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TERM NOTE
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Debtor's Name: Specialty Laboratories, Inc.
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Debtor's Address: Office: #210 Loan Number
2211 Michigan Avenue
Santa Monica, California 90404
Maturity Date: Amount
March 31, 2002 $5,000,000
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Santa Monica, California $5,000,000 Date: April 7, 1997
FOR VALUE RECEIVED, on March 31, 2002 (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 Five Million Dollars
($5,000,000), 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 (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) consecutive
installments of Eighty-Three Thousand Three Hundred Thirty-Three and 33/100
Dollars ($83,333.33) each on the last day of each month, commencing April 30,
1997. 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 last day of each
month (commencing April 30, 1997). 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 Debtor. 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 (or 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 repay 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: [ILLEGIBLE] [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 at any time 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 on the next preceding Business Day. In
no event shall any Interest Period extend beyond the
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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 Debtor'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 Total
Liabilities to Tangible Net Worth for the fiscal period covered thereby was
greater than 1.25 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 Total Liabilities to Tangible Net Worth for the fiscal
period covered thereby was less than or equal to 1.25 to 1.00 but greater
than 1.00 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 Total
Liabilities to Tangible Net Worth for the fiscal period covered thereby was
less than or equal to 1.00 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 Total Liabilities to Tangible Net Worth
shall be deemed to be greater than 1.25 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. of Finance & Treasurer
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