<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 12, 1999
QUIDEL CORPORATION
-----------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Delaware 0-10961 94-2573850
- ---------------------------- ---------------------------- --------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10165 McKellar Court, San Diego, California 92121
- ---------------------------------------------------------- --------------------------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (619) 552-1100
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(A)
On July 12, 1999, Quidel Corporation, through its wholly owned subsidiary,
MBS Acquisition Corporation, completed its previously disclosed tender offer for
the outstanding shares of common stock, and the associated rights, of Metra
Biosystems, Inc. The details of the tender offer were disclosed in a Tender
Offer Statement on Schedule 14D-1, filed with the SEC on June 9, 1999 and
subsequently amended (the "Schedule 14D-1"). According to the Depositary's final
report, 11,864,978 shares were validly tendered and not withdrawn as of the
expiration of the tender offer, representing approximately 93% of the
outstanding Metra Biosystems shares.
MBS Acquisition Corporation purchased all of the shares validly tendered
according to the terms of the tender offer. Because MBS Acquisition Corporation
owns more than 90% of the outstanding Metra Biosystems shares, Quidel intends to
acquire Metra Biosystems by way of a "short-form" merger, without any action
required by Metra Biosystems' shareholders. MBS Acquisition Corporation
anticipates effecting the merger on or after August 4, 1999.
The source of funds used to acquire the Metra Biosystems shares was
previously disclosed in the Schedule 14D-1 and the definitive agreements
relating to the financing used to acquire the Metra Biosystems shares are filed
as Exhibits 10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K.
(B)
Metra Biosystems develops and commercializes diagnostic products for the
detection and management of metabolic and joint diseases and disorders. Quidel
intends to devote the Metra Biosystems assets to the continuation and
development of this line of business.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) AND (B) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED AND PRO FORMA FINANCIAL
INFORMATION.
The financial statements and PRO FORMA financial information required by
this item will be filed by Quidel no later than September 27, 1999.
(C) EXHIBITS.
The following exhibits are filed with this Current Report on Form 8-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ ---------------------------------------------------------------------------------------------------
<C> <S>
10.1 Business Loan Agreement, dated as of July 12, 1999, by and between Bank of America National Trust
and Savings Association and Quidel Corporation
10.2 Security Agreement, dated as of July 12, 1999, by and among Bank of America National Trust and
Savings Association, Quidel Corporation, MBS Acquisition Corporation, and Pacific Biotech, Inc.
10.3 Subsidiary Guaranty, dated as of July 12, 1999, by MBS Acquisition Corporation and Pacific Biotech,
Inc.
10.4 Cash Collateral Agreement, dated as of July 12, 1999, by and between Bank of America National Trust
and Savings Association and Metra Biosystems, Inc.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUIDEL CORPORATION
A DELAWARE CORPORATION
<TABLE>
<S> <C> <C>
By: /s/ CHARLES J. CASHION
-----------------------------------------
Charles J. Cashion
SENIOR VICE PRESIDENT CORPORATE
OPERATIONS,
CHIEF FINANCIAL OFFICER
AND SECRETARY
</TABLE>
Date: July 23, 1999
<PAGE>
BUSINESS LOAN AGREEMENT
July 12, 1999
QUIDEL CORPORATION
and
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS....................................................................1
1.1 "Acceptable Cash Collateral...........................................1
1.2 "Acceptable Equipment.................................................1
1.3 "Acceptable Inventory.................................................1
1.4 "Acceptable Receivable................................................2
1.5 "Acquisition".........................................................4
1.6 "Borrowing Base"......................................................4
1.7 "Cash"................................................................5
1.9 "Cash Equivalents"....................................................5
1.10 "Credit Limit"........................................................6
1.15 "Material Adverse Effect".............................................7
1.18 "Metra"...............................................................7
1.21 "Permitted Encumbrances"..............................................7
1.22 "Sale/Leaseback Transaction"..........................................7
1.23 "Security Agreement"..................................................7
1.24 "Significant Subsidiary"..............................................7
1.25 "Subsidiary Guaranty..................................................8
2. FACILITY NO. 1: LINE OF CREDIT; AMOUNT AND TERMS...............................8
2.1 Line of Credit Amount.................................................8
2.2 Availability Period...................................................8
2.4 Conditions to Availability of Credit..................................8
2.5 Interest Rate.........................................................8
2.6 Repayment Terms.......................................................9
3. FACILITY NO. 2: TERM LOAN; AMOUNT AND TERMS...................................9
3.1 Term Loan Amount......................................................9
3.2 Availability Period..................................................10
3.3 Purpose..............................................................10
Interest Rate.................................................................10
3.5 Repayment Terms......................................................10
3.6 Release of Cash Collateral...........................................10
4. OPTIONAL INTEREST RATES.......................................................10
4.1 Optional Rates.......................................................10
4.2 IBOR Rate............................................................10
4.3 LIBOR Rate...........................................................12
5. FEES AND EXPENSES.............................................................14
<PAGE>
5.1 Fees.................................................................14
5.2 Expenses.............................................................14
5.3 Reimbursement Costs..................................................14
6. COLLATERAL....................................................................15
6.1 Personal Property....................................................15
6.2 Subsidiary Guaranties................................................15
7. DISBURSEMENTS, PAYMENTS AND COSTS.............................................15
7.1 Requests for Credit..................................................15
7.2 Disbursements and Payments...........................................15
7.3 Telephone and Telefax Authorization..................................15
7.4 Direct Debit (Pre-Billing)...........................................16
7.4 Banking Days.........................................................17
7.5 Taxes................................................................17
7.6 Additional Costs.....................................................17
7.7 Interest Calculation.................................................17
7.8 Default Rate.........................................................17
7.9 Interest Compounding.................................................18
7.10 Overdrafts...........................................................18
7.11 Payments in Kind.....................................................18
8. CONDITIONS....................................................................18
8.1 Authorizations.......................................................18
8.2 Governing Documents..................................................18
8.3 Security Agreements..................................................18
8.6 Evidence of Priority.................................................19
8.7 Consent to Removal...................................................19
8.8 Insurance............................................................19
8.9 Subsidiary Guaranty..................................................19
8.10 Legal Opinion........................................................19
8.11 Good Standing........................................................19
8.12 Payment of Fees......................................................19
8.13 Appraisals...........................................................19
8.14 Due Diligence........................................................19
8.15 No Material Adverse Change...........................................19
8.16 Termination of Existing Financing Agreements.........................19
8.17 Other Items..........................................................20
9. REPRESENTATIONS AND WARRANTIES................................................20
9.1 Organization of Borrower and its Subsidiaries........................20
9.2 Authorization........................................................20
9.3 Enforceable Agreement................................................20
<PAGE>
9.4 Good Standing........................................................20
9.5 No Conflicts.........................................................20
9.6 Financial Information................................................20
9.7 Lawsuits.............................................................21
9.8 Collateral...........................................................21
9.9 Permits, Franchises..................................................21
9.10 Other Obligations....................................................21
9.11 Income Tax Matters...................................................21
9.12 No Tax Avoidance Plan................................................21
9.13 No Event of Default..................................................21
9.14 Insurance............................................................21
9.15 Merchantable Inventory...............................................21
9.16 ERISA Plans..........................................................21
9.17 Location of Borrower and its Subsidiaries............................22
9.18 Environmental Matters................................................22
9.19 Year 2000 Compliance.................................................23
10. COVENANTS.....................................................................23
10.1 Use of Proceeds......................................................23
10.2 Financial Information................................................23
10.3 Tangible Net Worth...................................................24
10.4 Senior Debt to EBITDA................................................25
10.5 Profitability........................................................25
10.6 Limitation on Losses.................................................25
10.7 Trusts...............................................................25
10.8 Other Debts..........................................................25
10.9 Other Liens..........................................................26
10.10 Capital Expenditures.................................................26
10.11 Leases...............................................................26
10.12 Dividends............................................................26
10.13 Notices to Bank......................................................27
10.14 Books and Records....................................................27
10.15 Audits...............................................................27
10.16 Compliance with Laws.................................................27
10.17 Preservation of Rights...............................................27
10.18 Maintenance of Properties............................................27
10.19 Perfection of Liens..................................................27
10.20 Cooperation..........................................................27
10.21 Insurance............................................................28
10.22 Additional Negative Covenants........................................28
10.23 Bank as Principal Depository.........................................29
10.24 ERISA Plans..........................................................29
10.25 Compliance with Environmental Requirements...........................29
<PAGE>
10.26 Closing Balance Sheet and Income Statement...........................29
10.27 Future Subsidiaries..................................................29
10.28 Landlord Waiver......................................................29
11. HAZARDOUS WASTE INDEMNIFICATION...............................................30
12. EVENTS OF DEFAULT.............................................................30
12.1 Failure to Pay.......................................................30
12.2 Lien Priority........................................................30
12.3 False Information....................................................30
12.4 Bankruptcy...........................................................30
12.5 Receivers............................................................31
12.6 Judgments............................................................31
12.7 Government Action....................................................31
12.8 Material Adverse Change..............................................31
12.9 Cross-default........................................................31
12.10 Default under Related Documents......................................31
12.11 Other Bank Agreements................................................31
12.12 ERISA Plans..........................................................31
12.13 Other Breach Under Agreement.........................................31
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS.......................................32
13.1 GAAP.................................................................32
13.2 California Law.......................................................32
13.3 Successors and Assigns...............................................32
13.4 Arbitration..........................................................32
13.5 Severability; Waivers................................................34
13.6 Administration Costs.................................................34
13.7 Attorneys' Fees......................................................34
13.8 Multiple Borrowers...................................................34
13.9 Individual Liability.................................................34
13.10 One Agreement........................................................34
13.11 Disposition of Schedules, Reports, Etc...............................35
13.12 Returned Merchandise.................................................35
13.13 Verification of Receivables..........................................35
13.14 Waiver of Confidentiality............................................35
13.15 Indemnification......................................................35
13.16 Notices..............................................................36
13.17 Headings.............................................................36
13.18 Counterparts.........................................................37
</TABLE>
<PAGE>
EXECUTION
BUSINESS LOAN AGREEMENT
(RECEIVABLES AND INVENTORY)
This Agreement, dated as of July 12, 1999, is between Bank
of America National Trust and Savings Association (the "Bank") and Quidel
Corporation, a Delaware corporation (the "Borrower").
1. DEFINITIONS
In addition to the terms which are defined elsewhere in
this Agreement, the following terms have the respective meanings indicated
for the purposes of this Agreement:
1.1 "ACCEPTABLE CASH COLLATERAL" means Cash deposited by
Metra in a deposit account maintained with the Bank pursuant to the Cash
Collateral Agreement and subject to a perfected first priority security
interest in favor of the Bank.
1.2 "ACCEPTABLE EQUIPMENT" means equipment of the
Borrower or Metra (but not any other Significant Subsidiaries) which
satisfies the following requirements:
(a) the equipment is owned by the Borrower or Metra
free of any title defects or any liens or interests of others except
the security interest in favor of the Bank.
(b) the equipment is located at locations which the
Borrower has disclosed to the Bank and which are acceptable to the
Bank.
(c) the equipment is otherwise acceptable to the
Bank;
PROVIDED THAT no assets of Metra shall be deemed to be part of Acceptable
Equipment unless and until Metra has become a Subsidiary Guarantor and has
executed the Security Agreement and the lien of the Bank in such assets are
perfected and of first priority.
1.3 "ACCEPTABLE INVENTORY" means inventory of the Borrower
or Metra (but not any other Significant Subsidiaries) which satisfies the
following requirements:
(a) The inventory is owned by the Borrower or Metra
free of any title defects or any liens or interests of others except
the security interest in favor of the Bank.
(b) The inventory is located at locations which the
Borrower has disclosed to the Bank and which are acceptable to the
Bank.
-1-
<PAGE>
(c) The inventory consists of raw materials held for
use in the ordinary course of business of the Borrower or Metra and is
of good and merchantable quality. Display items, finished goods,
work-in-process, samples, and packing and shipping materials are not
acceptable. Inventory which is obsolete, unsalable, damaged, defective,
discontinued or slow-moving, or which has been returned by the buyer,
is not acceptable. Inventory will be considered slow-moving if it has
been held for use by the Borrower or Metra for more than 12 months
from its purchase.
(d) The inventory is not subject to any licensing
agreements which would prohibit or restrict in any way the ability of
the Bank to sell the inventory to third parties.
(e) The inventory is otherwise acceptable to the Bank
PROVIDED THAT no assets of Metra shall be deemed to be part of Acceptable
Inventory unless and until Metra has become a Subsidiary Guarantor and has
executed the Security Agreement and the lien of the Bank in such assets are
perfected and of first priority.
1.4 "ACCEPTABLE RECEIVABLE" means an account receivable
of the Borrower or Metra (but not any other Significant Subsidiaries) which
satisfies the following requirements:
(a) The account has resulted from the sale of goods
or the performance of services by the Borrower or Metra in the ordinary
course of business of the Borrower or Metra and without any further
obligation on the part of the Borrower or Metra to service, repair, or
maintain any such goods sold.
(b) There are no conditions which must be satisfied
before the Borrower or Metra is entitled to receive payment of the
account. Accounts arising from COD sales, consignments or guaranteed
sales are not acceptable.
(c) The debtor upon the account does not claim any
defense to payment of the account, whether well founded or otherwise.
(d) The account balance does not include the amount
of any counterclaims or offsets which have been or may be asserted
against the Borrower or Metra by the account debtor (including offsets
for any "contra accounts" owed by the Borrower or Metra to the account
debtor for goods purchased by the Borrower or Metra or for services
performed for the Borrower or Metra). To the extent any counterclaims,
offsets, or contra accounts exist in favor of the debtor, such amounts
shall be deducted from the account balance.
-2-
<PAGE>
(e) The account is not the obligation of an account
debtor who has asserted or may assert any counterclaims or offsets
against the Borrower or Metra (including offsets for any "contra
accounts" owed by the Borrower or Metra to the account debtor for goods
purchased by the Borrower or Metra or for services performed for the
Borrower or Metra).
(f) The account represents a genuine obligation of
the debtor for goods sold to and accepted by the debtor, or for
services performed for and accepted by the debtor. To the extent any
credit balances exist in favor of the debtor, such credit balances
shall be deducted from the account balance.
(g) The Borrower or Metra has sent an invoice to the
debtor in the amount of the account.
(h) The Borrower or Metra is not prohibited by the
laws of the state where the account debtor is located from bringing an
action in the courts of that state to enforce the debtor's obligation
to pay the account. The Borrower or Metra has taken all appropriate
actions to ensure access to the courts of the state where the account
debtor is located, including, where necessary, the filing of a Notice
of Business Activities Report or other similar filing with the
applicable state agency or the qualification by the Borrower or Metra
as a foreign corporation authorized to transact business in such state.
(i) The account is owned by the Borrower or Metra
free of any title defects or any liens or interests of others except
the security interest in favor of the Bank.
(j) The debtor upon the account is not any of the
following:
(i) an employee, affiliate, parent or
subsidiary of the Borrower or Metra, or an entity which has
common officers or directors with the Borrower or Metra.
(ii) the U.S. government or any agency or
department of the U.S. government unless the Bank agrees in
writing to accept the obligation, the Borrower or Metra
complies with the procedures in the Federal Assignment of
Claims Act of 1940 (41 U.S.C. Section15) with respect to the
obligation, and the underlying contract expressly provides
that neither the U.S. government nor any agency or department
thereof shall have the right of set-off against the Borrower
or Metra.
(iii) any state, county, city, town or
municipality.
(iv) any person or entity located in a
foreign country unless (A) the account is supported by an
irrevocable letter of credit issued by a bank acceptable to
the Bank, and, if requested by the Bank, the original of such
letter of credit and/or any usance drafts drawn under such
letter of credit and accepted by the issuing or confirming
bank have been delivered to the Bank, or (B) the account is
covered by foreign credit insurance acceptable to the Bank and
the account is otherwise an Acceptable Receivable.
(k) The account is not in default. An account will be
considered in default if any of the following occur:
(i) The account is not paid within 90 days
from its invoice date;
(ii) The debtor obligated upon the account
suspends business, makes a general assignment for the benefit
of creditors, or fails to pay its debts generally as they come
due; or
(iii) Any petition is filed by or against the
debtor obligated upon the account under any bankruptcy law or
any other law or laws for the relief of debtors;
(l) The account does not arise from the sale of goods
which remain in the Borrower's or Metra's possession or under the
Borrower's or Metra's control.
-3-
<PAGE>
(m) The account is not evidenced by a promissory note
or chattel paper, nor is the account debtor obligated to the Borrower
or Metra under any other obligation which is evidenced by a promissory
note.
(n) The account does not arise from the sale of
minerals (including oil and gas) at the wellhead or minehead.
(o) The account is otherwise acceptable to the Bank;
PROVIDED THAT no assets of Metra shall be deemed to be part of Acceptable
Receivables unless and until Metra has become a Subsidiary Guarantor and has
executed the Security Agreement and the lien of the Bank in such assets are
perfected and of first priority. In addition to the foregoing limitations,
the dollar amount of accounts included as Acceptable Receivables which are
the obligations of a single debtor shall not exceed the concentration limit
established for that debtor. To the extent the total of such accounts exceeds
a debtor's concentration limit, the amount of any such excess shall be
excluded (unless the Bank otherwise consents with respect any one or more
account debtors in writing in its sole discretion). The concentration limit
for each debtor shall be equal to 15% of the total amount of the Borrower's
Acceptable Receivables at that time.
-4-
<PAGE>
1.5 "ACQUISITION" means, in respect of the Borrower's
acquisition through MBS Acquisition of (a) not less than 90% of the shares of
the capital stock of Metra concurrently with the funding of the initial loans
under this Agreement, and (b) the remaining balance of the shares of the
capital stock of Metra not later than 20 days following the date of this
Agreement.
1.6 "BORROWING BASE" means the sum of:
(a) 75% of the balance due on Acceptable Receivables;
(b) 30% of the value of Acceptable Inventory;
(c) 30% of the value, net of depreciation, of
Acceptable Equipment; and
(d) the lesser of (i) 80% of the value of Cash and
Cash Equivalents or (ii) $2,000,000; PROVIDED, HOWEVER, the Borrowing
Base component described in this clause (d) shall remain in effect only
through the earlier of :
(y) five days following the date of this
Agreement; and
(z) the date on which the Borrower receives
the proceeds of the Sale/Leaseback Transaction.
In determining the value of Acceptable Equipment and
Acceptable Inventory to be included in the Borrowing Base, the Bank will use
the lowest of (i) the Borrower's cost, (ii) the Borrower's estimated market
value, or (iii) the Bank's independent determination of the resale value of
such equipment or inventory in such quantities and on such terms as the Bank
deems appropriate.
1.7 "CASH" means all monetary and non-monetary items
owned by the Borrower or any of the Subsidiary Guarantors that are treated as
cash in accordance with GAAP, consistently applied.
1.8 "CASH COLLATERAL AGREEMENT" means a Cash Collateral
Agreement executed on the date hereof by Metra in favor of the Bank in the
form of Exhibit H, either as originally executed or as it may from time to
time be supplemented, modified, amended, extended or supplanted.
1.9 "CASH EQUIVALENTS" means Borrower's or any Subsidiary
Guarantor's investments in:
-5-
<PAGE>
(a) United States Government securities due within
one year after the date of the making of the Investment;
(b) readily marketable direct obligations of any
State of the United States of America or any political subdivision of
any such State or any public agency or instrumentality thereof given on
the date of such Investment a credit rating of at least Aa by Moody's
Investors Service, Inc. or AA by Standard & Poor's Rating Group (a
division of McGraw-Hill, Inc.), in each case due within one year from
the making of the Investment;
(c) certificates of deposit issued by, bank deposits
in, Eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering United States Government securities
executed by the Bank or any bank incorporated under the laws of the
United States of America, any State thereof or the District of Columbia
and having on the date of the Borrower's or such Subsidiary Guarantor's
investment therein combined capital, surplus and undivided profits of
at least $250,000,000, or total assets of at least $5,000,000,000, in
each case due within one year after the date of the making of such
investment;
(d) certificates of deposit issued by, bank deposits
in, eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering United States Government securities
executed by the Bank or any branch or office located in the United
States of America of a bank incorporated under the Laws of any
jurisdiction outside the United States of America having on the date of
the Borrower's or such Subsidiary Guarantor's investment therein
combined capital, surplus and undivided profits of at least
$500,000,000, or total assets of at least $15,000,000,000, in each case
due within one year after the date of the making of such investment;
(e) repurchase agreements covering United States
Government securities executed by a broker or dealer registered under
Section 15(b) of the Securities Exchange Act of 1934, as amended,
having on the date of Borrower's or such Subsidiary Guarantor's
investment therein capital of at least $50,000,000, due within 90 days
after the date of the making of such investment; PROVIDED that the
maker of such investment receives written confirmation of the transfer
to it of record ownership of the United States Government securities on
the books of a "primary dealer" in such United States Government
securities or on the books of such registered broker or dealer, as soon
as practicable after the making of such investment;
(f) readily marketable commercial paper or other debt
securities issued by corporations doing business in and incorporated
under the laws of the United States of America or any State thereof
or of any corporation that is the holding company for a bank described
in clause (c) or (d) above given on the date of the Borrower's or
such Subsidiary Guarantor's investment therein a credit rating of at
least
-6-
<PAGE>
P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's
Rating Group (a division of McGraw-Hill, Inc.), in each case due
within one year after the date of the making of such investment;
(g) "money market preferred stock" issued by a
corporation incorporated under the laws of the United States of America
or any State thereof (i) given on the date of the Borrower's or such
Subsidiary Guarantor's investment therein a credit rating of at least
Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's
Rating Group (a division of McGraw-Hill, Inc.), in each case having an
investment period not exceeding 50 days or (ii) to the extent that
investors therein have the benefit of a standby letter of credit issued
by the Bank or a bank described in clauses (c) or (d) above; PROVIDED
that (y) the amount of all such investments issued by the same issuer
does not exceed $5,000,000 and (z) the aggregate amount of all such
investments does not exceed $15,000,000;
(h) a readily redeemable "money market mutual fund"
sponsored by a bank described in clause (c) or (d) hereof, or a
registered broker or dealer described in clause (e) hereof, that has
and maintains an investment policy limiting its investments primarily
to instruments of the types described in clauses (a) through (g) hereof
and given on the date of the Borrower's or such Subsidiary Guarantor's
investment therein a credit rating of at least Aa by Moody's Investors
Service, Inc. and AA by Standard & Poor's Rating Group (a division of
McGraw-Hill, Inc.); and
(i) corporate notes or bonds having an original term
to maturity of not more than one year issued by a corporation
incorporated under the laws of the United States of America, or a
participation interest therein; PROVIDED that (i) commercial paper
issued by such corporation is given on the date of Borrower's or such
Subsidiary Guarantor's investment therein a credit rating of at least
Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's
Rating Group (a division of McGraw-Hill, Inc.), (ii) the amount of all
such investments issued by the same issuer does not exceed $5,000,000
and (iii) the aggregate amount of all such investments does not exceed
$15,000,000.
1.10 "CREDIT LIMIT" means, initially, the amount of
$10,000,000, which limit shall be reduced to $7,500,000 on the ninetieth
(90th) day after the Borrower's consummation of the Sale/ Leaseback
Transaction.
1.11 "EVENT OF DEFAULT" has the meaning set forth in the
preamble to Section 12.
1.12 "GAAP" means, as of any date of determination,
accounting principles (a) set forth as generally accepted in then currently
effective Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants, (b) set forth as generally
accepted in then currently effective Statements of the Financial Accounting
Standards Board or (c) that are then
-7-
<PAGE>
approved by such other entity as may be approved by a significant segment of
the accounting profession in the United States of America. The term
"CONSISTENTLY APPLIED," as used in connection therewith, means that the
accounting principles applied are consistent in all material respects with
those applied at prior dates or for prior periods.
1.13 "INTER-COMPANY LOAN" means a proposed loan from Metra
to Borrower, to be made a principal amount which is not less than the
principal amount of the Acceptable Cash Collateral, and evidenced by a
promissory note pledged (following the Merger) to the Bank.
1.14 "LOAN DOCUMENTS" means, collectively, this Agreement
each of the guarantees, security agreements, cash collateral agreements and
other loan papers contemplated hereby to be executed by Borrower and its
Significant Subsidiaries in connection herewith.
1.15 "MATERIAL ADVERSE EFFECT" means any set of
circumstances or events which (a) has had or could reasonably be expected to
have any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any other loan document entered into in
connection herewith, (b) has been or could reasonably be expected to be
material and adverse to the business or condition (financial or otherwise) of
the Borrower and its subsidiaries, taken as a whole, or (c) has materially
impaired or could reasonably be expected to materially impair the ability of
the Borrower to perform its obligations to the Bank under this Agreement.
1.16 "MBS ACQUISITION" means MBS Acquisition Corporation,
a Delaware corporation which is a wholly-owned subsidiary of Borrower.
1.17 "MERGER" means the merger of Metra with MBS, with
Metra the survivor.
1.18 "METRA" means Metra Biosystems, a California
corporation.
1.19 "OBLIGATIONS" means all obligations and indebtedness
of Borrower under this Agreement, including without limitations obligations
for principal, interest, fees, expenses and indemnities, whether now existing
or hereafter arising, including any interest or other obligations arising
after the filing of any bankruptcy or similar proceeding with respect to
Borrower.
1.20 "PACIFIC BIOTECH" means Pacific Biotech, Inc., a
California corporation and a wholly-owned subsidiary of the Borrower.
1.21 "PERMITTED ENCUMBRANCES" has the meaning specified in
SECTION 10.9 of this Agreement.
-8-
<PAGE>
1.22 "SALE/LEASEBACK TRANSACTION" means the contemplated
sale and leaseback by the Borrower of its headquarters facility located at
10165 McKellar Court, San Diego, California 92121.
1.23 "SECURITY AGREEMENT" means the security agreement to
be executed and delivered pursuant to SECTION 8.3 by the Borrower, MBS
Acquisition and Pacific Biotech (and, upon the consummation of the Merger, by
Metra), substantially in the form of EXHIBIT A, either as originally executed
or as it may from time to time be supplemented, modified, amended, extended
or supplanted.
1.24 "SIGNIFICANT SUBSIDIARY" means, collectively, Metra,
Pacific Biotech, and each other current or future domestic subsidiary of the
Borrower that either (a) had net income for the fiscal year of the Borrower
then most recently ended in excess of 5% of the Borrower's consolidated net
income for such fiscal year or (b) had assets in excess of 5% of the total
assets of the Borrower and its subsidiaries on a consolidated basis as at the
end of the fiscal year of Borrower then most recently ended.
1.25 "SUBSIDIARY GUARANTY" means the subsidiary guaranty
to be executed and delivered pursuant to SECTION 8.9 by each of MBS
Acquisition and Pacific Biotech (and, concurrently with the Merger, by
Metra), substantially in the form of EXHIBIT B, either as originally executed
or as it may from time to time be supplemented, modified, amended, extended
or supplanted.
2. FACILITY NO. 1: LINE OF CREDIT; AMOUNT AND TERMS
2.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below,
the Bank will provide a line of credit ("Facility No. 1") to the
Borrower. The amount of the line of credit (the "Facility No. 1
Commitment") is equal to the lesser of (i) the Credit Limit or (ii) the
Borrowing Base as determined by the Bank from time to time in
accordance with this Agreement.
(b) This is a revolving line of credit providing for
cash advances. During the availability period, the Borrower may repay
principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding
principal balance of advances under the line of credit to exceed the
Facility No. 1 Commitment. If the Borrower exceeds this limit, the
Borrower will immediately pay the excess to the Bank upon the Bank's
demand. The Bank may apply payments received from the Borrower under
this Section to the obligations of the Borrower to the Bank in the
-9-
<PAGE>
order and the manner as the Bank, in its discretion, may determine.
2.2 AVAILABILITY PERIOD. The line of credit is available
between the date of this Agreement and August 31, 2000 (the "Facility No. 1
Expiration Date") unless the Borrower is in default.
2.3 PURPOSE. The line of credit shall be used by the
Borrower to finance a portion of the Acquisition and to fund the ongoing
working capital requirements of the Borrower and its subsidiaries.
2.4 CONDITIONS TO AVAILABILITY OF CREDIT. In addition to
the items required to be delivered to the Bank under the Section entitled
"Financial Information" in the "Covenants" section of this Agreement, the
Borrower will promptly deliver a borrowing base certificate to the Bank at
such times as may be requested by the Bank, substantially in the for of
EXHIBIT C, summarizing the accounts receivable, inventory, equipment, Cash
and Cash Equivalents of the Borrower (and, when appropriate, of Metra) on
which the requested extension of credit is to be based, together with all
supporting documentation required by the Bank in order to calculate the
Borrowing Base.
2.5 INTEREST RATE.
(a) Unless the Borrower elects an optional interest
rate as described below, the interest rate applicable to Facility No. 1
is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest
publicly announced from time to time by the Bank as its Reference Rate.
The Reference Rate is set by the Bank based on various factors,
including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans. The Bank may price loans to its customers at,
above, or below the Reference Rate. Any change in the Reference Rate
shall take effect at the opening of business on the day specified in
the public announcement of a change in the Bank's Reference Rate.
2.6 REPAYMENT TERMS.
(a) The Borrower will pay interest on August 1, 1999,
and then on the first calendar day of each month thereafter until
payment in full of any principal outstanding under this line of credit.
(b) The Borrower will repay in full all principal and
any unpaid interest or other charges outstanding under this line of
credit no later than the Facility No. 1 Expiration Date. Any interest
period for the optional interest rate (as described below) shall expire
no later than the Facility No. 1 Expiration Date.
-10-
<PAGE>
(c) The Borrower may prepay the loan in full or in
part at any time, subject, if applicable, to the payment of the
prepayment fee described in Sections 4.2(e) and 4.3(g) .
2.7 MANDATORY PAYMENTS. The Borrower shall be required
to make mandatory payments of the principal balance outstanding under this
line of credit promptly and in any event within one Business Day following
its receipt of (a) the proceeds of the Sale/Leaseback Transaction and/or (b)
the proceeds of the issuance of any equity securities of the Borrower, in the
amount of such proceeds net of associated transaction expenses.
2.8 OPTIONAL INTEREST RATES. Instead of the interest rate
based on the Bank's Reference Rate, the Borrower may elect the optional interest
rates listed below for this Facility No.1 during interest periods agreed to by
the Bank and the Borrower. The optional interest rates shall be subject to the
terms and conditions described later in this Agreement. Any principal amount
bearing interest at one of the optional rates under this Agreement is referred
to as a "Portion." The following optional interest rates are available:
(a) the IBOR Rate PLUS 1.50 percentage points.
(b) the LIBOR Rate PLUS 1.50 percentage points.
3. FACILITY NO. 2: TERM LOAN; AMOUNT AND TERMS
3.1 TERM LOAN AMOUNT. The Bank agrees to provide a term
loan ("Facility No. 2") to the Borrower in an amount equal to the lesser of
(a) Nineteen Million Dollars ($19,000,000) or (b) the aggregate amount of
Acceptable Cash Collateral pledged by Metra to the Bank ("Facility No. 2
Commitment"). The amount of credit available under Facility No. 2 Commitment
will be reduced by the outstanding balance of the term loan.
3.2 AVAILABILITY PERIOD. The term loan will be disbursed
in full in a single advance on the date of the Acquisition (but not later
than July 13, 1999).
3.3 PURPOSE. The term loan shall be used by the Borrower
to finance a portion of the Acquisition.
3.4 INTEREST RATE. The interest rate applicable to the
term loan is the Bank's Reference Rate.
3.5 REPAYMENT TERMS.
(a) Unless the term loan is earlier due pursuant to
subsection (b) below, the Borrower will pay all accrued but unpaid
interest on the term loan on the
-11-
<PAGE>
date upon which it is repaid, and in any event on August 1, 1999.
(b) The Borrower will repay in full any principal,
interest or other outstanding charges on the term loan in a single
installment not later than the fifth day following the date of this
Agreement.
(c) The Borrower may prepay the term loan in full or
in part at any time, without premium or penalty, in an amount not less
than One Million Dollars ($1,000,000).
3.6 RELEASE OF CASH COLLATERAL. Concurrently with the
making of the InterCompany Loan, and subject to arrangements acceptable to
the Bank being made for the concurrent repayment of the term loan, the Bank
shall terminate its security interest in the Acceptable Cash Collateral.
4. OPTIONAL INTEREST RATES
4.1 OPTIONAL RATES. Each optional interest rate is a
rate per year. Interest will be paid on the first business day of each month.
At the end of any interest period, the interest rate will revert to the rate
based on the Reference Rate, unless the Borrower has designated another
optional interest rate for the Portion. No Portion will be converted to a
different interest rate during the applicable interest period. Upon the
occurrence of an Event of Default under this Agreement, the Bank may
terminate the availability of optional interest rates for interest periods
commencing after the Event of Default occurs.
4.2 IBOR RATE. The election of IBOR Rates shall be
subject to the following terms and requirements:
(a) The interest period during which the IBOR Rate
will be in effect will be one, two, three, four, five or six months.
The last day of the interest period will be determined by the Bank
using the practices of the offshore dollar inter-bank market.
(b) Each IBOR Rate Portion will be for an amount not
less than the following:
(i) for interest periods of six months, Five
Hundred Thousan Dollars ($500,000).
(ii) for interest periods of one, two, three,
four, or five months, One Million Dollars ($1,000,000).
-12-
<PAGE>
(c) The "IBOR Rate" means the interest rate
determined by the following formula, rounded upward to the
nearest 1/100 of one percent. (All amounts in the
calculation will be determined by the Bank as of the first
day of the interest period.)
IBOR Rate = IBOR BASE RATE
---------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "IBOR Base Rate" means the interest rate
at which the Bank's Grand Cayman Branch, Grand Cayman, British
West Indies, would offer U.S. dollar deposits for the
applicable interest period to other major banks in the
offshore dollar inter-bank market.
(ii) "Reserve Percentage" means the total of
the maximum reserve percentages for determining the reserves
to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) Each prepayment of an IBOR Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid, and a
prepayment fee as described below. A "prepayment" is a payment of an
amount on a date earlier than the scheduled payment date for such
amount as required by this Agreement. The prepayment fee shall be equal
to the amount (if any) by which:
(i) the additional interest which would have
been payable during the interest period on the amount prepaid
had it not been prepaid, exceeds
(ii) the interest which would have been
recoverable by the Bank by placing the amount prepaid on
deposit in the domestic certificate of deposit market, the
eurodollar deposit market, or other appropriate money market
selected by the Bank for a period starting on the date on
which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment
date for the amount prepaid, if earlier).
(e) The Bank will have no obligation to accept an
election for an IBOR Rate Portion if any of the following described
events has occurred and is continuing:
-13-
<PAGE>
(i) Dollar deposits in the principal amount,
and for periods equal to the interest period, of an IBOR Rate
Portion are not available in the offshore dollar inter-bank
market; or
(ii) the IBOR Rate does not accurately
reflect the cost of an IBOR Rate Portion.
4.3 LIBOR RATE. The election of LIBOR Rates shall be
subject to the following terms and requirements:
(a) The interest period during which the LIBOR Rate
will be in effect will be one, two, three, four, five or six months.
The first day of the interest period must be a day other than a
Saturday or a Sunday on which the Bank is open for business in
California, New York and London and dealing in offshore dollars (a
"LIBOR Banking Day"). The last day of the interest period and the
actual number of days during the interest period will be determined by
the Bank using the practices of the London inter-bank market.
(b) Each LIBOR Rate Portion will be for an amount not
less than the following:
(i) for interest periods of six months, Five
Hundred Thousand Dollars ($500,000).
(ii) for interest periods of one, two, three,
four or five months, One Million Dollars ($1,000,000).
(c) The "LIBOR Rate" means the interest rate
determined by the following formula, rounded upward to the nearest
1/100 of one percent. (All amounts in the calculation will be
determined by the Bank as of the first day of the interest period.)
LIBOR Rate = LONDON INTER-BANK OFFERED RATE
---------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means
the average per annum interest rate at which U.S. dollar
deposits would be offered for the applicable interest period
by major banks in the London inter-bank market, as shown on
the Telerate Page 3750 (or such other page as may replace it)
at approximately 11:00 a.m. London time two (2) London Banking
Days before
-14-
<PAGE>
the commencement of the interest period. If such rate does
not appear on the Telerate Page 3750 (or such other page that
may replace it), the rate for that interest period will be
determined by such alternate method as reasonably selected
by Bank. A "London Banking Day" is a day on which the Bank's
London Branch is open for business and dealing in offshore
dollars.
(ii) "Reserve Percentage" means the total of
the maximum reserve percentages for determining the reserves
to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) The Borrower shall irrevocably request a LIBOR
Rate Portion no later than 12:00 noon San Francisco time on the LIBOR
Banking Day preceding the day on which the London Inter-Bank Offered
Rate will be set, as specified above. For example, if there are no
intervening holidays or weekend days in any of the relevant locations,
the request must be made at least three days before the LIBOR Rate
takes effect.
(e) The Borrower may not elect a LIBOR Rate with
respect to any principal amount which is scheduled to be repaid before
the last day of the applicable interest period.
(f) Each prepayment of a LIBOR Rate Portion, whether
voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid and a
prepayment fee as described below. A "prepayment" is a payment of an
amount on a date earlier than the scheduled payment date for such
amount as required by this Agreement. The prepayment fee shall be equal
to the amount (if any) by which:
(i) the additional interest which would have
been payable during the interest period on the amount prepaid
had it not been prepaid, exceeds
(ii) the interest which would have been
recoverable by the Bank by placing the amount prepaid on
deposit in the domestic certificate of deposit market, the
eurodollar deposit market, or other appropriate money market
selected by the Bank, for a period starting on the date on
which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment
date for the amount prepaid, if earlier).
(g) The Bank will have no obligation to accept an
election for a
-15-
<PAGE>
LIBOR Rate Portion if any of the following described events has
occurred and is continuing:
(i) Dollar deposits in the principal amount,
and for periods equal to the interest period, of a LIBOR Rate
Portion are not available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately
reflect the cost of a LIBOR Rate Portion.
5. FEES AND EXPENSES
5.1 FEES.
(a) LINE OF CREDIT FEE. The Borrower agrees to pay a
loan fee in respect of Facility No. 1 equal to 0.125% per annum of the
Credit Limit. This fee is due on or before the date of this Agreement.
(b) TERM LOAN FEE. The Borrower agrees to pay a
one-time loan fee in the amount of Fifteen Thousand Dollars ($15,000)
in respect of Facility No. 2. This fee is due on or before the date of
this Agreement.
(c) UNUSED LINE OF CREDIT COMMITMENT FEE. The
Borrower agrees to pay a fee on any difference between the Credit Limit
and the amount of credit it actually uses under Facility No. 1,
determined by the weighted average credit outstanding under Facility
No. 1 during the specified period. The fee will be calculated at 0.125%
per year. This fee is due quarterly in arrears on September 30, 1999,
December 31, 1999, March 31, 2000 and June 30, 2000.
(d) WAIVER FEE. If the Bank, at its discretion,
agrees to waive or amend any terms of this Agreement, the Borrower
will, at the Bank's option, pay the Bank a fee for each waiver or
amendment in an amount advised by the Bank at the time the Borrower
requests the waiver or amendment. Nothing in this Section shall imply
that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional requirements
as a condition to any waiver or amendment.
5.2 EXPENSES. The Borrower agrees to immediately repay
the Bank for expenses that include, but are not limited to, filing, recording
and search fees, appraisal fees, title report fees, documentation fees, and
related fees reasonably incurred by the Bank in connection with its due
diligence investigation of the Borrower, the Significant Subsidiaries and
their respective assets.
-16-
<PAGE>
5.3 REIMBURSEMENT COSTS.
(a) The Borrower agrees to reimburse the Bank for any
reasonable expenses it incurs in the preparation of this Agreement and
any agreement or instrument required by this Agreement. Expenses
include, but are not limited to, reasonable attorneys' fees, including
any allocated costs of the Bank's in-house counsel.
(b) The Borrower agrees to reimburse the Bank for the
cost of periodic audits and appraisals of the collateral securing this
Agreement, if required by the Bank, at such intervals as the Bank may
reasonably require, but not more frequently than twice during the term
of this Agreement. The audits and appraisals may be performed by
employees of the Bank or by independent appraisers.
6. COLLATERAL
6.1 PERSONAL PROPERTY. The Borrower's obligations to the
Bank under this Agreement will be secured by all personal property the
Borrower and each Significant Subsidiary now owns or will own in the future
(provided that Metra shall not be required to grant liens in its assets until
the Merger has been consummated). The collateral is further defined in the
Security Agreement.
6.2 SUBSIDIARY GUARANTIES. The obligations of the
Subsidiary Guarantors to the Bank under the Subsidiary Guaranty will be
secured by all personal property the Subsidiary Guarantors now own or will
own in the future. The collateral is further defined in the Security
Agreement.
7. DISBURSEMENTS, PAYMENTS AND COSTS
7.1 REQUESTS FOR CREDIT. Each request for an extension
of credit will be made in writing in a manner acceptable to the Bank, or by
another means acceptable to the Bank.
7.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by the
Bank and each payment by the Borrower will be:
(a) made at the Bank's branch (or other location)
selected by the Bank from time to time;
(b) made for the account of the Bank's branch
selected by the Bank
-17-
<PAGE>
from time to time;
(c) made in immediately available funds, or such
other type of funds selected by the Bank;
(d) evidenced by records kept by the Bank. In
addition, the Bank may, at its discretion, require the Borrower to sign
one or more promissory notes.
7.3 TELEPHONE AND TELEFAX AUTHORIZATION.
(a) The Bank may honor telephone or telefax
instructions for advances or repayments or for the designation of the
optional interest rates given by any one of the individuals authorized
to sign loan agreements on behalf of the Borrower, or any other
individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will
be withdrawn from the Borrower's accounts with the Bank as designated
in writing by the Borrower.
(c) The Bank will provide written confirmation to the
Borrower of transactions made based on telephone or telefax
instructions. The Borrower agrees to notify the Bank promptly of any
discrepancy between the confirmation and the telephone or telefax
instructions.
(d) The Borrower indemnifies and excuses the Bank
(including its officers, employees, and agents) from all liability,
loss, and costs in connection with any act resulting from telephone or
telefax instructions the Bank reasonably believes are made by any
individual authorized by the Borrower to give such instructions. This
indemnity and excuse will survive this Agreement's termination.
7.4 DIRECT DEBIT (PRE-BILLING).
(a) The Borrower agrees that the Bank will debit the
Borrower's account number 14504-08705, or such other of the Borrower's
accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and
interest and any fees from the Borrower becomes due (the "Due Date").
If the Due Date is not a banking day, the Designated Account will be
debited on the next banking day.
(b) Approximately 10 days prior to each Due Date, the
Bank will mail to the Borrower a statement of the amounts that will be
due on that Due Date (the "Billed Amount"). The calculation will be
made on the assumption that no new extensions of credit or payments
will be made between the date of the billing
-18-
<PAGE>
statement and the Due Date, and that there will be no changes in the
applicable interest rate.
(c) The Bank will debit the Designated Account for
the Billed Amount, regardless of the actual amount due on that date
(the "Accrued Amount"). If the Billed Amount debited to the Designated
Account differs from the Accrued Amount, the discrepancy will be
treated as follows:
(i) If the Billed Amount is less than the
Accrued Amount, the Billed Amount for the following Due Date
will be increased by the amount of the discrepancy. The
Borrower will not be in default by reason of any such
discrepancy.
(ii) If the Billed Amount is more than the
Accrued Amount, the Billed Amount for the following Due Date
will be decreased by the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrower interest on any
overpayment.
(d) The Borrower will maintain sufficient funds in
the Designated Account to cover each debit. If there are insufficient
funds in the Designated Account on the date the Bank enters any debit
authorized by this Agreement, the debit will be reversed.
(e) The Borrower may terminate this direct debit
arrangement at any time by sending written notice to the Bank at the
address specified at the end of this Agreement. If the Borrower
terminates this arrangement, then the principal amount outstanding
under this Agreement will at the option of the Bank bear interest at a
rate per annum which is 0.5 percentage point(s) higher than the rate of
interest otherwise provided under this Agreement.
7.4 BANKING DAYS. Unless otherwise provided in this
Agreement, a banking day is a day other than a Saturday or a Sunday on which
the Bank is open for business in California. All payments and disbursements
which would be due on a day which is not a banking day will be due on the
next banking day. All payments received on a day which is not a banking day
will be applied to the credit on the next banking day.
7.5 TAXES.
(a) If any payments to the Bank under this Agreement
are made from outside the United States, the Borrower will not deduct
any foreign taxes from
-19-
<PAGE>
any payments it makes to the Bank. If any such taxes are imposed on
any payments made by the Borrower (including payments under this
Section), the Borrower will pay the taxes and will also pay to the
Bank, at the time interest is paid, any additional amount which the
Bank specifies as necessary to preserve the after-tax yield the Bank
would have received if such taxes had not been imposed. The Borrower
will confirm that it has paid the taxes by giving the Bank official
tax receipts (or notarized copies) within 30 days after the due date.
(b) Payments made by the Borrower to the Bank will be
made without deduction of United States withholding or similar taxes.
If the Borrower is required to pay U.S. withholding taxes, the Borrower
will pay such taxes in addition to the amounts due to the Bank under
this Agreement. If the Borrower fails to make such tax payments when
due, the Borrower indemnifies the Bank against any liability for such
taxes, as well as for any related interest, expenses, additions to tax,
or penalties asserted against or suffered by the Bank with respect to
such taxes.
(c) In the event that the Bank assigns all or any
portion of its interest hereunder to any foreign person, that person
shall provide the Borrower and the Banks with evidence that it is not
subject to back-up withholding.
7.6 ADDITIONAL COSTS. The Borrower will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or
regulation, or any request or requirement of a regulatory agency which is
applicable to all national banks or a class of all national banks. The costs
and losses will be allocated to the loan in a manner determined by the Bank,
using any reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's
assets and commitments for credit.
7.7 INTEREST CALCULATION. Except as otherwise stated in
this Agreement, all interest and fees, if any, will be computed on the basis
of a 360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used. Installments of
principal which are not paid when due under this Agreement shall continue to
bear interest until paid.
7.8 DEFAULT RATE. Upon the occurrence and during the
continuation of any default under this Agreement, principal amounts
outstanding under this Agreement will at the option of the Bank bear interest
at a rate which is two (2) percentage point(s) higher than the rate of
interest otherwise provided under this Agreement. This will not constitute a
waiver of any default.
-20-
<PAGE>
7.9 INTEREST COMPOUNDING. At the Bank's sole option in
each instance, any interest, fees or costs which are not paid when due under
this Agreement shall bear interest from the due date at the Bank's Reference
Rate. This may result in compounding of interest.
7.10 OVERDRAFTS. At the Bank's sole option in each
instance, the Bank may do one of the following:
(a) The Bank may make advances under this Agreement
to prevent or cover an overdraft on any account of the Borrower with
the Bank. Each such advance will accrue interest from the date of
the advance or the date on which the account is overdrawn, whichever
occurs first, at the interest rate described in this Agreement.
(b) The Bank may reduce the amount of credit
otherwise available under this Agreement by the amount of any overdraft
on any account of the Borrower with the Bank.
This Section shall not be deemed to authorize the Borrower to create
overdrafts on any of the Borrower's accounts with the Bank.
7.11 PAYMENTS IN KIND. If the Bank requires delivery in
kind of the proceeds of collection of the Borrower's accounts receivable,
such proceeds shall be credited to interest, principal, and other sums owed
to the Bank under this Agreement in the order and proportion determined by
the Bank in its sole discretion. All such credits will be conditioned upon
collection and any returned items may, at the Bank's option, be charged to
the Borrower.
8. CONDITIONS
The Bank must receive the following items, in form and
content acceptable to the Bank, before it is required to extend any credit to
the Borrower under this Agreement:
8.1 AUTHORIZATIONS. Evidence that the execution,
delivery and performance by the Borrower and each Subsidiary Guarantor of
this Agreement, the Security Agreement, the Subsidiary Guaranty and all other
instruments or agreements required under this Agreement have been duly
authorized.
8.2 GOVERNING DOCUMENTS. A copy of the articles or
certificates of incorporation of the Borrower and each of the Subsidiary
Guarantors.
8.3 SECURITY AGREEMENTS. The Security Agreement, signed
by the Borrower and each of the Subsidiary Guarantors, and the signed
original of such other security agreements, financing statements and fixture
filings (together with collateral in which
-21-
<PAGE>
the Bank requires a possessory security interest) as the Bank requires.
8.4 PLEDGE OF STOCK. A letter agreement in form and
substance acceptable to the Bank pursuant to which certificates representing
100% of the issued and outstanding capital stock of Pacific Biotech and MBS
Acquisition are delivered to the Bank (together with such certificates and
related stock powers in blank).
8.5 THE CASH COLLATERAL AGREEMENT. The Cash Collateral
Agreement signed by Metra, and the deposit of the Acceptable Cash Collateral
with the Bank.
8.6 EVIDENCE OF PRIORITY. Evidence that the security
interests and liens in favor of the Bank are valid, enforceable, and prior to
all other rights and interests, except for Permitted Encumbrances.
8.7 CONSENT TO REMOVAL. For any personal property
collateral located on real property which is not owned by the Borrower, a
Consent to Removal from the owner of the real property, substantially in the
form of EXHIBIT D hereto.
8.8 INSURANCE. Evidence of insurance coverage, as
required in the "Covenants" section of this Agreement.
8.9 SUBSIDIARY GUARANTY. The Subsidiary Guaranty signed
by each of the Subsidiary Guarantors.
8.10 LEGAL OPINION. A written opinion from the Borrower's
legal counsel, substantially in the form of EXHIBIT E hereto and an
acceptable legal opinion, in form and substance acceptable to the Bank, or
other evidence acceptable to the Bank, as to the corporate good standing of
Metra, its due execution and delivery of the Cash Collateral Agreement, and
the absence of conflicts between the Cash Collateral Agreement and any laws,
contracts or organizational documents of Metra.
8.11 GOOD STANDING. Certificates of good standing for the
Borrower and each of the Subsidiary Guarantors from their respective states
of formation and from any other state in which the Borrower or any Subsidiary
Guarantor is required to qualify to conduct its business.
8.12 PAYMENT OF FEES. Payment of all accrued and unpaid
expenses incurred by the Bank as required by the Section "Reimbursement
Costs."
8.13 APPRAISALS. Appraisals prepared by appraisers
acceptable to the Bank with respect to the liquidation value of the
Borrower's inventory and equipment.
8.14 DUE DILIGENCE. The Bank shall have been satisfied
with its due
-22-
<PAGE>
diligence investigation of the Borrower, the Subsidiary Guarantors and their
respective assets, books and records, and systems, including the Bank's
review of the Borrower's draft audited financial statements for its fiscal
year ended March 31, 1999. Such draft audited financial statements shall
contain no material variations from the final audited financial statements
for such fiscal year.
8.15 NO MATERIAL ADVERSE CHANGE. No circumstance or event
that constitutes a Material Adverse Effect shall have occurred since March
31, 1999.
8.16 TERMINATION OF EXISTING FINANCING AGREEMENTS. The
Borrower shall have caused the existing lenders to the Borrower and the
Subsidiary Guarantors to terminate their credit facilities to the Borrower
and the Subsidiary Guarantors and to deliver "payoff" letters to the Bank,
confirming such lenders' agreement to terminate their security interests in
the assets of the Borrower and/or the Subsidiary Guarantors promptly upon
their receipt of payoff funds from the Bank.
8.17 OTHER ITEMS. Any other items that the Bank
reasonably requires.
9. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank
is repaid in full, the Borrower makes the following representations and
warranties. Each request for an extension of credit constitutes a renewed
representation:
9.1 ORGANIZATION OF BORROWER AND ITS SUBSIDIARIES. The
Borrower is a corporation duly formed and existing under the laws of the
state where organized. Giving effect to the Acquisition, each of the
subsidiaries of Borrower are corporations duly formed and existing under the
laws of the states where organized.
9.2 AUTHORIZATION. This Agreement the other Loan
Documents are within the Borrower's and its subsidiaries' powers, have been
duly authorized, and do not conflict with any of their organizational
documents.
9.3 ENFORCEABLE AGREEMENT. This Agreement and the other
Loan Documents are legal, valid and binding agreements of the Borrower and
its Significant Subsidiaries (as the case may be), enforceable against the
Borrower and its Significant Subsidiaries in accordance with their terms, and
any instrument or agreement required hereunder, when executed and delivered,
will be similarly legal, valid, binding and enforceable; PROVIDED, HOWEVER,
the enforceability of this Agreement and of such other instruments and
agreements may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally.
-23-
<PAGE>
9.4 GOOD STANDING. In each state in which the Borrower
and its Significant Subsidiaries do business, each is properly licensed, in
good standing, and, where required, in compliance with fictitious name
statutes, EXCEPT where the failure so to be licensed or in good standing
would not constitute a Material Adverse Effect.
9.5 NO CONFLICTS. This Agreement and the other Loan
Documents do not conflict with any law, agreement, or obligation by which the
Borrower and its Significant Subsidiaries are bound.
9.6 FINANCIAL INFORMATION. All financial and other
information that has been or will be supplied to the Bank, including the
Borrower's audited financial statements for its fiscal year ended March 31,
1999 is:
(a) sufficiently complete to give the Bank accurate
knowledge of the Borrower's financial condition, including all material
contingent liabilities.
(b) in compliance with all government regulations
that apply.
Since the date of the financial statement specified above, there has been no
material adverse change in the financial condition, operations, properties or
prospects of the Borrower and its Subsidiaries taken as a whole.
9.7 LAWSUITS. There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower or any of its Significant
Subsidiaries which, if lost, could have a Material Adverse Effect, except as
have been disclosed in writing to the Bank.
9.8 COLLATERAL. All collateral required in this
Agreement is owned by the grantor of the security interest free of any title
defects or any liens or interests of others except for Permitted Encumbrances.
9.9 PERMITS, FRANCHISES. The Borrower and its
Significant Subsidiaries possess all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights,
patent rights and fictitious name rights necessary to enable it to conduct
the business in which they are now engaged, except to the extent the failure
to possess such assets could not reasonably be expected to cause a Material
Adverse Effect.
9.10 OTHER OBLIGATIONS. The Borrower and its Significant
Subsidiaries are not in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract,
instrument or obligation except for such defaults as have not caused a
Material Adverse Effect.
-24-
<PAGE>
9.11 INCOME TAX MATTERS. The Borrower and its Significant
Subsidiaries are not subject to limitations on their entitlement to deduct
interest for federal income tax purposes under Section 163(j) of the Internal
Revenue Code of 1986 (known as the "earnings stripping" provisions) and has
no knowledge of any pending assessments or adjustments of its income tax for
any year, except as have been disclosed in writing to the Bank.
9.12 NO TAX AVOIDANCE PLAN. The Borrower's obtaining of
credit from the Bank under this Agreement does not have as a principal
purpose the avoidance of U.S. withholding taxes.
9.13 NO EVENT OF DEFAULT. There is no event which is, or
with notice or lapse of time or both would be, a default under this Agreement.
9.14 INSURANCE. The Borrower has obtained, and maintained
in effect, the insurance coverage required in the "Covenants" section of this
Agreement.
9.15 MERCHANTABLE INVENTORY. All inventory which is
included in the Borrowing Base is of good and merchantable quality and free
from defects.
9.16 ERISA PLANS.
(a) Each Plan (other than a multiemployer plan) is in
compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state law. Each Plan has received
a favorable determination letter from the IRS and to the best knowledge
of the Borrower, nothing has occurred which would cause the loss of
such qualification. The Borrower has fulfilled its obligations, if any,
under the minimum funding standards of ERISA and the Code with respect
to each Plan, and has not incurred any material liability with respect
to any Plan under Title IV of ERISA.
(b) There are no claims, lawsuits or actions
(including by any governmental authority), and there has been no
prohibited transaction or violation of the fiduciary responsibility
rules, with respect to any Plan which has resulted or could reasonably
be expected to result in a Material Adverse Effect.
(c) With respect to any Plan subject to Title IV of
ERISA:
(i) No reportable event has occurred under
Section 4043(c) of ERISA for which the PBGC requires 30 day
notice.
(ii) No action by the Borrower or any ERISA
Affiliate to terminate or withdraw from any Plan has been
taken and no notice of intent to terminate a Plan has been
filed under Section 4041 of ERISA.
-25-
<PAGE>
(iii) No termination proceeding has been
commenced with respect to a Plan under Section 4042 of ERISA,
and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.
(d) The following terms have the meanings indicated
for purposes of this Agreement:
(i) "Code" means the Internal Revenue Code
of 1986, as amended from time to time.
(ii) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended from time to time.
(iii) "ERISA Affiliate" means any trade or
business (whether or not incorporated) under common control
with the Borrower within the meaning of Section 414(b) or (c)
of the Code.
(iv) "PBGC" means the Pension Benefit
Guaranty Corporation.
(v) "Plan" means a pension, profit-sharing,
or stock bonus plan intended to qualify under Section 401(a)
of the Code, maintained or contributed to by the Borrower or
any ERISA Affiliate, including any multiemployer plan within
the meaning of Section 4001(a)(3) of ERISA.
9.17 LOCATION OF BORROWER AND ITS SUBSIDIARIES. The
Borrower's and its Significant Subsidiaries place of business (or, if the
Borrower or any such Significant Subsidiary has more than one place of
business, its chief executive office) is located at the address listed under
the Borrower's signature on this Agreement (or at such other address as may
be set forth in a notice of change of address delivered to Lender after the
date hereof).
9.18 ENVIRONMENTAL MATTERS. The Borrower and its
Significant Subsidiaries (a) are not in material violation of any health,
safety, or environmental law or regulation regarding hazardous substances and
(b) are not the subject of any material claim, proceeding, written notice, or
other written communication regarding hazardous substances. "Hazardous
substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state
or local law (whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including without
limitation petroleum or natural gas.
9.19 YEAR 2000 COMPLIANCE. The Borrower has developed and
budgeted for
-26-
<PAGE>
a comprehensive program to address the "year 2000 problem" (that is, the
inability of computers, as well as embedded microchips in non-computing
devices, to properly perform date-sensitive functions with respect to certain
dates prior to and after December 31, 1999). The Borrower has implemented
that program substantially in accordance with its timetable and budget and
reasonably anticipates that it will substantially avoid the year 2000 problem
as to all computers, as well as embedded microchips in non-computing devices,
that are material to the Borrower's business, properties or operations. The
Borrower has developed adequate contingency plans to ensure uninterrupted and
unimpaired business operation in the event of a failure of its own or a third
party's systems or equipment due to the year 2000 problem, including those of
vendors, customers, and suppliers, as well as a general failure of or
interruption in its communications and delivery infrastructure.
10. COVENANTS
The Borrower agrees, so long as credit is available under
this Agreement and until the Bank is repaid in full:
10.1 USE OF PROCEEDS. To use the proceeds of Facility No.
1 only to finance a portion of the Acquisition and to fund the Borrower's
ongoing working capital requirements and to use the proceeds of Facility No.
2 only to finance a portion of the Acquisition.
10.2 FINANCIAL INFORMATION. To provide the following
financial information and statements in form and content acceptable to the
Bank, and such additional information as requested by the Bank from time to
time:
(a) Within 90 days of the Borrower's fiscal year end,
the Borrower's annual financial statements. These financial statements
must be audited (with an unqualified opinion) by a Certified Public
Accountant acceptable to the Bank. The statements shall be prepared on
a consolidated basis. The Borrower shall prepare and provide the Bank
with consolidating schedules for its Significant Subsidiaries.
(b) Within 45 days of the period's end (except in the
case of the last period in each fiscal year, as to which the deadline
shall be 90 days after the end of such period), the Borrower's
quarterly financial statements. These financial statements may be
Borrower prepared. The statements shall be prepared on a consolidated
and consolidating basis and shall provide a comparison to the
Borrower's prior year-end plan.
(c) Promptly, upon sending or receipt, copies of any
management letters and correspondence relating to management letters,
sent or received by the Borrower to or from the Borrower's auditor.
(d) Copies of the Borrower's Form 10-K Annual Report,
Form
-27-
<PAGE>
10-Q Quarterly Report and Form 8-K Current Report within 15 days
after the date of filing with the Securities and Exchange Commission.
(e) Within the period(s) provided in subsection (b)
above, a compliance certificate of the Borrower, substantially in the
form of EXHIBIT G, signed by an authorized financial officer of the
Borrower setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance with
all financial covenants at the end of the period covered by the
financial statements then being furnished and (ii) whether there
existed as of the date of such financial statements and whether there
exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature
thereof and the action the Borrower is taking and proposes to take with
respect thereto.
(f) Promptly upon receipt, copies of all notices,
orders, or other communications regarding (i) any enforcement action by
any governmental authority relating to health, safety, the environment,
or any hazardous substances with regard to the Borrower's property,
activities, or operations, or (ii) any claim against the Borrower or
any Significant Subsidiary regarding hazardous substances.
(g) A borrowing base certificate, substantially in
the form of EXHIBIT C, setting forth the amount of Acceptable
Receivables, and Acceptable Inventory Acceptable Equipment, Cash and
Cash Equivalents as of the last day of each quarter within thirty (30)
days after the end of such quarter and, upon the Bank's request, copies
of the invoices or the record of invoices from the Borrower's sales
journal for such Acceptable Receivables, copies of the delivery
receipts, purchase orders, shipping instructions, bills of lading and
other documentation pertaining to such Acceptable Receivables, and
copies of the cash receipts journal pertaining to the borrowing base
certificate. The Borrower shall provide the Bank with a new borrowing
base certificate concurrently with its request for each advance under
Facility No. 1, setting forth the Borrowing Base as of the last day of
the then most recently ended calendar month for which the Borrower is
obliged to have delivered its financial statements to the Bank pursuant
to this Agreement.
(h) By April 30, 2000, quarterly financial
projections for each quarter of Borrower's fiscal year ending March 31,
2001.
(i) Promptly upon the Bank's request, such other
books, records, statements, lists of property and accounts, budgets,
forecasts or reports as to the Borrower and as to each guarantor of the
Borrower's obligations to the Bank as the Bank may reasonably request.
10.3 TANGIBLE NET WORTH. To maintain on a consolidated basis
tangible net worth equal to at least Thirty-Two Million Two Hundred Fifty
Thousand Dollars
-28-
<PAGE>
($32,250,000). The Borrower's compliance with this covenant shall be tested
as of the last day of each fiscal quarter of the Borrower.
"TANGIBLE NET WORTH" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, capitalized or
deferred research and development costs, deferred marketing expenses,
deferred receivables, and other like intangibles, and monies due from
affiliates, officers, directors, employees, or shareholders of the Borrower)
plus liabilities subordinated to the Bank in a manner acceptable to the Bank
(using the Bank's standard form) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.
10.4 SENIOR DEBT TO EBITDA. To maintain on a consolidated
basis a ratio of Senior Debt to EBITDA not exceeding 2.50:1.0. "Senior Debt"
means Borrower's and its subsidiaries consolidated indebtedness for borrowed
money not subordinated to the Borrower's and each such subsidiaries'
obligations to the Bank in a manner acceptable to the Bank, using the Bank's
standard subordination agreement form. "EBITDA" means Borrower's and its
subsidiaries' consolidated net income before interest, taxes, depreciation
and amortization. The Borrower's compliance with this covenant shall be
tested at the end of each fiscal quarter of the Borrower, using the results
of operations for that quarter and of each of the three immediately preceding
quarters.
10.5 PROFITABILITY. To maintain on a consolidated basis a
positive net income before taxes and extraordinary items for the Borrower's
fiscal year 2000.
10.6 LIMITATION ON LOSSES. Not incur on a consolidated
basis a net loss before taxes and extraordinary items for more than one
fiscal quarter in any fiscal year of the Borrower.
10.7 TRUSTS. Not to transfer any of the Borrower's or its
Significant Subsidiaries' assets to a trust unless the trust is acceptable to
the Bank in form and content, and the trustee guaranties payment of the
Borrower's obligations under this Agreement prior to any such transfer.
10.8 OTHER DEBTS. Not to have outstanding or incur, or
permit any Significant Subsidiary to have outstanding or incur, any direct or
contingent liabilities or capital lease obligations (other than those to the
Bank), or become liable for the liabilities of others, without the Bank's
written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on
normal trade credit.
(b) Endorsing negotiable instruments received in the
usual course
-29-
<PAGE>
of business.
(c) Obtaining surety bonds in the usual course of
business.
(d) Liabilities in existence on the date of this
Agreement disclosed in writing to the Bank.
(e) Additional debts and lease obligations for the
acquisition of fixed assets, to the extent permitted by Section 10.9(d)
and (e).
(f) The Intercompany Loan and other indebtedness
incurred between Borrower and the Subsidiary Guarantors in the ordinary
course of their business.
(g) Additional debts and lease obligations for
business purposes which do not exceed a total principal amount of Two
Hundred Fifty Thousand Dollars ($250,000) outstanding at any one time.
10.9 OTHER LIENS. Not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrower
or any of its Subsidiaries now or later owns, except the following
(collectively, "Permitted Encumbrances"):
(a) Deeds of trust and security agreements in favor
of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement
and described in EXHIBIT F hereto.
(d) Additional purchase money security interests in
equipment or other personal property fixed assets or real property
acquired after the date of this Agreement (or capital leases thereof)
if the total principal amount of debts secured by such liens does not
exceed Two Hundred Fifty Thousand Dollars ($250,000) at any one time.
(e) Additional liens against equipment or other
personal property fixed assets of the Borrower and its Subsidiaries (or
capital leases) which, together with the liens permitted under
subsection (d) above, secure obligations in a total principal amount
not exceeding Two Hundred Fifty Thousand Dollars ($250,000).
(f) Pledges and deposits in favor of governmental
agencies required by statute in connection with workers compensation,
unemployment insurance, social security laws and similar legislation.
-30-
<PAGE>
(g) Mechanics liens and other statutory inchoate
liens, to the extent not delinquent.
(h) Easements and other similar encumbrances upon
real property which do not materially detract from Borrower's and its
Significant Subsidiaries' use thereof.
10.10 CAPITAL EXPENDITURES. Not to spend or incur
obligations, or permit its Subsidiaries to spend or incur obligations
(including the total amount of any new capital leases) for more than Five
Million Dollars ($5,000,000) in any single fiscal year to acquire fixed
assets.
10.11 LEASES. Not to permit the aggregate payments due in
any fiscal year under all leases of Borrower and its Subsidiaries (including
capital and operating leases for real or personal property) to exceed Two
Million Five Hundred Thousand Dollars ($2,500,000).
10.12 DIVIDENDS. Not to declare or pay any dividends on
any of the shares of capital stock or other equity interests of Borrower and
its Subsidiaries except dividends payable in capital stock of the Borrower,
and not to purchase, redeem or otherwise acquire for value any of its shares,
or create any sinking fund in relation thereto, except for acquisitions, made
when no default hereunder has occurred and remains continuing, of stock held
by members of the management of Borrower upon their death, disability,
retirement or termination of employment in an aggregate amount not to exceed
Five Hundred Thousand Dollars ($500,000)..
10.13 NOTICES TO BANK. To promptly notify the Bank in
writing of:
(a) any lawsuit over One Million Dollars ($1,000,000)
against the Borrower or any Subsidiary.
(b) any substantial dispute between the Borrower or
any Significant Subsidiary and any government authority.
(c) any failure to comply with this Agreement.
(d) any Material Adverse Effect.
(e) any change in the Borrower's or any Subsidiaries'
name, legal structure, place of business, or chief executive office if
any such person has more than one place of business.
-31-
<PAGE>
(f) the receipt of any notice or communication
regarding (i) any threatened or pending investigation or enforcement
action by any governmental authority or any other claim relating to
health, safety, the environment, or any hazardous substances with
regard to the Borrower's or its Significant Subsidiaries' property,
activities, or operations or (ii) any belief or suspicion of the
Borrower that hazardous substances exist on or under the Borrower's or
its Significant Subsidiaries' real property.
10.14 BOOKS AND RECORDS. To maintain (and cause its
subsidiaries to maintain) adequate books and records.
10.15 AUDITS. To allow the Bank and its agents to inspect
the Borrower's and its subsidiaries properties and examine, audit, and make
copies of books and records at any reasonable time and upon reasonable notice.
10.16 COMPLIANCE WITH LAWS. To comply (and cause its
subsidiaries to comply) in all material respects with the laws (including any
fictitious name statute), regulations, and orders of any government body with
authority over the Borrower's and its subsidiaries business.
10.17 PRESERVATION OF RIGHTS. To maintain and preserve all
rights, privileges, and franchises the Borrower and its Significant
Subsidiaries now have that are reasonably necessary or desirable to the
conduct of their business as now conducted or contemplated to be conducted.
10.18 MAINTENANCE OF PROPERTIES. To make any repairs,
renewals, or replacements to keep the Borrower's and its Significant
Subsidiaries properties in good working condition.
10.19 PERFECTION OF LIENS. To help the Bank perfect and
protect its security interests and liens, and reimburse it for related costs
it incurs to protect its security interests and liens.
10.20 COOPERATION. To take any action reasonably requested
by the Bank to carry out the intent of this Agreement.
10.21 INSURANCE.
(a) INSURANCE COVERING COLLATERAL. To maintain all
risk property damage insurance policies covering the tangible property
comprising the collateral. Each insurance policy must be in an amount
acceptable to the Bank. The insurance must be issued by an insurance
company acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in a form acceptable to the
-32-
<PAGE>
Bank.
(b) GENERAL BUSINESS INSURANCE. To maintain insurance
satisfactory to the Bank as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of the
Borrower's and its Significant Subsidiaries' properties, public
liability insurance including coverage for contractual liability,
product liability and workers' compensation, and any other insurance
which is usual for the Borrower's business.
(c) EVIDENCE OF INSURANCE. Upon the request of the
Bank, to deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing all insurance
in force.
10.22 ADDITIONAL NEGATIVE COVENANTS. Not to, without the
Bank's written consent:
(a) engage in any business activities substantially
different from the Borrower's present business.
(b) liquidate or dissolve the Borrower's business or
that of any Significant Subsidiary.
(c) enter into any consolidation, merger, or other
combination, or become a partner in a partnership, a member of a joint
venture, or a member of a limited liability company, except for the
Merger and any other consolidation, merger or other combination between
Borrower and a Subsidiary Guarantor where Borrower is the survivor.
(d) except for any such transfers of assets among
Borrower and the Subsidiary Guarantors, sell, assign, lease, transfer
or otherwise dispose of any assets for less than fair market value, or
enter into any agreement to do so or permit any Significant Subsidiary
so to do. For the purpose of this Section, "fair market value" shall be
deemed to mean (i) with respect to accounts receivable, the balance
outstanding thereunder (except for reasonable discounts for
collection); (ii) with respect to inventory, the Borrower's cost
thereof or, if less, the fair market value thereof; and (iii) with
respect to fixed assets or equipment, the greater of the amount
determined by an appraisal acceptable to the Bank or the outstanding
balance of any financing (or portion thereof) obtained from the Bank to
finance or refinance the acquisition of, or which is secured by, such
equipment or fixed assets, except that the fair market value of
obsolete, worn-out or damaged equipment shall be as determined in good
faith by the Borrower.
(e) sell, assign, lease, transfer or otherwise
dispose of any part of
-33-
<PAGE>
the Borrower's business or the Borrower's assets except inventory
sold in the ordinary course of the Borrower's business and obsolete,
worn out or surplus equipment having a value of not more than
$1,000,000, in the aggregate, during the term of this Agreement.
(f) enter into any sale and leaseback agreement
covering any of its fixed assets, EXCEPT for the Sale/Leaseback
Transaction.
(g) acquire or purchase a business or its assets,
other than in connection with the Acquisition.
10.23 BANK AS PRINCIPAL DEPOSITORY. To maintain the Bank
as the principal depository bank for Borrower and its subsidiaries, including
for the maintenance of business, cash management, operating and
administrative deposit accounts.
10.24 ERISA PLANS. With respect to a Plan subject to Title
IV of ERISA, to give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under
Section 4043(c) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by the Borrower or any ERISA Affiliate
to terminate or withdraw from a Plan or the filing of any notice of
intent to terminate under Section 4041 of ERISA.
(c) The commencement of any proceeding with respect
to a Plan under Section 4042 of ERISA.
10.25 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. With
regard to the Borrower's and its Significant Subsidiaries' property,
activities, or operations, to comply with the recommendations of any
qualified environmental engineer or orders or directions issued by any
governmental authority relating to health, safety, the environment, or any
hazardous substances including those orders or directives requiring the
investigation, clean-up, or removal of hazardous substances.
10.26 CLOSING BALANCE SHEET AND INCOME STATEMENT. To
provide the Bank with the Borrower's consolidated balance sheet and income
statement within thirty (30) days after consummating the Acquisition.
10.27 FUTURE SUBSIDIARIES. Cause each Significant
Subsidiary established or acquired by the Borrower after the date of this
Agreement to execute and deliver to the Bank an appropriate joinder to each
of the Subsidiary Guaranty and the Security Agreement, and concurrently
deliver in pledge to the Bank 100% of the capital stock thereof.
-34-
<PAGE>
10.28 LANDLORD WAIVER. Cause the new owner of the
Borrower's headquarters facility following the completion of the
Sale/Leaseback Transaction to execute in favor of the Bank a consent to
remove personal property substantially in the form of the Bank's standard
form attached hereto as EXHIBIT D.
10.29 COVENANTS REGARDING METRA. Cause the Merger to occur
within 30 days following the initial loans hereunder, and cause Metra to
execute a joinder to the Subsidiary Guaranty and the Security Agreement
concurrently with the Merger, and pledge 100% of the capital stock of Metra
to the Bank.
10.30 REPAYMENT OF THE TERM LOAN. Do all things necessary
to assure the prompt repayment of the term loan, including without limitation
the making of the Intercompany Loan not later than five days following the
initial loans under this Agreement (unless Borrower assures another source of
payment for the term loan).
11. HAZARDOUS WASTE INDEMNIFICATION
The Borrower will indemnify and hold harmless the Bank from
any loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance. This indemnity will
apply whether the hazardous substance is on, under or about the Borrower's
and its Significant Subsidiaries' property or operations or property leased
to the Borrower and its Significant Subsidiaries. The indemnity includes but
is not limited to reasonable attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to the Bank, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns. "Hazardous
substances" means any substance, material or waste that is or becomes
designated or regulated as "toxic," "hazardous," "pollutant," or
"contaminant" or a similar designation or regulation under any federal, state
or local law (whether under common law, statute, regulation or otherwise) or
judicial or administrative interpretation of such, including without
limitation petroleum or natural gas. This indemnity will survive repayment of
the Borrower's obligations to the Bank.
12. EVENTS OF DEFAULT
If any of the following events occurs (each, an "Event of
Default"), the Bank may do one or more of the following: declare the Borrower
in default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior
notice. If an event of default occurs under the Section entitled
"Bankruptcy," below, with respect to the Borrower, then, the entire debt
outstanding under
-35-
<PAGE>
this Agreement will automatically be due immediately.
12.1 FAILURE TO PAY. The Borrower fails to make a payment
under this Agreement within 5 days after the date when due.
12.2 LIEN PRIORITY. The Bank fails to have an enforceable
first lien (except for Permitted Encumbrances) on or security interest in any
property given as security for this Agreement or the Subsidiary Guaranty).
12.3 FALSE INFORMATION. The Borrower (or any Subsidiary
Guarantor) has given the Bank false or misleading information or
representations.
12.4 BANKRUPTCY. The Borrower (or any Subsidiary
Guarantor) files a bankruptcy petition, a bankruptcy petition is filed
against the Borrower (or any Subsidiary Guarantor) or the Borrower (or any
Subsidiary Guarantor) makes a general assignment for the benefit of
creditors. The default will be deemed cured if any bankruptcy petition filed
against the Borrower (or any Subsidiary Guarantor) is dismissed within a
period of 60 days after the filing; PROVIDED, HOWEVER, that the Bank will not
be obligated to extend any additional credit to the Borrower during that
period.
12.5 RECEIVERS. A receiver or similar official is
appointed for the Borrower's (or any Subsidiary Guarantor's) business, or the
business is terminated, or any Subsidiary Guarantor is liquidated or
dissolved (except in connection with any merger or consolidation permitted
hereunder).
12.6 JUDGMENTS. Any judgments or arbitration awards are
entered against the Borrower (or any Subsidiary Guarantor), or the Borrower
(or any Subsidiary Guarantor) enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Five
Hundred Thousand Dollars ($500,000) or more in excess of any insurance
coverage.
12.7 GOVERNMENT ACTION. Any government authority takes
action against or affecting the Borrower or its Significant Subsidiaries that
the Bank reasonably believes could have a Material Adverse Effect.
12.8 MATERIAL ADVERSE CHANGE. A Material Adverse Effect
occurs.
12.9 CROSS-DEFAULT. Any default occurs under any
agreement in connection with any credit the Borrower (or any Subsidiary
Guarantor) has obtained from anyone else or which the Borrower (or any
Subsidiary Guarantor) has guaranteed in the amount of Five Hundred Thousand
Dollars ($500,000) or more in the aggregate if the default consists of
failing to make a payment when due or gives the other lender the right to
accelerate the obligation.
-36-
<PAGE>
12.10 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty,
security agreement or other document required by this Agreement is violated
or no longer in effect.
12.11 OTHER BANK AGREEMENTS. The Borrower (or any
Subsidiary Guarantor) fails to perform any obligation under any other
agreement the Borrower (or any Subsidiary Guarantor) has with the Bank or any
affiliate of the Bank. If, in the Bank's opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this Agreement for a period of thirty days after the date on which the Bank
gives written notice of the breach to the Borrower; PROVIDED, HOWEVER, that
the Bank will not be obligated to extend any additional credit to the
Borrower during that period.
12.12 ERISA PLANS. Any one or more of the following events
occurs with respect to a Plan of the Borrower subject to Title IV of ERISA,
provided such event or events could reasonably be expected, in the judgment
of the Bank, to subject the Borrower to any tax, penalty or liability (or any
combination of the foregoing) which, in the aggregate, could have a Material
Adverse Effect:
(a) A reportable event shall occur under Section
4043(c) of ERISA with respect to a Plan.
(b) Any Plan termination (or commencement of
proceedings to terminate a Plan) or the full or partial withdrawal from
a Plan by the Borrower or any ERISA Affiliate.
12.13 OTHER BREACH UNDER AGREEMENT. The Borrower fails to
perform any obligation under any term of this Agreement not specifically
referred to in this Article, or Borrower or any Significant Subsidiary fails
to perform any obligation under any other Loan Document. This includes any
failure by the Borrower or any Significant Subsidiary to comply with any
financial covenants set forth in this Agreement, whether such failure is
evidenced by financial statements delivered to the Bank or is otherwise known
to the Borrower or the Bank. If, in the Bank's opinion, the breach is capable
of being remedied, the breach will not be considered an event of default
under this Agreement for a period of thirty (30) days after the date on which
the Bank gives written notice of the breach to the Borrower; PROVIDED,
HOWEVER, that the Bank will not be obligated to extend any additional credit
to the Borrower during that period.
13. ENFORCING THIS AGREEMENT; MISCELLANEOUS
13.1 GAAP. Except as otherwise stated in this Agreement,
all financial information provided to the Bank and all financial covenants
will be made under GAAP, consistently applied.
-37-
<PAGE>
13.2 CALIFORNIA LAW. This Agreement is governed by
California law.
13.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on
the Borrower's and the Bank's successors and assignees. The Borrower agrees
that it may not assign this Agreement without the Bank's prior consent. The
Bank may sell participations in or assign this loan, and may exchange
financial information about the Borrower with actual or potential
participants or assignees; provided that such actual or potential
participants or assignees shall agree to treat all financial information
exchanged as confidential. If a participation is sold or the loan is
assigned, the purchaser will have the right of set-off against the Borrower.
13.4 ARBITRATION.
(a) This Section concerns the resolution of any
controversies or claims between the Borrower and the Bank, including
but not limited to those that arise from:
(i) This Agreement (including any renewals,
extensions or modifications of this Agreement);
(ii) Any document, agreement or procedure
related to or delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from
any business conducted between the Borrower and the Bank,
including claims for injury to persons, property or business
interests (torts).
(b) At the request of the Borrower or the Bank, any
such controversies or claims will be settled by arbitration in
accordance with the United States Arbitration Act. The United States
Arbitration Act will apply even though this Agreement provides that it
is governed by California law.
(c) Arbitration proceedings will be administered by
the American Arbitration Association and will be subject to its
commercial rules of arbitration. The arbitration will be conducted in
California within the following county or counties: Los Angeles or San
Diego.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Section is
the equivalent of the filing of a lawsuit, and any claim or controversy
which may be arbitrated under this Section is subject to any applicable
statute of limitations. The arbitrators will have the authority
-38-
<PAGE>
to decide whether any such claim or controversy is barred by the
statute of limitations and, if so, to dismiss the arbitration on
that basis.
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration
proceeding may be submitted to any authorized court of law to be
confirmed and enforced.
(g) The procedure described above will not apply if
the controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to the Bank
secured by real property located in California. In this case, both the
Borrower and the Bank must consent to submission of the claim or
controversy to arbitration. If both parties do not consent to
arbitration, the controversy or claim will be settled as follows:
(i) The Borrower and the Bank will designate
a referee (or a panel of referees) selected under the auspices
of the American Arbitration Association in the same manner as
arbitrators are selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in
California Code of Civil Procedure Section 638 and the
following related sections;
(iii) The referee (or the presiding referee of
the panel) will be an active attorney or a retired judge; and
(iv) The award that results from the decision
of the referee (or the panel) will be entered as a judgment in
the court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644
and 645.
(h) This provision does not limit the right of the
Borrower or the Bank to:
(i) exercise self-help remedies such as
setoff;
(ii) foreclose against or sell any real or
personal property collateral; or
(iii) act in a court of law, before, during or
after the arbitration proceeding to obtain:
-39-
<PAGE>
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(i) The pursuit of or a successful action for
interim, additional or supplementary remedies, or the filing of a court
action, does not constitute a waiver of the right of the Borrower or
the Bank, including the suing party, to submit the controversy or claim
to arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to the
Bank which is secured by real property located in California at the
time of the proposed submission to arbitration, this right is limited
according to the provision above requiring the consent of both the
Borrower and the Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property
securing this Agreement, the Bank has the option to exercise the power
of sale under the deed of trust or mortgage, or to proceed by judicial
foreclosure.
13.5 SEVERABILITY; WAIVERS. If any part of this Agreement
is not enforceable, the rest of the Agreement may be enforced. The Bank
retains all rights, even if it makes a loan after default. If the Bank waives
a default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.
13.6 ADMINISTRATION COSTS. The Borrower shall pay the
Bank for all reasonable costs incurred by the Bank in connection with
administering this Agreement.
13.7 ATTORNEYS' FEES. The Borrower shall reimburse the
Bank for any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or remedies
under this Agreement and any other documents executed in connection with this
Agreement, and in connection with any amendment, waiver, "workout" or
restructuring under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees incurred in connection with the lawsuit or arbitration
proceeding, as determined by the court or arbitrator. In the event that any
case is commenced by or against the Borrower under the Bankruptcy Code (Title
11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys' fees incurred by the Bank
related to the preservation, protection, or enforcement of any rights of the
Bank in such a case. As used in this Section, "attorneys' fees" includes the
allocated costs of the Bank's in-house counsel.
13.8 MULTIPLE BORROWERS. If two or more borrowers sign
this Agreement, each will be individually obligated to repay the Bank in
full, and all will be obligated together.
13.9 INDIVIDUAL LIABILITY. The Bank may proceed against
the Borrower's
-40-
<PAGE>
business and non-business property in enforcing this and other agreements
relating to this loan.
13.10 ONE AGREEMENT. This Agreement and any related
security or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and
agreements between the Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements
between the Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the
final, complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
13.11 DISPOSITION OF SCHEDULES, REPORTS, ETC. DELIVERED BY
BORROWER. The Bank will not be obligated to return any schedules, invoices,
statements, budgets, forecasts, reports or other papers delivered by the
Borrower. The Bank will destroy or otherwise dispose of such materials at
such time as the Bank, in its discretion, deems appropriate.
13.12 RETURNED MERCHANDISE. Until the Bank exercises its
rights to collect the accounts receivable as provided under any security
agreement required under this Agreement, the Borrower may continue its
present policies for returned merchandise and adjustments. Credit adjustments
with respect to returned merchandise shall be made immediately upon receipt
of the merchandise by the Borrower or upon such other disposition of the
merchandise by the debtor in accordance with the Borrower's instructions. If
a credit adjustment is made with respect to any Acceptable Receivable, the
amount of such adjustment shall no longer be included in the amount of such
Acceptable Receivable in computing the Borrowing Base.
13.13 VERIFICATION OF RECEIVABLES. The Bank may at any
time, either orally or in writing (in the name of Borrower or its appropriate
subsidiary unless an Event of Default has occurred), request confirmation
from any debtor of the current amount and status of the accounts receivable
upon which such debtor is obligated.
13.14 WAIVER OF CONFIDENTIALITY. The Borrower authorizes
the Bank to discuss the Borrower's financial affairs and business operations
with any accountants, auditors, business consultants, or other professional
advisors employed by the Borrower, and authorizes such parties to disclose to
the Bank such financial and business information or reports (including
management letters) concerning the Borrower as the Bank may request.
-41-
<PAGE>
13.15 INDEMNIFICATION. The Borrower will indemnify and
hold the Bank harmless from any loss, liability, damages, judgments, and
costs of any kind relating to or arising directly or indirectly out of (a)
this Agreement or any document required hereunder, (b) any credit extended or
committed by the Bank to the Borrower hereunder, (c) any claim, whether
well-founded or otherwise, that there has been a failure to comply with any
law regulating the Borrower's sales or leases to or performance of services
for debtors obligated upon the Borrower's accounts receivable and disclosures
in connection therewith, and (d) any litigation or proceeding related to or
arising out of this Agreement, any such document, any such credit, or any
such claim. This indemnity includes but is not limited to reasonable
attorneys' fees (including the allocated cost of in-house counsel). This
indemnity shall not apply to any of the foregoing to the extent that the same
result from the gross negligence or wilful misconduct of the Bank or other
indemnified person. This indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive repayment of
the Borrower's obligations to the Bank. All sums due to the Bank hereunder
shall be obligations of the Borrower, due and payable immediately without
demand.
13.16 NOTICES. All notices required under this Agreement
shall be personally delivered or sent by first class mail, postage prepaid,
to the addresses on the signature page of this Agreement, or to such other
addresses as the Bank and the Borrower may specify from time to time in
writing.
13.17 HEADINGS. Article and Section headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
-42-
<PAGE>
13.18 COUNTERPARTS. This Agreement may be executed in as
many counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
This Agreement is executed as of the date stated at the top of the first page.
Bank of America National Trust and Quidel Corporation
Savings Association
By /s/ Karin S. Barnes By /s/ Andre de Bruin
--------------------------------- ---------------------------------
Typed Name Karin S. Barnes Typed Name Andre de Bruin
------------------------- -------------------------
Title Vice President Title President and CEO
------------------------------ ------------------------------
By By /s/ Charles J. Cashion
--------------------------------- ---------------------------------
Typed Name Typed Name Charles J. Cashion
------------------------- -------------------------
Title Title Senior Vice President
------------------------------ Corporate Operations,
Chief Financial Officer
and Secretary
-----------------------------
Address where notices to the Bank Address where notices to the
are to be sent: Borrower are to be sent:
San Diego Regional Commercial 10165 McKellar Court
Banking Office San Diego, California 92121
450 B Street Attention: President
San Diego, California 92101
Attention: Karin Barnes
-43-
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), dated as of July
12, 1999, is made by Quidel Corporation, a Delaware corporation (the
"Borrower"), and those Significant Subsidiaries of the Borrower that are
parties hereto, as indicated on the signature pages hereof, and/or that
become parties hereto in the manner provided in SECTION 22 hereof, jointly
and severally, as Grantors, in favor of Bank of America National Trust and
Savings Association (the "Bank"), with reference to the following facts:
RECITALS
A. Pursuant to the Business Loan Agreement of even date
herewith by and between the Borrower and the Bank (the "Loan Agreement"), the
Bank has agreed to provide the Borrower with certain revolving and term
credit facilities.
B. The Loan Agreement provides, as a condition of the
availability of such credit facilities, that Grantors shall enter into this
Agreement and shall grant security interests to the Bank as herein provided.
C. Each Grantor expects to realize direct and indirect
benefits as a result of the availability of the aforementioned credit
facilities.
AGREEMENT
NOW, THEREFORE, in order to induce the Bank to extend the
aforementioned credit facilities to the Borrower, and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Grantors hereby jointly and severally represent, warrant,
covenant, agree, assign and grant as follows:
1. DEFINITIONS. This Agreement is the Security Agreement
referred to in the Loan Agreement. Terms defined in the Loan Agreement and
not otherwise defined in this Agreement shall have the meanings defined for
those terms in the Loan Agreement. Terms defined in the California Uniform
Commercial Code and not otherwise defined in this Agreement or in the Loan
Agreement shall have the meanings defined for those terms in the California
Uniform Commercial Code. As used in this Agreement, the following terms shall
have the meanings respectively set forth after each:
"AGREEMENT" means this Security Agreement, and any extensions,
modifications, renewals, restatements, supplements or amendments hereof,
INCLUDING, without limitation, any documents or agreements by which
additional Grantors become party hereto.
"COLLATERAL" means and includes all present and future right,
title and interest of Grantors, or any one or more of them, in or to any
personal property or assets whatsoever, wherever located, and all rights and
powers of Grantors, or any one or more of them, to transfer any interest in
or to any personal property or assets whatsoever, INCLUDING, without
limitation, any and all of the following personal property:
-1-
<PAGE>
(a) All present and future accounts, accounts
receivable, agreements, contracts, leases, contract rights, rights to
payment, instruments, documents, chattel paper, security agreements,
guaranties, letters of credit, undertakings, surety bonds, insurance
policies (whether or not required by the terms of the Loan Agreement),
notes and drafts, and all forms of obligations owing to any Grantor or in
which any Grantor may have any interest, however created or arising and
whether or not earned by performance;
(b) All present and future general intangibles, all tax
refunds of every kind and nature to which any Grantor now or hereafter
may become entitled, however arising, all other refunds, and all
deposits, reserves, loans, royalties, cost savings, deferred payments,
goodwill, choses in action, liquidated damages, rights to
indemnification, trade secrets, computer programs, software, customer
lists, trademarks, trade names, patents, licenses, copyrights,
technology, processes, proprietary information and insurance proceeds of
which any Grantor is a beneficiary;
(c) All present and future deposit accounts of any
Grantor, INCLUDING, without limitation, any demand, time, savings,
passbook or like account maintained by any Grantor with any bank, savings
and loan association, credit union or like organization, and all money,
Cash and Cash Equivalents of any Grantor, whether or not deposited in any
such deposit account, and INCLUDING, specifically, any and all deposit
accounts maintained by Metra Biosystems, Inc. with the Bank as collateral
security for the Secured Obligations;
(d) All present and future books and records, INCLUDING,
without limitation, books of account and ledgers of every kind and
nature, all electronically recorded data relating to any Grantor or the
business thereof, all receptacles and containers for such records, and
all files and correspondence;
(e) All present and future goods, INCLUDING, without
limitation, all consumer goods, farm products, inventory, equipment,
machinery, tools, molds, dies, furniture, furnishings, fixtures, trade
fixtures, motor vehicles, and all other goods used in connection with or
in the conduct of any Grantor's business;
(f) All present and future inventory and merchandise,
INCLUDING, without limitation, all present and future goods held for sale
or lease or to be furnished under a contract of service, all raw
materials, work in process and finished goods, all packing materials,
supplies and containers relating to or used in connection with any of the
foregoing, and all bills of lading, warehouse receipts or documents of
title relating to any of the foregoing;
(g) All present and future stocks, bonds, debentures,
securities, subscription rights, options, warrants, puts, calls,
certificates, partnership interests, joint venture interests, Investments
and/or brokerage accounts and all rights, preferences, privileges,
dividends, distributions, redemption payments, or liquidation payments
with respect thereto;
(h) All present and future accessions, appurtenances,
components, repairs, repair parts, spare parts, replacements,
substitutions, additions, issue and/or improvements to or of or with
respect to any of the foregoing;
-2-
<PAGE>
(i) All other tangible and intangible personal property
of any Grantor;
(j) All rights, remedies, powers and/or privileges of
any Grantor with respect to any of the foregoing; and
(k) Any and all proceeds and products of any of the
foregoing, INCLUDING, without limitation, all money, accounts, general
intangibles, deposit accounts, documents, instruments, chattel paper,
goods, insurance proceeds, and any other tangible or intangible personal
property received upon the sale or disposition of any of the foregoing.
Notwithstanding anything herein to the contrary, the Collateral shall not
include (i) any stock of Metra Biosystems, Inc. unless and until the same is
delivered to the Bank; (ii) any agreement with a third party existing on the
date hereof that prohibits the grant of a lien or security interest on such
agreement or any of any Grantor's rights thereunder without the consent of
such party or under which a consent to such grant is otherwise required,
which consent has not been obtained, except to the extent rights under any
such agreement are covered by Section 9-318 of the Uniform Commercial Code;
or (iii) any license, permit or other governmental approval that, under the
terms and conditions of such governmental approval or under applicable law,
cannot be subjected to a lien or security interest in favor of the Bank
without the consent of the relevant governmental authority which consent has
not been obtained; PROVIDED, HOWEVER, that the Collateral shall include (A)
the proceeds of the above to the extent such proceeds are otherwise included
in the Collateral, and (B) all items excluded pursuant to clause (ii) and
(iii) from and after the date on which the requisite consent is obtained.
"SECURED OBLIGATIONS" means any and all present and future
obligations of any type or nature of the Borrower to the Bank arising under
or relating to the Loan Agreement, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or noncontingent,
INCLUDING obligations of performance as well as obligations of payment, and
INCLUDING interest that accrues after the commencement of any bankruptcy or
insolvency proceeding by or against the Borrower.
2. FURTHER ASSURANCES. At any time and from time to time at
the request of the Bank, each Grantor shall execute and deliver to the Bank
all such financing statements and other instruments and documents in form and
substance satisfactory to the Bank as shall reasonably be necessary or
desirable to fully perfect, when filed and/or recorded, the Bank's security
interests granted pursuant to SECTION 3 of this Agreement. At any time and
from time to time, the Bank shall be entitled to file and/or record any or
all such financing statements, instruments and documents held by it, and any
or all such further financing statements, documents and instruments, and to
take all such other actions, as the Bank may reasonably deem appropriate to
perfect and to maintain perfected the security interests granted in SECTION 3
of this Agreement. Before and after the occurrence of any Event of Default,
at the Bank's request, each Grantor shall execute all such further financing
statements, instruments and documents, and shall do all such further acts and
things, as reasonably may be deemed necessary or desirable by the Bank to
create and perfect, and to continue and preserve, an indefeasible security
interest in the Collateral in favor of the Bank, or the priority thereof.
With respect to any Collateral consisting of certificated securities,
instruments, documents, certificates of title or the like, as to which the
Bank's security interest need be perfected by, or the priority thereof need
be assured by, possession of such Collateral, Grantors will upon demand of
the Bank deliver possession of same in pledge
-3-
<PAGE>
to the Bank. With respect to any Collateral consisting of securities,
instruments, partnership or joint venture interests or the like, Grantors
hereby consent and agree that the issuers of, or obligors on, any such
Collateral, or any registrar or transfer agent or trustee for any such
Collateral, shall be entitled to accept the provisions of this Agreement as
conclusive evidence of the right of the Bank to effect any transfer or
exercise any right hereunder or with respect to any such Collateral,
notwithstanding any other notice or direction to the contrary heretofore or
hereafter given by any Grantor or any other person to such issuers or such
obligors or to any such registrar or transfer agent or trustee.
3. SECURITY AGREEMENT. For valuable consideration, Grantors
and each of them hereby assign and pledge to the Bank, and grant to the Bank
a security interest in, all presently existing and hereafter acquired
Collateral, as security for the timely payment and performance of the Secured
Obligations, and each of them. This Agreement is a continuing and irrevocable
agreement and all the rights, powers, privileges and remedies hereunder shall
apply to any and all Secured Obligations, including those arising under
successive transactions which shall either continue the Secured Obligations,
increase or decrease them, or from time to time create new Secured
Obligations after all or any prior Secured Obligations have been satisfied,
and notwithstanding the bankruptcy of any Grantor or any other person or any
other event or proceeding affecting any person.
4. GRANTORS' REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
EXCEPT as otherwise disclosed to the Bank in writing concurrently herewith,
Grantors represent, warrant and agree that: (a) each Grantor will pay, prior
to delinquency, all taxes, charges, liens and assessments against the portion
of the Collateral owned by it, EXCEPT Permitted Encumbrances and such other
liens as are timely contested in good faith, and upon its failure to pay or
so contest such taxes, charges, liens and assessments, the Bank at its option
may pay any of them, and the Bank shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same; (b) the
Collateral will not be used for any unlawful purpose or in violation of any
law, regulation or ordinance, nor used in any way that will void or impair
any insurance required to be carried in connection therewith; (c) each
Grantor will, to the extent consistent with good business practice, keep the
portion of the Collateral owned by it in reasonably good repair, working
order and condition, and from time to time make all needful and proper
repairs, renewals, replacements, additions and improvements thereto and, as
appropriate and applicable, will otherwise deal with such portion of the
Collateral in all such ways as are considered good practice by owners of like
Property; (d) each Grantor will take all reasonable steps to preserve and
protect the Collateral; (e) each Grantor will maintain, with responsible
insurance companies, insurance covering the Collateral against such insurable
losses as is required by the Loan Agreement and as is consistent with sound
business practice, and will cause the Bank to be designated as an additional
insured and loss payee with respect to all insurance (whether or not required
by the Loan Agreement), will obtain the written agreement of the insurers
that such insurance shall not be cancelled, terminated or materially modified
to the detriment of the Bank without at least 30 days prior written notice to
the Bank, and will furnish copies of such insurance policies or certificates
to the Bank promptly upon request therefor; (f) Grantors will promptly notify
the Bank in writing in the event of damage to any material portion of the
Collateral from any source whatsoever, and, EXCEPT for the disposition of
collections and other proceeds of the Collateral permitted by SECTION 6
hereof, Grantors will not remove or permit to be removed any part of the
Collateral from their places of business without the prior written consent of
the Bank, EXCEPT for such items of the Collateral as are removed in the
ordinary course of business or in connection with any transaction or
-4-
<PAGE>
disposition otherwise permitted by the Loan Agreement; and (g) in the event
any Grantor changes its name or its address as either are set forth herein or
in the Loan Agreement, such Grantor will notify the Bank of such name and/or
address change promptly, but in any event, within five (5) banking days. If
any Collateral, or any interest therein, is disposed of in violation of these
provisions, the security interest shall continue in such Collateral or
interest notwithstanding such disposition. The Bank shall execute and deliver
any releases or other documents reasonably requested by the relevant Grantor
to accomplish or confirm the release of Collateral provided by this Section.
5. THE BANK'S RIGHTS RE COLLATERAL. At any time (whether or
not an Event of Default has occurred), without notice or demand and at the
expense of each Grantor with regard to the portion of the Collateral owned by
it, the Bank may, to the extent it may be necessary or desirable to protect
the security hereunder, but the Bank shall not be obligated to: (a) at all
reasonable times on reasonable notice, enter upon any premises on which
Collateral is situated and examine the same or (b) perform any obligation of
any Grantor under this Agreement or any obligation of the Borrower under the
Loan Agreement if such Grantor or Borrower has breached such obligation and
all cure periods, if any, have expired. At any time and from time to time, at
the expense of each Grantor with regard to the portion of the Collateral
owned by it, the Bank may, to the extent it may be necessary or desirable to
protect the security hereunder, but the Bank shall not be obligated to,
request from obligors on the Collateral, in the name of any Grantor or in the
name of the independent auditors (or in the name of the Bank if the Bank
shall then have the right directly to notify obligors on the Collateral as
provided in SECTION 9), information concerning the Collateral and the amounts
owing thereon. Each Grantor shall maintain books and records pertaining to
the Collateral in such detail, form and scope as the Bank shall reasonably
require consistent with the Bank's interests hereunder. Each Grantor shall at
any time at the Bank's request mark the Collateral and/or such Grantor's
ledger cards, books of account and other records relating to the Collateral
with appropriate notations satisfactory to the Bank disclosing that they are
subject to the Bank's security interests. The Bank shall at all reasonable
times on reasonable notice have full access to and the right to audit any and
all of Grantors' books and records pertaining to the Collateral, and to
confirm and verify the value of the Collateral and to do whatever else the
Bank reasonably may deem necessary or desirable to protect its interests;
PROVIDED, HOWEVER, that any such action which involves communicating with
customers of Grantors shall be carried out by the Bank through Grantors'
independent auditors unless the Bank shall then have the right directly to
notify obligors on the Collateral as provided in SECTION 9. The Bank shall be
under no duty or obligation whatsoever to take any action to preserve any
rights of or against any prior or other parties in connection with the
Collateral, to exercise any voting rights or managerial rights with respect
to any Collateral, whether or not an Event of Default shall have occurred, or
to make or give any presentments, demands for performance, notices of
non-performance, protests, notices of protests, notices of dishonor or
notices of any other nature whatsoever in connection with the Collateral or
the Secured Obligations. Subject to SECTION 7 hereof, the Bank shall be under
no duty or obligation whatsoever to take any action to protect or preserve
the Collateral or any rights of any Grantor therein, or to make collections
or enforce payment thereon, or to participate in any foreclosure or other
proceeding in connection therewith.
6. COLLECTIONS ON THE COLLATERAL. EXCEPT as otherwise
provided in the Loan Agreement, Grantors shall have the right to use and to
continue to make collections on and receive dividends and other proceeds of
all of the Collateral in the ordinary course of business so long as no
-5-
<PAGE>
Event of Default shall have occurred and be continuing and the Bank has not
exercised its option set forth below. Upon the occurrence and during the
continuance of an Event of Default, at the option of the Bank, Grantors'
right to make collections on and receive dividends and other proceeds of the
Collateral and to use or dispose of such collections and proceeds shall
terminate, and any and all dividends, proceeds and collections, including all
partial or total prepayments, then held or thereafter received on or on
account of the Collateral will be held or received by Grantors in trust for
the Bank and immediately delivered in kind to the Bank. Any remittance
received by any Grantor from any person shall be presumed to relate to the
Collateral and to be subject to the Bank's security interests. Upon the
occurrence and during the continuance of an Event of Default, the Bank shall
have the sole right at all times to receive, receipt for, endorse, assign,
deposit and deliver, in the name of the Bank or in the name of the
appropriate Grantor, any and all checks, notes, drafts and other instruments
for the payment of money constituting proceeds of or otherwise relating to
the Collateral; and each Grantor hereby authorizes the Bank to affix, by
facsimile signature or otherwise, the general or special endorsement of it,
in such manner as the Bank shall deem advisable, to any such instrument in
the event the same has been delivered to or obtained by the Bank without
appropriate endorsement, and the Bank and any collecting bank are hereby
authorized to consider such endorsement to be a sufficient, valid and
effective endorsement by the appropriate Grantor, to the same extent as
though it were manually executed by the duly authorized officer of the
appropriate Grantor, regardless of by whom or under what circumstances or by
what authority such facsimile signature or other endorsement actually is
affixed, without duty of inquiry or responsibility as to such matters, and
each Grantor hereby expressly waives demand, presentment, protest and notice
of protest or dishonor and all other notices of every kind and nature with
respect to any such instrument.
7. POSSESSION OF COLLATERAL BY THE BANK. All the Collateral
now, heretofore or hereafter delivered to the Bank shall be held by the Bank
in its possession, custody and control. Any or all of the Collateral
delivered to the Bank may be held in an interest-bearing or
non-interest-bearing account, in the Bank's sole and absolute discretion, and
the Bank may, in its discretion, apply any such interest to payment of the
Secured Obligations. Nothing herein shall obligate the Bank to invest any
Collateral or obtain any particular return thereon. Upon the occurrence and
during the continuance of an Event of Default, whenever any of the Collateral
is in the Bank's possession, custody or control, the Bank may use, operate
and consume the Collateral, whether for the purpose of preserving and/or
protecting the Collateral, or for the purpose of performing any of Grantors'
obligations with respect thereto, or otherwise, subject to compliance with
the requirements of applicable laws. The Bank may at any time deliver or
redeliver the Collateral or any part thereof to Grantors, and the receipt of
any of the same by any Grantor shall be complete and full acquittance for the
Collateral so delivered, and the Bank thereafter shall be discharged from any
liability or responsibility therefor. So long as the Bank exercises
reasonable care with respect to any Collateral in its possession, custody or
control, the Bank shall have no liability for any loss of or damage to such
Collateral, and in no event shall the Bank have liability for any diminution
in value of Collateral occasioned by economic or market conditions or events.
The Bank shall be deemed to have exercised reasonable care within the meaning
of the preceding sentence if the Collateral in the possession, custody or
control of the Bank is accorded treatment substantially equal to that which
the Bank accords its own property, it being understood that the Bank shall
not have any responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Collateral, whether or not the Bank has or is deemed
to
-6-
<PAGE>
have knowledge of such matters, or (b) taking any necessary steps to preserve
rights against any person with respect to any Collateral.
8. EVENTS OF DEFAULT. There shall be an Event of Default
hereunder upon the occurrence and during the continuance of an event of
default under the Loan Agreement.
9. RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and
during the continuance of an Event of Default, subject to compliance with the
requirements of applicable laws, the Bank shall have, in any jurisdiction
where enforcement hereof is sought, in addition to all other rights and
remedies that the Bank may have under applicable law or in equity or under
this Agreement (INCLUDING, without limitation, all rights set forth in
SECTION 6 hereof) or under the Loan Agreement, all rights and remedies of the
Bank under the Uniform Commercial Code as enacted in any jurisdiction, and,
in addition, the following rights and remedies, all of which may be exercised
with or without notice to Grantors and without affecting the obligations of
Grantors hereunder or under the Loan Agreement, or the enforceability of the
liens and security interests created hereby: (a) to foreclose the liens and
security interests created hereunder or under any other agreement relating to
any Collateral by any available judicial procedure or without judicial
process; (b) to enter any premises where any Collateral may be located for
the purpose of securing, protecting, inventorying, appraising, inspecting,
repairing, preserving, storing, preparing, processing, taking possession of
or removing the same; (c) to sell, assign, lease or otherwise dispose of any
Collateral or any part thereof, either at public or private sale or at any
broker's board, in lot or in bulk, for cash, on credit or otherwise, with or
without representations or warranties and upon such terms as shall be
acceptable to the Bank; (d) to notify obligors on the Collateral that the
Collateral has been assigned to the Bank and that all payments thereon are to
be made directly and exclusively to the Bank; (e) to collect by legal
proceedings or otherwise all dividends, distributions, interest, principal or
other sums now or hereafter payable upon or on account of the Collateral; (f)
to cause the Collateral to be registered in the name of the Bank, as legal
owner; (g) to enter into any extension, reorganization, deposit, merger or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith the Bank may deposit or surrender
control of the Collateral and/or accept other property in exchange for the
Collateral; (h) to settle, compromise or release, on terms acceptable to the
Bank, in whole or in part, any amounts owing on the Collateral and/or any
disputes with respect thereto; (i) to extend the time of payment, make
allowances and adjustments and issue credits in connection with the
Collateral in the name of the Bank or in the name of any Grantor; (j) to
enforce payment and prosecute any action or proceeding with respect to any or
all of the Collateral and take or bring, in the name of the Bank or in the
name of any Grantor, any and all steps, actions, suits or proceedings deemed
by the Bank necessary or desirable to effect collection of or to realize upon
the Collateral, INCLUDING any judicial or nonjudicial foreclosure thereof or
thereon, and each Grantor specifically consents to any nonjudicial
foreclosure of any or all of the Collateral or any other action taken by the
Bank which may release any obligor from personal liability on any of the
Collateral, and each Grantor waives any right not expressly provided for in
this Agreement to receive notice of any public or private judicial or
nonjudicial sale or foreclosure of any security or any of the Collateral; and
any money or other property received by the Bank in exchange for or on
account of the Collateral, whether representing collections or proceeds of
Collateral, and whether resulting from voluntary payments or foreclosure
proceedings or other legal action taken by the Bank or Grantors may be
applied by the Bank without notice to Grantors to the Secured Obligations in
such order and manner as the Bank in its sole
-7-
<PAGE>
discretion shall determine; (k) to insure, process and preserve the
Collateral; (l) to exercise all rights, remedies, powers or privileges
provided under any of the Loan Documents; (m) to remove, from any premises
where the same may be located, the Collateral and any and all documents,
instruments, files and records, and any receptacles and cabinets containing
the same, relating to the Collateral, and the Bank may, at the cost and
expense of each Grantor, use such of its supplies, equipment, facilities and
space at its places of business as may be necessary or appropriate to
properly administer, process, store, control, prepare for sale or disposition
and/or sell or dispose of the portion of the Collateral owned by such Grantor
or to properly administer and control the handling of collections and
realizations thereon, and the Bank shall be deemed to have a rent-free
tenancy of any premises of any Grantor for such purposes and for such periods
of time as reasonably required by the Bank; (n) to receive, open and dispose
of all mail addressed to any Grantor and notify postal authorities to change
the address for delivery thereof to such address as the Bank may designate;
PROVIDED that the Bank agrees that it will promptly deliver over to the
appropriate Grantor such opened mail as does not relate to the Collateral;
and (o) to exercise all other rights, powers, privileges and remedies of an
owner of the Collateral; all at the Bank's sole option and as the Bank in its
sole discretion may deem advisable. Grantors will, at the Bank's request,
assemble the Collateral and make it available to the Bank at places which the
Bank may reasonably designate, whether at the premises of Grantors or
elsewhere, and will make available to the Bank, free of cost, all premises,
equipment and facilities of Grantors for the purpose of the Bank's taking
possession of the Collateral or storing same or removing or putting the
Collateral in salable form or selling or disposing of same.
Upon the occurrence and during the continuance of an Event of
Default, the Bank also shall have the right, without notice or demand, either
in person, by agent or by a receiver to be appointed by a court (and Grantors
hereby expressly consent upon the occurrence and during the continuance of an
Event of Default to the appointment of such a receiver), and without regard
to the adequacy of any security for the Secured Obligations, to take
possession of the Collateral or any part thereof and to collect and receive
the rents, issues, profits, income and proceeds thereof. Taking possession of
the Collateral shall not cure or waive any Event of Default or notice thereof
or invalidate any act done pursuant to such notice. The rights, remedies and
powers of any receiver appointed by a court shall be as ordered by said court.
Any public or private sale or other disposition of the
Collateral may be held at any office of the Bank, or at Grantors' places of
business, or at any other place permitted by applicable law, and without the
necessity of the Collateral's being within the view of prospective
purchasers. The Bank may direct the order and manner of sale of the
Collateral, or portions thereof, as it in its sole and absolute discretion
may determine, and Grantors expressly waive any right to direct the order and
manner of sale of any Collateral. The Bank or any person on the Bank's behalf
may bid and purchase at any such sale or other disposition. The net cash
proceeds resulting from the collection, liquidation, sale, lease or other
disposition of the Collateral shall be applied, first, to the expenses
(including reasonable attorneys' fees and disbursements) of retaking,
holding, storing, processing and preparing for sale or lease, selling,
leasing, collecting, liquidating and the like, and then to the satisfaction
of the Secured Obligations in such order as shall be determined by the Bank
in its sole and absolute discretion. Grantors and any other person then
obligated therefor shall pay to the Bank on demand any deficiency with regard
thereto which may remain after such sale, disposition, collection or
liquidation of the Collateral.
-8-
<PAGE>
Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
the Bank will send or otherwise make available to the Borrower, as agent for
Grantors and each of them, reasonable notice of the time and place of any
public sale thereof or of the time on or after which any private sale thereof
is to be made. The requirement of sending reasonable notice conclusively
shall be met if such notice is mailed, first class mail, postage prepaid, to
the Borrower at its address set forth in the Loan Agreement, or delivered or
otherwise sent to the Borrower, at least five (5) days before the date of the
sale. Each Grantor other than the Borrower hereby irrevocably appoints the
Borrower as its agent for the purpose of receiving notice of sale hereunder,
and agrees that such Grantor conclusively shall be deemed to have received
notice of sale when notice of sale has been given to the Borrower. Each
Grantor expressly waives any right to receive notice of any public or private
sale of any Collateral or other security for the Secured Obligations EXCEPT
as expressly provided for in this paragraph.
With respect to any Collateral consisting of securities,
partnership interests, joint venture interests, Investments or the like, and
whether or not any of such Collateral has been effectively registered under
the Securities Act of 1933, as amended, or other applicable laws, the Bank
may, in its sole and absolute discretion, sell all or any part of such
Collateral at private sale in such manner and under such circumstances as the
Bank may deem necessary or advisable in order that the sale may be lawfully
conducted. Without limiting the foregoing, the Bank may (i) approach and
negotiate with a limited number of potential purchasers, and (ii) restrict
the prospective bidders or purchasers to persons who will represent and agree
that they are purchasing such Collateral for their own account for investment
and not with a view to the distribution or resale thereof. In the event that
any such Collateral is sold at private sale, Grantors agree that if such
Collateral is sold for a price which the Bank in good faith believes to be
reasonable under the circumstances then existing, then (a) the sale shall be
deemed to be commercially reasonable in all respects, (b) Grantors shall not
be entitled to a credit against the Secured Obligations in an amount in
excess of the purchase price, and (c) the Bank shall not incur any liability
or responsibility to Grantors in connection therewith, notwithstanding the
possibility that a substantially higher price might have been realized at a
public sale. Grantors recognize that a ready market may not exist for such
Collateral if it is not regularly traded on a recognized securities exchange,
and that a sale by the Bank of any such Collateral for an amount
substantially less than a pro rata share of the fair market value of the
issuer's assets minus liabilities may be commercially reasonable in view of
the difficulties that may be encountered in attempting to sell a large amount
of such Collateral or Collateral that is privately traded.
Upon consummation of any sale of Collateral hereunder, the Bank
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such
sale shall hold the Collateral so sold absolutely free from any claim or
right upon the part of any Grantor or any other person, and each Grantor
hereby waives (to the extent permitted by applicable laws) all rights of
redemption, stay and appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted. If the sale of all or any part of the Collateral is made on credit
or for future delivery, the Bank shall not be required to apply any portion
of the sale price to the Secured Obligations until such amount actually is
received by the Bank, and any Collateral so sold may be retained by the Bank
until the sale price is paid in full by the purchaser or purchasers thereof.
The Bank shall not incur any liability in case any such purchaser
-9-
<PAGE>
or purchasers shall fail to pay for the Collateral so sold, and, in case of
any such failure, the Collateral may be sold again.
10. VOTING RIGHTS; DIVIDENDS; ETC. With respect to any
Collateral consisting of securities, partnership interests, joint venture
interests, investments or the like (referred to collectively and individually
in this SECTION 10 and in SECTION 11 as the "INVESTMENT COLLATERAL"), so long
as no Event of Default occurs and remains continuing:
10.1 VOTING RIGHTS. Grantors shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Investment Collateral, or any part thereof, for any purpose not inconsistent
with the terms of this Agreement or the Loan Agreement; PROVIDED, HOWEVER,
that Grantors shall not exercise, or shall refrain from exercising, any such
right if it would result in an Event of Default.
10.2 DIVIDEND AND DISTRIBUTION RIGHTS. EXCEPT as
otherwise provided in the Loan Agreement, Grantors shall be entitled to
receive and to retain and use any and all dividends or distributions paid in
respect of the Investment Collateral; PROVIDED, HOWEVER, that, subject to
compliance with the requirements of applicable laws, any and all such
dividends or distributions received in the form of capital stock,
certificated securities, warrants, options or rights to acquire capital stock
or certificated securities forthwith shall be, and the certificates
representing such capital stock or certificated securities, if any, forthwith
shall be delivered to the Bank to hold as pledged Collateral and shall, if
received by any Grantor, be received in trust for the benefit of the Bank, be
segregated from the other property of such Grantor, and forthwith be
delivered to the Bank as pledged Collateral in the same form as so received
(with any necessary endorsements).
11. RIGHTS DURING EVENT OF DEFAULT. With respect to any
Investment Collateral, so long as an Event of Default has occurred and is
continuing:
11.1 VOTING, DIVIDEND, AND DISTRIBUTION RIGHTS. At the
option of the Bank, subject to compliance with the requirements of applicable
laws, all rights of Grantors to exercise the voting and other consensual
rights which they would otherwise be entitled to exercise pursuant to SECTION
10.1 above, and to receive the dividends and distributions which they would
otherwise be authorized to receive and retain pursuant to SECTION 10.2 above,
shall cease, and all such rights thereupon shall become vested solely in the
Bank which thereupon shall have the sole right to exercise such voting and
other consensual rights and to receive and to hold as pledged Collateral such
dividends and distributions.
11.2 DIVIDENDS AND DISTRIBUTIONS HELD IN TRUST. All
dividends and other distributions which are received by Grantors contrary to
the provisions of this Agreement shall be received in trust for the benefit
of the Bank, shall be segregated from other funds of Grantors, and forthwith
shall be paid over to the Bank as pledged Collateral in the same form as so
received (with any necessary endorsements).
11.3 IRREVOCABLE PROXY. Subject to compliance with the
requirements of applicable laws, each Grantor does hereby revoke all previous
proxies with regard to the Investment Collateral and appoint the Bank as its
proxyholder to attend and vote at any and all meetings of the shareholders or
other equity holders of the persons that issued the Investment Collateral and
any adjournments thereof, held on or after the date of the giving of this
proxy and prior to the termination of this
-10-
<PAGE>
proxy, and to execute any and all written consents of shareholders or equity
holders of such persons executed on or after the date of the giving of this
proxy and prior to the termination of this proxy, with the same effect as if
such Grantor had personally attended the meetings or had personally voted its
shares or other interests or had personally signed the written consents;
PROVIDED, HOWEVER, that the proxyholder shall have rights hereunder only upon
the occurrence and during the continuance of an Event of Default. Each
Grantor hereby authorizes the Bank to substitute another person as the
proxyholder and, upon the occurrence and during the continuance of any Event
of Default, hereby authorizes the proxyholder to file this proxy and any
substitution instrument with the secretary or other appropriate official of
the appropriate person. This proxy is coupled with an interest and is
irrevocable until such time as all Secured Obligations have been paid and
performed in full.
12. ATTORNEY-IN-FACT. Each Grantor hereby irrevocably
nominates and appoints the Bank as its attorney-in-fact for the following
purposes, subject to compliance with the requirements of applicable laws: (a)
to do all acts and things which the Bank may deem necessary or advisable to
perfect and continue perfected the security interests created by this
Agreement and, upon the occurrence and during the continuance of an Event of
Default, to preserve, process, develop, maintain and protect the Collateral;
(b) upon the occurrence and during the continuance of an Event of Default, to
do any and every act which any Grantor is obligated to do under this
Agreement, at the expense of the Grantor so obligated and without any
obligation to do so; (c) to prepare, sign, file and/or record, for any
Grantor, in the name of the appropriate Grantor, any financing statement,
application for registration, or like paper, and to take any other action
deemed by the Bank necessary or desirable in order to perfect or maintain
perfected the security interests granted hereby; and (d) upon the occurrence
and during the continuance of an Event of Default, to execute any and all
papers and instruments and do all other things necessary or desirable to
preserve and protect the Collateral and to protect the Bank's security
interests therein; PROVIDED, HOWEVER, that the Bank shall be under no
obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, the Bank shall have no liability or responsibility
for any act taken or omission with respect thereto.
13. COSTS AND EXPENSES. Each Grantor agrees to pay to the
Bank all reasonable costs and expenses (INCLUDING, without limitation,
reasonable attorneys' fees and disbursements) incurred by the Bank in the
enforcement or attempted enforcement of this Agreement, whether or not an
action is filed in connection therewith, and in connection with any waiver or
amendment of any term or provision hereof. All advances, charges, costs and
expenses, INCLUDING reasonable attorneys' fees and disbursements, incurred or
paid by the Bank in exercising any right, privilege, power or remedy
conferred by this Agreement (INCLUDING, without limitation, the right to
perform any Secured Obligation of any Grantor under the Loan Agreement), or
in the enforcement or attempted enforcement thereof, shall be secured hereby
and shall become a part of the Secured Obligations and shall be paid to the
Bank by each Grantor, immediately upon demand, together with interest thereon
at the rate(s) provided for under the Loan Agreement.
14. STATUTE OF LIMITATIONS AND OTHER LAWS. Until the Secured
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to the Bank
hereunder shall continue to exist and may be exercised by the Bank at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Each
-11-
<PAGE>
Grantor expressly waives the benefit of any and all statutes of limitation,
and any and all laws providing for exemption of property from execution or
for valuation and appraisal upon foreclosure, to the maximum extent permitted
by applicable law.
15. OTHER AGREEMENTS. Nothing herein shall in any way modify
or limit the effect of terms or conditions set forth in any other security or
other agreement executed by any Grantor or in connection with the Secured
Obligations, but each and every term and condition hereof shall be in
addition thereto. All provisions contained in the Loan Agreement that apply
to loan documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
16. INCORPORATION OF SURETYSHIP PROVISIONS AND WAIVERS. The
attached EXHIBIT B, "Suretyship Provisions and Waivers", is hereby
incorporated by this reference as though set forth herein in full.
17. CONDITION OF BORROWER AND ITS SUBSIDIARIES. Each Grantor
represents and warrants to the Bank that each Grantor has established
adequate means of obtaining from the Borrower and its subsidiaries, on a
continuing basis, financial and other information pertaining to the
businesses, operations and condition (financial and otherwise) of the
Borrower and its subsidiaries and their respective assets and properties, and
each Grantor now is and hereafter will be completely familiar with the
businesses, operations and condition (financial and otherwise) of the
Borrower and its subsidiaries and their respective assets and properties.
Each Grantor hereby expressly waives and relinquishes any duty on the part of
the Bank (should any such duty exist) to disclose to any Grantor any matter,
fact or thing related to the businesses, operations or condition (financial
or otherwise) of the Borrower or its subsidiaries or their respective assets
and properties, whether now known or hereafter known by the Bank during the
life of this Agreement. With respect to any of the Secured Obligations, the
Bank need not inquire into the powers of Borrower or any subsidiaries thereof
or the officers or employees acting or purporting to act on their behalf, and
all Secured Obligations made or created in good faith reliance upon the
professed exercise of such powers shall be secured hereby.
18. LIENS ON REAL PROPERTY. In the event that all or any
part of the Secured Obligations at any time are secured by any one or more
deeds of trust or mortgages or other instruments creating or granting liens
on any interests in real property, each Grantor authorizes the Bank, upon the
occurrence of and during the continuance of any Event of Default, at its sole
option, without notice or demand and without affecting any Secured
Obligations of any Grantor, the enforceability of this Agreement, or the
validity or enforceability of any liens of the Bank on any Collateral, to
foreclose any or all of such deeds of trust or mortgages or other instruments
by judicial or nonjudicial sale. Insofar as the liens created herein secure
the obligations of other persons, (i) each Grantor expressly waives any
defenses to the enforcement of this Agreement or any liens created or granted
hereby or to the recovery by the Bank against Borrower or any guarantor or
any other person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Grantors and may preclude Grantors from
obtaining reimbursement or contribution from any of the other Grantors and
(ii) each Grantor expressly waives any defenses or benefits that may be
derived from California Code of Civil Procedure Sections 580a, 580b, 580d or
726, or comparable provisions of the laws of any other jurisdiction, and all
other suretyship defenses it other wise might or would have under California
law or other applicable law. Each Grantor expressly waives any right to
receive notice of any judicial or nonjudicial
-12-
<PAGE>
foreclosure or sale of any real property or interest therein subject to any
such deeds of trust or mortgages or other instruments and any Grantor's
failure to receive any such notice shall not impair or affect such Grantor's
obligations or the enforceability of this Agreement or any liens created or
granted hereby.
19. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding
anything to the contrary elsewhere contained herein or in the Loan Agreement
to which any Grantor is a party until no part of any commitment to lend
remains outstanding and all of the Secured Obligations have been paid and
performed in full, Grantors hereby waive with respect to the Borrower and its
successors and assigns (including any surety) and any other person, any and
all rights at law or in equity to subrogation, to reimbursement, to
exoneration, to contribution, to setoff or to any other rights that could
accrue to a surety against a principal, to a guarantor against a maker or
obligor, to an accommodation party against the party accommodated, or to a
holder or transferee against a maker and which Grantors may have or hereafter
acquire against the Borrower or any other party in connection with or as a
result of Grantors' execution, delivery and/or performance of this Agreement
or any other loan document to which any Grantor is a party. Grantors agree
that they shall not have or assert any such rights against the Borrower or
its successors and assigns or any other attempted setoff to any action
commenced against Grantors by the Borrower (as borrower or in any other
capacity) or any other person. Grantors hereby acknowledge and agree that
this waiver is intended to benefit the Bank and shall not limit or otherwise
affect Grantors' liability hereunder, under any other Loan Document to which
any Grantor is a party, or the enforceability hereof or thereof.
20. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS.
Grantors and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Grantors
otherwise may have against the Borrower, the Bank or others, or against
Collateral, and that, under the circumstances, the waivers and consents
herein given are reasonable and not contrary to public policy or law. If any
of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective
to the maximum extent permitted by law.
21. CONTINUING EFFECT. This Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against any Grantor for liquidation or reorganization, should any Grantor
become insolvent or make an assignment for the benefit of creditors or should
a receiver or trustee be appointed for all or any significant part of any
Grantor'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 Secured
Obligations, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by the Bank,
whether as a "voidable preference," "fraudulent conveyance," or otherwise,
all as though such payment or performance had not been made. In the event
that any payment or any part thereof is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only
by such amount paid and not so rescinded, reduced, restored or returned.
22. ADDITIONAL GRANTORS. From time to time following the
Closing Date, additional Significant Subsidiaries of the Borrower may become
parties hereto, as additional Grantors, by executing and delivering
-13-
<PAGE>
to the Bank an Instrument of Joinder substantially in the form of EXHIBIT A,
accompanied by such documentation as the Bank may require in connection
therewith, wherein such additional Grantors agree to become a party hereto
and to be bound hereby. Upon delivery of such Instrument of Joinder to and
acceptance thereof by the Bank, notice of which acceptance is hereby waived
by Grantors, each such additional Grantor shall be as fully a party hereto as
if such Grantor were an original signatory hereof. Each Grantor expressly
agrees that its Secured Obligations and the liens upon its property granted
herein shall not be affected or diminished by the addition or release of
additional Grantors hereunder, nor by any election of the Bank not to cause
any other Significant Subsidiaries of the Borrower to become an additional
Grantor hereunder. This Agreement shall be fully effective as to any Grantor
who is or becomes a party hereto regardless of whether any other person
becomes or fails to become or ceases to be a Grantor hereunder.
23. RELEASE OF GRANTORS. This Agreement and all Secured
Obligations of Grantors hereunder shall be released when all Secured
Obligations have been paid in full in Cash or otherwise performed in full and
when the Bank's financing commitments under each of Facility No. 1 and
Facility No. 2 no longer remain outstanding. Upon such release of Grantors'
Secured Obligations hereunder, the Bank promptly shall return any pledged
Collateral to Grantors, or to the person or persons legally entitled thereto,
and promptly shall endorse, execute, deliver, record and file all instruments
and documents, and do all other acts and things, reasonably required for the
return of the Collateral to Grantors, or to the person or persons legally
entitled thereto, and to evidence or document the release of the Bank's
interests arising under this Agreement, all as reasonably requested by, and
at the sole expense of, Grantors.
24. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same agreement.
25. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA.
-14-
<PAGE>
26. WAIVER OF JURY TRIAL. EACH GRANTOR AND THE BANK
EXPRESSLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GRANTOR AND THE
BANK AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT, THE LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, each Grantor has executed this Agreement by
its duly authorized officer as of the date first written above.
"Grantors"
QUIDEL CORPORATION,
a Delaware corporation
By: /s/ Charles J. Cashion
------------------------------------
Title: Senior Vice President Corporate
Operations, Chief Financial
Officer and Secretary
---------------------------------
PACIFIC BIOTECH, INC.,
a California corporation
By: /s/ Charles J. Cashion
------------------------------------
Title: Vice President and Chief Financial Officer
---------------------------------
MBS ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Charles J. Cashion
------------------------------------
Title: Secretary and Treasurer
---------------------------------
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
-15-
<PAGE>
By: /s/ Karin S. Barnes
------------------------------------
Title: Vice President
---------------------------------
-16-
<PAGE>
EXHIBIT A
TO
SECURITY AGREEMENT
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
_________________, ____, by ______________________________, a
___________________________ ("Joining Party"), and delivered to Bank of
America National Trust and Savings Association (the "Bank") pursuant to the
Security Agreement dated as of July 12, 1999 made by Quidel Corporation, a
Delaware corporation, Pacific Biotech, Inc., a California corporation, and
MBS Acquisition Corporation, a Delaware corporation (collectively with such
other parties that may be added from time to time, the "Grantors"), in favor
of the Bank (the "Security Agreement"). Terms used but not defined in this
Joinder shall have the meanings defined for those terms in the Security
Agreement.
RECITALS
(A) The Security Agreement was made by the Grantors in favor of the
Bank as required by that certain Business Loan Agreement dated as of July 12,
1999 by and between Quidel Corporation, a Delaware corporation ("Borrower"),
and the Bank (the "Loan Agreement").
(B) Joining Party has become a Significant Subsidiary (as such term
is defined in the Loan Agreement) of the Borrower and, as such, is required
by the Loan Agreement to become a party to the Security Agreement.
(C) Joining Party expects to realize direct and indirect benefits as
a result of the availability to the Borrower of the credit facilities under
the Loan Agreement.
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
(1) By this Joinder, Joining Party becomes a party to the Security
Agreement as an additional joint and several "Grantor." Joining Party agrees
that, upon its execution hereof, it will become a Grantor under the Security
Agreement with respect to all obligations of the Borrower heretofore or
hereafter incurred under the Loan Agreement, and will be bound by all terms,
conditions, and duties applicable to a Grantor under the Security Agreement.
(2) The effective date of this Joinder is ________________.
"Joining Party"
---------------------------------------
a
-------------------------------------
By:
-----------------------------------
Title:
--------------------------------
-1-
<PAGE>
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:
---------------------------------
Title:
-----------------------------
-2-
<PAGE>
EXHIBIT B
TO
SECURITY AGREEMENT
SURETYSHIP PROVISIONS AND WAIVERS
Each Grantor acknowledges that the liens and security interests
created or granted herein will or may secure obligations of persons other
than such Grantor and, in full recognition of that fact, each Grantor
consents and agrees that the Bank may, at any time and from time to time,
without notice or demand, and without affecting the enforceability or
security hereof:
(a) supplement, modify, amend, extend, renew, or otherwise
change the time for payment or the terms of the Secured Obligations or any
part thereof, including any increase or decrease of the rate(s) of
interest thereon;
(b) supplement, modify, amend or waive, or enter into or give
any agreement, approval or consent with respect to, the Secured
Obligations or any part thereof or any provision of the Loan Agreement or
of any other agreement, document or instrument executed and delivered in
connection with the Loan Agreement (collectively with the Loan Agreement,
the "Loan Documents"), or any condition, covenant, default, remedy, right,
representation or term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Secured Obligations or any part thereof;
(d) accept partial payments on the Secured Obligations;
(e) receive and hold additional security or guaranties for
the Secured Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon,
subordinate, exchange, substitute, transfer and enforce any security or
guaranties, and apply any security and direct the order or manner of
sale thereof as the Bank in its sole and absolute discretion may
determine;
(g) release any person or any guarantor from any personal
liability with respect to the Secured Obligations or any part thereof;
(h) settle, release on terms satisfactory to the Bank or by
operation of applicable laws or otherwise liquidate or enforce any Secured
Obligations and any security or guaranty therefor in any manner, consent
to the transfer of any security and bid and purchase at any sale; and
(i) consent to the merger, change or any other restructuring
or termination of the corporate existence of the Borrower or any other
person, and correspondingly restructure the Secured Obligations, and any
such merger, change, restructuring or termination shall not affect the
liability of any Grantor or the continuing existence of any liens
hereunder, under any other Loan Document to which any Grantor is a party
or the enforceability hereof
-1-
<PAGE>
or thereof with respect to all or any part of the Secured Obligations.
Upon the occurrence of and during the continuance of any Event of
Default, the Bank may enforce this Agreement independently as to each Grantor
and independently of any other remedy or security the Bank at any time may
have or hold in connection with the Secured Obligations, and it shall not be
necessary for the Bank to marshal assets in favor of any Grantor, the
Borrower or any other person or to proceed upon or against and/or exhaust any
other security or remedy before proceeding to enforce this Agreement. Each
Grantor expressly waives any right to require the Bank to marshal assets in
favor of such Grantor, the Borrower or any other person or to proceed against
any other person or any collateral provided by any other person, and agrees
that the Bank may proceed against any person and/or collateral in such order
as it shall determine in its sole and absolute discretion. The Bank may file
a separate action or actions against any Grantor, whether action is brought
or prosecuted with respect to any other security or against any other
Grantor, the Borrower or any other person, or whether any other person is
joined in any such action or actions. Each Grantor agrees that the Bank and
the Borrower and any other person may deal with each other in connection with
the Secured Obligations or otherwise, or alter any contracts or agreements
now or hereafter existing between any of them, in any manner whatsoever, all
without in any way altering or affecting the security of this Agreement. The
Bank's rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount
at any time paid on account of the Secured Obligations which thereafter shall
be required to be restored or returned by the Bank upon the bankruptcy,
insolvency or reorganization of the Borrower, any Grantor or any other
person, or otherwise, all as though such amount had not been paid. The liens
created or granted herein and the enforceability of this Agreement at all
times shall remain effective to secure the full amount of all the Secured
Obligations including, without limitation, the amount of all loans and
interest thereon at the rates provided for in the Loan Agreement and the
note(s) thereunder, even though the Secured Obligations, including any part
thereof or any other security or guaranty therefor, may be or hereafter may
become invalid or otherwise unenforceable as against the Borrower or any
other person and whether or not the Borrower or any other person shall have
any personal liability with respect thereto. Each Grantor expressly waives
any and all defenses now or hereafter arising or asserted by reason of (a)
any disability or other defense of the Borrower or any other person with
respect to the Secured Obligations, (b) the unenforceability or invalidity of
any security or guaranty for the Secured Obligations or the lack of
perfection or continuing perfection or failure of priority of any security
for the Secured Obligations, (c) the cessation for any cause whatsoever of
the liability of the Borrower or any other person (other than by reason of
the full payment and performance of all Secured Obligations), (d) any failure
of the Bank to marshal assets in favor of such Grantor or any other person,
(e) except as otherwise required by law or as provided in this Agreement, any
failure of the Bank to give notice of sale or other disposition of collateral
to such Grantor or any other person or any defect in any notice that may be
given in connection with any sale or disposition of collateral, (f) except as
otherwise required by law or as provided in this Agreement, any failure of
the Bank to comply with applicable laws in connection with the sale or other
disposition of any collateral or other security for any Obligation, including
without limitation any failure of the Bank to conduct a commercially
reasonable sale or other disposition of any collateral or other security for
any Obligation, (g) any act or omission of the Bank or others that directly
or indirectly results in or aids the discharge or release of the Borrower,
any Grantor or any other person or the Secured Obligations or any other
security or guaranty
-2-
<PAGE>
therefor by operation of law, (h) any law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other
respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of the Bank to file or enforce a claim in any bankruptcy or
other proceeding with respect to any person, (j) the election by the Bank, in
any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy Code,
(k) any extension of credit or the grant of any liens under Section 364 of
the United States Bankruptcy Code, (l) any use of cash collateral under
Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any person, (n) the avoidance of any liens in favor
of the Bank for any reason, (o) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any person, including any discharge of, or bar or
stay against collecting, all or any of the Secured Obligations (or any
interest thereon) in or as a result of any such proceeding, or (p) to the
extent permitted, the benefits of any form of one-action rule. Until no part
of any commitment to lend remains outstanding and all of the Secured
Obligations have been paid and performed in full, Grantors shall have no
right of subrogation, contribution, reimbursement or indemnity, and each
Grantor expressly waives any right to enforce any remedy that the Bank now
has or hereafter may have against any other person and waives the benefit of,
or any right to participate in, any other security now or hereafter held by
the Bank. Each Grantor expressly waives all setoffs and counterclaims and all
presentments, demands for payment or performance, notices of nonpayment or
nonperformance, protests, notices of protest, notices of dishonor and all
other notices or demands of any kind or nature whatsoever with respect to the
Secured Obligations, and all notices of acceptance of this Agreement or of
the existence, creation or incurring of new or additional Secured Obligations.
-3-
<PAGE>
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY, dated as of July 12, 1999, is
made by the corporations listed on the signature pages hereto, together with
each other person who may become a party hereto pursuant to SECTION 17 of
this Subsidiary Guaranty (each, a "Guarantor," and collectively, the
"Guarantors"), jointly and severally, in favor of Bank of America National
Trust and Savings Association ("Lender"), with reference to the following
facts:
RECITALS
A. Pursuant to the Business Loan Agreement of even date
herewith by and between Quidel Corporation, a Delaware corporation (the
"Borrower"), and Lender (such Business Loan Agreement, as it may hereafter be
amended, extended, renewed, supplemented, or otherwise modified from time to
time, being referred to hereinafter as the "Loan Agreement"), Lender is
providing the Borrower with certain credit facilities.
B. As a condition to the availability of such credit
facilities, the Guarantors are required to enter into this Subsidiary
Guaranty and to guaranty the Guarantied Obligations (as defined below) as
hereinafter provided.
C. The Guarantors expect to realize direct and indirect
benefits from the availability of the aforementioned credit facilities to the
Borrower, given the financial or business support which will be provided to the
Guarantors by the Borrower.
AGREEMENT
NOW, THEREFORE, in order to induce Lender to extend the
aforementioned credit facilities to the Borrower, and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, the Guarantors hereby represent, warrant, covenant, agree and
guaranty as follows:
1. DEFINITIONS. This Subsidiary Guaranty is the
Subsidiary Guaranty referred to in the Loan Agreement. Terms defined in the
Loan Agreement and not otherwise defined in this Subsidiary Guaranty shall
have the respective meanings given those terms in the Loan Agreement when
used herein and such definitions are incorporated herein as though set forth
in full. In addition, as used herein, the following terms shall have the
meanings respectively set forth after each:
"GUARANTIED OBLIGATIONS" means all obligations of the Borrower
at any time and from time to time owed to Lender under the
Loan Agreement, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or
noncontingent, INCLUDING obligations of performance as well as
obligations of payment, and INCLUDING interest that accrues
after the commencement of any bankruptcy or insolvency
proceeding by or against the Borrower, any Guarantor or any
other person.
-1-
<PAGE>
"SUBSIDIARY GUARANTY" means this Subsidiary Guaranty, and any
extensions, modifications, renewals, restatements,
reaffirmations, supplements or amendments hereof, INCLUDING,
without limitation, any documents or agreements by which
additional Guarantors become party hereto.
2. GUARANTY OF GUARANTIED OBLIGATIONS. The Guarantors
hereby, jointly and severally, irrevocably and unconditionally guaranty and
promise to pay and perform on demand the Guarantied Obligations and each and
every one of them, INCLUDING all amendments, modifications, supplements,
renewals or extensions of any of them, whether such amendments,
modifications, supplements, renewals or extensions are evidenced by new or
additional instruments, documents or agreements or change the rate of
interest on any Guarantied Obligation or the security therefor, or otherwise.
3. NATURE OF GUARANTY. This Subsidiary Guaranty is
irrevocable and continuing in nature and relates to any Guarantied
Obligations now existing or hereafter arising. This Subsidiary Guaranty is a
guaranty of prompt and punctual payment and performance and is not merely a
guaranty of collection.
4. RELATIONSHIP TO OTHER AGREEMENTS. Nothing herein shall
in any way modify or limit the effect of terms or conditions set forth in any
other document, instrument or agreement executed by any Guarantor or in
connection with the Guarantied Obligations, but each and every term and
condition hereof shall be in addition thereto. All provisions contained in
the Loan Agreement that apply generally to all loan documents executed and
delivered in connection with the Guarantied Obligations are fully applicable
to this Subsidiary Guaranty and are incorporated herein by this reference.
5. SUBORDINATION OF INDEBTEDNESS OWED BY THE BORROWER TO
THE GUARANTORS. Each Guarantor agrees that:
(a) Any indebtedness of the Borrower now or hereafter
owed to any Guarantor hereby is subordinated to the Guarantied
Obligations.
(b) If Lender so requests, upon the occurrence and
during the continuance of any event of default under the Loan
Agreement, any such indebtedness of the Borrower now or hereafter owed
to any Guarantor shall be collected, enforced and received by such
Guarantor as trustee for Lender and shall be paid over to Lender in
kind on account of the Guarantied Obligations, but without reducing or
affecting in any manner the obligations of such Guarantor under the
other provisions of this Subsidiary Guaranty.
(c) Should such Guarantor fail to collect or enforce
any such indebtedness of the Borrower now or hereafter owed to such
Guarantor and pay the proceeds thereof to Lender in accordance with
SECTION 5(b) hereof, Lender as such Guarantor's attorney-in-fact may do
such acts and sign such documents in such Guarantor's name as Lender
considers necessary or desirable to effect such collection, enforcement
and/or payment.
6. STATUTES OF LIMITATIONS AND OTHER LAWS. Until the
Guarantied Obligations shall have been paid and performed in full, all the
-2-
<PAGE>
rights, privileges, powers and remedies granted to Lender hereunder shall
continue to exist and may be exercised by Lender at any time and from time to
time irrespective of the fact that any of the Guarantied Obligations may have
become barred by any statute of limitations. Each Guarantor expressly waives
the benefit of any and all statutes of limitation and of any and all laws
providing for exemption of property from execution or for evaluation and
appraisal upon foreclosure, to the maximum extent permitted by applicable
laws.
7. INCORPORATION OF SURETYSHIP PROVISIONS AND WAIVERS.
The attached EXHIBIT B, "Suretyship Provisions and Waivers", is hereby
incorporated by this reference as though set forth herein in full.
8. CONDITION OF THE BORROWER AND ITS SUBSIDIARIES. Each
Guarantor represents and warrants to Lender that such Guarantor has
established adequate means of obtaining from the Borrower, on a continuing
basis, financial and other information pertaining to the business, operations
and condition (financial and otherwise) of the Borrower and its subsidiaries
and their assets and properties, and each Guarantor now is and hereafter will
be completely familiar with the business, operations and condition (financial
and otherwise) of the Borrower and its subsidiaries and their assets and
properties. Each Guarantor hereby expressly waives and relinquishes any duty
on the part of Lender (should any such duty exist) to disclose to any
Guarantor any matter, fact or thing related to the business, operations or
condition (financial or otherwise) of the Borrower or its subsidiaries or
their assets or properties, whether now known or hereafter known by Lender
during the life of this Subsidiary Guaranty. With respect to any of the
Guarantied Obligations, Lender need not inquire into the powers of the
Borrower or any subsidiaries thereof or of the officers or employees acting
or purporting to act on the their behalf, and all Guarantied Obligations made
or created in good faith reliance upon the pro fessed exercise of such powers
shall be secured hereby.
9. LIENS ON REAL PROPERTY. In the event that all or any
part of the Guarantied Obligations at any time are secured by any one or more
deeds of trust or mortgages or other instruments creating or granting liens
on any interests in real property, each Guarantor authorizes Lender, upon the
occurrence of and during the continuance of any event of default under the
Loan Agreement, at its sole option, without notice or demand and without
affecting any Guarantied Obligations of any Guarantor, the enforceability of
this Subsidiary Guaranty, or the validity or enforceability of any liens of
Lender on any Collateral, to foreclose any or all of such deeds of trust or
mortgages or other instruments by judicial or nonjudicial sale. Each
Guarantor expressly waives any defenses to the enforcement of this Subsidiary
Guaranty or any rights of Lender created or granted hereby or to the recovery
by Lender against the Borrower, any Guarantor or any other person liable
therefor of any deficiency after a judicial or nonjudicial foreclosure or
sale, even though such a foreclosure or sale may impair the subrogation
rights of any Guarantor or may preclude any Guarantor from obtaining
reimbursement or contribution from the Borrower. Each Guarantor expressly
waives any defenses or benefits that may be derived from California Code of
Civil Procedure ss.ss. 580a, 580b, 580d or 726, or comparable provisions of
the laws of any other jurisdiction, and all other suretyship defenses it
otherwise might or would have under California Law or other applicable law.
Each Guarantor expressly waives any right to receive notice of any judicial
or nonjudicial foreclosure or sale of any real property or interest therein
subject to any such deeds of trust or mortgages or other instruments and any
Guarantor's or any other person's failure to receive any such notice shall
not impair or affect
-3-
<PAGE>
Guarantors' Obligations or the enforceability of this Subsidiary Guaranty or
any rights of Lender created or granted hereby.
10. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding
anything to the contrary elsewhere contained herein or in any other loan
document to which any Guarantor is a party, until no part of any commitment
to lend remains outstanding and all of the Secured Obligations have been paid
and performed in full, the Guarantors hereby expressly waive with respect to
the Borrower and its successors and assigns (INCLUDING any surety) and any
other person which is directly or indirectly a creditor of the Borrower, or
any surety for the Borrower, any and all rights at law or in equity to
subrogation, to reimbursement, to exoneration, to contribution (EXCEPT as
specifically provided in SECTION 11 below), to setoff or to any other rights
that could accrue to a surety against a principal, to a guarantor against a
maker or obligor, to an accommodation party against the party accommodated,
or to a holder or transferee against a maker, and which the Guarantors may
have or hereafter acquire against the Borrower or any other such person in
connection with or as a result of the Guarantors' execution, delivery and/or
performance of this Guaranty or any other loan document to which any
Guarantor is a party. The Guarantors agree that they shall not have or assert
any such rights against the Borrower or its successors and assigns or any
other person (INCLUDING any surety) which is directly or indirectly a
creditor of the Borrower or any surety for the Borrower, either directly or
as an attempted setoff to any action commenced against the Guarantors by the
Borrower (as borrower or in any other capacity), Lender or any other such
person. The Guarantors hereby acknowledge and agree that this waiver is
intended to benefit the Borrower and Lender and shall not limit or otherwise
affect the Guarantors' liability hereunder, under any other Loan Document to
which any Guarantor is a party, or the enforceability hereof or thereof.
11. RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees
that to the extent that a Guarantor shall have paid more than its
proportionate share of all payments made hereunder, provided that the
Guarantied Obligations are then satisfied, such Guarantor shall be entitled
to seek and receive contribution from and against any other Guarantor
hereunder who has not paid its proportionate share of all such payments. The
provisions of this SECTION 11 shall in no respect limit the obligations and
liabilities of any Guarantor to Lender, and, subject to the provisions of
SECTION 18 below, each Guarantor shall remain liable to Lender for the full
amount guaranteed by such Guarantor hereunder. The "proportionate share" of
any Guarantor shall be a fraction (which shall in no event exceed 1.00) the
numerator of which is the excess, if any, of the fair value of the assets of
such Guarantor over a fair estimate of the liabilities of Guarantor and the
denominator of which is the excess (but not less than $1.00) of the fair
value of the aggregate assets (without duplication) of all the Guarantors
over a fair estimate of the aggregate liabilities (without duplication) of
all the Guarantors. All relevant calculations shall be made as of the date
such Guarantor became a Guarantor.
12. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS.
Each Guarantor warrants and agrees that each of the waivers and consents set
forth herein is made with full knowledge of its significance and
consequences, with the understanding that events giving rise to any defense
or right waived may diminish, destroy or otherwise adversely affect rights
which Guarantor otherwise may have against the Borrower, Lender or others, or
against any Collateral, and that, under the circumstances, the waivers and
consents herein given are reasonable and not contrary to public policy or
law. Each Guarantor acknowledges that it has either consulted with legal
counsel regarding the effect of this Subsidiary Guaranty and the
-4-
<PAGE>
waivers and consents set forth herein, or has made an informed decision not
to do so. If this Subsidiary Guaranty or any of the waivers or consents
herein is determined to be unenforceable under or in violation of applicable
law, this Subsidiary Guaranty and such waivers and consents shall be
effective to the maximum extent permitted by law.
13. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby
makes each and every representation and warranty applicable to such Guarantor
set forth in SECTION 9 of the Loan Agreement as if set forth in full herein.
14. COSTS AND EXPENSES. Each Guarantor agrees to pay to
Lender all reasonable costs and expenses (INCLUDING, without limitation,
reasonable attorneys' fees and disbursements) incurred by Lender in the
enforcement or attempted enforcement of this Subsidiary Guaranty, whether or
not an action is filed in connection therewith, and in connection with any
waiver or amendment of any term or provision hereof. All reasonable advances,
charges, costs and expenses, INCLUDING reasonable attorneys' fees and
disbursements (including the reasonably allocated cost of legal counsel
employed by Lender), incurred or paid by Lender in exercising any right,
privilege, power or remedy conferred by this Subsidiary Guaranty, or in the
enforcement or attempted enforcement thereof, shall be subject hereto and
shall become a part of the Guarantied Obligations and shall be paid to Lender
by each Guarantor, immediately upon demand, together with interest thereon at
the rate(s) provided for under the Loan Agreement.
15. CONSTRUCTION OF THIS GUARANTY. This Subsidiary
Guaranty is intended to give rise to ABSOLUTE AND UNCONDITIONAL obligations
on the part of each Guarantor; hence, in any construction hereof,
NOTWITHSTANDING ANY PROVISION OF ANY LOAN DOCUMENT TO THE CONTRARY, this
Subsidiary Guaranty shall be construed strictly in favor of Lender in order
to accomplish its stated purpose.
16. LIABILITY. Notwithstanding anything to the contrary
elsewhere contained herein or in any other loan document to which any
Guarantor is a party, the aggregate liability of all of the Guarantors
hereunder for payment and performance of the Guarantied Obligations shall not
exceed an amount which, in the aggregate, is $1.00 less than that amount
which if so paid or performed would constitute or result in a "fraudulent
transfer", "fraudulent conveyance", or terms of similar import, under
applicable state or federal law, including without limitation, Section 548 of
the United States Bankruptcy Code. The liability of each Guarantor hereunder
is independent of any other guaranties at any time in effect with respect to
all or any part of the Guarantied Obligations, and each Guarantor's liability
hereunder may be enforced regardless of the existence of any such guaranties.
Any termination by or release of any guarantor in whole or in part (whether
it be another Guarantor under this instrument or not) shall not affect the
continuing liability of any Guarantor hereunder, and no notice of any such
termination or release shall be required. The execution hereof by each
Guarantor is not founded upon an expectation or understanding that there will
be any other guarantor of the Guarantied Obligations.
17. JOINDER. All future acquired or established
Significant Subsidiaries of the Borrower shall become a Guarantor under and
become bound by the terms and conditions of this Subsidiary Guaranty by
executing and delivering to Lender an Instrument of Joinder substantially in
the form attached hereto as EXHIBIT A, accompanied by such documentation as
Lender may require to establish the due organization, valid existence and
good
-5-
<PAGE>
standing of such person, its qualification to engage in business in each
material jurisdiction in which it is required to be so qualified, its
authority to execute, deliver and perform this Subsidiary Guaranty, and the
identity, authority and capacity of each responsible official thereof
authorized to act on its behalf.
18. RELEASE OF GUARANTORS. This Subsidiary Guaranty and
all obligations of the Guarantors hereunder shall be released when all
Guarantied Obligations have been paid in full in Cash or otherwise performed
in full and when Lender has no further commitment under the Loan Agreement to
provide loans to the Borrower. Upon such release of any or all such
Guarantors' Obligations hereunder, Lender shall endorse, execute, deliver,
record and file all instruments and documents, and do all other acts and
things, reasonably required to evidence or document the release of Lender's
rights arising under this Subsidiary Guaranty, all as reasonably requested
by, and at the sole expense of, the Guarantors.
19. ARBITRATION.
(a) This Section concerns the resolution of any
controversies or claims between any Guarantor and Lender, including but
not limited to those that arise from:
(i) This Subsidiary Guaranty (including any
renewals, extensions or modifications of this Subsidiary
Guaranty);
(ii) Any document, agreement or procedure
related to or delivered in connection with this Subsidiary
Guaranty;
(iii) Any violation of this Subsidiary Guaranty;
or
(iv) Any claims for damages resulting from any
business conducted between any Guarantor and Lender, including
claims for injury to persons, property or business interests
(torts).
(b) At the request of the appropriate Guarantor or
Lender, any such controversies or claims will be settled by arbitration
in accordance with the United States Arbitration Act. The United States
Arbitration Act will apply even though this Subsidiary Guaranty
provides that it is governed by California law.
(c) Arbitration proceedings will be administered by
the American Arbitration Association and will be subject to its
commercial rules of arbitration. The arbitration will be conducted in
California within the following county or counties: Los Angeles or San
Diego.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Section is
the equivalent of the filing of a lawsuit, and any claim or controversy
which may be arbitrated under this Section is subject to any applicable
statute of limitations. The arbitrators will have the authority to
decide whether any such claim or controversy is barred by the statute
of limitations and, if so, to dismiss the arbitration on that basis.
-6-
<PAGE>
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration
proceeding may be submitted to any authorized court of law to be
confirmed and enforced.
(g) The procedure described above will not apply if
the controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to Lender secured
by real property located in California. In this case, both the
appropriate Guarantor and Lender must consent to submission of the
claim or controversy to arbitration. If both parties do not consent
to arbitration, the controversy or claim will be settled as follows:
(i) The appropriate Guarantor and Lender
will designate a referee (or a panel of referees) selected
under the auspices of the American Arbitration Association in
the same manner as arbitrators are selected in
Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in
California Code of Civil Procedure Section 638 and the
following related sections;
(iii) The referee (or the presiding referee of
the panel) will be an active attorney or a retired judge; and
(iv) The award that results from the decision
of the referee (or the panel) will be entered as a judgment in
the court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644
and 645.
(h) This provision does not limit the right of any
Guarantor or Lender to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real
or personal property collateral; or
(iii) act in a court of law, before,
during or after the arbitration proceeding to obtain:
A. an interim remedy; and/or
B. additional or supplementary remedies.
(i) The pursuit of or a successful action for
interim, additional or supplementary remedies, or the filing of a court
action, does not constitute a waiver of the right of the appropriate
Guarantor or Lender, including the suing party, to submit the
controversy or claim to arbitration if the other party contests the
lawsuit. However, if the controversy or claim arises from or relates to
an obligation to Lender which is secured by real property located
-7-
<PAGE>
in California at the time of the proposed submission to arbitration,
this right is limited according to the provision above requiring the
consent of both the appropriate Guarantor and Lender to seek
resolution through arbitration.
(j) If Lender forecloses against any real property
securing this Subsidiary Guaranty, Lender has the option to exercise
the power of sale under the deed of trust or mortgage, or to proceed by
judicial foreclosure.
20. WAIVER OF JURY TRIAL. EACH GUARANTOR AND LENDER
EXPRESSLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS SUBSIDIARY GUARANTY, THE LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH GUARANTOR AND
LENDER AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS SUBSIDIARY GUARANTY, THE LOAN AGREEMENT OR THE OTHER
LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
SUBSIDIARY GUARANTY, THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS. ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
-8-
<PAGE>
21. THIS SUBSIDIARY GUARANTY SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA.
IN WITNESS WHEREOF, each Guarantor has executed this
Subsidiary Guaranty by its duly authorized officer as of the date first
written above.
"Guarantors"
PACIFIC BIOTECH, INC.,
a California corporation
By: /s/ Charles J. Cashion
------------------------------------
Name: Charles J. Cashion
----------------------------------
Title: Vice President and Chief Financial Officer
---------------------------------
MBS ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ Charles J. Cashion
------------------------------------
Name: Charles J. Cashion
----------------------------------
Title: Secretary and Treasurer
---------------------------------
Address for Guarantors:
c/o Quidel Corporation
10165 McKellar Court
San Diego, California 92121
Attn: Mr. Charles J. Cashion
Senior Vice President and
Chief Financial Officer
Telecopier: (858) 453-4338
Telephone: (858) 552-1100
-9-
<PAGE>
EXHIBIT A
TO
SUBSIDIARY GUARANTY
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
_________________, ____, by _____________________________________, a
___________________________ ("Joining Party"), and delivered to Bank of
America National Trust and Savings Association ("Lender") pursuant to the
Subsidiary Guaranty dated as of July 12, 1999 made by Pacific Biotech, Inc.,
a California corporation and MBS Acquisition Corporation, a Delaware
corporation (collectively, the "Guarantors"), in favor of Lender (as the same
may be amended or supplemented from time to time, the "Guaranty"). Terms used
but not defined in this Joinder shall have the meanings defined for those
terms in the Guaranty.
RECITALS
(a) The Guaranty was made by the Guarantors in favor of
Lender in connection with that certain Business Loan Agreement dated as of
July 12, 1999, by and between Quidel Corporation, a Delaware corporation (the
"Borrower"), and Lender (as the same may be amended or supplemented from time
to time, the "Loan Agreement").
(b) Joining Party has become a Significant Subsidiary of the
Borrower, and as such is required pursuant to SECTION 10.27 of the Loan
Agreement to become a Guarantor.
(c) Joining Party expects to realize direct and indirect
benefits as a result of the availability to the Borrower of the credit
facilities provided by Lender under the Loan Agreement.
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
-1-
<PAGE>
(1) By this Joinder, Joining Party becomes a "Guarantor"
under and pursuant to SECTION 17 of the Guaranty. Joining Party agrees that,
upon its execution hereof, it will become a Guarantor under the Guaranty with
respect to all obligations of the Borrower to Lender heretofore or hereafter
incurred under the Loan Agreement, and will be bound by all terms,
conditions, and duties applicable to a Guarantor under the Guaranty.
(2) The effective date of this Joinder is _________, ____.
"Joining Party"
------------------------------------
a
----------------------------------
By:
---------------------------------
Title:
-----------------------------
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------------
Title:
------------------------------
-2-
<PAGE>
EXHIBIT B
TO
SUBSIDIARY GUARANTY
SURETYSHIP PROVISIONS AND WAIVERS
Each Guarantor acknowledges that the liens and security
interests created or granted under the Security Agreement will or may secure
obligations of persons other than such Guarantor and, in full recognition of
that fact, each Guarantor consents and agrees that Lender may, at any time
and from time to time, without notice or demand, and without affecting the
enforceability or security hereof:
(a) supplement, modify, amend, extend, renew, or
otherwise change the time for payment or the terms of the obligations
of the Borrower to Lender under the Loan Agreement (collectively, the
"Obligations"), or any part thereof, including any increase or decrease
of the rate(s) of interest thereon;
(b) supplement, modify, amend or waive, or enter
into or give any agreement, approval or consent with respect to, the
Obligations or any part thereof or any provision of the Loan Agreement
or any other agreement, document or instrument executed and delivered
in connection therewith (collectively with the Loan Agreement, the
"Loan Documents") or of any additional security or guaranties, or any
condition, covenant, default, remedy, right, representation or term
thereof or thereunder;
(c) accept new or additional instruments, documents
or agreements in exchange for or relative to any of the Loan Documents
or the Obligations or any part thereof;
(d) accept partial payments on the Obligations;
(e) receive and hold additional security or
guaranties for the Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon,
subordinate, exchange, substitute, transfer and enforce any security or
guaranties, and apply any security and direct the order or manner of
sale thereof as Lender in its sole and absolute discretion may
determine;
(g) release any person or any guarantor from any
personal liability with respect to the Obligations or any part thereof;
(h) settle, release on terms satisfactory to Lender
or by operation of applicable laws or otherwise liquidate or enforce
any Obligations and any security or guaranty therefor in any manner,
consent to the transfer of any security and bid and purchase at any
sale; and
(i) consent to the merger, change or any other
restructuring or termination of the corporate existence of the Borrower
or any other person, and
-1-
<PAGE>
correspondingly restructure the Obligations, and any such merger,
change, restructuring or termination shall not affect the liability
of any Guarantor or the continuing existence of any liens hereunder,
under any other Loan Document to which any Guarantor is a party or
the enforceability hereof or thereof with respect to all or any part
of the Obligations.
Upon the occurrence of and during the continuance of any
event of default under the Loan Agreement, Lender may enforce this Subsidiary
Guaranty independently as to each Guarantor and independently of any other
remedy or security Lender at any time may have or hold in connection with the
Obligations, and it shall not be necessary for Lender to marshal assets in
favor of any Guarantor, the Borrower or any other person or to proceed upon
or against and/or exhaust any other security or remedy before proceeding to
enforce this Subsidiary Guaranty. Each Guarantor expressly waives any right
to require Lender to marshal assets in favor of such Guarantor, the Borrower
or any other person or to proceed against any other person or any collateral
provided by any other person, and agrees that Lender may proceed against any
person and/or collateral in such order as it shall determine in its sole and
absolute discretion. Lender may file a separate action or actions against any
Guarantor, whether action is brought or prosecuted with respect to any other
security or against any other Guarantor, the Borrower or any other person, or
whether any other person is joined in any such action or actions. Each
Guarantor agrees that Lender and the Borrower and any other person may deal
with each other in connection with the Obligations or otherwise, or alter any
contracts or agreements now or hereafter existing between any of them, in any
manner whatsoever, all without in any way altering or affecting the security
of the Security Agreement. Lender's rights hereunder shall be reinstated and
revived, and the enforceability of this Subsidiary Guaranty shall continue,
with respect to any amount at any time paid on account of the Obligations
which thereafter shall be required to be restored or returned by Lender upon
the bankruptcy, insolvency or reorganization of the Borrower, any Guarantor
or any other person, or otherwise, all as though such amount had not been
paid. The liens created or granted by the Security Agreement and the
enforceability of this Subsidiary Guaranty at all times shall remain
effective to secure the full amount of all the Obligations including, without
limitation, the amount of all loans and interest thereon at the rates
provided for in the Loan Agreement, even though the Obligations, including
any part thereof or any other security or guaranty therefor, may be or
hereafter may become invalid or otherwise unenforceable as against the
Borrower or any other person and whether or not the Borrower or any other
person shall have any personal liability with respect thereto. Each Guarantor
expressly waives any and all defenses now or hereafter arising or asserted by
reason of (a) any disability or other defense of the Borrower or any other
person with respect to the Obligations, (b) the unenforceability or
invalidity of any security or guaranty for the Obligations or the lack of
perfection or continuing perfection or failure of priority of any security
for the Obligations, (c) the cessation for any cause whatsoever of the
liability of the Borrower or any other person (other than by reason of the
full payment and performance of all Obligations), (d) any failure of Lender
to marshal assets in favor of such Guarantor or any other person, (e) except
as otherwise required by law or as provided in this Subsidiary Guaranty, any
failure of Lender to give notice of sale or other disposition of collateral
to such Guarantor or any other person or any defect in any notice that may be
given in connection with any sale or disposition of collateral, (f) except as
otherwise required by law or as provided in this Subsidiary Guaranty, any
failure of Lender to comply with applicable laws in connection with the sale
or other dis position of any collateral or other security for any Obligation,
including without limitation any failure of Lender to conduct a commercially
reasonable sale or other disposition of any collateral or other security for
any Obligation, (g) any act or omission of Lender or others that directly or
indirectly results in or aids the discharge or release of the Borrower, any
Guarantor or any other person or the Obligations or any other security or
guaranty therefor by operation of law or otherwise, (h) any law which
provides that the obligation of a surety or
-2-
<PAGE>
guarantor must neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (i) any
failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any person, (j) the election by Lender, in any
bankruptcy proceeding of any person, of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any liens under Section 364 of the United States
Bankruptcy Code, (l) any use of cash collateral under Section 363 of the
United States Bankruptcy Code, (m) any agreement or stipulation with respect
to the provision of adequate protection in any bankruptcy proceeding of any
person, (n) the avoidance of any liens in favor of Lender for any reason, (o)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, liquidation or dissolution proceeding commenced by or against any
person, including any discharge of, or bar or stay against collecting, all or
any of the Obligations (or any interest thereon) in or as a result of any
such proceeding or (p) to the extent permitted, the benefits of any form of
one-action rule.
-3-
<PAGE>
CASH COLLATERAL AGREEMENT
THIS CASH COLLATERAL AGREEMENT (this "Agreement"), dated as
of July 12, 1999, is made by Metra Biosystems, Inc., a California
corporation, as Grantor, in favor of Bank of America National Trust and
Savings Association (the "Bank"), with reference to the following facts:
RECITALS
A. Pursuant to the Business Loan Agreement of even date herewith by
and between Quidel Corporation (the "Borrower") and the Bank (the
"Loan Agreement"), the Bank has agreed to provide the Borrower with
certain revolving and term credit facilities.
B. The Loan Agreement provides, as a condition of the availability of
such credit facilities, that Grantor shall enter into this Agreement
and shall grant security interests to the Bank as herein provided.
C. Grantor expects to realize direct and indirect benefits as a result
of the availability of the aforementioned credit facilities.
AGREEMENT
NOW, THEREFORE, in order to induce the Bank to extend the
aforementioned credit facilities to the Borrower, and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Grantor hereby represents, warrants, covenants, agrees, assigns
and grants as follows:
1. DEFINITIONS. This Agreement is the Cash Collateral
Agreement referred to in the Loan Agreement. Terms defined in the Loan
Agreement and not otherwise defined in this Agreement shall have the meanings
defined for those terms in the Loan Agreement. Terms defined in the
California Uniform Commercial Code and not otherwise defined in this
Agreement or in the Loan Agreement shall have the meanings defined for those
terms in the California Uniform Commercial Code. As used in this Agreement,
the following terms shall have the meanings respectively set forth after each:
"AGREEMENT" means this Cash Collateral Agreement, and any
extensions, modifications, renewals, restatements, supplements or amendments
hereof.
"COLLATERAL" means and includes all present and future
right, title and interest of Grantor, whether now existing or hereafter
arising, in and to the following:
(a) Bank of America National Trust and Savings
Association Account No. 14506-08709 (the "Pledged Account") and any
substitute or additional account(s) in which funds from the Pledged
Account, or any other funds or assets now or hereafter pledged to the
Bank hereunder, may be held from time to time (collectively, together
with the Pledged Account, the "Pledged Accounts"), and all funds and
assets now or hereafter deposited by Grantor or otherwise held by the
Bank in any Pledged Account; and
-1-
<PAGE>
(b) All cash and noncash proceeds and products of
any of the foregoing, including without limitation all interest and
dividends earned on the Pledged Accounts, all monies and other tangible
or intangible property received upon a sale or other disposition of any
of the Pledged Accounts, and all rights to payment in connection with
any cause of action with respect to any Pledged Accounts, all of which
proceeds and products shall, if received by Grantor from time to time,
be immediately delivered by Grantor to the Bank to be held and/or
applied by the Bank in accordance with this Agreement.
"SECURED OBLIGATIONS" means any and all present and future
obligations of any type or nature of the Borrower to the Bank arising under
or relating to the Facility No. 2 term loan made pursuant to the Loan
Agreement, whether due or to become due, matured or unmatured, liquidated or
unliquidated, or contingent or noncontingent, INCLUDING obligations of
performance as well as obligations of payment, and INCLUDING interest that
accrues thereon after the commencement of any bankruptcy or insolvency
proceeding by or against the Borrower.
2. FURTHER ASSURANCES. At any time and from time to time
at the request of the Bank, Grantor shall execute and deliver to the Bank all
such financing statements and other instruments and documents in form and
substance satisfactory to the Bank as shall reasonably be necessary or
desirable to fully perfect, when filed and/or recorded, the Bank's security
interests granted pursuant to SECTION 3 of this Agreement.
3. PLEDGE AGREEMENT. For valuable consideration, Grantor
hereby assigns and pledges to the Bank, and grants to the Bank a security
interest in, all presently existing and hereafter acquired Collateral, as
security for the timely payment and performance of the Secured Obligations,
and each of them. This Agreement is a continuing and irrevocable agreement
and all the rights, powers, privileges and remedies hereunder shall apply to
any and all Secured Obligations, including those arising under successive
transactions which shall either continue the Secured Obligations, increase or
decrease them, or from time to time create new Secured Obligations after all
or any prior Secured Obligations have been satisfied, and notwithstanding the
bankruptcy of Grantor or any other person or any other event or proceeding
affecting any person.
4. GRANTOR'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
EXCEPT as otherwise disclosed to the Bank in writing concurrently herewith,
Grantor represents, warrants and agrees that: (a) Grantor will pay, prior to
delinquency, all taxes, charges, liens and assessments against the
Collateral, EXCEPT Permitted Encumbrances and such other liens as are timely
contested in good faith, and upon its failure to pay or so contest such
taxes, charges, liens and assessments, the Bank at its option may pay any of
them, and the Bank shall be the sole judge of the legality or validity
thereof and the amount necessary to discharge the same; (b) the Collateral
will not be used for any unlawful purpose or in violation of any law,
regulation or ordinance, nor used in any way that will void or impair any
insurance required to be carried in connection therewith; (c) Grantor will
take all reasonable steps to preserve and protect the Collateral; and (d) in
the event Grantor changes its name or its address as either are set forth
herein or in the Loan Agreement, Grantor will notify the Bank of such name
and/or address change promptly, but in any event, within five (5) banking
days. If any Collateral, or any interest therein, is disposed of in violation
of these provisions, the security interest shall continue in such Collateral
or interest notwithstanding such disposition. The Bank shall execute and
deliver any releases or other documents reasonably requested by Grantor to
accomplish or confirm the release of Collateral provided by this Section.
-2-
<PAGE>
5. THE BANK'S RIGHTS RE COLLATERAL. At any time (whether or
not an Event of Default has occurred), without notice or demand and at the
expense of Grantor, the Bank may, to the extent it may be necessary or
desirable to protect the security hereunder, but the Bank shall not be
obligated to, perform any obligation of Grantor under this Agreement or any
obligation of the Borrower under the Loan Agreement if Grantor or Borrower
has breached such obligation and all cure periods, if any, have expired.
6. RESTRICTIONS ON PLEDGED ACCOUNTS. Except as expressly
provided for in the Loan Agreement, while any Secured Obligation remains
outstanding, Grantor shall have no right to withdraw any amounts from the
Pledged Account.
7. EVENTS OF DEFAULT. There shall be an Event of Default
hereunder upon the occurrence and during the continuance of an Event of
Default under the Loan Agreement.
8. RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and
during the continuance of an Event of Default, subject to compliance with the
requirements of applicable laws, the Bank shall have, in any jurisdiction
where enforcement hereof is sought, in addition to all other rights and
remedies that the Bank may have under applicable law or in equity or under
this Agreement (INCLUDING, without limitation, all rights set forth in
SECTION 5 hereof) or under the Loan Agreement, all rights and remedies of the
Bank under the Uniform Commercial Code as enacted in any jurisdiction, and,
in addition, the following rights and remedies, all of which may be exercised
with or without notice to Grantor and without affecting the obligations of
Grantor hereunder or under the Loan Agreement, or the enforceability of the
liens and security interests created hereby: (a) to foreclose the liens and
security interests created hereunder or under any other agreement relating to
any Collateral by any available judicial procedure or without judicial
process; (b) to sell, assign, lease or otherwise dispose of any Collateral or
any part thereof, either at public or private sale or at any broker's board,
in lot or in bulk, for cash, on credit or otherwise, with or without
representations or warranties and upon such terms as shall be acceptable to
the Bank; (c) to collect by legal proceedings or otherwise all dividends,
distributions, interest, principal or other sums now or hereafter payable
upon or on account of the Collateral; (d) to enter into any extension,
reorganization, deposit, merger or consolidation agreement, or any other
agreement relating to or affecting the Collateral, and in connection
therewith the Bank may deposit or surrender control of the Collateral and/or
accept other property in exchange for the Collateral; (e) to enforce payment
and prosecute any action or proceeding with respect to any or all of the
Collateral and take or bring, in the name of the Bank or in the name of
Grantor, any and all steps, actions, suits or proceedings deemed by the Bank
necessary or desirable to effect collection of or to realize upon the
Collateral, INCLUDING any judicial or nonjudicial foreclosure thereof or
thereon, and Grantor specifically consents to any nonjudicial foreclosure of
any or all of the Collateral or any other action taken by the Bank which may
release any obligor from personal liability on any of the Collateral, and
Grantor waives any right not expressly provided for in this Agreement to
receive notice of any public or private judicial or nonjudicial sale or
foreclosure of any security or any of the Collateral; and any money or other
property received by the Bank in exchange for or on account of the
Collateral, whether representing collections or proceeds of Collateral, and
whether resulting from voluntary payments or foreclosure proceedings or other
legal action taken by the Bank or Grantor may be applied by the Bank without
notice to Grantor to the Secured Obligations in such order and manner as the
Bank in its sole discretion shall determine; (k) to insure, process and
preserve the Collateral; (l) to exercise all rights, remedies, powers or
privileges
-3-
<PAGE>
provided under any of the Loan Documents; (m) to receive, open and dispose of
all mail addressed to Grantor and notify postal authorities to change the
address for delivery thereof to such address as the Bank may designate;
PROVIDED that the Bank agrees that it will promptly deliver over to Grantor
such opened mail as does not relate to the Collateral; and (n) to exercise
all other rights, powers, privileges and remedies of an owner of the
Collateral; all at the Bank's sole option and as the Bank in its sole
discretion may deem advisable.
9. ATTORNEY-IN-FACT. Grantor hereby irrevocably nominates
and appoints the Bank as its attorney-in-fact for the following purposes,
subject to compliance with the requirements of applicable laws: (a) to do all
acts and things which the Bank may deem necessary or advisable to perfect and
continue perfected the security interests created by this Agreement and, upon
the occurrence and during the continuance of an Event of Default, to
preserve, process, develop, maintain and protect the Collateral; (b) upon the
occurrence and during the continuance of an Event of Default, to do any and
every act which Grantor is obligated to do under this Agreement, at the
expense of Grantor and without any obligation to do so; (c) to prepare, sign,
file and/or record, for Grantor, in the name of Grantor, any financing
statement, application for registration, or like paper, and to take any other
action deemed by the Bank necessary or desirable in order to perfect or
maintain perfected the security interests granted hereby; and (d) upon the
occurrence and during the continuance of an Event of Default, to execute any
and all papers and instruments and do all other things necessary or desirable
to preserve and protect the Collateral and to protect the Bank's security
interests therein; PROVIDED, HOWEVER, that the Bank shall be under no
obligation whatsoever to take any of the foregoing actions, and, absent bad
faith or actual malice, the Bank shall have no liability or responsibility
for any act taken or omission with respect thereto.
10. COSTS AND EXPENSES. Grantor agrees to pay to the Bank
all reasonable costs and expenses (INCLUDING, without limitation, reasonable
attorneys' fees and disbursements) incurred by the Bank in the enforcement or
attempted enforcement of this Agreement (but not the other Loan Documents),
whether or not an action is filed in connection therewith, and in connection
with any waiver or amendment of any term or provision hereof. All advances,
charges, costs and expenses, INCLUDING reasonable attorneys' fees and
disbursements, incurred or paid by the Bank in exercising any right,
privilege, power or remedy conferred by this Agreement, or in the enforcement
or attempted enforcement thereof, shall be secured hereby and shall become a
part of the Secured Obligations and shall be paid to the Bank by Grantor,
immediately upon demand, together with interest thereon at the rate(s)
provided for Base Rate Loans under the Loan Agreement.
11. STATUTE OF LIMITATIONS AND OTHER LAWS. Until the Secured
Obligations shall have been paid and performed in full, the power of sale and
all other rights, privileges, powers and remedies granted to the Bank
hereunder shall continue to exist and may be exercised by the Bank at any
time and from time to time irrespective of the fact that any of the Secured
Obligations may have become barred by any statute of limitations. Grantor
expressly waives the benefit of any and all statutes of limitation, and any
and all laws providing for exemption of property from execution or for
valuation and appraisal upon foreclosure, to the maximum extent permitted by
applicable law.
12. OTHER AGREEMENTS. Nothing herein shall in any way modify
or limit the effect of terms or conditions set forth in any other security or
other agreement executed by Grantor or in connection with the Secured
Obligations, but each and every term and condition hereof shall be in
addition thereto. All provisions contained in the Loan Agreement that apply
to loan
-4-
<PAGE>
documents generally are fully applicable to this Agreement and are
incorporated herein by this reference.
13. INCORPORATION OF SURETYSHIP PROVISIONS AND WAIVERS. The
attached EXHIBIT A, "Suretyship Provisions and Waivers", is hereby
incorporated by this reference as though set forth herein in full.
14. CONDITION OF BORROWER AND ITS SUBSIDIARIES. Grantor
represents and warrants to the Bank that Grantor has obtained such
information regarding the Borrower and its subsidiaries and their businesses,
operations and condition (financial and otherwise) and their respective
assets and properties, as it requires as a condition to entering into this
Agreement. Grantor hereby expressly waives and relinquishes any duty on the
part of the Bank (should any such duty exist) to disclose to Grantor any
matter, fact or thing related to the businesses, operations or condition
(financial or otherwise) of the Borrower or its subsidiaries or their
respective assets and properties, whether now known or hereafter known by the
Bank during the life of this Agreement. With respect to any of the Secured
Obligations, the Bank need not inquire into the powers of the Borrower or any
subsidiaries thereof or the officers or employees acting or purporting to act
on their behalf, and all Secured Obligations made or created in good faith
reliance upon the professed exercise of such powers shall be secured hereby.
15. LIENS ON REAL PROPERTY. In the event that all or any
part of the Secured Obligations at any time are secured by any one or more
deeds of trust or mortgages or other instruments creating or granting liens
on any interests in real property, Grantor authorizes the Bank, upon the
occurrence of and during the continuance of any Event of Default, at its sole
option, without notice or demand and without affecting any Secured
Obligations of Grantor, the enforceability of this Agreement, or the validity
or enforceability of any liens of the Bank on any Collateral, to foreclose
any or all of such deeds of trust or mortgages or other instruments by
judicial or nonjudicial sale. Insofar as the liens created herein secure the
obligations of other persons, (i) Grantor expressly waives any defenses to
the enforcement of this Agreement or any liens created or granted hereby or
to the recovery by the Bank against Borrower or any guarantor or any other
person liable therefor of any deficiency after a judicial or nonjudicial
foreclosure or sale, even though such a foreclosure or sale may impair the
subrogation rights of Grantor and may preclude Grantor from obtaining
reimbursement or contribution from any other person, and (ii) Grantor
expressly waives any defenses or benefits that may be derived from California
Code of Civil Procedure Sections 580a, 580b, 580d or 726, or comparable
provisions of the laws of any other jurisdiction, and all other suretyship
defenses it otherwise might or would have under California law or other
applicable law. Grantor expressly waives any right to receive notice of any
judicial or nonjudicial foreclosure or sale of any real property or interest
therein subject to any such deeds of trust or mortgages or other instruments
and Grantor's failure to receive any such notice shall not impair or affect
Grantor's obligations or the enforceability of this Agreement or any liens
created or granted hereby.
16. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding
anything to the contrary elsewhere contained herein or in the Loan Agreement
to which Grantor is a party until no part of any commitment to lend remains
outstanding and all of the Secured Obligations have been paid and performed
in full, Grantor hereby waive with respect to the Borrower and its successors
and assigns (including any surety) and any other person, any and all rights
at law or in equity to subrogation, to reimbursement, to exoneration, to
contribution, to setoff or to any other rights that could accrue to a surety
against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, or to a holder or
transferee against a maker and which Grantor may have or hereafter acquire
-5-
<PAGE>
against the Borrower or any other party in connection with or as a result of
Grantor's execution, delivery and/or performance of this Agreement or any
other loan document to which Grantor is a party. Grantor agrees that it shall
not have or assert any such rights against the Borrower or its successors and
assigns or any other attempted setoff to any action commenced against Grantor
by the Borrower (as borrower or in any other capacity) or any other person.
Grantor hereby acknowledges and agrees that this waiver is intended to
benefit the Bank and shall not limit or otherwise affect Grantor's liability
hereunder, under any other Loan Document to which Grantor is a party, or the
enforceability hereof or thereof.
17. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS.
Grantor warrants and agrees that each of the waivers and consents set forth
herein are made after consultation with legal counsel and with full knowledge
of their significance and consequences, with the understanding that events
giving rise to any defense or right waived may diminish, destroy or otherwise
adversely affect rights which Grantor otherwise may have against the
Borrower, the Bank or others, or against Collateral, and that, under the
circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or law. If any of the waivers or consents herein
are determined to be contrary to any applicable law or public policy, such
waivers and consents shall be effective to the maximum extent permitted by
law.
18. CONTINUING EFFECT. This Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by
or against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor'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 Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned by the Bank, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though such
payment or performance had not been made. In the event that any payment or
any part thereof is rescinded, reduced, restored or returned, the Secured
Obligations shall be reinstated and deemed reduced only by such amount paid
and not so rescinded, reduced, restored or returned.
19. RELEASE OF GRANTOR. This Agreement and all Secured
Obligations of Grantor hereunder shall be released as provided in Section 3.6
of the Loan Agreement when all Secured Obligations have been paid in full in
Cash or otherwise performed in full and when the Bank's financing commitments
under the Facility No. 2 term loan no longer remain outstanding. Upon such
release of Grantor's Secured Obligations hereunder, the Bank promptly shall
return any pledged Collateral to Grantor, or to the person or persons legally
entitled thereto, and promptly shall endorse, execute, deliver, record and
file all instruments and documents, and do all other acts and things,
reasonably required for the return of the Collateral to Grantor, or to the
person or persons legally entitled thereto, and to evidence or document the
release of the Bank's interests arising under this Agreement, all as
reasonably requested by, and at the sole expense of, Grantor.
20. ARBITRATION.
(a) This Section concerns the resolution of any
controversies or claims between Grantor and the Bank, including but not
limited to those that arise from:
1) This Agreement (including any renewals,
extensions or modifications of this Agreement);
-6-
<PAGE>
2) Any document, agreement or procedure related to
or delivered in connection with this Agreement;
3) Any violation of this Agreement; or
4) Any claims for damages resulting from the
transactions contemplated hereby, including claims for injury to
persons, property or business interests (torts).
(b) At the request of Grantor or the Bank, any such
controversies or claims will be settled by arbitration in accordance with
the United States Arbitration Act. The United States Arbitration Act will
apply even though this Agreement provides that it is governed by
California law.
(c) Arbitration proceedings will be administered by the
American Arbitration Association and will be subject to its commercial
rules of arbitration. The arbitration will be conducted in California
within the following county or counties: Los Angeles or San Diego.
(d) For purposes of the application of the statute of
limitations, the filing of an arbitration pursuant to this Section is the
equivalent of the filing of a lawsuit, and any claim or controversy which
may be arbitrated under this Section is subject to any applicable statute
of limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations and,
if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is
arbitrable, the arbitrators will have the authority to resolve any such
dispute.
(f) The decision that results from an arbitration
proceeding may be submitted to any authorized court of law to be confirmed
and enforced.
(g) The procedure described above will not apply if the
controversy or claim, at the time of the proposed submission to
arbitration, arises from or relates to an obligation to the Bank secured
by real property located in California. In this case, both Grantor and the
Bank must consent to submission of the claim or controversy to
arbitration. If both parties do not consent to arbitration, the
controversy or claim will be settled as follows:
(i) Grantor and the Bank will designate a
referee (or a panel of referees) selected under the auspices of
the American Arbitration Association in the same manner as
arbitrators are selected in Association-sponsored proceedings;
(ii) The designated referee (or the panel of
referees) will be appointed by a court as provided in California
Code of Civil Procedure Section 638 and the following related
sections;
(iii) The referee (or the presiding referee of
the panel) will be an active attorney or a retired judge; and
(iv) The award that results from the decision of
the referee (or the panel) will be entered as a judgment in the
court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644 and
645.
-7-
<PAGE>
(h) This provision does not limit the right of Grantor or
the Bank to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal
property collateral; or
(iii) act in a court of law, before, during or after
the arbitration proceeding to obtain:
a) an interim remedy; and/or
b) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim,
additional or supplementary remedies, or the filing of a court action,
does not constitute a waiver of the right of Grantor or the Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to the Bank
which is secured by real property located in California at the time of the
proposed submission to arbitration, this right is limited according to the
provision above requiring the consent of both Grantor and the Bank to seek
resolution through arbitration.
(j) If the Bank forecloses against any real property
securing this Agreement, the Bank has the option to exercise the power of
sale under the deed of trust or mortgage, or to proceed by judicial
foreclosure.
21. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of
which, taken together, shall constitute one and the same agreement.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA.
-8-
<PAGE>
23. WAIVER OF JURY TRIAL. GRANTOR AND THE BANK EXPRESSLY
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT,
THE LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. EACH GRANTOR AND THE BANK AGREE THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN AGREEMENT
AND THE OTHER LOAN DOCUMENTS. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
IN WITNESS WHEREOF, Grantor has executed this Agreement by its
duly authorized officer as of the date first written above.
"Grantor"
METRA BIOSYSTEMS, INC.,
a California corporation
By: /s/ George W. Dunbar
--------------------------------
George Dunbar, President
By: /s/ Mark Weeks
--------------------------------
Mark Weeks, Secretary
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Karin S. Barnes
--------------------------------
Title: Vice President
-----------------------------
-9-
<PAGE>
EXHIBIT A
TO
CASH COLLATERAL AGREEMENT
SURETYSHIP PROVISIONS AND WAIVERS
Grantor acknowledges that the liens and security interests created
or granted herein will or may secure obligations of persons other than
Grantor and, in full recognition of that fact, Grantor consents and agrees
that the Bank may, at any time and from time to time, without notice or
demand, and without affecting the enforceability or security hereof:
(a) supplement, modify, amend, extend, renew, or otherwise
change the time for payment or the terms of the Secured Obligations or any
part thereof, including any increase or decrease of the rate(s) of
interest thereon;
(b) supplement, modify, amend or waive, or enter into or give
any agreement, approval or consent with respect to, the Secured
Obligations or any part thereof or any provision of the Loan Agreement or
of any other agreement, document or instrument executed and delivered in
connection with the Loan Agreement (collectively with the Loan Agreement,
the "Loan Documents"), or any condition, covenant, default, remedy, right,
representation or term thereof or thereunder;
(c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Secured Obligations or any part thereof;
(d) accept partial payments on the Secured Obligations;
(e) receive and hold additional security or guaranties for
the Secured Obligations or any part thereof;
(f) release, reconvey, terminate, waive, abandon,
subordinate, exchange, substitute, transfer and enforce any security or
guaranties, and apply any security and direct the order or manner of
sale thereof as the Bank in its sole and absolute discretion may
determine;
(g) release any person or any guarantor from any personal
liability with respect to the Secured Obligations or any part thereof;
(h) settle, release on terms satisfactory to the Bank or by
operation of applicable laws or otherwise liquidate or enforce any Secured
Obligations and any security or guaranty therefor in any manner, consent
to the transfer of any security and bid and purchase at any sale; and
(i) consent to the merger, change or any other restructuring
or termination of the corporate existence of the Borrower or any other
person, and correspondingly restructure the Secured Obligations, and any
such merger, change, restructuring or termination shall not affect the
liability of Grantor or the continuing existence of any liens hereunder,
under any other Loan Document to which Grantor is a party or the
enforceability hereof or thereof with respect to all or any part of the
Secured Obligations.
Upon the occurrence of and during the continuance of any Event of
Default, the Bank may enforce this Agreement independently as to Grantor and
-1-
<PAGE>
independently of any other remedy or security the Bank at any time may have
or hold in connection with the Secured Obligations, and it shall not be
necessary for the Bank to marshal assets in favor of Grantor, the Borrower or
any other person or to proceed upon or against and/or exhaust any other
security or remedy before proceeding to enforce this Agreement. Grantor
expressly waives any right to require the Bank to marshal assets in favor of
Grantor, the Borrower or any other person or to proceed against any other
person or any collateral provided by any other person, and agrees that the
Bank may proceed against any person and/or collateral in such order as it
shall determine in its sole and absolute discretion. The Bank may file a
separate action or actions against Grantor, whether action is brought or
prosecuted with respect to any other security or against the Borrower or any
other person, or whether any other person is joined in any such action or
actions. Grantor agrees that the Bank and the Borrower and any other person
may deal with each other in connection with the Secured Obligations or
otherwise, or alter any contracts or agreements now or hereafter existing
between any of them, in any manner whatsoever, all without in any way
altering or affecting the security of this Agreement. The Bank's rights
hereunder shall be reinstated and revived, and the enforceability of this
Agreement shall continue, with respect to any amount at any time paid on
account of the Secured Obligations which thereafter shall be required to be
restored or returned by the Bank upon the bankruptcy, insolvency or
reorganization of the Borrower, Grantor or any other person, or otherwise,
all as though such amount had not been paid. The liens created or granted
herein and the enforceability of this Agreement at all times shall remain
effective to secure the full amount of all the Secured Obligations including,
without limitation, the amount of all loans and interest thereon at the rates
provided for in the Loan Agreement and the note(s) thereunder, even though
the Secured Obligations, including any part thereof or any other security or
guaranty therefor, may be or hereafter may become invalid or otherwise
unenforceable as against the Borrower or any other person and whether or not
the Borrower or any other person shall have any personal liability with
respect thereto. Grantor expressly waives any and all defenses now or
hereafter arising or asserted by reason of (a) any disability or other
defense of the Borrower or any other person with respect to the Secured
Obligations, (b) the unenforceability or invalidity of any security or
guaranty for the Secured Obligations or the lack of perfection or continuing
perfection or failure of priority of any security for the Secured
Obligations, (c) the cessation for any cause whatsoever of the liability of
the Borrower or any other person (other than by reason of the full payment
and performance of all Secured Obligations), (d) any failure of the Bank to
marshal assets in favor of Grantor or any other person, (e) except as
otherwise required by law or as provided in this Agreement, any failure of
the Bank to give notice of sale or other disposition of collateral to Grantor
or any other person or any defect in any notice that may be given in
connection with any sale or disposition of collateral, (f) except as
otherwise required by law or as provided in this Agreement, any failure of
the Bank to comply with applicable laws in connection with the sale or other
disposition of any collateral or other security for any Obligation, including
without limitation any failure of the Bank to conduct a commercially
reasonable sale or other disposition of any collateral or other security for
any Obligation, (g) any act or omission of the Bank or others that directly
or indirectly results in or aids the discharge or release of the Borrower,
Grantor or any other person or the Secured Obligations or any other security
or guaranty therefor by operation of law, (h) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal obligation,
(i) any failure of the Bank to file or enforce a claim in any bankruptcy or
other proceeding with respect to any person, (j) the election by the Bank, in
any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy Code,
(k) any extension of credit or the grant of any liens under Section 364 of
the United States Bankruptcy Code, (l) any use of cash collateral under
Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any person, (n) the avoidance of any liens in favor
of the Bank for any reason, (o) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against any person, including any discharge of, or bar or
stay against collecting, all or any of the Secured Obligations (or any
interest thereon) in or as a result of
-2-
<PAGE>
any such proceeding, or (p) to the extent permitted, the benefits of any form
of one-action rule. Until no part of any commitment to lend remains
outstanding and all of the Secured Obligations have been paid and performed
in full, Grantor shall have no right of subrogation, contribution,
reimbursement or indemnity, and Grantor expressly waives any right to enforce
any remedy that the Bank now has or hereafter may have against any other
person and waives the benefit of, or any right to participate in, any other
security now or hereafter held by the Bank. Grantor expressly waives all
setoffs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Secured Obligations, and all notices of
acceptance of this Agreement or of the existence, creation or incurring of
new or additional Secured Obligations.
-3-
