shall not have the right to
assign any Note or this Security Agreement or any interest therein unless the
Lender shall have given the Borrower prior written
65
13
consent and the Borrower and its assignee shall have delivered assignment
documentation in form and substance satisfactory to the Lender in its sole
discretion. The Lender may assign its rights and delegate its obligations under
any Note or this Security Agreement.
9.5 AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or
waiver of any provision of this Security Agreement and any consent to any
departure by the Borrower from any provision of this Security Agreement shall be
effective only by a writing signed by the Lender and shall bind and benefit the
Borrower and the Lender and their respective successors and assigns, subject, in
the case of the Borrower, to the first sentence of Section 9.4.
9.6 INTERPRETATION OF AGREEMENT. Time is of the essence
in each provision of this Security Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term of provision of this Security Agreement conflicts with any Note, or any
term or provision thereof, and is not dealt with herein with more specificity,
this Security Agreement shall control with respect to the subject matter of such
term or provision. Acceptance of or acquiescence is a course or performance
rendered under this Security Agreement shall not be relevant in determining the
meaning of this Security Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
9.7 CONTINUING SECURITY INTEREST. This Security Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) insure, together with the rights and remedies of the Lender hereunder,
to the benefit of the Lender and its successors, transferees and assigns.
9.8 REINSTATEMENT. To the extent permitted by law, this
Security Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
9.9 SURVIVAL OF PROVISIONS. All representations,
warranties and covenants of the Borrower contained herein shall survive the
execution and delivery of this Security Agreement, and shall terminate only upon
the full and final payment and performance by the Borrower of the Obligations
secured hereby.
9.10 INDEMNIFICATION. The Borrower agrees to indemnify
and hold harmless the Lender and its directors, officers, agents, employees and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person.
9.11. COUNTERPARTS; TELECOPIED SIGNATURES. This Security
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Security Agreement and each of the other Loan
Documents and any notices given in connection herewith or therewith may be
executed and delivered by telecopier or other facsimile transmission all with
the same effect as of the same was fully executed and delivered original manual
counterpart.
9.12. SEVERABILITY. In case any provision in or
obligation under this Security Agreement or any Note or any other Loan Document
shall be invalid, illegal or unenforceable in any
66
14
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
9.13. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
9.14. ENTIRE AGREEMENT. The Borrower and the Lender agree
that this Security Agreement, the Schedule hereto, and the Lender's written
commitment to the Borrower and the Commitment Letter between the Lender and the
Borrower dated as of February 25, 1997, as amended, supplemented or otherwise
modified from time to time, are the complete and exclusive statements between
the parties with respect to the subject matter hereof, superseding all proposals
and prior agreements, oral or written, and all other communications between the
parties with respect to the subject matter hereof and constitute the entire
agreement between the parties.
9.15. SETOFF. In addition to and not in limitation of all
rights of offset that the Lender may have under Applicable Law, and whether or
not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
9.16. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
9.17. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
9.18 VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN XXXX COUNTY,
OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND,
BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (b) THE RIGHT TO INTERPOSE ANY NONCOMPULSORY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED IN SECTION 9.2 HEREOF. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
67
15
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT IN EACH INSTANCE
TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused
this Security Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date first set forth above.
ABAXIS, INC.
By: /S/Xxxx Xx
------------------------------
Name: Xxxx X. Xx
Title: VP Finance & Admin. & CFO
Federal Tax ID Number: 00-0000000
Accepted as of 4/30/97
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /S/Xxxx X. Xxxx
----------------------------
Name: Xxxx X. Xxxx
Title: Vice President
