Exhibit 10.4
CONTINUING SECURITY AGREEMENT

     
Name of Debtor:
  IRIS INTERNATIONAL, INC., a Delaware corporation (“Borrower”)
State Organization No.:
  2128608
Debtor’s Address:
  9158 Eton Ave, Chatsworth, California

Dated as of July 27, 2011
This Continuing Security Agreement is entered into as of July 27, 2011, by and
between Borrower (the “Debtor”) and JPMorgan Chase Bank, N.A., in its capacity
as administrative agent for the lenders party to the Credit Agreement referred
to below (in such capacity, together with its successors and assigns in such
capacity, the “Agent”), whose address is 300 South Grand Avenue, Floor 4, Los
Angeles, CA 90071.
Debtor, the Agent, and the Lenders are entering into that certain Credit
Agreement, dated as of July 27, 2011 (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”;
capitalized terms used herein but not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement). The Debtor is entering
into this agreement in order to induce the Agent and the Lenders to enter into
and extend credit to the Debtor under the Credit Agreement.
Grant of Security Interest. The Debtor grants, pledges, and assigns to the
Agent, on behalf of and for the ratable benefit of the Lenders, a continuing
security interest in all of the “Collateral” (as hereinafter defined) owned by
the Debtor, all of the collateral in which the Debtor has rights or power to
transfer rights and all Collateral in which Debtor later acquires ownership,
other rights or rights or power to transfer rights to secure the payment and
performance of the Liabilities.
Liabilities. “Liabilities” means all obligations, indebtedness and liabilities
of the Debtor whether individual, joint and several, absolute or contingent,
direct or indirect, liquidated or unliquidated, now or hereafter existing in
favor of the Agent, including without limitation, all liabilities, all interest,
costs and fees arising under or from any note, open account, overdraft, letter
of credit application, endorsement, surety agreement, guaranty, credit card,
lease, Rate Management Transaction, acceptance, foreign exchange contract or
depository service contract, whether payable to the Agent or to a third party
and subsequently acquired by the Agent, any monetary obligations (including
interest) incurred or accrued during the pendency of any bankruptcy, insolvency,
receivership or other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions, modifications,
consolidations, rearrangements, restatements, replacements or substitutions of
any of the foregoing. “Rate Management Transaction” means (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between the Borrower and JPM and/or its Affiliates which relate to a Swap
Agreement, or (b) any type of transaction that is similar to a transaction
referred to in clause (a) above that is currently, or in the future becomes,
recurrently entered into in the financial markets and which is a forward, swap,
future, option or other derivative on one or more rates, currencies,
commodities, equity securities or other equity instruments, debt securities or
other debt instruments, economic indices or measures of economic risk or value,
or other benchmarks against which payments or deliveries are to be made, or any
combination of the foregoing transactions. The Debtor and the Agent specifically
contemplate that Liabilities include indebtedness hereafter incurred by the
Debtor to the Agent.
Collateral. Accounts; Chattel Paper; Deposit Accounts and other payment
obligations of a financial institution (including the Agent); Documents;
Equipment; General Intangibles; Instruments; Inventory; Investment Property; and
Letter of Credit Rights.
Description of Collateral. As used in this agreement, the term “Collateral”
means all of the Debtor’s property whether owned individually or jointly with
others of the types indicated above and defined below, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located, including but not limited to any items listed on any schedule or list
attached hereto. In addition, the term “Collateral” includes all “proceeds,”
“products” and “supporting obligations” (as such terms are defined in the “UCC”,
meaning the Uniform Commercial Code of California, as in effect from time to
time) of the Collateral indicated above, including but not limited to all stock
rights, subscription rights, dividends, stock dividends, stock splits, or
liquidating dividends, and all cash, accounts, chattel paper, “instruments,”
“investment property,” “financial assets,” and “general intangibles” (as such
terms are defined in the UCC) arising from the sale, rent, lease, casualty loss
or other disposition of the Collateral, and any Collateral returned to,
repossessed by or stopped in transit by the Debtor, and all insurance claims
relating to any of the Collateral (defined above). The term “Collateral” further
includes all of the Debtor’s right, title and interest in and to all books,
records and data relating to the Collateral identified above, regardless of the
form of media containing such information or data, and all software necessary or
desirable to use any of the Collateral identified above or to access, retrieve,
or process any of such information or data. Where the Collateral is in the
possession of the Agent or the Agent’s agent, the Debtor agrees to deliver to
the Agent any property that represents an increase in the Collateral or profits
or proceeds of the Collateral.

 

 

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1.  
“Accounts” means all of the Debtor’s “accounts” as defined in Article 9 of the
UCC.

2.  
“Chattel Paper” means all of the Debtor’s “chattel paper” as defined in
Article 9 of the UCC.

3.  
“Deposit Accounts” means all of the Debtor’s “deposit accounts” as defined in
Article 9 of the UCC and other payment obligations of a financial institution
(including the Agent) to the Debtor.

4.  
“Documents” means all of the Debtor’s “documents” as defined in Article 9 of the
UCC.

5.  
“Equipment” means all of the Debtor’s “equipment” as defined in Article 9 of the
UCC. In addition, “Equipment” includes any “documents” (as defined in Article 9
of the UCC) issued with respect to any of the Debtor’s “equipment” (as defined
in Article 9 of the UCC) and certificates of title relating to the foregoing.
Without limiting the security interest granted, the Debtor represents and
warrants that the Debtor’s Equipment is presently located at the address set
forth in this agreement or in a separate Collateral Location Schedule delivered
to the Agent.

6.  
“General Intangibles” means all of the Debtor’s “general intangibles”, as
defined in Article 9 of the UCC. In addition, “General Intangibles” further
includes any right to a refund of taxes paid at any time to any governmental
entity.

7.  
“Instruments” means all of the Debtor’s “instruments” as defined in Article 9 of
the UCC.

8.  
“Inventory” means all of the Debtor’s “inventory” as defined in Article 9 of the
UCC. In addition, “Inventory” includes any “documents” and certificates of title
issued with respect to any of the Debtor’s “inventory” (as defined in Article 9
of the UCC). Without limiting the security interest granted, the Debtor
represents and warrants that the Debtor’s Inventory is presently located at the
address set forth in this agreement or in a separate Collateral Location
Schedule delivered to the Agent.

9.  
“Investment Property” means all of the Debtor’s “investment property” as defined
in Article 9 of the UCC and all of the Debtor’s “financial assets,” as defined
in Article 8 of the UCC.

10.  
“Letter of Credit Rights” means all of the Debtor’s “letter of credit rights” as
defined in Article 9 of the UCC.

Notwithstanding anything contained in this agreement to the contrary, the term
“Collateral” shall not include voting capital stock of any controlled foreign
corporation (as that term is defined in the Code) (“CFC”) of the Debtor, solely
to the extent that (y) such capital stock represents more than 65% of the
outstanding voting capital stock of such CFC, and (z) pledging or hypothecating
more than 65% of the total outstanding voting capital stock of such CFC would
result in material adverse tax consequences.
Collateral Location Schedule. “Collateral Location Schedule” means a schedule in
the form attached to this agreement. The Debtor agrees to complete, execute and
deliver a Collateral Location Schedule to the Agent with respect to any
Collateral for which the Debtor has identified a location in this agreement:
(i) concurrently with the execution of this agreement, if the initial location
of the Collateral is other than the address of the Debtor set forth above; and
(ii) within ten (10) days prior to the relocation of any Collateral to any place
other than the address of the Debtor set forth above or the location identified
in any previously submitted Collateral Location Schedule.
Representations, Warranties and Covenants. The Debtor represents and warrants
to, and covenants and agrees with the Agent that each of the following is true
and will remain true until termination of this agreement and full and final
payment of all Liabilities:

1.  
Its principal residence or chief executive office is at the address shown above;

2.  
The Debtor’s name as it appears in this agreement is its exact name as it
appears in the Debtor’s organizational documents, as amended, including any
trust documents;

3.  
It is or will become the owner of the Collateral free from any liens,
encumbrances or security interests, except for this security interest and
existing liens disclosed to and accepted by the Agent in writing, and it will
defend the Collateral against all claims and demands of all persons at any time
claiming any interest in the Collateral;

4.  
It will keep the Collateral free of liens, encumbrances and other security
interests, except for this security interest, maintain the Collateral in good
repair, not use it illegally and exhibit the Collateral to the Agent on demand;

5.  
At its own expense, the Debtor will maintain comprehensive casualty insurance on
the Collateral against such risks, in such amounts, with such deductibles and
with such companies as may be satisfactory to the Agent. Each insurance policy
shall contain a lender’s loss payable endorsement in form and substance
satisfactory to the Agent and a prohibition against cancellation or amendment of
the policy or removal of the Agent as loss payee without at least thirty
(30) days’ prior written notice to the Agent. In all events, the amounts of such
insurance coverages shall conform to prudent business practices and shall be in
such minimum amounts that the Debtor will not be deemed a co-insurer. The
policies and certificates evidencing them, shall, if the Agent so requests, be
deposited with the Agent. The Debtor authorizes the Agent to endorse on the
Debtor’s behalf and to negotiate drafts reflecting proceeds of insurance of the
Collateral, provided that the Agent shall remit to the Debtor such surplus, if
any, as remains after the proceeds have been applied, at the Agent ‘s option, to
the satisfaction of all of the Liabilities (in such order of application as the
Agent may elect) or to the establishment of a cash collateral account for the
Liabilities;

6.  
It will not sell, lease, license or offer to sell, lease, license or otherwise
transfer the Collateral or any rights in or to the Collateral, without the
written consent of the Agent, except for the sale of inventory in the ordinary
course of business;

 

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7.  
It will not change the location of the Collateral from the locations of the
Collateral described in this agreement and any separate Collateral Location
Schedule provided to the Agent, without providing at least ten (10) days’ prior
written notice to the Agent by means of submitting a Collateral Location
Schedule;

8.  
It will pay promptly when due all taxes and assessments upon the Collateral, or
for the use or operation of the Collateral;

9.  
No financing statement covering all or any part of the Collateral or any
proceeds is on file in any public office, unless the Agent has approved that
filing. From time to time at the Agent’s request, the Debtor will execute one or
more financing statements or similar record and a control agreement with respect
to the proceeds in form satisfactory to the Agent and will pay the cost of
filing them in all public offices where filing is deemed by the Agent to be
necessary or desirable. In addition, the Debtor shall execute and deliver, or
cause to be executed and delivered, such other documents as the Agent may from
time to time request to perfect or to further evidence the security interest
created in the Collateral by this agreement including, without limitation:
(a) any certificate or certificates of title to the Collateral with the security
interest of the Agent noted thereon or executed applications for such
certificates of title in form satisfactory to the Agent; (b) any assignments of
claims under government contracts which are included as part of the Collateral,
together with any notices and related documents as the Agent may from time to
time request; (c) any assignment of any specific account receivable as the Agent
may from time to time request; (d) a notice of and acknowledgment of the Agent’s
security interest and a control agreement with respect to any Collateral, all in
form and substance satisfactory to the Agent; (e) a notice to and acknowledgment
from any person holding or in possession of any Collateral that such persons
holds the Collateral as a bailee for the Agent’s benefit, all in form and
substance satisfactory to the Agent; and (f) any consent to the assignment of
proceeds of any letter of credit, all in form and substance satisfactory to the
Agent;

10.  
It will not, without the Agent’s prior written consent, change the Debtor’s
name, the Debtor’s business organization, the jurisdiction under which the
Debtor’s business organization is formed or organized, or the Debtor’s chief
executive office, or of any additional places of the Debtor’s business;

11.  
It will provide any information that the Agent may reasonably request and will
permit the Agent or the Agent’s agents to inspect and copy its books, records,
data and the Collateral at any time during normal business hours;

12.  
The Agent shall have the right now, and at any time in the future in its sole
and absolute discretion, without notice to the Debtor, to (a) prepare, file and
sign the Debtor’s name on any proof of claim in bankruptcy or similar document
against any owner of the Collateral and (b) prepare, file and sign the Debtor’s
name on any financing statement, notice of lien, assignment or satisfaction of
lien or similar document in connection with the Collateral. The Debtor hereby
authorizes the Agent to file financing statements covering Collateral or such
lesser amount of assets as the Agent may determine, or the Agent may, at its
option, file financing statements or similar records containing any collateral
description which reasonably describes the Collateral in which a security
interest is granted under this agreement;

13.  
Immediately upon the Debtor’s receipt of any Collateral evidenced by an
agreement, “instrument,” “chattel paper,” certificated “security” or “document”
(as such terms are defined in the UCC) (collectively, “Special Collateral”), the
Debtor shall mark the Special Collateral to show that it is subject to the
Agent’s security interest and shall deliver the original to the Agent together
with appropriate endorsements and other specific evidence of assignment or
transfer in form and substance satisfactory to the Agent;

14.  
The Debtor shall keep all tangible Collateral in good order and repair and shall
not waste or destroy any of the Collateral, nor use any of the Collateral in
violation of any applicable law or any policy of insurance thereon. To the
extent that the Collateral consists of “farm products” (as defined in the UCC),
the Debtor shall attend to and care for the crops and livestock in accordance
with the best practices of good husbandry, and do, or cause to be done, any and
all acts that may at any time be appropriate or necessary to grow, raise,
harvest, care for, preserve and protect the farm products;

15.  
Except as may be otherwise disclosed in writing by the Debtor to the Agent, none
of the Collateral is attached to real estate so as to constitute a “fixture” (as
defined in the UCC) and none of the Collateral shall at any time hereafter be
attached to real estate so as to constitute a fixture. If any of the Collateral
is now or at any time hereafter becomes so attached to real estate so as to
constitute a fixture, the Debtor shall, at any time upon the Agent’s request,
furnish the Agent with a disclaimer of interest in the Collateral executed by
each person or entity having an interest in such real estate.

Accounts; Chattel Paper; General Intangibles and Instruments. If the Collateral
includes the Debtor’s “Accounts, Chattel Paper, General Intangibles and
Instruments” and until the Agent gives notice to the Debtor to the contrary, the
Debtor will, in the usual course of its business and at its own expense, on the
Agent’s behalf but not as the Agent’s agent, demand and receive and use its best
efforts to collect all moneys due or to become due with respect to the
Collateral. Until the Debtor is in default, it may use the funds collected in
its business. Upon notice from the Agent or upon default, the Debtor agrees that
all sums of money it receives on account of or in payment or settlement of the
Accounts, Chattel Paper, General Intangibles and Instruments shall be held by it
as trustee for the Agent without commingling with any of the Debtor’s other
funds, and shall immediately be delivered to the Agent with endorsement to the
Agent’s order of any check or similar instrument. It is agreed that, at any time
the Agent so elects, the Agent shall be entitled, in its own name or in the name
of the Debtor or otherwise, but at the expense and cost of the Debtor, to
collect, demand, receive, sue for or compromise any and all Accounts, Chattel
Paper, General Intangibles, and Instruments, and to give good and sufficient
releases, to endorse any checks, drafts or other orders for the payment of money
payable to the Debtor and, in the Agent’s discretion, to file any claims or take
any action or proceeding which the Agent may deem necessary or advisable. It is
expressly understood and agreed, however, that the Agent shall not be required
or obligated in any manner to make any demand or to make any inquiry as to the
nature or sufficiency of any payment received by it or to present or file any
claim or take any other action to collect or enforce the payment of any amounts
which may have been assigned to the Agent or to which the Agent may be entitled
at any time or times. All notices required in this paragraph will be immediately
effective when sent. Such notices need not be given prior to the Agent’s taking
action. The Debtor appoints the Agent or the Agent’s designee as the Debtor’s
attorney-in-fact to do all things with reference to the Collateral as provided
for in this section including without limitation (1) to notify the post office
authorities to change the Debtor’s mailing

 

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address to one designated by the Agent, (2) to receive, open and dispose of mail
addressed to the Debtor, (3) to sign the Debtor’s name on any invoice or bill of
lading relating to any Collateral, on assignments and verifications of account
and on notices to the Debtor’s customers, and (4) to do all things necessary to
carry out this agreement or to perform any of the obligations of the Debtor
under this agreement. The Debtor ratifies and approves all acts of the Agent as
attorney-in-fact. The Agent shall not be liable for any act or omission, nor any
error of judgment or mistake of fact or law, but only for its gross negligence
or willful misconduct. This power being coupled with an interest is irrevocable
until all of the Liabilities have been fully satisfied and shall survive the
death or disability of the Debtor.
Pledge. If the Debtor is not liable for all or any part of the Liabilities, then
the Debtor agrees that:

1.  
If any moneys become available from any source other than the Collateral that
the Agent can apply to the Liabilities, the Agent may apply them in any manner
it chooses, including but not limited to applying them against obligations,
indebtedness or liabilities which are not secured by this agreement.

2.  
The Agent may take any action against the Borrower, the Collateral or any other
collateral for the Liabilities, or any other person or entity liable for any of
the Liabilities.

3.  
The Agent may release the Borrower or anyone else from the Liabilities, either
in whole or in part, or release the Collateral in whole or in part or any other
collateral for the Liabilities, and need not perfect a security interest in the
Collateral or any other collateral for the Liabilities.

4.  
The Agent does not have to exercise any rights that it has against the Borrower
or anyone else, or make any effort to realize on the Collateral or any other
collateral for the Liabilities, or exercise any right of setoff.

5.  
Without notice or demand and without affecting the Debtor’s obligations
hereunder, from time to time, the Agent is authorized to: (a) renew, modify,
compromise, rearrange, restate, consolidate, extend, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the Liabilities
or any part thereof, including increasing or decreasing the rate of interest
thereon; (b) release, substitute or add any one or more sureties, endorsers, or
guarantors; (c) take and hold other collateral for the payment of the
Liabilities, and enforce, exchange, substitute, subordinate, impair, waive or
release any such collateral; (d) proceed against the Collateral or any other
collateral for the Liabilities and direct the order or manner of sale as the
Agent in its discretion may determine; and (e) apply any and all payments
received by the Agent in connection with the Liabilities, or recoveries from the
Collateral or any other collateral for the Liabilities, in such order or manner
as the Agent in its discretion may determine.

6.  
The Debtor’s obligations hereunder shall not be released, diminished or affected
by (a) any act or omission of the Agent, (b) the voluntary or involuntary
liquidation, sale or other disposition of all or substantially all of the assets
of the Borrower, or any receivership, insolvency, bankruptcy, reorganization, or
other similar proceedings affecting the Borrower or any of its assets or any
other obligor on the Liabilities or that obligor’s assets, (c) any change in the
composition or structure of the Borrower or any other obligor on the
Liabilities, including a merger or consolidation with any other person or
entity, or (d) any payments made upon the Liabilities.

7.  
The Debtor expressly consents to any impairment of any other collateral for the
Liabilities, including, but not limited to, failure to perfect a security
interest and release of any other collateral for the Liabilities and any such
impairment or release shall not affect the Debtor’s obligations hereunder.

8.  
The Debtor waives and agrees not to enforce any rights of subrogation,
contribution or indemnification that it may have against the Borrower, any
person or entity liable on the Liabilities, or the Collateral, until the
Borrower and the Debtor have fully performed all their obligations to the Agent,
even if those obligations are not covered by this agreement.

9.  
The Debtor waives (a) to the extent not prohibited by applicable law, all rights
and benefits under any laws or statutes regarding sureties, as may be amended,
(b) any right the Debtor may have to receive notice of the following matters
before the Agent enforces any of its rights: (i) the Agent’s acceptance of this
agreement, (ii) incurrence or acquisition of any Liabilities, any credit that
the Agent extends to the Borrower, (iii) the Borrower’s default, (iv) any
demand, diligence, presentment, dishonor and protest, or (v) any action that the
Agent takes regarding the Borrower, anyone else, any other collateral for the
Liabilities, or any of the Liabilities, which it might be entitled to by law or
under any other agreement, (c) any right it may have to require the Agent to
proceed against the Borrower, any guarantor or other obligor on the Liabilities,
the Collateral or any other collateral for the Liabilities, or pursue any remedy
in the Agent’s power to pursue, (d) any defense based on any claim that the
Debtor’s obligations exceed or are more burdensome than those of the Debtor,
(e) the benefit of any statute of limitations affecting the Debtor’s obligations
hereunder or the enforcement hereof, (f) any defense arising by reason of any
disability or other defense of the Borrower or by reason of the cessation from
any cause whatsoever (other than payment in full) of the obligation of the
Borrower for the Liabilities, and (g) any defense based on or arising out of any
defense that the Borrower may have to the payment or performance of the
Liabilities or any portion thereof. The Agent may waive or delay enforcing any
of its rights without losing them. Any waiver affects only the specific terms
and time period stated in the waiver.

10.  
The Debtor agrees that to the extent any payment or transfer is received by the
Agent in connection with the Liabilities, and all or any part of such payment or
transfer is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be transferred or repaid by the Agent or paid over to a
trustee, receiver or any other person or entity, whether under any bankruptcy
act or otherwise (any of those payments or transfers is hereinafter referred to
as a “Preferential Payment”), then this agreement shall continue to be effective
or shall be reinstated, as the case may be, even if all Liabilities have been
paid in full, and whether or not the Agent is in possession of this agreement or
whether agreement has been marked paid, cancelled, released or returned to the
Debtor, and, to the extent of the payment or repayment or other transfer by the
Agent, the Liabilities or part intended to be satisfied by the Preferential
Payment shall be revived and continued in full force and effect as if the
Preferential Payment had not been made. If this agreement must be reinstated,
the Debtor agrees to execute and deliver to the Agent any new security
agreements and financing statements, if necessary or if requested by the Agent,
in form and substance acceptable to the Agent, covering the Collateral.

 

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11.  
The Debtor agrees to fully cooperate with the Agent and not to delay, impede or
otherwise interfere with the efforts of the Agent to secure payment from the
assets which secure the Liabilities including actions, proceedings, motions,
orders, agreements or other matters relating to relief from automatic stay,
abandonment of property, use of cash collateral and sale of the Agent’s
collateral free and clear of all liens.

12.  
The Debtor has (a) without reliance on the Agent or any information received
from the Debtor and based upon the records and information the Debtor deems
appropriate, made an independent investigation of the Borrower, the Borrower’s
business, assets, operations, prospects and condition, financial or otherwise,
and any circumstances that may bear upon those transactions, the Borrower or the
obligations, liabilities and risks undertaken pursuant to this agreement;
(b) adequate means to obtain from the Borrower on a continuing basis information
concerning the Borrower and the Agent has no duty to provide any information
concerning the Borrower or other obligor on the Liabilities to the Debtor;
(c) full and complete access to the Borrower and any and all records relating to
any Liabilities now or in the future owing by the Borrower; (d) not relied and
will not rely upon any representations or warranties of the Debtor not embodied
in this agreement or any acts taken by the Debtor prior to or after the
execution or other authentication and delivery of this agreement (including but
not limited to any review by the Debtor of the business, assets, operations,
prospects and condition, financial or otherwise, of the Borrower); and
(e) determined that the Debtor will receive benefit, directly or indirectly, and
has or will receive fair and reasonably equivalent value, for the execution and
delivery of this agreement and the rights provided to Agent. By entering into
this agreement, the Debtor does not intend: (i) to incur or believe that the
Debtor will incur debts that would be beyond the Debtor’s ability to pay as
those debts mature; or (ii) to hinder, delay or defraud any creditor of the
Debtor. The Debtor is neither engaged in nor about to engage in any business or
transaction for which the remaining assets of the Debtor are unreasonably small
in relation to the business or transaction, and any property remaining with the
Debtor after the execution or other authentication of this agreement is not
unreasonably small capital.

13.  
If the Liabilities are secured by an interest in real property, the Debtor
waives all rights and defenses that the Debtor may have because the Liabilities
are secured by real property. This means, among other things: (a) the Agent may
enforce its rights and remedies under this agreement without first foreclosing
on any real or personal property collateral pledged by the Debtor or any other
person or entity to secure the Liabilities; and (b) if the Agent forecloses on
any real property collateral pledged by the Debtor or any other person or entity
to secure the Liabilities: (i) the amount of the Liabilities may be reduced only
by the price for which the collateral is sold at the foreclosure sale, even if
the collateral is worth more than the sales price; and (ii) the Agent may
enforce its rights and remedies under this agreement even if the Agent, by
foreclosing on the real property collateral, has destroyed any right the Debtor
may have to collect from the Debtor or any other person or entity. This is an
unconditional and irrevocable waiver of any rights and defenses the Debtor may
have because the Liabilities are secured by real property. The Debtor waives all
rights and defenses arising out of an election of remedies by the Agent, even
though that election of remedies, such as a nonjudicial foreclosure with respect
to security for a guaranteed obligation, has destroyed the Debtor’s rights of
subrogation and reimbursement against the Debtor by the operation of
Section 580d of the California Code of Civil Procedure or otherwise. Without
limiting any waiver, consent or agreement in this agreement, the Debtor further
expressly waives to the extent not prohibited by applicable law any and all
rights and defenses, including without limitation any rights of subrogation,
reimbursement, indemnification and contribution, that might otherwise be
available to the Debtor under California Civil Code Sections 2787 to 2855,
inclusive, 2899 and 3433, or under California Code of Civil Procedure
Sections 580a, 580b, 580d and 726, or any of such sections, including any
revision or replacement of such statutes or rules hereafter enacted.

Default; Remedies. If any of the Liabilities are not paid at maturity, whether
by acceleration or otherwise, or if a default by anyone occurs under the terms
of any agreement related to any of the Liabilities, then the Agent shall have
the rights and remedies provided by law or this agreement, including but not
limited to the right to require the Debtor to assemble the Collateral and make
it available to the Agent at a place to be designated by the Agent which is
reasonably convenient to both parties, the right to take possession of the
Collateral with or without demand and with or without process of law, and the
right to sell and dispose of it and distribute the proceeds according to law.
Should a default occur, the Debtor will pay to the Agent all costs reasonably
incurred by the Agent for the purpose of enforcing its rights hereunder, to the
extent not prohibited by law, including, without limitation: costs of
foreclosure; costs of obtaining money damages; and a reasonable fee for the
services of internal and outside attorneys employed or engaged by the Agent or
its affiliates for any purpose related to this agreement, including, without
limitation, consultation, drafting documents, sending notices or instituting,
prosecuting or defending litigation or any proceeding. The Debtor agrees that
upon default the Agent may dispose of any of the Collateral in its then present
condition, that the Agent has no duty to repair or clean the Collateral prior to
sale, and that the disposal of the Collateral in its present condition or
without repair or clean-up shall not affect the commercial reasonableness of
such sale or disposition. The Agent’s compliance with any applicable state or
federal law requirements in connection with the disposition of the Collateral
will not adversely affect the commercial reasonableness of any sale of the
Collateral. The Agent may disclaim warranties of title, possession, quiet
enjoyment, and the like, and the Debtor agrees that any such action shall not
affect the commercial reasonableness of the sale. In connection with the right
of the Agent to take possession of the Collateral, the Agent may take possession
of any other items of property in or on the Collateral at the time of taking
possession, and hold them for the Debtor without liability on the part of the
Agent. The Debtor expressly agrees that the Agent may enter upon the premises
where the Collateral is believed to be located without any obligation of payment
to the Debtor, and that the Agent may, without cost, use any and all of the
Debtor’s “equipment” (as defined in the UCC) in the manufacturing or processing
of any “inventory” (as defined in the UCC) or in growing, raising, cultivating,
caring for, harvesting, loading and transporting of any of the Collateral that
constitutes “farm products” (as defined in the UCC). If there is any statutory
requirement for notice, that requirement shall be met if the Agent sends notice
to the Debtor at least ten (10) days prior to the date of sale, disposition or
other event giving rise to the required notice, and such notice shall be deemed
commercially reasonable. The Debtor is liable for any deficiency remaining after
disposition of the Collateral. Notwithstanding anything to the contrary set
forth in this agreement, the Agent’s rights to recover attorneys’ fees and other
legal expenses hereunder is subject to California Civil Code Section 1717,
including any revision or replacement of such statute or rule hereafter enacted.

 

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Miscellaneous.

1.  
Where the Collateral is located at, used in or attached to a facility leased by
the Debtor, the Debtor will obtain from the lessor a consent to the granting of
this security interest and a release or subordination of the lessor’s interest
in any of the Collateral, in form and substance satisfactory to the Agent.

2.  
At its option the Agent may, but shall be under no duty or obligation to,
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral, pay for insurance on the Collateral, and pay
for the maintenance and preservation of the Collateral, and the Debtor agrees to
reimburse the Agent on demand for any payment made or expense incurred by the
Agent, with interest at the highest rate at which interest may accrue under any
of the instruments or documents evidencing the Liabilities.

3.  
No delay on the part of the Agent in the exercise of any right or remedy waives
that right or remedy, no single or partial exercise by the Agent of any right or
remedy precludes any other exercise of it or the exercise of any other right or
remedy, and no waiver or indulgence by the Agent of any default is effective
unless it is in writing and signed by the Agent, nor does a waiver on one
occasion waive that right on any future occasion.

4.  
If any provision of this agreement is invalid, it shall be ineffective only to
the extent of its invalidity, and the remaining provisions shall be valid and
effective.

5.  
Except as provided in the Accounts; Chattel Paper; General Intangibles; and
Instruments paragraph above, any notices and demands under or related to this
document shall be in writing and delivered to the intended party at its address
stated herein, and if to the Agent, at its main office if no other address of
the Agent is specified herein, by one of the following means: (a) by hand,
(b) by a nationally recognized overnight courier service, or (c) by certified
mail, postage prepaid, with return receipt requested. Notice shall be deemed
given: (a) upon receipt if delivered by hand, (b) on the Delivery Day after the
day of deposit with a nationally recognized courier service, or (c) on the third
Delivery Day after the notice is deposited in the mail. “Delivery Day” means a
day other than a Saturday, a Sunday, or any other day on which national banking
associations are authorized to be closed. Any party may change its address for
purposes of the receipt of notices and demands by giving notice of such change
in the manner provided in this provision.

6.  
All rights of the Agent benefit the Agent’s successors and assigns; and all
obligations of the Debtor bind the Debtor’s heirs, executors, administrators,
successors and assigns. If more than one person or entity signs as the Debtor,
their obligations are joint and several and each agreement, representation,
warranty and covenant shall be individual, joint and several and the
“Collateral” includes any property that is owned by any Debtor individually or
jointly with any other.

7.  
A carbon, photographic or other reproduction of this agreement is sufficient as,
and can be filed as, a financing statement. The Agent is irrevocably appointed
the Debtor’s attorney-in-fact to execute any financing statement on the Debtor’s
behalf covering the Collateral. The Debtor authorizes the Agent to file one or
more financing statements or similar records related to the security interests
created by this agreement, and further authorizes the Agent, as secured party
herein, instead of the Debtor, to sign such financing statements and other
similar records.

8.  
Time is of the essence under this agreement and in the performance of every
term, covenant and obligation contained herein.

Security Agreement in Addition to Other Security Agreements. This Agreement is
in addition to and not in substitution or replacement of any other security
agreement executed by the Debtor in favor of the Agent, and the Agent’s rights
under this Agreement and any such other security agreement are cumulative.
Indemnification. The Debtor agrees to indemnify, defend and hold the Agent, its
parent companies, subsidiaries, affiliates, their respective successors and
assigns and each of their respective shareholders, directors, officers,
employees and agents (collectively the “Indemnified Persons”) harmless from and
against any and all loss, liability, obligation, damage, penalty, judgment,
claim, deficiency, expense, interest, penalties, attorneys’ fees (including the
fees and expenses of attorneys engaged by the Indemnified Person at the
Indemnified Person’s reasonable discretion) and amounts paid in settlement
(“Claims”) to which any Indemnified Person may become subject arising out of or
relating to this agreement or the Collateral, except to the limited extent that
the Claims are proximately caused by the Indemnified Person’s gross negligence
or willful misconduct. The indemnification provided for in this paragraph shall
survive the termination of this agreement and shall not be affected by the
presence, absence or amount of or the payment or nonpayment of any claim under,
any insurance.
Reinstatement. This agreement shall remain in full force and effect and continue
to be effective should any petition be filed by or against the Debtor for
liquidation or reorganization, should the Debtor become insolvent or make an
assignment for the benefit of any creditor or creditors or should a receiver or
trustee be appointed for all or any significant part of the Debtor’s assets, and
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Debtor’s obligations under this agreement,
the Credit Agreement, and/or the other Loan Documents, 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 Debtor’s obligations under this
agreement, the Credit Agreement, and/or the other Loan Documents, 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 Debtor’s
obligations under this agreement, the Credit Agreement, and the other Loan
Documents shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

6

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Governing Law and Venue. This agreement shall be governed by and construed in
accordance with the laws of the State of California (without giving effect to
its laws of conflicts), and to the extent applicable, federal law, except to the
extent that the laws regarding the perfection and priority of security interests
of the state(s) in which either the Debtor or any property securing the
Liabilities is located are applicable. The Debtor agrees that any legal action
or proceeding with respect to any of its obligations under this agreement may be
brought by the Agent in any state or federal court located in the State of
California, as the Agent in its sole discretion may elect. By the execution and
delivery of this agreement, the Debtor submits to and accepts, for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Debtor waives any claim that the State of
California is not a convenient forum or the proper venue for any such suit,
action or proceeding.
Additional Representations, Warranties and Covenants. The Debtor represents,
warrants and covenants to the Agent that each of the following is true and will
remain true until termination of this agreement and payment in full of all
Liabilities: (a) the execution and delivery of this agreement and the
performance of the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, and do not require the consent
or approval of any governmental authority or any third party; (b) this agreement
is a valid and binding agreement, enforceable according to its terms; and
(c) all balance sheets, profit and loss statements, and other financial
statements furnished to the Agent in connection with the Liabilities are
accurate and fairly reflect the financial condition of the organizations and
persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. The Debtor, other than a natural person,
further represents that: (a) it is duly organized, validly existing and in good
standing under the laws of the state where it is organized and in good standing
in each state where it is doing business; and (b) the execution and delivery of
this agreement and the performance of the obligations it imposes (i) are within
its powers and have been duly authorized by all necessary action of its
governing body; and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any agreement or document
governing its affairs.
WAIVER OF SPECIAL DAMAGES. THE DEBTOR WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE AGENT IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
JURY WAIVER AND JUDICIAL REFERENCE PROVISION. THE DEBTOR AND THE AGENT HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN OR AMONG THE DEBTOR AND THE AGENT ARISING OUT OF OR IN ANY
WAY RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE
AGENT TO PROVIDE THE FINANCING DESCRIBED HEREIN.
IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE OF CALIFORNIA
(THE “COURT”) BY OR AGAINST THE DEBTOR OR THE AGENT IN CONNECTION WITH ANY
CONTROVERSY, DISPUTE OR CLAIM DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY) (EACH, A “CLAIM”) AND THE WAIVER SET FORTH
IN THE PRECEDING PARAGRAPH IS NOT ENFORCEABLE IN SUCH ACTION OR PROCEEDING, THE
DEBTOR AND THE AGENT (BY ITS ACCEPTANCE HEREOF) AGREE AS FOLLOWS:
(1) WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN PARAGRAPH (2) BELOW, ANY
CLAIM WILL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN ACCORDANCE WITH
THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.2,
INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTES OR RULES HEREAFTER
ENACTED. THE DEBTOR AND THE AGENT INTEND THIS GENERAL REFERENCE AGREEMENT TO BE
SPECIFICALLY ENFORCEABLE IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE
SECTION 638, INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE
HEREAFTER ENACTED. EXCEPT AS OTHERWISE PROVIDED IN THIS AND THE OTHER DOCUMENTS
AND INSTRUMENTS EXECUTED IN CONNECTION WITH THE LIABILITIES, VENUE FOR THE
REFERENCE PROCEEDING WILL BE IN THE STATE OR FEDERAL COURT IN THE COUNTY OR
DISTRICT WHERE VENUE IS OTHERWISE APPROPRIATE UNDER APPLICABLE LAW.
(2) THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE
PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR
PERSONAL PROPERTY; (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING, WITHOUT
LIMITATION, SET-OFF); (C) APPOINTMENT OF A RECEIVER; AND (D) TEMPORARY,
PROVISIONAL OR ANCILLARY REMEDIES (INCLUDING, WITHOUT LIMITATION, WRITS OF
ATTACHMENT, WRITS OF POSSESSION, TEMPORARY RESTRAINING ORDERS OR PRELIMINARY
INJUNCTIONS). THIS DOCUMENT DOES NOT LIMIT THE RIGHT OF THE DEBTOR OR THE AGENT
TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND REMEDIES DESCRIBED IN CLAUSES (A) —
(D) AND ANY SUCH EXERCISE OR OPPOSITION DOES NOT WAIVE THE RIGHT OF THE DEBTOR
OR THE AGENT TO A REFERENCE PROCEEDING PURSUANT TO THIS DOCUMENT.

 

7

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(3) UPON THE WRITTEN REQUEST OF THE DEBTOR OR THE AGENT, THE DEBTOR AND THE
AGENT SHALL SELECT A SINGLE REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE. IF
THE DEBTOR AND THE AGENT DO NOT AGREE UPON A REFEREE WITHIN TEN (10) DAYS OF
SUCH WRITTEN REQUEST, THEN, THE DEBTOR OR THE AGENT, MAY REQUEST THE COURT TO
APPOINT A REFEREE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 640(B),
INCLUDING ANY REVISION OR REPLACEMENT OF SUCH STATUTE OR RULE HEREAFTER ENACTED.
(4) ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL,
SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN THE DEBTOR OR THE AGENT
SO REQUESTS, A COURT REPORTER WILL BE USED AND THE REFEREE WILL BE PROVIDED A
COURTESY COPY OF THE TRANSCRIPT. THE PARTY MAKING SUCH REQUEST SHALL HAVE THE
OBLIGATION TO ARRANGE FOR AND PAY COSTS OF THE COURT REPORTER, PROVIDED THAT
SUCH COSTS, ALONG WITH THE REFEREE’S FEES, SHALL ULTIMATELY BE BORNE BY THE
PARTY WHO DOES NOT PREVAIL, AS DETERMINED BY THE REFEREE.
(5) THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES. THE DEBTOR AND
THE AGENT SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE
DISCOVERY IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND MAY ENFORCE ALL
DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT
LAW IN THE STATE OF CALIFORNIA. THE REFEREE SHALL APPLY THE RULES OF EVIDENCE
APPLICABLE TO PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE
ALL ISSUES IN ACCORDANCE WITH APPLICABLE STATE AND FEDERAL LAW. THE REFEREE
SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY
MOTION WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING, WITHOUT LIMITATION,
MOTIONS FOR DEFAULT JUDGMENT OR SUMMARY JUDGMENT. THE REFEREE SHALL REPORT THE
REFEREE’S DECISION, WHICH REPORT SHALL ALSO INCLUDE FINDINGS OF FACT AND
CONCLUSIONS OF LAW.
(6) THE DEBTOR AND THE AGENT RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A
GENERAL REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND
NOT BY A JURY.
[signature pages follow]

 

8

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IN WITNESS WHEREOF, the Debtor and the Agent have executed this agreement as of
the date first above written.

            DEBTOR:

IRIS INTERNATIONAL, INC., a Delaware corporation
      By:           Name:           Title:      

 

9

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            AGENT:

JPMORGAN CHASE BANK, N.A.,
as the Agent
      By:           Name:           Title:        

Outside Counsel Prepared
Paul, Hastings, Janofsky & Walker, LLP/Peter S. Burke

 

10

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Collateral Location Schedule

     
Date:                                                           
                            
  Debtor:                                                             
                      
Check one: o Designation of initial location of Collateral
                    o Notice of intent to relocate Collateral
  Date of Continuing Security Agreement:                      

Instructions: This schedule should be completed by the Debtor (the owner of the
Collateral) described in the Continuing Security Agreement to which this form is
attached, if the Collateral is located at or will be relocated to, any place
other than the Debtor’s address set forth in the Continuing Security Agreement.
The Debtor is required to notify the Agent in writing at least ten (10) days’
prior to changing the location of any Collateral. The Debtor represents and
warrants that the Collateral is located or stored at the location(s) described
below and if any location(s) is leased or used for storage and not owned by the
Debtor, the name, address and the phone number of the Landlord or owner of the
warehouse (“Warehouseman”) and contact name is set forth below with respect to
the leased or storage premises.
Please PRINT or TYPE the following information.

      Collateral Location   Landlord/Warehouseman Information

Address:                                                                
  o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
 
  o Landlord            o Warehouseman
City, State:                                                                
  Name:                                                       
                      
 
  Address:                                                
                        
Zip Code:                                                                
  Suite Number:                                                                
 
  City, State:                                                                
    
Collateral:                                                                
  Zip Code:                                               
                       
 
  Contact Name:                                                               
 
  Phone Number:                                                              

      Collateral Location   Landlord/Warehouseman Information

Address:                                                                
  o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
 
  o Landlord            o Warehouseman
City, State:                                                                
  Name:                                                        
                      
 
  Address:                                                
                        
Zip Code:                                                                
  Suite Number:                                                                
 
  City, State:                                              
                       
Collateral:                                                                
  Zip Code:                                                
                       
 
  Contact Name:                                                               
 
  Phone Number:                                                               

      Collateral Location   Landlord/Warehouseman Information

Address:                                                                
  o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
 
  o Landlord            o Warehouseman
City, State:                                                                
  Name:                                                       
                      
 
  Address:                                                
                       
Zip Code:                                                             
  Suite Number:                                                               
 
  City, State:                                                                
    
Collateral:                                                                
  Zip Code:                                                                    
  
 
  Contact Name:                                                              
 
  Phone Number:                                                             

      Collateral Location   Landlord/Warehouseman Information

Address:                                                                
  o Check if Collateral Location is owned by the Debtor, otherwise, check
applicable box and complete information below.
 
  o Landlord            o Warehouseman
City, State:                                                                
  Name:                                                     
                         
 
  Address:                                                                     
    
Zip Code:                                                                
  Suite Number:                                                                 
 
  City, State:                                                                  
    
Collateral:                                                                
  Zip Code:                                                                    
    
 
  Contact Name:                                                                
 
  Phone Number:                                                               

     
DEBTOR:                                                                
   
By:                                                                            
   
Name:                                                                
   
Title: