1
EXHIBIT 10.31
FIRST AMENDMENT TO
AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (the
"Amendment") is made this 16th day of October, 1997, by and among BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION doing business as SEAFIRST BANK,
successor by merger to Seattle-First National Bank, a national banking
association ("Seafirst" and together with its successors and assigns, the
"Lenders"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION doing
business as SEAFIRST BANK, a national banking association, as agent for Lenders
(the "Agent"), SPACELABS MEDICAL, INC., a California corporation (the
"Borrower") and SPACELABS MEDICAL, INC., a Delaware corporation (the
"Guarantor").
RECITALS
A. Borrower, Lender, Guarantor and Agent are parties to that certain
Amended and Restated Loan Agreement dated as of July 16, 1997 (as the same may
be amended, modified or extended from time to time the "Loan Agreement") and the
related Loan Documents described therein.
B. Borrower has requested that the Loan Agreement be amended to make
additional interest rate options available to Borrower. Lender and Agent are
prepared to amend the Loan Agreement to provide an Overnight Rate option and an
IBOR Rate option (as such terms are hereinbelow defined) on the terms and
conditions set forth below.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
shall have the meaning given in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is amended as
follows:
(a) AMENDMENT TO DEFINITIONS. In Section 1.1, amendments are made
to the definitions, as follows:
(1) APPLICABLE IBOR RATE. The definition of "Applicable IBOR
Rate" is added to read as follows:
"Applicable IBOR Rate" means the Xxxxxxx XXXX Rate or the
Revolving IBOR Rate, as applicable.
2
(2) APPLICABLE INTEREST PERIOD. The definition of
"Applicable Interest Period" is amended and restated to read as follows:
"Applicable Interest Period" means, with respect to any Loan,
the period commencing on the first day Borrower elects to have the
Overnight Rate, the IBOR Rate, the LIBOR Rate or the Quoted Rate, as
applicable, apply to such Loan and ending:
(a) the following Business Day in the case of a Overnight
Rate Loan as specified in the Interest Rate Notice given in respect of
such Overnight Rate Loan;
(b) One, two or three weeks thereafter in the case of a IBOR
Rate Loan as specified in the Interest Rate Notice given in respect of
such IBOR Rate Loan;
(c) One, two, three or six months thereafter in the case of
a LIBOR Rate Loan as specified in the Interest Rate Notice given in
respect of such LIBOR Rate Loan;
(d) on any date that is an anniversary of the date that the
Quoted Rate was selected to apply to the Term Loan as specified in the
Interest Rate Notice;
provided, however, that the Applicable Interest Period with respect to any
Loan shall end on the first LIBOR Business Day of the first, second,
third, fourth or seventh month following the last day of any period during
which the Base Rate or the Quoted Rate applied to such Loan, and all
subsequent Applicable Interest Periods shall end on the first LIBOR
Business Day of a month, provided, further, that the initial Applicable
Interest Period with respect to any Xxxxxxx Loan or Revolving Loan shall
end on the first LIBOR Business Day of the first, second, third, fourth or
seventh month following the disbursement of such Loan, and all subsequent
Applicable Interest Periods shall end on the first LIBOR Business Day of a
month, provided, further, that no Applicable Interest Period for any Loan
may be selected if it extends beyond the Maturity Date.
(3) APPLICABLE XXXXXXX INTEREST RATE. The definition of
"Applicable Xxxxxxx Interest Rate" is amended and restated to read as follows:
2
3
"Applicable Xxxxxxx Interest Rate" means for each Xxxxxxx Loan
(or portion of thereof) the Overnight Rate, the Xxxxxxx XXXX Rate, the
Xxxxxxx LIBOR Rate or the Base Rate as designated by Borrower in an
Interest Rate Notice given with respect to such Xxxxxxx Loan (or portion
thereof) or as otherwise determined pursuant to Section 2.8(c).
(4) APPLICABLE REVOLVING INTEREST RATE. The definition of
"Applicable Revolving Interest Rate" is amended and restated to read as follows:
"Applicable Revolving Interest Rate" means for each Revolving
Loan (or portion of thereof) the Overnight Rate, the Revolving IBOR Rate,
the Revolving LIBOR Rate or the Base Rate as designated by Borrower in an
Interest Rate Notice given with respect to such Revolving Loan (or portion
thereof) or as otherwise determined pursuant to Section 2.8(c).
(5) XXXXXXX XXXX RATE. The definition of "Xxxxxxx XXXX Rate"
is added to read as follows:
"Xxxxxxx XXXX Rate" means, for any Applicable Interest Period,
(i) prior to the Xxxxxxx Conversion Date, an interest rate per annum equal
to the IBOR Rate for such Applicable Interest Period plus fifty (50) basis
points, and (ii) on and after the Xxxxxxx Conversion Date, an interest
rate per annum equal to the IBOR Rate for such Applicable Interest Period
plus sixty five (65) basis points.
(6) IBOR RATE LOAN. The definition of "IBOR Rate Loan" is
added to read as follows:
"IBOR Rate Loan" means a Loan or portion thereof bearing
interest at an IBOR Rate.
(7) IBOR RATE. The definition of "IBOR Rate" is added to
read as follows:
"IBOR Rate" means, with respect to any Loan for any Applicable
Interest Period, an interest rate per annum equal to the product of (i)
the Offshore Rate; and (ii) the Eurodollar Reserves in effect on the first
day of such Applicable Interest Period. As used herein the "Offshore Rate"
means the rate of interest per annum determined by Agent as the rate at
which dollar deposits in the approximate amount of such Loan for such
Applicable Interest Period would be offered by Bank of America National
Trust and Savings
3
4
Association's Grand Cayman Branch, Grand Cayman B.W.I. (or such other
office as may be designated for such purpose by Bank of America National
Trust and Savings Association), to major banks in the offshore dollar
interbank market at their request at approximately 11:00 a.m. (New York
City time) on the first date of the proposed Applicable Interest Period.
As used herein "Eurodollar Reserves" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve
percentages (including, without limitation, any special, supplemental,
marginal or emergency reserves) expressed as a decimal established by the
Board of Governors of the Federal Reserve System or any other banking
authority to which Lenders are subject for Eurocurrency Liability (as
defined in Regulation D of such Board of Governors). It is agreed that for
purposes hereof, each Loan accruing interest at the IBOR Rate shall be
deemed to constitute a Eurocurrency Liability and to be subject to the
reserve requirements of Regulation D, without benefit of credit or
proration, exemptions or offsets which might otherwise be available to
Lenders from time to time under such Regulation D. Eurodollar Reserves
shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage and shall apply to Applicable Interest
Periods commencing after the effective date of change.
(8) OVERNIGHT RATE LOAN. The definition of "Overnight Rate
Loan" is added to read as follows:
"Overnight Rate Loan" means a Loan or portion thereof bearing
interest at an Overnight Rate.
(9) OVERNIGHT RATE. The definition of "Overnight Rate" is
added to read as follows:
"Overnight Rate" means, with respect to any Xxxxxxx Loan or
any Revolving Loan for any Applicable Interest Period, an interest rate
per annum, as determined by Agent in its sole discretion and quoted to
Borrower.
(10) REVOLVING IBOR RATE. The definition of "Revolving IBOR
Rate" is added to read as follows:
"Revolving IBOR Rate" means, for any Applicable Interest
Period, (i) prior to the Revolving Conversion Date, an interest rate per
annum equal to
4
5
the IBOR Rate for such Applicable Interest Period plus fifty (50) basis
points, and (ii) on and after the Revolving Conversion Date, an interest
rate per annum equal to the IBOR Rate for such Applicable Interest Period
plus sixty five (65) basis points.
(b) AMENDMENTS TO SECTION 2.8. In Section 2.8, amendments are made
to subsections (b) and (c) as follows:
(1) INTEREST PAYMENT DATES. the second sentence of
Subsection 2.8(b) is hereby amended and restated as follows:
Accrued but unpaid interest on each Base Rate Loan, IBOR Rate Loan,
Overnight Rate Loan and Quoted Rate Loan shall be paid on the first
Business Day of the month immediately following the date hereof and
continuing on the first Business Day of each month thereafter and on the
date of any principal payment (to the extent accrued on the principal
amount paid) and on the Maturity Date.
(2) SELECTION OF ALTERNATIVE RATES. Subsections 2.8(c)(1),
(2) and (4) are hereby amended and restated as follows:
(1) Borrower may, subject to the requirements of this
Section 2.8(c), on same-day notice (in the case of a selection of the
Applicable IBOR Rate, Overnight Rate, or the Quoted Rate) or two (2)
London Business Days' prior notice (in the case of a selection of an
Applicable LIBOR Rate) elect to have interest accrue on any Loan or any
portion thereof at an Applicable LIBOR Rate, and in the case of any
Xxxxxxx Loan or any Revolving Loan at the Overnight Rate or the Applicable
IBOR Rate, and in the case of the Term Loan at the Quoted Rate, for an
Applicable Interest Period. Such notice (herein, an "Interest Rate
Notice") shall be deemed delivered on receipt by Agent except that any
Interest Rate Notice received by Agent after 10:00 a.m. (Seattle time), on
any Business Day, shall be deemed to be received on the immediately
succeeding Business Day. An Interest Rate Notice may be given in writing
or telephonically (but, if given telephonically, shall be confirmed in
writing prior to 12:00 noon (Seattle time) on the first day of the
Applicable Interest Period). Such Interest Rate Notice shall identify,
subject to the conditions of this Section 2.8(c), the Loan or portions
thereof, the Overnight Rate, the Applicable IBOR Rate, the Applicable
LIBOR Rate, the Base Rate or the Quoted Rate and the Applicable Interest
Period which Borrower
5
6
selects. Any such Interest Rate Notice shall be irrevocable and shall
constitute a representation and warranty by Borrower that as of the date
of such Interest Rate Notice no Event of Default or Default has occurred
and is continuing. On receipt of such Interest Rate Notice, Agent shall
promptly notify each Lender by telephone (confirmed promptly by telex or
facsimile transmission) of the information set forth in the Interest Rate
Notice.
(2) Borrower's right to select an Overnight Rate,
Applicable IBOR Rate or Applicable LIBOR Rate to apply to a Loan or any
portion thereof shall be subject to the following conditions: (i) neither
an Overnight Rate, an Applicable IBOR Rate or an Applicable LIBOR Rate may
be selected for any Loan or portion thereof which is already accruing
interest at an Overnight Rate, an Applicable IBOR Rate or an Applicable
LIBOR Rate unless such selection is only to become effective at the
maturity of the Applicable Interest Period then in effect; (ii) Agent
shall not have given notice pursuant to Section 2.8(e) that the LIBOR Rate
selected by Borrower is not available; (iii) in the case of a Xxxxxxx
Loan, the aggregate of all Xxxxxxx Loans or portions thereof accruing
interest at a particular Overnight Rate, IBOR Rate or LIBOR Rate for the
same Applicable Interest Period, and in the case of a Revolving Loan, the
aggregate of all Revolving Loans or portions thereof accruing interest at
a particular Overnight Rate, IBOR Rate or LIBOR Rate for the same
Applicable Interest Period, shall, in each case, be an integral multiple
of Five Thousand Dollars ($5,000); (iv) no Default or Event of Default
shall have occurred and be continuing; and (v) if Borrower elects to have
some portion (but less than all) of the Xxxxxxx Loans or the Revolving
Loans accrue interest at a designated Overnight Rate, IBOR Rate or LIBOR
Rate, Borrower shall select a portion of each Lender's Xxxxxxx Loans or
Revolving Loans, as the case may be, to accrue interest at such rate in
proportion to their respective Xxxxxxx Percentage Interests or Revolving
Percentage Interests, as the case may be.
(4) In the absence of an effective request for the
application of an Overnight Rate, an Applicable IBOR Rate, an Applicable
LIBOR Rate or Quoted Rate, the Loans or remaining portions thereof shall
accrue interest at the Base Rate.
6
7
(3) UNAVAILABLE IBOR OR LIBOR RATES. Subsection 2.8(e) is
hereby amended and restated as follows:
(e) UNAVAILABLE IBOR OR LIBOR RATES. If, for any reason, any
Lender determines that a fair and adequate means does not exist for
establishing a particular IBOR Rate or LIBOR Rate or that the making or
continuation of any IBOR Rate Loan or LIBOR Rate Loan by such Lender has
become unlawful, then such Lender may give notice of that fact to Agent
and Borrower and such determination shall become conclusive and binding
absent manifest error. After such notice has been given and until Lender
notifies Agent and Borrower that the circumstances giving rise to such
notice no longer exist, such IBOR Rate or LIBOR Rate, as the case may be,
shall no longer be available in respect of Loans. Any subsequent request
by Borrower to have interest accrue at such an IBOR Rate or LIBOR Rate
shall be deemed to be a request for interest to accrue at the Base Rate.
If such Lender shall thereafter determine to permit borrowing at such
rate, such Lender shall notify Agent and Borrower in writing of that fact,
and Borrower shall then once again become entitled to request that such
IBOR Rate or LIBOR Rate apply to the Loans in accordance with Section
2.8(c).
(4) SELECTION OF ALTERNATIVE RATES. The first paragraph of
Subsection 2.8(f) is hereby amended and restated as follows:
In the event that after the date hereof any change occurs in any
applicable law, regulation, treaty or directive or interpretation thereof
by any Government Authority charged with the administration or
interpretation thereof, or any condition is imposed by any Government
Authority after the date hereof or any change occurs in any condition
imposed by any Government Authority on or prior to the date hereof which:
(1) subjects any Lender to any Tax, or changes the
basis of taxation of any payments to any Lender on account of principal of
or interest on any IBOR Rate Loan, LIBOR Rate Loan, Quoted Rate Loan, the
Notes (to the extent such Note evidences an IBOR Rate Loan, a LIBOR Rate
Loan or a Quoted Rate Loan) or fees in respect of such Lender's obligation
to make an IBOR Rate Loan, a LIBOR Rate Loan, a Quoted Rate Loan or other
amounts payable with respect to any IBOR Rate Loan, LIBOR Rate Loan or
Quoted Rate Loan (other than a
7
8
change in the rate of tax based solely on the overall net or gross income
of such Lender); or
(2) imposes, modifies, or determines applicable any
reserve, deposit or similar requirements against any assets held by,
deposits with or for the account of, or loans or commitments by, any
office of any Lender in connection with an IBOR Rate Loan, a LIBOR Rate
Loan or a Quoted Rate Loan to the extent the amount of which is in excess
of, or was not applicable at the time of computation of, the amounts
provided for in the definition of Applicable IBOR Rate, Applicable LIBOR
Rate or Quoted Rate; or
(3) affects the amount of capital required or expected
to be maintained by banks generally or corporations controlling banks and
any Lender determines the amount by which such Lender or any corporation
controlling such Lender is required or expected to maintain or increase
its capital is increased by, or based upon, the existence of this
Agreement or of any Loan hereunder; or
(4) imposes upon any Lender any other condition with
respect to any IBOR Rate Loan, LIBOR Rate Loan or Quoted Rate Loan or its
obligation to make an IBOR Rate Loan, a LIBOR Rate Loan or a Quoted Rate
Loan; which, as a result thereof,
(a) increases the cost to any Lender of making or maintaining its Loans
hereunder, or (b) reduces the net amount of any payment received by any
Lender in respect of its IBOR Rate Loans, LIBOR Rate Loans or Quoted Rate
Loans (whether of principal, interest, or otherwise), or (c) requires any
Lender to make any payment on or calculated by reference to the gross
amount of any sum received by it in respect of its IBOR Rate Loans, LIBOR
Rate Loans or Quoted Rate Loans, in each case by an amount which such
Lender in its sole judgment deems material, then in any such case Borrower
shall pay to such Lender on demand such amount or amounts as will
compensate such Lender for any increased cost, deduction or payment
actually incurred or made by such Lender. The demand for payment by such
Lender shall be delivered to Borrower and Agent and shall state the
subjection or change which occurred or the reserve or deposit requirements
or other conditions which have been imposed upon such Lender or the
request, direction or requirement with which it has complied, together
with the date thereof, the amount of such cost, reduction or payment and
the manner in which such
8
9
amount has been calculated. The statement of any Lender as to the
additional amounts payable pursuant to this Section 2.8(f) shall be
binding on Borrower in the absence of manifest error.
(c) AMENDMENT TO SECTION 2.9. Section 2.9 is hereby amended and
restated as follows:
SECTION 2.9 PREPAYMENTS. Base Rate Loans may be repaid at any
time without a prepayment fee. Overnight Rate Loans, IBOR Rate Loans,
LIBOR Rate Loans and any Quoted Rate Loan may be repaid at the end of an
Applicable Interest Period without a prepayment fee. Quoted Rate Loans may
not be voluntarily repaid prior to the end of the Applicable Interest
Period. If an Overnight Rate Loan, an IBOR Rate Loan, a LIBOR Rate Loan or
a Quoted Rate Loan is repaid prior to the end of the Applicable Interest
Period, a prepayment fee computed in the manner set out in Schedule 1
shall be assessed and paid at the time of such early repayment. Such fee
shall apply in all circumstances where an Overnight Rate Loan, an IBOR
Rate Loan, a LIBOR Rate Loan or a Quoted Rate Loan is paid prior to the
end of the Applicable Interest Period, regardless of whether such payment
is voluntary, mandatory or the result of Agent's or Lenders' collection
efforts.
(d) AMENDMENT TO SECTION 2.10. The first sentence of subsection
Section 2.10(b) is hereby amended and restated as follows:
Each Lender is hereby authorized to record the date and amount of the
Loans it makes, the Base Rate, the Overnight Rate, the Applicable IBOR
Rate, Applicable LIBOR Rate or Quoted Rate, as applicable, and the date
and amount of each payment of principal and interest thereon on a schedule
annexed to or kept in respect of any Note.
(e) AMENDMENTS TO SCHEDULE 1: Schedule 1 is hereby amended and
restated as set forth in Schedule 1 attached hereto.
3. CONDITIONS TO EFFECTIVENESS. Notwithstanding anything contained
herein to the contrary, this Amendment shall not become effective until each of
the following conditions is fully and simultaneously satisfied:
(a) DELIVERY OF AMENDMENT. Borrower, Agent, Guarantor and each
Lender shall have executed and delivered counterparts of this Amendment to
Agent;
9
10
(b) CORPORATE AUTHORITY. Agent shall have received in form and
substance reasonably satisfactory to it (1) a copy of a resolution adopted by
the Board of Directors of each of Borrower and Guarantor authorizing the
execution, delivery and performance of this Amendment certified by the Secretary
of Borrower; (2) evidence of the authority and specimen signatures of the
persons who have signed this Amendment on behalf of Borrower and Guarantor; and
(3) such other evidence of corporate authority as Agent or any Lender shall
request;
(c) CONSENT OF GUARANTOR. Guarantor shall have executed the
subjoined Guarantor's Consent;
(d) REPRESENTATIONS TRUE; NO DEFAULT. The representations of
Borrower as set forth in Article 4 of the Loan Agreement shall be true on and as
of the date of this Amendment with the same force and effect as if made on and
as of this date. No Event of Default and no event which, with notice or lapse of
time or both, would constitute an Event of Default, shall have occurred and be
continuing or will occur as a result of the execution of the Amendment
Documents; and
(e) OTHER DOCUMENTS. Agent and Lenders shall have received such
other documents, instruments, and undertakings as Agent and such Lender may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lenders and Agent that each of the representations and warranties
set forth in Article 4 of the Loan Agreement is true and correct in each case as
if made on and as of the date of this Amendment and Borrower expressly agrees
that it shall be an additional Event of Default under the Loan Agreement if any
representation or warranty made hereunder shall prove to have been incorrect in
any material respect when made.
5. NO FURTHER AMENDMENT. Except as expressly modified by this
Amendment, the Loan Agreement and the other Loan Documents shall remain
unmodified and in full force and effect and the parties hereby ratify their
respective obligations thereunder. Without limiting the foregoing, Borrower
expressly reaffirms and ratifies its obligation to pay or reimburse Agent and
Lenders on request for all reasonable expenses, including legal fees, actually
incurred by Agent or such Lender in connection with the preparation of this
Amendment and the closing of the transactions contemplated hereby.
6. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Amendment comprises the entire
agreement of the parties with respect to the subject
10
11
matter hereof and supersedes all prior oral or written agreements,
representations or commitments.
(b) COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same Amendment.
(c) GOVERNING LAW. This Amendment and the other agreements
provided for herein and the rights and obligations of the parties hereto and
thereto shall be construed and interpreted in accordance with the laws of the
State of Washington.
(d) ORAL AGREEMENTS NOT ENFORCEABLE.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
EXECUTED AND DELIVERED by the duly authorized officers of the parties as
of the date first above written.
BORROWER: SPACELABS MEDICAL, INC., a
California corporation
By /s/ XXXXX X. XXXXXXX
-------------------------------------------
Its Vice President and Corporate Controller
-------------------------------------------
GUARANTOR: SPACELABS MEDICAL, INC., a Delaware
corporation
By /s/ XXXXX X. XXXXXXX
-------------------------------------------
Its Vice President and Corporate Controller
-------------------------------------------
11
12
LENDER: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, successor by
merger to Seattle-First National
Bank, a national banking
association
By /S/ XXXX XXXXXXXXXX
--------------------------------------------
Its Vice President
AGENT: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national
banking association
By /S/ XXXX X. XXXXX
--------------------------------------------
Its Vice President
12
13
GUARANTOR'S CONSENT
SPACELABS MEDICAL, INC., a Delaware corporation (the "Guarantor") is a
guarantor of the indebtedness, liabilities and obligations of SPACELABS MEDICAL,
INC., a California corporation (the "Borrower") under the Amended and Restated
Loan Agreement and the other Loan Documents described in the Loan Agreement.
Guarantor hereby acknowledges that it has received a copy of the First Amendment
to Amended and Restated Loan Agreement dated as of October 16, 1997 by and among
Borrower, Bank of America National Trust and Savings Association doing business
as Seafirst Bank, as lender, Bank of America National Trust and Savings
Association doing business as Seafirst Bank, as agent, and Guarantor (the
"Amendment") and hereby consents to its contents, including all prior and
current amendments to the Loan Agreement and the other Loan Documents described
therein (notwithstanding that such consent is not required). Guarantor hereby
confirms that its guarantee of the obligations of Borrower remains in full force
and effect, and that the obligations of Borrower under the Loan Documents shall
include the obligations of Borrower under the Loan Documents as amended by the
Amendment.
GUARANTOR: SPACELABS MEDICAL, INC., a Delaware
corporation
By /s/ XXXXX X. XXXXXXX
-------------------------------------------
Its Vice President and Corporate Controller
-------------------------------------------
13
14
SCHEDULE 1
Prepayment Fees
The amount of the fee to be paid pursuant to Section 2.7 shall depend on
the following:
(1) The amount by which interest rates have changed between the
Reference Date and the Prepayment Date. As used herein, "Reference
Date" shall mean the first day of an Applicable Interest Period. As
used herein, "Prepayment Date" shall mean the date Borrower either
voluntarily or involuntarily prepays an Overnight Loan, an IBOR Rate
Loan, a LIBOR Rate Loan or a Quoted Rate Loan. Certain U.S. Treasury
rates are used as a benchmark to measure changes in interest rate
levels.
(a) A "reference rate" equal to the average interest rate yield at
the Reference Date for U.S. Government Securities having
maturities equivalent to that of the applicable Overnight Rate
Loan, IBOR Rate Loan, LIBOR Rate Loan or Quoted Rate Loan will
be determined in the manner described below for determining
applicable rates but will be established as of the Reference
Date for the Applicable Interest Period. This rate represents
interest rate levels at the time an Overnight Rate Loan, an
IBOR Rate Loan, a LIBOR Rate Loan or a Quoted Rate Loan is
made or its interest rate fixed.
(b) An "applicable rate," determined as described below,
represents interest rate levels as of the Prepayment Date.
(2) The amount of principal prepaid.
(3) A payment fee factor (see "payment fee factor schedule" below). This
factor represents the economic loss to a Lender resulting from a one
dollar payment if rates were to drop by one percent from the time
the rate was fixed.
14
15
CALCULATION OF PREPAYMENT FEE
If the reference rate is lower than or equal to the applicable rate, there
is no prepayment fee.
If the applicable rate is lower than the reference rate, the prepayment
fee shall be equal to the difference between the reference rate and the
applicable rate (expressed as a decimal), multiplied by the appropriate factor
from the prepayment fee factor schedule, multiplied by the principal amount of
the LIBOR Rate Loan or Quoted Rate Loan which is prepaid.
Example:
A LIBOR Rate Loan with principal of $850,000 is fully prepaid with 4
months remaining prior to the end of the Applicable Interest Period. A
reference rate of 10% was assigned to the LIBOR Rate Loan when the rate
was fixed. The applicable rate (as determined by current 4-month U.S.
Treasury rates) is 8.5%. Rates are therefore judged to have dropped by
1.5% since the rate was fixed, and a prepayment fee applies.
A prepayment fee factor of .37 is determined from the tables below, and
the prepayment fee is computed as follows:
Prepayment Fee = (.10-.085) x (.37) x ($850,000) = $4,717.50
APPLICABLE RATES
The applicable rate is equal to the average interest rate yield at the
time of prepayment for U.S. Government Securities having maturities equivalent
to the remaining portion of the Applicable Interest Period.
The applicable rate shall be determined from the Federal Reserve
Statistical Release (Publication H.15(519)) in the "This Week" (most recent
week) column under the heading U.S. Government Securities - Treasury Bills -
Secondary Market, interpolated to the nearest month.
Rates listed in the Federal Reserve Statistical Release for maturities of
less than one year are on a discount rate basis, and these rates shall be
converted to a coupon equivalent basis, based upon a 360-day year. The
Statistical Release published on Monday shall be used for calculation of
prepayment fees payable on the following Tuesday through the following Monday,
with appropriate adjustment if the day of publication changes.
15
16
PREPAYMENT FEE FACTOR SCHEDULES
Months Remaining in the
Applicable Interest Period for IBOR or LIBOR Rate Loans(1)
0 1 2 3 4 5 6
--- --- --- --- --- --- ---
Factors 0 .09 .18 .28 .37 .46 .55
7 8 9 10 11 12
--- --- --- ---- ---- ----
Factors .64 .73 .82 .92 1.01 1.10
Months Remaining in the
Applicable Interest Period for Quoted Rate Loans(1)
0 3 6 9 12 24 36
--- --- --- --- ---- ---- ----
Factors 0 .30 .59 .86 1.15 2.2 3.3
48 60 84 120 240 360
---- ---- ---- ---- ---- ----
Factors 4.3 5.3 7.1 9.4 15.0 18.1
----------
(1) If the remaining Applicable Interest Period or time prior to scheduled
maturity is between any two time periods in the above schedules,
interpolate between the corresponding factors.
No Lender is required to actually reinvest the paid principal in any U.S.
Government Treasury obligations as a condition to receiving a prepayment fee as
calculated above.
16
