TERM NOTE B
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Debtor's Name: Specialty Laboratories, Inc.
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Debtor's Address: Office: #210 Loan Number
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
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Maturity Date: Amount
February 1, 2004 $11,000,000
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Santa Monica, California $11,000,000 Date: January 23, 1998
FOR VALUE RECEIVED, on February 1, 2004 (the "Maturity Date"), the undersigned
("Debtor") promises to pay to the order of UNION BANK OF CALIFORNIA, N.A.
("Bank"), as indicated below, the principal sum of Eleven Million Dollars
($11,000,000), or so much thereof as is disbursed, together with interest on the
balance of such principal from time to time outstanding, at the per annum rate
or rates and at the times set forth below. This Term Note B (this "Note") is
governed by the terms and conditions of the Amended and Restated Loan Agreement
(as such term is defined hereinbelow).
1. PAYMENTS.
PRINCIPAL PAYMENTS. Debtor shall pay principal in sixty (60) equal
consecutive monthly installments, each in an amount sufficient to fully amortize
the principal balance hereof by the Maturity Date, beginning February 1, 1999,
and continuing on the first day of each month thereafter. The availability under
this Note shall be reduced on the same day and in the same amount as each
scheduled principal payment.
INTEREST PAYMENTS. Debtor shall pay interest on the first day of each
month (commencing February 1, 1998). Should interest not be paid when due, it
shall become part of the principal and bear interest as herein provided. All
computations of interest under this Note shall be made on the basis of a year of
360 days, for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in increments of at least One Hundred Thousand Dollars
($100,000) shall bear interest at a rate, based on an index selected by
Debtor, equal to Bank's LIBOR Rate for the Interest Period selected by
Debtor plus the LIBOR Rate Margin.
Any Base Interest Rate may not be changed, altered or otherwise
modified until the expiration of the Interest Period selected by
Xxxxxx. The exercise of interest rate options by Debtor shall be as
recorded in Bank's records, which records shall be prima facie evidence
of the amount borrowed as a Base Interest Rate Loan and the interest
rate; provided, however, that failure of Bank to make any such notation
in its records shall not discharge Debtor from its obligation to repay
in full with interest all amounts borrowed. In no event shall any
Interest Period extend beyond the Maturity Date.
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To exercise this option, Debtor may, from time to time with respect to
principal outstanding on which the Base Interest Rate is not accruing,
and on the expiration of any Interest Period with respect to principal
outstanding on which the Base Interest Rate has been accruing, select
an index offered by Bank for a Base Interest Rate Loan and an Interest
Period by telephoning an authorized lending officer of Bank located at
the banking office identified below prior to 10:00 a.m., Pacific time,
on any Business Day and advising that officer of the selected index,
the Interest Period and the Origination Date selected (which
Origination Date shall follow the date of such selection by no more
than two (2) Business Days).
Bank will mail a written confirmation of the terms of the selection to
Debtor promptly after the selection is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the selection, the index is
unavailable for any reason, the selection shall be void. Bank reserves
the right to fund the principal from any source of funds.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is
not bearing interest at a Base Interest Rate shall bear interest at a
rate per annum equal to the Reference Rate, which rate shall vary as
and when the Reference Rate changes.
Debtor shall pay all amounts due under this Note in lawful money of the
United States at Bank's Los Angeles Headquarters Commercial Banking
Office, or such other office as may be designated by Bank, from time to
time.
2. LATE PAYMENTS. If any payment required by the terms of this Note shall remain
unpaid ten days after same is due, at the option of Bank, Debtor shall pay a fee
of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this Note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in paragraph 1.b, above,
calculated from the date of default until all amounts payable under this Note
are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this Note bearing interest at a rate based
on the Reference Rate may be prepaid in whole or in part at any time,
without penalty or premium. Amounts outstanding under this Note bearing
interest at the Base Interest Rate may only be prepaid, in whole or in
part, provided that Bank has received not less than five (5) Business
Days' prior written notice of an intention to make such prepayment and
Debtor pays a prepayment fee to Bank in an amount equal to the present
value of the product of: (i) the difference (but not less than zero)
between (a) the Base Interest Rate applicable to the principal amount
which Debtor intends to prepay and (b) the return which Bank could
obtain if it used the amount of such prepayment of principal to
purchase at bid price regularly quoted securities issued by the United
States having a maturity date most closely coinciding with the relevant
Base Rate Maturity Date and such securities were held by Bank until the
relevant Base Rate Maturity Date ("Yield Rate"); (ii) a fraction, the
numerator of which is the number of days in the period between the date
of prepayment and the relevant Base Rate Maturity Date and the
denominator of which is 360; and (iii) the amount of the principal so
prepaid (except in the event that principal payments are required and
have been made as scheduled under the terms of the Base Interest Rate
Loan being prepaid, then an amount equal to the lesser of (A) the
amount prepaid or (B) fifty percent (50%) of the sum of (1) the amount
prepaid and (2) the amount of principal scheduled under the terms of
the Base Interest Rate Loan being prepaid
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to be outstanding at the relevant Base Rate Maturity Date). Present
value under this Note is determined by discounting the above product to
present value using the Yield Rate as the annual discount factor.
b. In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under the above
prepayment formula exceed the interest that Bank would have received if
no prepayment had occurred. All prepayments shall include payment of
accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before application to principal. A
determination by Bank as to the prepayment fee amount, if any, shall be
conclusive.
c. Such prepayment fee, if any, shall also be payable if prepayment
occurs as the result of the acceleration of the principal of this Note
by Bank because of any default hereunder. If, following such
acceleration, all or any portion of a Base Interest Rate Loan is
satisfied, whether through sale of property encumbered by any security
agreement or other agreement securing this Note, at a foreclosure sale
held thereunder or through the tender of payment at any time following
such acceleration, but prior to such a foreclosure sale, then such
satisfaction shall be deemed an evasion of the prepayment conditions
set forth above, and Bank shall, automatically and without notice or
demand, be entitled to receive, concurrently with such satisfaction the
prepayment fee set forth above, and the amount of such prepayment fee
shall be added to the principal. DEBTOR HEREBY ACKNOWLEDGES AND AGREES
THAT BANK WOULD NOT EXTEND THE CREDIT TO DEBTOR EVIDENCED BY THIS NOTE
WITHOUT DEBTOR'S AGREEMENT, AS SET FORTH ABOVE, TO PAY BANK A
PREPAYMENT FEE UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE
PRINCIPAL BEARING INTEREST AT THE BASE INTEREST RATE FOLLOWING THE
ACCELERATION OF THE MATURITY DATE HEREOF BY REASON OF A DEFAULT. DEBTOR
HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON ITS BEHALF TO SEPARATELY
INITIAL THE AGREEMENT CONTAINED IN THIS PARAGRAPH BY PLACING THEIR
INITIALS BELOW:
INITIALS: /s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
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5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not
be limited to, any of the following: (a) the failure of Debtor to make any
payment required under this Note when due and, in the case of any interest
payment only, such failure shall continue for five (5) days; (b) any breach,
misrepresentation or other default by Debtor, any guarantor, co-maker, endorser,
or any person or entity other than Debtor providing security for this Note
(hereinafter individually and collectively referred to as the "Obligor") under
any security agreement, guaranty or other agreement between Bank and any
Obligor, and such breach, misrepresentation or other default, if in respect of a
financial covenant which is capable of being cured, is not cured within thirty
(30) days after its occurrence; (c) the insolvency of any Obligor or the failure
of any Obligor generally to pay such Obligor's debts as such debts become due;
(d) the commencement as to any Obligor of any voluntary or involuntary
proceeding under any laws relating to bankruptcy, insolvency, reorganization,
arrangement, debt adjustment or debtor relief and in the case of any involuntary
proceeding, the same shall not be dismissed or discharged within sixty (60) days
after commencement; (e) the assignment by any Obligor for the benefit of such
Obligor's creditors of any substantial part of such Obligor's property; (f) the
appointment, or commencement of any proceeding for the appointment of a
receiver, trustee, custodian or similar official for all or substantially all of
any Obligor's property; (g) the commencement of any proceeding for the
dissolution or liquidation of any Obligor; (h) the termination of existence or
death of any Obligor; (i) the revocation of any guaranty or subordination
agreement given in connection with this Note; (j)
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the failure of any Obligor to comply with any order, judgment, injunction,
decree, writ or demand of any court or other public authority; (k) the filing or
recording against any Obligor, or the property of any Obligor, of any notice of
levy, notice to withhold, or other legal process for taxes other than property
taxes; (l) the default by any Obligor personally liable for amounts owed
hereunder on any obligation concerning the borrowing of money; (m) the issuance
against any Obligor, or the property of any Obligor, of any writ of attachment,
execution, or other judicial lien; or (n) the deterioration of the financial
condition of any Obligor which results in Bank deeming itself, in good faith,
insecure. Upon the occurrence of any such default, Bank, in its discretion, may
cease to advance funds hereunder and may declare all obligations under this Note
immediately due and payable; however, upon the occurrence of an event of default
under subsection (d), (e), (f) or (g) hereof, all principal and interest shall
automatically become immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this Note are not
paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement of
this Note. Debtor and any endorsers of this Note, for the maximum period of time
and the full extent permitted by law, (a) waive diligence, presentment, demand,
notice of nonpayment, protest, notice of protest, and notice of every kind; (b)
waive the right to assert the defense of any statute of limitations to any debt
or obligation hereunder; and (c) consent to renewals and extensions of time for
the payment of any amounts due under this Note. The receipt of any check or
other item of payment by Bank, at its option, shall not be considered a payment
on account until such check or other item of payment is honored when presented
for payment at the drawee bank. Bank may delay the credit of such payment based
upon Bank's schedule of funds availability, and interest under this Note shall
accrue until the funds are deemed collected. In any action brought under or
arising out of this Note, Debtor and any Obligor, including their successors and
assigns, hereby consent to the jurisdiction of any competent court within the
State of California, as provided in any alternative dispute resolution agreement
executed between Debtor and Bank, and consent to service of process by any means
authorized by said state's law. The term "Bank" includes, without limitation,
any holder of this Note. This Note shall be construed in accordance with and
governed by the laws of the State of California. This Note hereby incorporates
any alternative dispute resolution agreement previously, concurrently or
hereafter executed between Debtor and Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meanings
respectively set forth below: "AMENDED AND RESTATED LOAN AGREEMENT" shall mean
that certain Amended and Restated Loan Agreement dated as of April 7, 1997, by
and between Debtor and Bank, as amended by that certain First Amendment dated as
of even date herewith and as at any time further amended, supplemented or
otherwise modified or further restated. "BASE INTEREST RATE" shall mean a rate
of interest based on the LIBOR Rate. "BASE INTEREST RATE LOAN" shall mean
amounts outstanding under this Note that bear interest at the Base Interest
Rate. "BASE RATE MATURITY DATE" shall mean the last day of the Interest Period
with respect to principal outstanding under a Base Interest Rate Loan. "BUSINESS
DAY" shall mean a day which is not a Saturday or Sunday on which Bank is open
for business in the state identified in paragraph 6 above, and with the respect
to the rate of interest based on the LIBOR Rate, on which dealings in U.S.
dollar deposits outside of the United States may be carried on by Bank.
"INTEREST PERIOD" shall mean any calendar period of one (1), three (3), six (6),
nine (9) or, subject to availability, twelve (12) months. In determining an
Interest Period, a month means a period that starts on one Business Day in a
month and ends on and includes the day preceding the numerically corresponding
day in the next month. For any month in which there is no such numerically
corresponding day, then as to that month, such day shall be deemed to be the
last calendar day of such month. Any Interest Period which would otherwise end
on a non-Business Day shall end on the next succeeding Business Day unless that
is the first day of a month, in which event such Interest Period shall end
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on the next preceding Business Day. In no event shall any Interest Period
extend beyond the Maturity Date. "LIBOR RATE" shall mean a per annum rate of
interest (rounded upward, if necessary, to the nearest 1/100 of 1%) at which
dollar deposits, in immediately available funds and in lawful money of the
United States would be offered to Bank, outside of the United States, for a
term coinciding with the Interest Period selected by Debtor and for an amount
equal to the amount of principal covered by Xxxxxx's interest rate selection,
plus Bank's costs, including the cost, if any of reserve requirements. "LIBOR
RATE MARGIN" shall mean, (i) two and three-quarters percent (2-3/4%) per
annum, effective on the first day of the month following the month in which
Bank receives a Financial Statement (as such term is defined in the Amended
and Restated Loan Agreement) from Debtor demonstrating that the ratio of
Debtor's Funded Indebtedness to EBITDA for the fiscal period covered thereby
was greater than 2.25 to 1.00, (ii) two and forty-five one hundredths percent
(2.45%) per annum, effective on the first day of the month following the
month in which Bank receives a Financial Statement from Debtor demonstrating
that the ratio of Debtor's Funded Indebtedness to EBITDA for the fiscal
period covered thereby was less than or equal to 2.25 to 1.00 but greater
than 1.50 to 1.00 and (iii) two percent (2%) per annum, effective on the
first day of the month following the month in which Bank receives a Financial
Statement from Debtor demonstrating that the ratio of Debtor's Funded
Indebtedness to EBITDA for the fiscal period covered thereby was less than or
equal to 1.50 to 1.00; provided, however, that (x) if at any time there
exists an Event of Default under the Amended and Restated Loan Agreement, or
any event which, with notice or the lapse of time, or both, would become an
Event of Default under the Amended and Restated Loan Agreement or (y) if
Debtor fails to deliver any Financial Statement to Bank within the required
time period set forth in the Amended and Restated Loan Agreement, then the
ratio of Debtor's Funded Indebtedness to EBITDA shall be deemed to be greater
than 2.25 to 1.00 until such Event of Default or unmatured Event of Default
is cured or otherwise waived by Bank or such Financial Statement is delivered
to Bank, as the case may be; and provided further, however, that the LIBOR
Rate Margin shall never be a negative number. "ORIGINATION DATE" shall mean
the Business Day on which funds are made available to Debtor relating to
Debtor's selection of the Base Interest Rate. "REFERENCE RATE" shall mean the
rate announced by Bank from time to time at its corporate headquarters as its
Reference Rate. The Reference Rate is an index rate determined by Bank from
time to time as a means of pricing certain extensions of credit and is
neither directly tied to any external rate of interest or index nor
necessarily the lowest rate of interest charged by Bank at any given time.
SPECIALTY LABORATORIES, INC.
By [ILLEGIBLE]
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Title President
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By [ILLEGIBLE]
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Title V.P. Finance and Treasurer
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