Exhibit 10.3

SECURITY AGREEMENT
 
THIS SECURITY AGREEMENT (the “Agreement”) is made as of January 6, 2014, by and
between WAFERGEN, INC., a Delaware corporation (the “Company”), and INTEGENX
INC., a California corporation (the “Secured Party”).
 
RECITALS:
 
WHEREAS, Company and Secured Party contemplate entering into that certain Asset
Purchase Agreement of even date herewith (the “Purchase Agreement”; capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Purchase Agreement), pursuant to which, among other things, (i) Secured
Party shall sell to Purchaser, and Purchaser shall acquire, the Transferred
Assets and (ii) Purchaser shall deliver that certain Secured Promissory Note of
even date herewith, made payable to Secured Party in the original principal
amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the
“Note”); and

WHEREAS, To induce Secured Party to accept the Note, Company has agreed to enter
into this Agreement with Secured Party to grant a lien on the Transferred Assets
as security for the Secured Obligations (as defined below).

NOW, THEREFORE, in order to induce Secured Party to accept the Note, and for
other valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
 
1.           Grant of Security Interest.  As security for the Secured
Obligations (as defined below), Company hereby grants to Secured Party a
security interest (the “Security Interest”) in the Transferred Assets
(hereinafter, the “Collateral”).  The Security Interest shall constitute a first
lien against the Collateral, subject only to purchase money security interests.
 
2.           Definition of Secured Obligations.  The term “Secured Obligations”
means the Company’s obligations under the Note.
 
3.           Perfection.  Company shall perform any and all reasonable steps
requested by Secured Party to perfect the Security Interest herein given,
including but not limited to, the execution and filing of financing or
continuation statements in form and substance reasonably satisfactory to Secured
Party.  Company shall notify Secured Party in writing of any change of Company’s
name, corporate structure or identity.
 
4.           Covenants of Company.
 
    (a)           Company agrees to defend the title to the Collateral against
all persons and against all claims and all demands whatsoever;
 
    (b)           Company shall retain possession of the Collateral (except for
inventory, raw materials and work in process used or sold in the ordinary course
of business) during the existence of this agreement and Company agrees not to
sell, exchange, assign, loan, deliver, mortgage or otherwise dispose of same
without the prior written consent of the Secured Party;
 

 
 

--------------------------------------------------------------------------------

 

    (c)           Company agrees to keep the collateral free and clear of all
liens, charges, encumbrances, taxes and assessments, and to pay, when due, all
taxes, assessments and licenses fees relating to the Collateral;
 
    (d)           Company shall keep the Collateral insured against loss by fire
(including extended coverage), theft and other hazards as the Secured Party may
require; Company shall give prompt written notice to the Secured Party and to
insurers of loss or damage to the Collateral and shall promptly file proofs of
loss with insurers. The risk of loss, damage or deterioration of or to said
goods shall rest upon Company, and no such loss, damage or deterioration shall
in any way diminish or discharge the liability of Company to perform in full the
Secured Obligations and Company agrees to give immediate notice to the Secured
Party of any loss or damage to any of the Collateral or loss of possession
thereof.
 
5.           Default and Remedies.  “Event of Default” shall have the meaning
given to such term in the Note.  If an Event of Default occurs, Secured Party
shall have the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in California, including, without limitation, the
right of sale or disposition of the Collateral, or any part thereof.  Until
there shall be an Event of Default, the Company shall have the right to remain
and continue in the quiet and peaceable possession of the Collateral and shall
have the full and free enjoyment of the same.
 
6.           Application of Proceeds.  The proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be paid to and applied
by Secured Party in the following order of priorities:
 
    (a)           First:  To the payment of the costs and expenses of such sale
or other realization, including the reasonable out-of-pocket expenses of Secured
Party;
 
    (b)           Second:  To the payment of any amounts outstanding under the
Secured Obligations (with payments applied first to interest and then to
principal); and
 
    (c)           Third:  The balance (if any) of such proceeds shall be paid to
Company or its successors or assigns.
 
If, upon the sale, license or other disposition of the Collateral, the proceeds
thereof are insufficient to pay all amounts to which the Secured Party is
legally entitled, the Company will be liable for the deficiency, together with
interest thereon, at the rate of twelve per cent (12%) per annum or the lesser
amount permitted by applicable law. To the extent permitted by applicable law,
the Company waives all claims, damages and demands against the Secured Party
arising out of the repossession, removal, retention or sale of the Collateral,
unless due to the gross negligence or willful misconduct of the Secured Party.
 
7.           Counsel Fees and Expenses.  If Secured Party retains counsel for
the purpose of collecting any money which may be due under or secured in any way
by this Security Agree­ment, or to recover the Collateral, or to protect its
interest therein by reason of a default or breach by Company, then and in that
event Company agrees to pay counsel fees together with any and all disbursements
incurred by Secured Party in connection with the taking, maintaining, and
disposing of the Collateral.
 

 
2

--------------------------------------------------------------------------------

 

8.           Notices.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, and if not, then on the next
Business Day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt.  All communications shall be sent as
follows:
 

 
If to the Holder:
IntegenX Inc.
   
5720 Stoneridge Drive, Suite 300
   
Pleasanton, California 94588
   
Facsimile:  (925) 574-7373
   
Attention: President
       
with a copy to:
IntegenX Inc.
   
5720 Stoneridge Drive, Suite 300
   
Pleasanton, California 94588
   
Facsimile:  (925) 574-7373
   
Attention: General Counsel
       
If to the Company:
Wafergen, Inc.
   
7400 Paseo Padre Parkway
   
Fremont, California 94555
   
Facsimile:  (510) 793-8992
   
Attention: Ivan Trifunovich
       
with a copy to:
K&L Gates LLP
   
4350 Lassiter at North Hills, Suite 300
   
Raleigh, North Carolina 27609
   
Facsimile:  (919) 516-2028
   
Attention: D. Scott Coward, Esq.

Any party may change the address(es) to which notices to it are to be sent by
giving notice of such change to the other party in accordance with this Section
7.
 
9.           Further Assurances.  Company shall deliver to Secured Party such
instruments as are necessary to carry out the intent hereof, and shall join with
Secured Party in executing financing statements in appropriate form for
perfecting the security interests granted hereby.  This Agreement, and the
security interest created hereunder, shall terminate automatically upon
satisfaction in full of the Secured Obligations.  Secured Party shall, upon the
termination of this Agreement, deliver to Company termination statements (and
other appropriate instruments) in form and substance satisfactory to Company.
 
10.           Failure To Enforce Terms.  The failure of Secured Party to enforce
any of the terms or provisions of this Agreement or Secured Party’s failure to
declare a default hereunder shall apply only to that particular instance, and
shall not operate as a continuing waiver.
 

 
3

--------------------------------------------------------------------------------

 

11.           Gender and Number.  Words of any gender used in this Agreement
shall be held and construed to include any other gender, and words in the
singular shall be held to include the plural, and vice versa, unless the context
requires otherwise.
 
12.           Headings.  The headings used in this Agreement are used for
reference purposes and convenience and shall not constitute part of this
Agreement in construing the terms and provisions hereof.
 
13.           Applicable Law.  This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding the conflict of laws provisions thereof.
 
14.           Modification.  No change or modification of this Agreement shall
be valid or binding upon the parties hereto unless such change or modification
shall be in writing and shall be signed by the parties hereto.
 
15.           Entire Agreement.  This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between the parties
hereto with respect to the subject matter hereof and constitutes the only
agreements between the parties with respect to said subject matter.
 
16.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
 
17.           Assignment.  This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by the Company without the
prior written consent of the Secured Party.   Any instrument purporting to make
an assignment in violation of this Section 16 shall be void.
 
18.           No Conflict.  The execution, delivery and performance of this
Agreement by the Company does not conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing the Company’s debt or
otherwise) or other understanding to which the Company is a party or by which
any property or asset of the Company is bound or affected. No consent
(including, without limitation, from members or creditors of the Company) is
required for the Company to enter into and perform its obligations hereunder.
 
19.           Miscellaneous.  This Agreement shall inure to the benefit of the
Company and the Secured Party, and all their respective successors and permitted
assigns.  Nothing in this Agreement is intended or shall be construed to give to
any other person, firm or corporation any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
 
[SIGNATURE PAGE FOLLOWS]

 
4

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement as
of the date first above written.
 

 
SECURED PARTY:
         
INTEGENX INC.
           
By:
/s/ Robert A. Schueren
   
Name:
Robert A. Schueren
   
Its:
President and Chief Executive Officer

 
COMPANY:
         
WAFERGEN, INC.
           
By:
/s/ Ivan Trifunovich
   
Name:
Ivan Trifunovich
   
Its:
President and Chief Executive Officer

 
 

--------------------------------------------------------------------------------