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FAX TRANSMISSION-3 PAGES
ORIGINAL DELIVERED BY U.S. MAIL
June 30, 2000
Mr. James A. Richman
Chief Financial Officer
SpaceLabs Medical
15220 N.E. 40th Street
P.O. Box 97013
Redmond, WA 98073-9713
FAX: 425-885-4877
Dear Jim:
We are pleased to propose the following terms associated with the requested
restructure of the financial covenants and extension of the revolving periods.
With the exception of the specific items listed below, all of the terms and
conditions of the existing loan agreement dated July 16, 1997, as subsequently
amended, will remain in full force and effect.
Amendment
of Financial Covenants: The requirement to comply with Sections 5.11
(Funded Debt to EBITDA Ratio) and 5.12 (EBITDA to
Debt Service Ratio) will not be measured as of June
30, 2000 and September 30, 2000. With respect to
the forgoing covenants, the calculation of EBITDA
for ensuing quarters will be amended as follows:
for the quarter ended December 31, 2000, EBITDA
shall be computed using four times the EBITDA for
such quarter; for the quarter ended March 31, 2001,
EBITDA shall be computed using three times the
EBITDA for the quarter ended March 31, 2001 plus
the EBITDA for the quarter ended December 31, 2000;
for the quarter ended June 30, 2001, EBITDA shall
be computed using two times the EBITDA for the
quarter ended June 30, 2001 plus the EBITDAs for
the quarters ended December 31, 2000 and March 31,
2001. As of September 30, 2001, a trailing four
quarters calculation of EBITDA shall resume.
For purposes of calculating compliance with Section
5.12, the CPLTD that is associated with the balloon
payment due on the Term Loan (see below) during
December 2003, and which will first appear as a
part of CPLTD on March 31, 2003, will not be
included in the determination of the Debt Service
Ratio.
With respect to Section 5.13 (Tangible Net Worth),
the initial required TNW shall be $135,000,000 as
of the quarter ended June 30, 2000, with all other
terms under Section 5.13 (required step-ups in the
required TNW, etc.) remaining unchanged.
Section 6.5 shall be revised to introduce the
requirement that SpaceLabs earn at least one dollar
of net income in each fiscal year. For the year
ended December 31, 2000, the requirement to earn
one dollar of net income will only pertain to the
fourth quarter ended December 31, 2000. Any
existing language that is contrary to this new
requirement will be either eliminated or amended.
New Financial Covenant: Fixed Charge Coverage Ratio no lower than 1.10:1.
For the quarter ended September 30, 2000, EBITDA
shall be computed using four times the EBITDA for
such quarter. Beginning with the quarter ended
December 31, 2000, EBITDA will be calculated in a
manner consistent with that pertaining to
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Mr. Jim Richman
SpaceLabs Medical
June 30, 2000
Sections 5.11 and 5.12 as described in the second
paragraph of this letter. The definition of Fixed
Charge Coverage shall mean EBITDA less Cash Taxes
less unfinanced CAPEX less Cash Dividends divided
by Interest plus MDR.
Maturity: The revolving commitment maturity of the Revolving
Note will be extended from July 16, 2000 to July
16, 2005. The Revolving Note will not include a
term-out option. The maturity of the revolving
commitment of the Burdick Note will be extended
from July 16, 2000 to July 16, 2001. Per the terms
of the Burdick Note, the term repayment period will
commence on July 16, 2001 and extend for five years
beyond July 16, 2001. Principal repayment terms
will remain as scheduled, except that principal
repayment in the first four quarters of the
term-out period will total $3MM (paid in equal
amounts each quarter), while the principal payments
due in the last four quarters of the term-out
period will total $9MM (paid in equal amounts each
quarter).
In addition to the aforementioned, the final
maturity of the existing Term Loan (loan
outstanding equal to approximately $11.5MM) will be
extended for one year to December 2003. Principal
amortization during the "extension year" will equal
the amount paid historically.
Collateral: A first security interest in the A/Rs, and
Inventory of Borrower and its principal
subsidiaries will be granted. In addition, a first
deed of trust in the Redmond, headquarters real
estate (headquarters building and manufacturing
site) will be granted; but the loan documentation
shall contain a proviso which will permit SpaceLabs
to convey the property to a wholly-owned subsidiary
subject to all of the conditions of the deed of
trust.
Up-front Fee: 45 basis points on the $75,000,000 cumulative
commitment for the Revolving and Burdick Notes.
Pricing Grid: For the Revolving and Burdick Notes, all of the
existing borrowing spreads will be replaced by the
following grid:
<TABLE>
<CAPTION>
Funded Debt/ Borrowing Fee on
EBITDA* Spread Unused
------- ------ ------
<S> <C> <C> <C>
>= 4.0X 250bp 60bp
>= 3.5X 225 60
>= 3.0X 200 60
< 3.0X 150 60
</TABLE>
*Measured in a manner consistent with the covenant
calculation described above.
For the quarters ended September 30 and December
31, 2000, the Borrowing Spread will be 250bp. With
respect to the Term Loan, the borrowing spread will
be increased to LIBOR + 150bp for the life of the
loan.
Final Execution: Final credit approval for this proposal has been
obtained at both, Bank of America and U.S. Bank.
Therefore, the foregoing is a binding commitment
that extends to both Banks and Borrower subject to
the successful negotiation and execution of final
loan documents reflecting the conditions addressed
herein.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING PAYMENT OF THE DEBT ARE NOT ENFORCEABLE UNDER
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Mr. Jim Richman
SpaceLabs Medical
June 30, 2000
WASHINGTON LAW R.C.W. 19.26.
Jim, we look forward to working with you on this request. Please call me with
any questions and/or comments you might have.
Sincerely,
Dora Brown
cc:
Scott Stewart, SpaceLabs Medical
Hank Knottnerus, Bank of America
Larry Davis, Bank of America
Jim Lawrence, U.S. Bank
Wilfred Jack, U.S. Bank
ACCEPTED BY:
(Name, Title---Printed)
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(Signature)
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(Date)
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