[UNION BANK LETTERHEAD]
BORROWER'S COPY
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June 26, 1996
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇, President
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Controller
Specialty Laboratories, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Loan Agreement ("Agreement")
Date: April 15, 1996
Principal Sum of $6,500,000
Gentlemen:
In reference to the Agreement between Union Bank ("Bank") and Specialty
Laboratories, Inc. ("Borrower") dated April 15, 1996 and in the principal
amount indicated above, the Bank and Borrower desire to amend the Agreement.
This amendment shall be called the First Amendment to the Agreement.
Initially capitalized terms used herein which are not otherwise defined shall
have the meaning assigned thereto in the Agreement.
Amendments to the Agreement:
(a) Section 4.5(d) is amended in its entirety to read as follows:
"4.5(d) In connection with each financial statement provided ▇▇▇▇▇▇▇▇▇,
a statement executed by the chief financial officer, controller or president
of Borrower, certifying that no event of default has occurred and no event
exists which with notice or the lapse of time, or both, would result in an
event of default hereunder";
(b) Section 4.5(f) is amended in its entirety to read as follows:
"4.5(f)(i) Within forty-five (45) days after each fiscal quarter, except
for the final quarter of each fiscal year, a certification of compliance with
all covenants under this Agreement and any Amendments thereto, executed by
▇▇▇▇▇▇▇▇'s chief financial officer, controller or president, in form
acceptable to Bank; (ii) Within one hundred twenty (120) days after each
fiscal year end, a certification of compliance with all covenants under this
Agreement and any Amendments thereto, executed by ▇▇▇▇▇▇▇▇'s chief financial
officer, controller or president, in form acceptable to Bank";
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(c) Section 4.8 is amended in its entirety to read as follows:
"4.8 EBITDA TO PRINCIPAL REDUCTIONS ON REDUCING REVOLVING LOAN RATIO.
Borrower will maintain a ratio of EBITDA, less dividends, to Principal
Reductions on Reducing Revolving Loan of not less than 1.5:1.0 "EBITDA" shall
mean earnings before interest, taxes, depreciation, and amortization for the
four fiscal quarters immediately preceding the date of the calculation.
"Principal Reductions on Reducing Revolving Loan" shall mean those principal
reductions, as referenced in Section 1.1 of the Agreement, coming due for
the four fiscal quarters immediately following the date of the calculation.
Compliance with this subsection shall be measured as of the end of
Borrower's fiscal quarter beginning with the fiscal quarter ended 7/31/96."
This First Amendment shall become effective when the Bank shall have
received the acknowledgment copy of this First Amendment executed by the
Borrower. Except as specifically amended hereby, the Agreement shall remain
in full force and effect and is hereby ratified and confirmed. This First
Amendment shall not be a waiver of any existing default or breach of a
condition to covenant unless specified herein.
Very truly yours,
UNION BANK
By: /s/ [ILLEGIBLE]
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Title: V.P.
--------------------------------
By: /s/ ▇▇▇▇▇▇ ▇. Nations
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Title: Vice President
--------------------------------
Agreed and Accepted to this _______day of
_____________________________, 1996.
SPECIALTY LABORATORIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: President
---------------------------------
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Title: Controller
---------------------------------
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[UNION BANK LETTERHEAD]
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of April
15, 1996 by and between Specialty Laboratories, Inc., a California
corporation ("Borrower") and UNION BANK, a division of Union Bank of
California, N.A. ("Bank").
SECTION 1. THE LOAN
1.1 THE REDUCING REVOLVING LOAN. Bank will loan to Borrower an
amount not to exceed Six Million Five Hundred Thousand Dollars ($6,500,000)
outstanding in the aggregate at any one time (the "Reducing Revolving Loan").
Borrower may borrow, repay and reborrow all or part of the Reducing Revolving
Loan in accordance with the terms of a promissory note (the "Revolving Note")
in such form as Bank specifies. All borrowings of the Reducing Revolving Loan
must be made before April 30, 2001, (the "Maturity Date") at which time all
unpaid principal and interest shall be due and payable. Bank shall enter each
amount of the Reducing Revolving Loan borrowed and repaid in Bank's records
and such entries shall be prima facie evidence of the accuracy of the amount
thereof from time to time outstanding. Omission of Bank to make any such
entries shall not discharge Borrower of its obligation to repay in full with
interest all amounts borrowed. The principal amount available for borrowing
under the Reducing Revolving Loan shall be reduced by Two Hundred Thousand
Dollars ($200,000) on the last day of each quarter, beginning with the
quarter ending July 31, 1996 until the Maturity Date, at which time the
principal amount available under the Reducing Revolving Loan shall have been
reduced to Two Million Five Hundred Dollars ($2,500,000). Borrower shall make
the necessary quarterly principal reduction payments in order to reduce the
aggregate outstanding principal balance of the Reducing Revolving Loan as
specified above.
1.2 TERMINOLOGY
As used herein, the word "Loan" shall mean, collectively, all the credit
facilities described above.
As used herein, the word "Note" shall mean, collectively, all the promissory
notes described above.
As used herein, the words "Loan Documents" shall mean all documents executed
in connection with this Agreement.
1.3 PURPOSE OF LOAN. The proceeds of the Reducing Revolving Loan
shall be used for general working capital purposes.
1.4 INTEREST. The unpaid principal balance of the Reducing
Revolving Loan from time to time outstanding shall bear interest at the rate,
and be payable at the times, provided for in the Revolving Note.
1.5 LOAN COMMITMENT FEE. Borrower shall pay in advance a
commitment fee of Ten Thousand Five Hundred Dollars ($10,500) Dollars on or
before the date of execution of this Agreement. No portion of this fee shall
be reimbursable.
1.6 BALANCES. Borrower shall maintain its major depository
accounts with Bank until the Note and all sums payable pursuant to this
Agreement have been paid in full.
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1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse the
proceeds of the Loan as provided in Bank's standard form Authorization
executed by ▇▇▇▇▇▇▇▇.
1.8 SECURITY. Prior to any disbursement of the Loan, ▇▇▇▇▇▇▇▇
shall have executed a security agreement, on Bank's standard form, and a
financing statement, suitable for filing in the office of the Secretary of
State of the State of California and any other state designated by Bank,
granting to Bank a first priority security interest in such of ▇▇▇▇▇▇▇▇'s
property as is described in said security agreement. Exceptions to Bank's
first priority, if any, are permitted only as otherwise provided in this
Agreement.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and any Note or any of the other Loan
Documents, the terms of such note or other Loan Documents will prevail over
the terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Bank's
satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied with
all terms and conditions required by this Agreement to be performed or
complied with by it prior to or at the date of the making of such
disbursement and shall have executed and delivered to Bank the Note and other
documents deemed necessary by Bank.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank with
certified copies of resolutions duly adopted by the Board of Directors of
Borrower, authorizing this Agreement and the Loan Documents. Such resolutions
shall also designate the persons who are authorized to act on ▇▇▇▇▇▇▇▇'s
behalf in connection with this Agreement and to do the things required of
Borrower pursuant to this Agreement.
2.3 TERMINATION STATEMENTS. Borrower shall have provided Bank with
UCC-2 termination statements executed by such secured creditors as may be
required by Bank suitable for filing with the Secretary of State in each
state designated by Bank.
2.4 CONTINUING COMPLIANCE. At the time any disbursement is to be
made, there shall not exist any event, condition or act which constitutes an
event of default under Section 6 hereof or any event, condition or act which
with notice, lapse of time or both would constitute such event of default;
nor shall there be any such event, condition, or act immediately after the
disbursement were it to be made.
SECTION 3. REPRESENTATION AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is the
operation of a commercial clinical laboratory.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling
interest or at least a 25% ownership interest) and their addresses, and the
names of Borrower's principal shareholders, are as provided on a schedule
delivered to Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and performance
of this Agreement, the Note and all other agreements and instruments required
by Bank in connection with the Loan are not in contravention of any of
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the terms of any indenture, agreement or undertaking to which Borrower is a
party or by which it or any of its property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of ▇▇▇▇▇▇▇▇,
including both a balance sheet at April 30, 1995, together with supporting
schedules, and an income statement for the twelve (12) months ended April 30,
1995, have heretofore been furnished to Bank, and are true and complete and
fairly represent the financial condition of Borrower during the period
covered thereby. Since April 30, 1995, there has been no material adverse
change in the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of in
the ordinary course of business, Borrower has good and marketable title to
all of the property reflected in its financial statements delivered to Bank
and to all property acquired by Borrower since the date of said financial
statements, free and clear of all liens, encumbrances, security interests and
adverse claims except those specifically referred to in said financial
statements, and those to be provided to Bank pursuant hereto, subject to
Borrower's compliance with Section 5.1 below.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely
to affect the financial condition, property or business of Borrower in a
materially adverse manner or result in liability in excess of Borrower's
insurance coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of any
of its material obligations, and there exists no event, condition or act
which constitutes an event of default under Section 6 hereof and no
condition, event or act which with notice or lapse of time, or both, would
constitute an event of default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the state of its organization, and has the power and authority to
carry on the business in which it is engaged and/or proposes to engage.
3.9 POWER. ▇▇▇▇▇▇▇▇ has the power and authority to enter into this
Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by this
Agreement have been duly authorized by all requisite corporate action of
Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations the
violation of which could reasonably be expected to have a material adverse
effect on the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of
Section 302 of ERISA, and no Reportable Event or Prohibited Transaction as
defined in ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently planned
by ▇▇▇▇▇▇▇▇, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934, in each case as in effect now or as the same may
hereafter be in effect. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used
directly or indirectly for such purpose.
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3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement
of the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until the Note and all sums payable pursuant to this Agreement or any
other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, ▇▇▇▇▇▇▇▇ agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan
only as provided in subsection 1.3 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims
levied or imposed upon it or its property, or any part thereof, provided,
however, that Borrower shall have the right in good faith to contest any such
taxes, assessments, charges or claims and, pending the outcome of such
contest, to delay or refuse payment thereof provided that adequately funded
reserves are established by it to pay and discharge any such taxes,
assessments, charges and claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and preserve
its existence and assets and all rights, franchises, licenses and other
authority necessary for the conduct of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the
properties of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during regular
business hours. In the absence of an Event of Default, Borrower shall
reimburse Bank for the reasonable costs and expenses of one audit per year.
4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within forty five (45) days after the close of each fiscal
quarter, except for the final quarter of each fiscal year, its unaudited
balance sheet as of the close of such fiscal quarter, its unaudited income
and expense statement with supportive schedules and statement of retained
earnings for that fiscal quarter, prepared in accordance with generally
accepted accounting principles;
(b) Within one hundred twenty (120) days after the close of
each fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year,
examined and prepared on an audited basis by independent certified public
accountants selected by Borrower and reasonably satisfactory to Bank, in
accordance with generally accepted accounting principles applied on a basis
consistent with that of the previous year;
(c) Such other financial statements and information as Bank
may reasonably request from time to time including financial statements and
information related to affiliates (including joint ventures) with respect to
which Borrower holds at least a 20% interest or cumulative investment greater
than $250,000; or otherwise exercises a controlling interest;
(d) In connection with each financial statement provided
hereunder, a statement executed by the chief financial officer of Borrower,
certifying that no event of default has occurred and no event exists which
with notice or the lapse of time, or both, would result in an event of
default hereunder;
(e) In connection with each fiscal year-end statement required
hereunder, any management letter of ▇▇▇▇▇▇▇▇'s certified public accountants;
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(f) Within forty five (45) days after each fiscal quarter,
a certification of compliance with all covenants under this Agreement,
executed by ▇▇▇▇▇▇▇▇'s chief financial officer of Borrower, in form
acceptable to Bank;
(g) Prompt written notice to Bank of all events of default
under any of the terms of provisions of this Agreement or of any other
agreement, contract, document or instrument entered, or to be entered into
with Bank; and of any litigation which, if decided adversely to Borrower,
would have a material adverse effect on Borrower's financial condition, and
of any other matter which has resulted in, or is likely to result in, a
material adverse change in it financial condition or operations.
(h) Prior written notice to Bank of any changes in
▇▇▇▇▇▇▇▇'s officers and other senior management; ▇▇▇▇▇▇▇▇'s name; and
location of Borrower's assets, principal place of business or chief executive
office
4.6 MINIMUM TANGIBLE NET WORTH. Beginning with the Fiscal Year
Ending April 30, 1996, Borrower will at all times maintain Minimum Tangible
Net Worth of not less than Nine Million Five Hundred Thousand Dollars
($9,500,000). Thereafter, Borrower will at all times maintain a Minimum
Tangible Net Worth that increases from said amount as of the end of
Borrower's fiscal year to the following amounts:
Fiscal Year End 4/30/1997 $12,500,000
Fiscal Year End 4/30/1998 15,500,000
Fiscal Year End 4/30/1999 18,500,000
Fiscal Year End 4/30/2000 21,500,000
Fiscal Year End 4/30/2001 24,500,000
"Minimum Tangible Net Worth" shall mean net worth decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible
assets, deferred taxes in excess of One Million Dollars ($1,000,000) or 5% of
total assets, (whichever is greater) organizational expenses, and monies due
from affiliates (including but not limited to officers, shareholders,
employees, and directors, and investments in, or organizational expenses
related to, subsidiaries or affiliates)
4.7 DEBT TO TANGIBLE NET WORTH. Borrower will at all times
maintain a ratio of total liabilities to tangible net worth of not greater
than 1.5:1.0.
4.8 EBITDA TO DEBT SERVICE RATIO. Borrower will maintain a
ratio of EBITDA, less dividends, to Debt Service of not less than 1.5:1.0.
"EBITDA" shall mean earnings before interest, taxes, depreciation, and
amortization for the four fiscal quarters immediately preceding the date of
the calculation. "Debt Service" shall mean the sum of that portion of term
obligations (including principal and interest) coming due during the four
fiscal quarters immediately following the date of calculation plus
non-financed capital expenditures during the four fiscal quarters immediately
following the date of calculation. Compliance with this subsection shall be
measured as of the end of Borrower's fiscal quarter beginning with the fourth
fiscal quarter ended 4/30/96.
4.9 INSURANCE. Borrower will keep all of its insurable
property, real, personal or mixed, insured by companies and in amounts
approved by Bank against fire and such other risks, and in such amounts, as
is customarily obtained by companies conducting similar business with respect
to like properties. Borrower will furnish to Bank statements of its insurance
coverage, will promptly furnish other or additional insurance deemed
necessary by and upon request of Bank to the extent that such insurance may
be available and hereby assigns to Bank, as security for Borrower's
obligations to Bank, the proceeds of any such insurance. Prior to any
disbursement of the Loan, Bank will be named loss payee on all policies
insuring collateral. Borrower will maintain adequate worker's compensation
insurance and adequate insurance against liability for damage to persons or
property. All policies shall require at least ten (10) days' written notice
to Bank before any policy may be altered or cancelled.
4.10 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon
demand by Bank, take such further action and execute all such additional
documents and instruments in connection with this Agreement as Bank in its
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reasonable discretion deems necessary, and promptly supply Bank with such
other information concerning its affairs as Bank may reasonably request from
time to time.
4.11 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly
to Bank upon demand, reasonable attorneys' fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house legal
counsel and legal staff) and all costs and other expenses paid or incurred by
Bank in collecting, modifying or compromising the Loan or in enforcing or
exercising its rights or remedies created by, connected with or provided for
in this Agreement or any of the Loan Documents, whether or not an
arbitration, judicial action or other proceeding is commenced. If such
proceeding is commenced, only the prevailing party shall be entitled to
attorneys' fees and court costs.
4.12 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof,
including but not limited to all filing and recording fees, costs of
appraisals, insurance and attorneys' fees, including the reasonable estimate
of the allocated costs and expenses of in-house legal counsel and legal staff.
4.13 REPORTS UNDER PENSION PLANS. Borrower will furnish to
Bank, as soon as possible and in any event within 15 days after Borrower
knows or has reason to know that any event or condition with respect to any
defined benefit pension plans of Borrower described in Section 3 above has
occurred, a statement of an authorized officer of Borrower describing such
event or condition and the action, if any, which Borrower proposes to take
with respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until the Note and all other sums payable pursuant to this Agreement or
any other of the Loan Documents have been paid in full, unless Bank waives
compliance in writing, ▇▇▇▇▇▇▇▇ agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume
or suffer to exist any mortgage, pledge, security interest, encumbrance, or
lien (other than for taxes not delinquent and for taxes and other items being
contested in good faith) on property of any kind, whether real, personal or
mixed, now owned or hereafter acquired, or upon the income or profits
thereof, except to Bank and except for minor encumbrances and easements on
real property which do not affect its market value, and except for existing
liens on Borrower's personal property and future purchase money security
interests encumbering only the personal property purchased. All of such
permitted personal property liens shall not exceed, in the aggregate, Twenty
Five Thousand ($25,000) at any time.
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any account receivable or any note, draft or other evidence of
indebtedness, except to Bank or except to a financial institution at face
value for deposit or collection purposes only and without any fee other than
fees normally charged by the financial institution for deposit or collection
services. Borrower will not borrow any money, become contingently liable to
borrow money, nor enter any agreement to directly or indirectly obtain
borrowed money, except pursuant to agreements made with Bank.
5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will
neither liquidate nor dissolve nor enter into any consolidation, merger,
partnership or other combination, nor convey, nor sell, nor lease all or the
greater part of its assets or business, nor purchase or lease all or the
greater part of the assets or business of another.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except
in the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in
any manner or extend credit.
5.5 INVESTMENTS. Borrower will not purchase the debt or equity
of another person or entity except for (i) savings accounts and certificates
of deposit of Bank, direct U.S. Government obligations and commercial paper
issued by corporations with the top ratings of ▇▇▇▇▇'▇ or Standard & Poor's,
provided all such permitted investments shall mature
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within one year of purchase, and (ii) so long as Borrower is in compliance
with the terms and conditions of this Agreement, at the time of investment,
investments in affiliates and subsidiaries.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay any
dividends, other than a dividend payable in its own common stock, or
authorize or make any other distribution with respect to any of its stock now
or hereafter outstanding.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire
any share of its capital stock for value except as provided for in that
certain Stock Purchase Agreement which is attached hereto as Exhibit A of
this Agreement.
5.8 NO TWO CONSECUTIVE QUARTERLY LOSSES. Borrower will not
incur a Net Loss, as defined by GAAP, for two consecutive quarterly periods.
SECTION 6. EVENT OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue the
Loan and, upon Bank's election, unless otherwise provided under the Note,
shall make all sums of interest and principal and any other amounts owing
under the Loan immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor, or any other notices or demands.
6.1 Borrower shall default in the due and punctual payment of
the principal of or the interest on the Note or any of the other Loan
Documents, and such default (if in respect of the interest payment) is not
cured within 5 days; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or
observance of any covenant or condition of the Loan Documents, and such
default, if in respect of financial covenants, is not cured within 30 days of
Borrower becoming aware of its occurrenc; or
6.4 Any guaranty or subordination agreement required hereunder
is breached or becomes ineffective, or any Guarantor or subordinating
creditor dies, disavows or attempts to revoke or terminate such guaranty or
subordination agreement; or
6.5 There is a change in ownership or control of ten percent
(10%) or more of the issued and outstanding stock of Borrower other than
charges in ownership occasioned by changes in the ownership interests within
the Specialty Family Partnership (attached as schedule B).
6.6 There is a change of management such that Dr. ▇▇▇▇▇ ▇▇▇▇▇
is no longer Chairman and Chief Executive Officer of Borrower.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies given
to Bank hereunder shall be cumulative and not alternative and shall be in
addition to all rights, powers and remedies given to Bank by law against
Borrower or any other person, including but not limited to Bank's rights of
setoff or banker's lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank in
exercising any right, power or remedy hereunder shall not be deemed a waiver
thereof and any single or partial exercise of any right, power or remedy
shall not preclude the further exercise thereof. No waiver shall be effective
unless it is in writing and signed by an officer of Bank.
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7.3 INUREMENT. The benefits of this Agreement shall inure
to the successors and assigns of Bank and the permitted successors and
assignees of Borrower, and any assignment of Borrower without Bank's consent
shall be null and void.
7.4 APPLICABLE LAW. This Agreement and all other
agreements and instruments required by Bank in connection therewith shall be
governed by and construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of
this Agreement be determined to be illegal or unenforceable, all other
provisions nevertheless shall be effective.
7.6 INTEGRATION CLAUSE. Except for documents and
instruments specifically referenced herein, this Agreement constitutes the
entire agreement between Bank and Borrower regarding the Loan and all prior
communications verbal or written between Borrower and Bank shall be of no
further effect.
7.7 CONSTRUCTION. The section and subsection headings
herein are for convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in
writing signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or
more counterparts to this Agreement, each of which shall be deemed an
original.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or
allowed hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with the
signatures at the end of this Agreement and shall be considered to have been
validly given: (a) upon delivery, if delivered personally; (b) upon receipt,
if mailed, first class postage prepaid, with the United States Postal
Service; (c) on the next business day, if sent by overnight courier service
of recognized standing; and (d) upon telephoned confirmation of receipt, if
telecopied.
8.2 The addresses to which notices or demands are to be given
may be changed from time to time by notice delivered as provided above.
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THIS AGREEMENT is executed on behalf of the parties by duly
authorized officers as of the date first above written.
UNION BANK
By:
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Title:
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By:
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Title:
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Address:
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Attention:
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Telecopier:
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Telephone:
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SPECIALTY LABORATORIES, INC.
By: ILLEGIBLE
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Title: President
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By: ILLEGIBLE
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Title: VP CFO
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Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
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SANTA MONICA, CA 90404
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
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Telecopier:(▇▇▇) ▇▇▇-▇▇▇▇
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ EXT 486
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AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT ("Agreement") is made and entered
into as of April 7, 1997 by and between SPECIALTY LABORATORIES, INC., a
California corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A.
("Bank"). This Agreement amends and restates in its entirety that certain
Loan Agreement dated as of April 15, 1996 by and between Borrower and Bank
(the "Prior Agreement").
SECTION 1. THE CREDIT
1.1 Credit Facilities.
1.1.1 THE REVOLVING LOAN. Bank will loan to Borrower an
amount not to exceed Fifteen Million Dollars ($15,000,000) outstanding in the
aggregate at any one time (the "Revolving Loan"). Borrower may borrow, repay
and reborrow all or part of the Revolving Loan in accordance with the terms
of the Revolving Note. All borrowings of the Revolving Loan must be made
before May 31, 1999, at which time all unpaid principal of and interest on
the Revolving Loan shall be due and payable. The Revolving Loan shall be
evidenced by a promissory note (the "Revolving Note") on the standard form
used by Bank to evidence its commercial loans. Bank shall enter each amount
borrowed and repaid in Bank's records and such entries shall be deemed to be
the amount of the Revolving Loan outstanding. Omission of Bank to make any
such entries shall not discharge Borrower of its obligation to repay in full
with interest all amounts borrowed.
1.1.2 THE STANDBY L/C SUBLIMIT. As a sublimit to the
Revolving Loan, Bank shall issue, for the account of Borrower, one or more
irrevocable standby letters of credit (individually, an "L/C" and
collectively, the "L/Cs"). All such L/Cs shall be drawn on such terms and
conditions as are acceptable to Bank. The aggregate amount available to be
drawn under all outstanding L/Cs and the aggregate amount of unpaid
reimbursement obligations under drawn L/Cs shall not exceed Three Hundred
Thousand Dollars ($300,000) and shall reduce, dollar for dollar, the maximum
amount available under the Revolving Loan. No L/C shall have an expiry date
more than 12 months from its date of issuance and each L/C shall be governed
by the terms of (and ▇▇▇▇▇▇▇▇ agrees to execute) Bank's standard form for L/C
applications and reimbursement agreements. No L/C shall expire after May 31,
1999.
1.1.3 THE TERM LOAN. Bank will loan to Borrower the sum
of Five Million Dollars ($5,000,000) (the "Term Loan") at Borrower's request,
in one disbursement on or before April 30, 1997 in accordance with the terms
of the Term Note. In the event of a prepayment of principal and payment of
any resulting fees, any prepaid amounts shall be applied to the scheduled
principal payments in the reverse order of their maturity. The Term Loan
shall be evidenced by a promissory note (the "Term Note") on the standard
form used by Bank to evidence its commercial loans.
1.2 TERMINOLOGY.
As used herein, the word "Loan" shall mean, collectively,
all the credit facilities described above.
As used herein, the word "Note" shall mean, collectively,
all the promissory notes described above.
As used herein, the words "Loan Documents" shall mean all
documents executed in connection with this Agreement.
1.3 BORROWING BASE. Notwithstanding any other provision of
this Agreement, Bank shall not be obligated to advance funds under the
Revolving Loan if at any time the aggregate of Borrower's obligations to Bank
thereunder shall exceed the sum of seventy-five percent (75%) of Borrower's
Eligible Accounts. If at any time ▇▇▇▇▇▇▇▇'s obligations to Bank under the
Revolving Loan exceed the sum so permitted, Borrower shall immediately repay
to Bank such excess.
1.3.1 ACCOUNTS; ELIGIBLE ACCOUNTS. The term "Accounts"
means all presently existing and hereafter arising accounts receivable,
contract rights, chattel paper, and all other forms of obligations owing to
Borrower, payable
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in United States Dollars, arising out of the sale or lease of goods, or the
rendition of services by ▇▇▇▇▇▇▇▇, whether or not earned by performance, and
any and all credit insurance, guaranties and other security therefor, as well
as all merchandise returned to or reclaimed by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇'s books
and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance
charges, which are due and payable within ninety (90) days, or less, from the
date of the invoice, have been validly assigned to Bank and strictly comply
with all of Borrower's warranties and representations to Bank, but Eligible
Accounts shall not include the following:
(a) Any Account with respect to which the account debtor
is an officer, shareholder, director, employee or agent of ▇▇▇▇▇▇▇▇;
(b) Any Account with respect to which the account debtor
is a subsidiary of, related to, or affiliated or has common officers or
directors with Borrower;
(c) Any Account relating to goods placed on consignment,
guaranteed sale or other terms by reason of which the payment by the account
debtor may be conditional;
(d) Any Account with respect to which the account debtor
is not a resident of the United States or Canada; provided, however that
Accounts with respect to which the account debtors are not residents of the
United States or Canada shall be deemed eligible so long as the aggregate
dollar amount of such Accounts does not exceed One Hundred Fifty Thousand
Dollars ($150,000) at any one time.
(e) Any Account with respect to which the account debtor
is the United States or any department, agency or instrumentality of the
United States; provided, however that Accounts with respect to which the
account debtors are the United States or any department, agency or
instrumentality of the United States shall be deemed eligible so long as the
aggregate dollar amount of all such Accounts does not exceed ten percent
(10%) of all Accounts at any one time.
(f) Any Account with respect to which Borrower is or may
become liable to the account debtor for goods sold or services rendered by
the account debtor to Borrower;
(g) Any Account with respect to which there is asserted
a defense, counterclaim, discount or set off, whether well-founded or
otherwise, except for those discounts, allowances and returns arising in the
ordinary course of ▇▇▇▇▇▇▇▇'s business;
(h) Any Account with respect to which the account debtor
becomes insolvent, fails to pay its debts as they mature or goes out of
business or is owed by an account debtor which has become the subject of a
proceeding under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including, but not
limited to, assignments for the benefit of creditors, formal or informal
moratoriums, compositions or extensions with all or substantially all of its
creditors;
(i) Any Account owed by any account debtor with respect
to which twenty-five percent (25%) or more of the aggregate dollar amount of
its Accounts are not paid within ninety (90) days from the due date of the
invoices corresponding thereto.
(j) Any Account that is not paid by the account debtor
within ninety (90) days of its date of invoice;
(k) Any Account that is not paid by the account debtor
and for which a credit memo has been issued which is over ninety (90) days
old;
(l) That portion of the Accounts owed by any single
account debtor which exceeds fifteen percent (15%) of all of the Accounts;
provided however that in the case of Accounts owed to Borrower by ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ plc or any subsidiary thereof, the permitted portion of Eligible
Accounts shall be twenty-five percent (25%); and
(m) Any Account which Bank, in good faith, deems not to
be an Eligible Account.
1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan
shall be used to repay in part Borrower's outstanding obligations under the
Prior Agreement and for Borrower's general working capital and investment
purposes. The proceeds of the Term Loan shall be used to repay in part
Borrower's outstanding obligations to Bank under the Prior Agreement. Each
L/C issued hereunder shall be issued for credit enhancement purposes.
1.5 INTEREST. The unpaid principal balance of the Revolving
Loan and the Term Loan shall bear interest at the rate or rates specifically
provided for in the Revolving Note and the Term Note.
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1.6 LOAN COMMITMENT FEES. Borrower shall pay in advance to
Bank commitment fees of Seven Thousand Five Hundred Dollars ($7,500) as
consideration for Bank making available the Revolving Loan and Ten Thousand
Dollars ($10,000) as consideration for Bank making the Term Loan. Such fees
will be paid on or before the date of execution of this Agreement. No portion
of such fees shall be reimbursable.
1.7 DISBURSEMENT. Upon execution hereof, Bank shall disburse
the proceeds of the Loan as provided in Bank's standard Form Authorizations
executed by ▇▇▇▇▇▇▇▇.
1.8 SECURITY. Prior to any disbursement of the Loan,
▇▇▇▇▇▇▇▇ shall have executed a security agreement, or Bank's standard form,
and a financing statement, suitable for filing in the office of the Secretary
of State of the State of California, the Secretary of State of the State of
Tennessee and any other state designated by Bank, granting to Bank a first
priority security interest in such of ▇▇▇▇▇▇▇▇'s property as is described in
said security agreement. At Bank's request, ▇▇▇▇▇▇▇▇ will also obtain
executed landlord's and mortgagee's waivers on Bank's form covering all of
Borrower's property located on leased or encumbered real property.
1.9 CONTROLLING DOCUMENT. In the event of any inconsistency
between the terms of this Agreement and the Note or any of the other Loan
Documents, the terms of the Note or other such Loan Documents will prevail
over the terms of this Agreement.
SECTION 2. CONDITIONS PRECEDENT
Bank shall not be obligated to disburse all or any portion of the
proceeds of the Loan unless at or prior to the time for the making of such
disbursement, the following conditions have been fulfilled to Bank's
satisfaction:
2.1 COMPLIANCE. Borrower shall have performed and complied
with all terms and conditions required by this Agreement to be performed or
complied with by it prior to or at the date of the making of such
disbursement and shall have executed and delivered to Bank the Note and the
other Loan Documents.
2.2 BORROWING RESOLUTION. Borrower shall have provided Bank
with certified copies of resolutions duly adopted by the board of directors
of Borrower, authorizing the execution, delivery and performance of this
Agreement and the Loan Documents. Such resolutions shall also designate the
persons who are authorized to act on ▇▇▇▇▇▇▇▇'s behalf in connection with
this Agreement and to do the things required of Borrower pursuant to this
Agreement.
2.3 CONTINUING COMPLIANCE. At the time any disbursement is to
be made, there shall not exist any event, condition or act which constitutes
an Event of Default under Section 6 hereof or any event, condition or act
which with notice, lapse of time or both would constitute an Event of
Default; nor shall there be any such event, condition, or act immediately
after the disbursement were it to be made.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
3.1 BUSINESS ACTIVITY. The principal business of Borrower is
the operation of a clinical reference laboratory.
3.2 AFFILIATES AND SUBSIDIARIES. Borrower's affiliates and
subsidiaries (those entities in which Borrower has either a controlling
interest or at least a 25% ownership interest) and their addresses, and the
names of Borrower's principal shareholders, are as provided on a schedule
delivered to Bank on or before the date of this Agreement.
3.3 AUTHORITY TO BORROW. The execution, delivery and
performance of this Agreement, the Note and all other Loan Documents are not
in contravention of any of the terms of any indenture, agreement or
undertaking to which Borrower is a party or by which it or any of its
property is bound or affected.
3.4 FINANCIAL STATEMENTS. The financial statements of
▇▇▇▇▇▇▇▇, including both a balance sheet at January 31, 1997, together with
supporting schedules, and an income statement for the nine (9) months ended
January 31, 1997, have heretofore been furnished to Bank, and are true and
complete and fairly represent the financial condition of Borrower during the
period covered thereby. Since January 31, 1997, there has been no material
adverse change in the financial condition or operations of Borrower.
3.5 TITLE. Except for assets which may have been disposed of
in the ordinary course of business, Borrower has good and marketable title to
all of the property reflected in its financial statements delivered to Bank
and to all
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property acquired by ▇▇▇▇▇▇▇▇ since the date of said financial statements,
free and clear of all Liens, except those specifically referred to in said
financial statements.
3.6 LITIGATION. There is no litigation or proceeding pending or
threatened against Borrower or any of its property which is reasonably likely to
affect the financial condition, property or business of Borrower in a materially
adverse manner or result in liability in excess of Borrower's insurance
coverage.
3.7 DEFAULT. Borrower is not now in default in the payment of
any of its material obligations, and there exists no event, condition or act
which constitutes an Event of Default under Section 6 hereof and no condition,
event or act which with notice or lapse of time, or both, would constitute an
Event of Default.
3.8 ORGANIZATION. Borrower is duly organized and existing under
the laws of the State of California, and has the power and authority to carry on
the business in which it is engaged and/or proposes to engage.
3.9 POWER. ▇▇▇▇▇▇▇▇ has the power and authority to enter into
this Agreement and to execute and deliver the Note and all of the other Loan
Documents.
3.10 AUTHORIZATION. This Agreement and all things required by
this Agreement have been duly authorized by all requisite corporate action of
Borrower.
3.11 QUALIFICATION. Borrower is duly qualified and in good
standing in any jurisdiction where such qualification is required.
3.12 COMPLIANCE WITH LAWS. Borrower is not in violation with
respect to any applicable laws, rules, ordinances or regulations which
materially affect the operations or financial condition of Borrower.
3.13 ERISA. Any defined benefit pension plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA has occurred with respect to any such plan.
3.14 REGULATION U. No action has been taken or is currently
planned by ▇▇▇▇▇▇▇▇, or any agent acting on its behalf, which would cause this
Agreement or the Note to violate Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
and Exchange Act of 1934. In each case as in effect now or as the same may
hereafter be in effect, Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock as one of its
important activities and none of the proceeds of the Loan will be used directly
or indirectly for such purpose.
3.15 CONTINUING REPRESENTATIONS. These representations shall be
considered to have been made again at and as of the date of each disbursement of
the Loan and shall be true and correct as of such date or dates.
SECTION 4. AFFIRMATIVE COVENANTS
Until all sums payable pursuant to this Agreement and the Loan Documents
have been paid in full, unless Bank consents compliance in writing, ▇▇▇▇▇▇▇▇
agrees that:
4.1 USE OF PROCEEDS. Borrower will use the proceeds of the Loan
only as provided in subsection 1.4 above.
4.2 PAYMENT OF OBLIGATIONS. Borrower will pay and discharge
promptly all taxes, assessments and other governmental charges and claims levied
or imposed upon it or its property, or any part thereof; provided, however, that
Borrower shall have the right in good faith to contest any such taxes,
assessments, charges or claims and, pending the outcome of such contest, to
delay or refuse payment thereof, provided that adequate funded reserves are
established by it to pay and discharge any such taxes, assessments, charges and
claims.
4.3 MAINTENANCE OF EXISTENCE. Borrower will maintain and
preserve its existence and assets and all rights, franchises, licenses and other
authority necessary for the conquest of its business and will maintain and
preserve its property, equipment and facilities in good order, condition and
repair. Bank may, at reasonable times, visit and inspect any of the properties
of Borrower.
4.4 RECORDS. Borrower will keep and maintain full and accurate
accounts and records of its operations according to generally accepted
accounting principles and will permit Bank to have access thereto, to make
examination and photocopies thereof, and to make audits during business hours.
Costs for such audits shall be paid by Borrower.
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4.5 INFORMATION FURNISHED. Borrower will furnish to Bank:
(a) Within thirty (30) days after the close of each
fiscal month, except for the final month of each fiscal year, its unaudited
balance sheet as of the close of such financial month, its unaudited income and
expense statement with supportive schedules and statement of retained earnings
for that fiscal month, prepared in accordance with generally accepted accounting
principles. Beginning with the fiscal month ended September 30, 1997, and for
each month thereafter (except for the final month of each fiscal year), the
foregoing financial information shall include the results of each of its
international joint venture affiliates, in its reporting of financial results to
Bank prepared in accordance in generally accepted accounting principles. Prior
thereto, Borrower will provide only such information with respect to its
international joint venture affiliates as to which Bank and Borrower may
mutually agree;
(b) Within one hundred twenty (120) days after the close
of each fiscal year, a copy of its statement of financial condition including at
least its balance sheet as of the close of such fiscal year, its income and
expense statement and retained earnings statement for such fiscal year, examined
and prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of the previous fiscal year;
(c) As soon as available copies of such financial
statements and reports as Borrower may file with any state or federal agency,
including all state and federal income tax returns;
(d) Such other financial statements and information as
Bank may reasonably request from time to time;
(e) Within thirty (30) days after the close of each
fiscal month and within one hundred twenty (120) days after the close of each
fiscal year, a certificate of ▇▇▇▇▇▇▇▇'s president or chief financial officer,
in a form acceptable to Bank, (i) accurately reporting the components of the
Borrowing Base described in subsection 1.3 hereinabove, including Borrower's
Accounts and Eligible Accounts, (ii) certifying that no Event of Default has
occurred and no event which with notice or lapse of time or both, would result
in an Event of Default and (iii) certifying compliance with all of the
covenants, whether financial or otherwise, contained in this Agreement;
(f) In connection with each fiscal year end statement
required hereunder, any management letter of ▇▇▇▇▇▇▇▇'s certified public
accountants;
(g) Prompt written notice to Bank of all Events of
Default under any of the terms or provisions of this Agreement and of any
default under any other agreement, contract, document or instrument entered, or
to be entered into with Bank; and of any litigation which, if decided adversely
to Borrower, would have a material adverse effect on Borrower's financial
condition; and of any other matter which has resulted in, or is likely to result
in, a material adverse change in its financial condition or operations; and
(h) Prior written notice to Bank of any changes in
Borrower's officers and other senior management; ▇▇▇▇▇▇▇▇'s name; and the
location of Borrower's assets, principal place of business or chief executive
office; and
(i) Within thirty (30) days after the close of each
calendar month, a copy of ▇▇▇▇▇▇▇▇'s summary aging of its Accounts. Borrower
will permit Bank to audit, at Borrower's expense, Bank's collateral upon
reasonable notice and during regular business hours.
4.6 TANGIBLE NET WORTH. Borrower will maintain Tangible Net
Worth of not less than the amounts indicated as at the end of the corresponding
fiscal years set forth below:
Fiscal Year End Amount
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April 30, 1997 $14,500,000
April 30, 1998 $15,500,000
April 30, 1999 $18,500,000
April 30, 2000 $21,500,000
April 30, 2001 $24,500,000
April 30, 2002 $27,500,000
As used in this Agreement, "Tangible Net Worth" shall mean Borrower's net
worth, increased by indebtedness of Borrower subordinated to Bank and decreased
by patents, licenses, trademarks, trade names, goodwill and other similar
intangible assets, organizational expenses, and monies due from affiliates
(including officers, shareholders and directors).
4.7 TOTAL LIABILITIES TO TANGIBLE NET WORTH. Until May 31,
1999, ▇▇▇▇▇▇▇▇ will at all times maintain a ratio of Total Liabilities to
Tangible Net Worth of not greater than 2.25:1.0. Thereafter, ▇▇▇▇▇▇▇▇ will at
all times maintain a ratio
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of Total Liabilities to Tangible Net Worth not greater than 2.00:1. As used in
this Agreement, "Total Liabilities" shall mean all items of ▇▇▇▇▇▇▇▇'s
indebtedness which, in accordance with generally accepted accounting principles,
would be included in determining liabilities as shown on the liability side of
Borrower's balance sheet.
4.8 PROFITABILITY. Borrower will achieve net profit, after
provision for income taxes, of not less than Three Million Dollars ($3,000,000)
for each fiscal year.
4.9 EBIDTA TO DEBT SERVICE RATIO. Borrower will maintain a
ratio of EBIDTA to Debt Service of not less than 2.0:1.0. "EBIDTA" shall mean
earnings before interest, taxes, depreciation, and amortization for the twelve
(12) months preceding the date of the calculation. "Debt Service" shall mean the
sum of that portion of term obligations (including principal and interest)
coming due during the twelve (12) months following the date of calculation.
Compliance with this subsection shall be measured as of the end of each fiscal
quarter of Borrower.
4.10 INSURANCE. Borrower will keep all of its insurable
property, whether real, personal or mixed, insured by companies and in amounts
approved by Bank against fire and such other risks, and in such amounts, as is
customarily obtained by companies conducting similar business with respect to
like properties. Borrower will furnish to Bank statements of its insurance
coverage, will promptly furnish other or additional insurance deemed necessary
by and upon request of Bank to the extent that such insurance may be available
and hereby assigns to Bank, as security for Borrower's obligations to Bank, the
proceeds of any such insurance. Prior to any disbursement of the Loan, Bank will
be named loss payee on all policies insuring the collateral and such policies
shall require at least ten (10) days' written notice to Bank before any policy
may be altered or canceled. Borrower will maintain adequate worker's
compensation insurance and adequate insurance against liability for damage to
persons or property.
4.11 ADDITIONAL REQUIREMENTS. Borrower will promptly, upon
demand by Bank, take such further action and execute all such additional
documents and instruments in connection with this Agreement as Bank in its
reasonable discretion deems necessary, and promptly supply Bank with such other
information concerning its affairs as Bank may reasonably request from time to
time.
4.12 LITIGATION AND ATTORNEY'S FEES. Borrower will promptly pay
to Bank upon demand, reasonable attorney's fees (including but not limited to
the reasonable estimate of the allocated costs and expenses of in-house legal
counsel and staff) and all costs and other expenses paid or incurred by Bank in
collecting, modifying or compromising the Loan or in enforcing or exercising its
rights or remedies created by, connected with or provided for in this Agreement
or any of the Loan Documents, whether or not an arbitration, judicial action or
other proceeding is commenced. If any such proceeding is commenced, only the
prevailing party shall be entitled to attorneys' fees and court costs.
4.13 BANK EXPENSES. Borrower will pay or reimburse Bank for all
costs, expenses and fees incurred by Bank in preparing and documenting this
Agreement and the Loan, and all amendments and modifications thereof, including
but not limited to all filing and recording fees, costs of appraisals, insurance
and attorney's fees, including the reasonable estimate of the allocated costs
and expenses of in-house legal counsel and staff.
4.14 REPORT UNDER PENSION PLANS. Borrower will furnish to Bank,
as soon as possible and in any event within fifteen (15) days after ▇▇▇▇▇▇▇▇
knows or has reason to know that any event or condition with respect to any
defined benefit pension plans of ▇▇▇▇▇▇▇▇ described in Section 3.13 above has
occurred, a statement of an authorized officer of Borrower describing such event
or condition and the action, if any, which Borrower proposes to take with
respect thereto.
SECTION 5. NEGATIVE COVENANTS
Until all sums payable pursuant to this Agreement and the Loan Documents
have been paid in full, unless Bank otherwise consents in writing, ▇▇▇▇▇▇▇▇
agrees that:
5.1 ENCUMBRANCES AND LIENS. Borrower will not create, assume or
suffer to exist any mortgage, pledge, security interest, encumbrance or lien
(collectively, "Liens") (other than for taxes not delinquent and for taxes and
other items being contested in good faith) on property of any kind, whether
real, personal or mixed, now owned or hereafter acquired, or upon the income or
profits thereof, except for (a) Liens now in favor of Bank, (b) minor
encumbrances and easements on real property which do not affect its market
value, (c) existing Liens on Borrower's personal property and (d) future
purchase money security interests encumbering only the personal property
purchased. All of such permitted personal property Liens shall secure
indebtedness not exceeding, in the aggregate, Twenty-Five Thousand Dollars
($25,000).
5.2 BORROWINGS. Borrower will not sell, discount or otherwise
transfer any Account or any note, draft or other evidence of indebtedness,
except to Bank or except to a financial institution at face value for deposit or
collection purposes only and without any fee other than fees normally charged by
the financial institution for deposit or collection services. Borrower will not
borrow any money, become contingently liable to borrow money, nor enter any
agreement to directly or indirectly obtain borrowed money, except pursuant to
agreements made with Bank.
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5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. Borrower will
neither liquidate nor dissolve nor enter into any consolidation, merger,
partnership or other combination, nor convey, sell or lease all or the
greater part of its assets or business, nor purchase or lease all or the
greater part of the assets or business of another.
5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not,
except in the ordinary course of business as currently conducted, make any
loans or advances, become a guarantor or surety, pledge its credit or
properties in any manner or extend credit.
5.5 INVESTMENTS. Except for investments made with the
proceeds of the Revolving Loan as contemplated in this Agreement, Borrower
will not purchase the debt or equity of another person or entity except for
savings accounts and certificates of deposit of Bank, direct U.S. Government
obligations and commercial paper issued by corporations with the top ratings
of ▇▇▇▇▇'▇ or Standard & Poor's, provided all such permitted investments
shall mature within one year of purchase.
5.6 PAYMENT OF DIVIDENDS. Borrower will not declare or pay
any dividends, other than a dividend payable in its own common stock, or
authorize or make any other distribution with respect to any of its stock now
or hereafter outstanding.
5.7 RETIREMENT OF STOCK. Borrower will not acquire or retire
any share of its capital stock for value.
5.8 PARENT AND SUBSIDIARY PROPERTY. Borrower will not
transfer any property to its parent or any affiliate of its parent, except
for value received in the normal course of business as business would be
conducted with an unrelated or unaffiliated entity. In no event shall
management fees or fees for services be paid by Borrower to any such direct
or indirect affiliate without Bank's prior written approval.
SECTION 6. EVENTS OF DEFAULT
The occurrence of any of the following events ("Events of Default")
shall terminate any obligation on the part of Bank to make or continue the
Loan and automatically, unless otherwise provided under the Note, shall make
all sums of interest and principal and any other amounts owing under the Loan
immediately due and payable, without notice of default, presentment or demand
for payment, protest or notice of nonpayment or dishonor, or any other
notices or demands:
6.1 Borrower shall default in the due and punctual payment of
the principal of or the interest on the Note or any of the other Loan
Documents; or
6.2 Any default shall occur under the Note; or
6.3 Borrower shall default in the due performance or observance
of any covenant or condition of the Loan Documents and such default, if in
respect of any covenant which is capable of being cured, is not cured within
thirty (30) days of its occurrence; or
6.4 There is a change in ownership or control of ten percent
(10)% or more of the issued and outstanding stock of Borrower, other than
changes in ownership occasioned by changes in the ownership interest within
the Specialty Family Limited Partnership; or
6.5 There is a change of management such that ▇▇▇▇▇ ▇. ▇▇▇▇▇ is
no longer chairman and chief executive officer of Borrower.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 ADDITIONAL REMEDIES. The rights, powers and remedies
given to Bank hereunder shall be cumulative and not alternative and shall be
in addition to all rights, powers and remedies given to Bank by law against
Borrower or any other person, including but not limited to Bank's rights of
set off or banker's lien.
7.2 NONWAIVER. Any forbearance or failure or delay by Bank
in exercising any right, power or remedy hereunder shall not be deemed a
waiver thereof and any single or partial exercise of any right, power or
remedy shall not preclude the further exercise thereof. No waiver shall be
effective unless it is in writing and signed by an officer of Bank.
7.3 INUREMENT. The benefits of this Agreement shall inure to
the successors and assigns of Bank and the permitted successors and assigns
of Borrower, and any assignment by Borrower without Bank's consent shall be
null and void.
-7-
7.4 APPLICABLE LAW. This Agreement and all other agreements
and instruments required by Bank in connection therewith shall be governed by
and construed according to the laws of the State of California.
7.5 SEVERABILITY. Should any one or more provisions of this
Agreement be determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective. In the event of any conflict between the
provisions of this Agreement and the provisions of the Note or any
reimbursement agreement evidencing any indebtedness hereunder, the provisions
of the Note or such reimbursement agreement shall prevail.
7.6 INTEGRATION CLAUSE. Except for documents and instruments
specifically referenced herein, this Agreement constitutes the entire
agreement between Bank and Borrower regarding the Loan, and all prior
communications, whether verbal or written, between Borrower and Bank shall be
of no further effect or evidentiary value.
7.7 CONSTRUCTION. The section and subsection headings herein
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
7.8 AMENDMENTS. This Agreement may be amended only in
writing signed by all parties hereto.
7.9 COUNTERPARTS. Borrower and Bank may execute one or more
counterparts to this Agreement, each of which shall be deemed an original,
but when together shall be one and the same instrument.
SECTION 8. SERVICE OF NOTICES
8.1 Any notices or other communications provided for or
allowed hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with the
signatures at the end of this Agreement and shall be considered to have been
validly given: (a) upon delivery, if delivered personally; (b) upon receipt,
if mailed, first class postage prepaid, with the United States Postal
Service; (c) on the next business day, if sent by overnight courier service
of recognized standing; and (d) upon telephoned confirmation of receipt, if
telecopied.
8.2 The addresses to which notices or demands are to be given
may be changed from time to time by notice delivered as provided above.
THIS AGREEMENT is executed on behalf of the parties by duly authorized
officers as of the date first above written.
SPECIALTY LABORATORIES, INC.
By: [ILLEGIBLE]
---------------------------------
Title: President
------------------------------
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Title: V.P. of Finance & Treasurer
------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Vice
President Finance and Treasurer
Telecopier:(▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, extension 1486
UNION BANK OF CALIFORNIA, N.A.
By: [ILLEGIBLE]
-------------------------------
Title: Vice President
----------------------------
Address: Los Angeles Headquarters Commercial
Banking Office
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
-8-
FIRST AMENDMENT
TO AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "First
Amendment") dated as of January 23, 1998, is made and entered into by and
between SPECIALTY LABORATORIES, INC., a California corporation ("Borrower"), and
UNION BANK OF CALIFORNIA, N.A., a national banking association ("Bank").
RECITALS:
▇. ▇▇▇▇▇▇▇▇ and Bank are parties to that certain Amended and Restated Loan
Agreement dated as of April 7, 1997 (the "Agreement"), pursuant to which Bank
agreed to extend credit to Borrower in the aggregate principal amount at any one
time outstanding not to exceed Twenty Million Three Hundred Thousand Dollars
($20,300,000).
▇. ▇▇▇▇▇▇▇▇ and Bank desire to amend the Agreement, but subject to the terms
and conditions of this First Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. AMENDMENTS TO SECTION 1 OF THE AGREEMENT.
(a) Section 1.1.3 of the Agreement is hereby amended to read in full as
follows:
"1.1.3 TERM LOAN A. Bank made a term loan ('Term Loan A') to Borrower
in multiple disbursements on or before April 30, 1997 in the aggregate principal
amount of Five Million Dollars ($5,000,000). As of the date of the First
Amendment to this Agreement, the outstanding principal amount of Term Loan A is
Four Million Two Hundred Fifty Thousand Dollars ($4,250,000). From and after the
date of the First Amendment to this Agreement, ▇▇▇▇▇▇▇▇'s obligation to repay
the principal of, and accrued interest on, Term Loan A shall be evidenced by a
replacement promissory note ('Term Note A') issued by Borrower in favor of Bank
on the standard form used by Bank to evidence its commercial loans and shall be
payable at the times, in the amounts and upon the terms set forth in Term Note
A. In the event of a prepayment of principal and payment of any resulting fees,
any prepaid amounts shall be applied to the scheduled principal payments due
under Term Loan A in the reverse order of their maturity."
1
(b) Section 1.1 of the Agreement is hereby further amended by adding a new
Section 1.1.4 thereto, which shall read in full as follows:
"1.1.4 TERM LOAN B. Bank shall make a term loan ('Term Loan B') to
Borrower in the principal amount of Eleven Million Dollars ($11,000,000) at
Borrower's request, in one or more disbursements from the date of the First
Amendment to this Agreement to and including February 1, 1999. Borrower's
obligation to repay the principal of, and accrued interest on, Term Loan B shall
be evidenced by a promissory note ('Term Note B') issued by Borrower in favor of
Bank on the standard form used by Bank to evidence its commercial loans and
shall be payable at the times, in the amounts and upon the terms set forth in
Term Note B. In the event of a prepayment of principal and payment of any
resulting fees, any prepaid amounts shall be applied to the scheduled principal
payments due under Term Loan B in the reverse order of their maturity."
(c) Section 1.4 of the Agreement is hereby amended to read in full as
follows:
"1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be used
to repay in part Borrower's outstanding obligations under the Prior Agreement
and for Borrower's general working capital and investment purposes. The proceeds
of Term Loan A were used to repay in part Borrower's outstanding obligations to
Bank under the Prior Agreement. The proceeds of Term Loan B shall be used only
(a) to purchase the limited partnership interest of ▇▇▇▇ ▇. ▇▇▇▇▇, deceased, in
the Specialty Family Limited Partnership from the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇;
provided, however, that the amount of such proceeds used for such purpose shall
not exceed One Million Dollars ($1,000,000) in the aggregate, (b) to purchase
new or used equipment; provided, however, that the amount of such proceeds used
for such purpose shall not exceed Three Million Five Hundred Thousand Dollars
($3,500,000) in the aggregate and (c) in connection with the construction of
tenant improvements and the purchase of equipment at Borrower's Memphis,
Tennessee location; provided, however, that the amount of such proceeds used
for such purpose shall not exceed Six Million Five Hundred Thousand Dollars
($6,500,000) in the aggregate."
(d) Section 1.5 of the Agreement is hereby amended to read in full as
follows:
"1.5 INTEREST. The unpaid principal balance of the Loan shall bear
interest at the rate or rates specifically provided for in the Note."
3. AMENDMENTS TO SECTION 4 OF THE AGREEMENT.
(a) The introductory paragraph of Section 4 of the Agreement is hereby
amended to read in full as follows:
"Until all sums payable pursuant to this Agreement and the Loan Documents
have been paid in full, unless Bank otherwise consents in writing, ▇▇▇▇▇▇▇▇
agrees that:"
2
(b) The second sentence of Section 4.5(a) of the Agreement is hereby
amended to read in full as follows:
"Within forty-five (45) days after the end of each fiscal month, beginning
with the fiscal month ended December 31, 1997, Borrower will furnish to Bank, in
its reporting of its financial results, the results of each of its international
joint venture affiliates, prepared in accordance with generally accepted
accounting principles."
(c) Section 4.6 of the Agreement is hereby amended to read in full as
follows:
"4.6 TANGIBLE NET WORTH. Borrower will achieve Tangible Net Worth of
not less than the amounts set forth below as at the end of the corresponding
fiscal years set forth below:
Fiscal Year End Amount
--------------- ------
December 31, 1997 $16,500,000
December 31, 1998 $16,500,000
December 31, 1999 $19,500,000
December 31, 2000 $22,500,000
December 31, 2001 $25,500,000
December 31, 2002 $28,500,000
December 31, 2003 $31,500,000
As used in this Agreement, 'Tangible Net Worth' shall mean Borrower's
net worth, increased by indebtedness of Borrower subordinated to Bank and
decreased by patents, licenses, trademarks, trade names, goodwill and other
similar intangible assets, organizational expenses, and monies due from
affiliates (including officers, shareholders and directors)."
(d) Section 4.7 of the Agreement is hereby amended to read in full as
follows:
"4.7 FUNDED INDEBTEDNESS TO EBITDA RATIO. Borrower will maintain, as
at the end of each fiscal quarter for the rolling four (4) fiscal quarters
then ending, a ratio of Funded Indebtedness to EBITDA of not greater than 2.4
to 1.0. As used in this Agreement, the term "Funded Indebtedness" shall mean
all outstanding term indebtedness and revolving credit indebtedness of
Borrower as of the date of calculation. As used in this Agreement, the term
"EBITDA" shall mean ▇▇▇▇▇▇▇▇'s earnings before interest, taxes, depreciation
and amortization for the twelve (12) months preceding the date of
calculation."
(e) Section 4.8 of the Agreement is hereby amended to read in full as
follows:
"4.8 PROFITABILITY. Borrower will achieve net profit, after provision
for income taxes, of not less than (a) Two Million Dollars ($2,000,000) for the
twelve (12) month
3
period ended December 31, 1997, (b) One Million Dollars ($1,000,000) for the
fiscal year ending December 31, 1998 and (c) Three Million Dollars
($3,000,000) for the fiscal years ending December 31, 1999 and thereafter."
(f) Section 4.9 of the Agreement is hereby amended to read in full as
follows:
"4.9 EBITDA TO DEBT SERVICE RATIO. Borrower will maintain, as at
the end of each fiscal quarter, a ratio EBITDA to Debt Service of not less
than 2.5 to 1.0. As used herein, the term "Debt Service" shall mean, with
respect to any fiscal period of Borrower, an amount equal to that portion of
the term indebtedness of Borrower (including principal and interest) coming
due during the twelve (12) months following the date of calculation."
4. EFFECTIVENESS OF THIS FIRST AMENDMENT. This First Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this First Amendment, duly executed by ▇▇▇▇▇▇▇▇;
(b) Term Note B, duly executed by ▇▇▇▇▇▇▇▇;
(c) A replacement Revolving Note, duly executed by ▇▇▇▇▇▇▇▇;
(d) A replacement Term Note A, duly executed by ▇▇▇▇▇▇▇▇;
(e) An Authorization, on Bank's standard form therefor, with respect to
the disbursement of the proceeds of Term Loan B, duly executed by ▇▇▇▇▇▇▇▇;
(f) A commitment fee in connection with the making of Term Loan B in the
sum of Eleven Thousand Dollars ($11,000); and
(g) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
5. RATIFICATION.
(a) Except as specifically amended hereinabove, the Agreement shall
remain in full force and effect and is hereby ratified and confirmed; and
(b) Upon the effectiveness of this First Amendment, (i) each reference
in the Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Agreement shall mean and be a reference
to the Agreement as amended by this First Amendment, (ii) each reference in
the Agreement to the "Revolving Note" or words of like import referring to
the Revolving Note shall mean and be a reference to the replacement Revolving
Note issued pursuant to this First Amendment, (iii) each reference in the
Agreement to the "Term Note" or words of like import referring to Term Note A
shall
4
mean and be a reference to the replacement Term Note A issued pursuant to
this First Amendment and (iv) each reference in the Agreement to the "Term
Loan" or words of like import referring to Term Loan A shall mean and be a
reference to Term Loan A.
6. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in Section 3 of
the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of this First Agreement are
within Borrower's corporate powers, have been duly authorized by all
necessary corporate action, have received all necessary approvals, if any,
and do not contravene any law or any contractual restriction binding on
Borrower;
(c) This First Amendment is, and the replacement Revolving Note, the
replacement Term Note A and the replacement Term Note B when delivered for
value received will be, the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their terms; and
(d) No event has occurred and is continuing or would result from this
First Amendment which constitutes an Event of Default under the Agreement, or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
7. GOVERNING LAW. This First Amendment shall be deemed a contract under and
subject to, and shall be construed for all purposes and in accordance with,
the laws of the State of California.
8. COUNTERPARTS. This First Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
5
WITNESS the due execution hereof as of the date first above written.
SPECIALTY LABORATORIES, INC.
By: /s/ [ILLEGIBLE]
Title: President
By: /s/ [ILLEGIBLE]
Title: V.P. Finance and Treasurer
UNION BANK OF CALIFORNIA, N.A.
By: ▇▇▇▇▇ ▇. [ILLEGIBLE]
Title: RVP
6
SECOND AMENDMENT AND WAIVER
TO AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDMENT AND WAIVER TO AMENDED AND RESTATED LOAN AGREEMENT
(this "Second Amendment") dated as of February 17, 1999, is made and entered
into by and between SPECIALTY LABORATORIES, INC., a California corporation
("Borrower"), and UNION BANK OF CALIFORNIA, N.A., a national banking association
("Bank").
RECITALS:
▇. ▇▇▇▇▇▇▇▇ and Bank are parties to that certain ▇▇▇▇▇▇▇ and Restated Loan
Agreement dated as of April 7, 1997, as amended by that certain First Amendment
dated as of January 23, 1998 (as so amended, the "Agreement"), pursuant to which
Bank agreed to extend credit to Borrower in the amounts provided for therein.
B. Pursuant to Section 4.8(b) of the Agreement, ▇▇▇▇▇▇▇▇ agreed, among other
things, to achieve net profit, after provision for income taxes, of not less
than One Million Dollars ($1,000,000) for the fiscal year ended December 31,
1998. ▇▇▇▇▇▇▇▇ has provided Bank with ▇▇▇▇▇▇▇▇'s internally-prepared financial
statement for the fiscal year ended December 31, 1998, which financial statement
indicates that ▇▇▇▇▇▇▇▇ has failed to achieve net profit, after provision for
income taxes, of at least One Million Dollars ($1,000,000) for such fiscal
year. Such failure constitutes an Event of Default under Section 6 of the
Agreement. ▇▇▇▇▇▇▇▇ has requested that Bank agree to waive such Event of
Default. Bank is willing to so waive such Event of Default, but subject to the
terms and conditions of this Second Amendment.
C. On or about January 23, 1998, Bank made a term loan facility ("Term Loan B")
available to Borrower, providing for one or more disbursements from the date of
the First Amendment to the Agreement to and including February 1, 1999 in the
aggregate principal amount not to exceed Eleven Million Dollars ($11,000,000).
▇▇▇▇▇▇▇▇'s obligation to repay the principal of, and accrued interest on, Term
Loan B is evidenced by a promissory note ("Term Note B") issued by Borrower in
favor of Bank on the standard form used by Bank to evidence its commercial loans
and is payable at the times, in the amounts and upon the terms set forth in Term
Note B.
D. As of the date of this Second Amendment, the outstanding principal amount of
Term Loan B is Four Million Eight Hundred Thirteen Thousand Five Hundred Eight
and 44/100 Dollars ($4,813,508.44). As of February 1, 1999, which was the final
date for disbursements under Term Loan B, the principal amount available to be
disbursed under Term Loan B was Six Million One Hundred Eighty-Six Thousand Four
Hundred Ninety-One and 56/100 Dollars ($6,186,491.56).
▇. ▇▇▇▇▇▇▇▇ has requested that Bank agree to (i) permit the outstanding
principal amount of Term Loan B as of the date of this Second Amendment to be
fully amortized
1
over sixty (60) months, with a maturity date of February 1, 2004 and (ii)
continue making the undisbursed principal amount of Term Loan B available to
Borrower, which amount would be available in one or more disbursements upon
▇▇▇▇▇▇▇▇'s request from the date of this Second Amendment to and including
February 1, 2000, on which date the outstanding principal amount thereof would
be amortized, based upon a sixty (60) month amortization period, but with a
maturity date of February 1, 2004. Bank is willing to agree to the foregoing,
but subject to the terms and conditions of this Second Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. WAIVER. Subject to the terms and conditions set forth in this Second
Amendment, Bank hereby waives the Event of Default that occurred under Section 6
of the Agreement as a result of Borrower's failure, pursuant to Section 4.8(b)
of the Agreement, to achieve net profit, after provision for income taxes, of
not less than One Million Dollars ($1,000,000) for the fiscal year ended
December 31, 1998; provided, however, that such waiver is granted upon the
condition that Borrower shall achieve net profit, after provision for income
taxes, of not less than zero Dollars ($0) for the fiscal year ended December 31,
1998.
3. WAIVER LIMITED. The waiver provided for in Section 2 of this Second Amendment
is limited precisely as written and shall not be deemed to excuse Borrower's
further performance of Section 4.8(b) of the Agreement, or any other condition,
covenant or term contained in the Agreement or any Loan Document. Any failure or
delay on the part of Bank in the exercise of any right, power or privilege under
the Agreement or any Loan Document shall not operate as a waiver thereof.
4. AMENDMENTS TO SECTION 1 OF THE AGREEMENT.
(a) Section 1.1.4 of the Agreement is hereby amended to read in full as
follows:
"1.1.4 TERM LOAN B.
"(a) On or about January 23, 1998, Bank made a term loan (`Term Loan
B') available to Borrower, providing for one or more disbursements from the date
of the First Amendment to this Agreement to and including February 1, 1999 in
the aggregate principal amount not to exceed Eleven Million Dollars
($11,000,000). Immediately prior to the date of the Second Amendment to this
Agreement, ▇▇▇▇▇▇▇▇'s obligation to repay the principal of, and accrued interest
on, Term Loan B was evidenced by a promissory note (`Term Note B') issued by
Borrower in favor of Bank on the standard form used by
2
Bank to evidence its commercial loans and was payable at the times, in the
amounts and upon the terms set forth in Term Note B.
"(b) As of the date of the Second Amendment to this Agreement, the
outstanding principal amount of Term Loan B (the 'Term Loan B Disbursed
Portion') was Four Million Eight Hundred Thirteen Thousand Five Hundred Eight
and 44/100 Dollars ($4,813,508.44). As of February 1, 1999, which was the final
date for disbursements under Term Loan B, the principal amount available to be
disbursed under Term Loan B (the 'Term Loan B Undisbursed Portion') was Six
Million One Hundred Eighty-Six Thousand Four Hundred Ninety-One and 56/100
Dollars ($6,186,491.56).
"(c) Borrower's obligation to repay the principal of, and accrued
interest on, the Term Loan B Disbursed Portion shall be evidenced by a
promissory note (`Term Note B-1') issued by Borrower in favor of Bank on the
standard form used by Bank to evidence its commercial loans and shall be payable
at the times, in the amounts, and upon the terms set forth in Term Note B-1. In
the event of a prepayment of principal and payment of any resulting fees, any
prepaid amounts shall be applied to the scheduled principal payments due under
Term Note B-1 in the reverse order of their maturity.
"(d) ▇▇▇▇▇▇▇▇'s obligation to repay the principal of, and accrued
interest on, all disbursements under the Term Loan B Undisbursed Portion shall
be evidenced by a promissory note ('Term Note B-2") issued by Borrower in favor
of Bank on the standard form used by Bank to evidence its commercial loans and
shall be payable at the times, in the amounts, and upon the terms set forth in
Term Note B-2. In the event of a prepayment of principal and payment of any
resulting fees, any prepaid amounts shall be applied to the scheduled principal
payments due under Term Note B-2 in the reverse order of their maturity."
(b) Section 1.4 of the Agreement is hereby amended to read in full as
follows:
"1.4 PURPOSE OF LOAN. The proceeds of the Revolving Loan shall be used
to repay in part Borrower's outstanding obligations under the Prior Agreement
and for Borrower's general working capital and investment purposes. The proceeds
of Term Loan A were used to repay in part Borrower's outstanding obligations to
Bank under the Prior Agreement. The proceeds of Term Loan B (including the Term
Loan B Disbursed Portion and the Term Loan B Undisbursed Portion thereof) shall
be used only (a) to purchase the limited partnership interest of ▇▇▇▇ ▇. ▇▇▇▇▇,
deceased, in the Specialty Family Limited Partnership from the Estate of ▇▇▇▇ ▇.
▇▇▇▇▇; provided, however, that the amount of such proceeds used for such purpose
shall not exceed One Million Dollars ($1,000,000) in the aggregate, (b) to
purchase new or used equipment; provided, however, that the amount of such
proceeds used for such purpose shall not exceed Three Million Five Hundred
Thousand Dollars ($3,500,000) in the aggregate and (c) for capital expenditures;
provided, however, that the amount of such proceeds used for such purpose shall
not exceed Six Million Five Hundred Thousand Dollars ($6,500,000) in the
aggregate."
3
5. EFFECTIVENESS OF THIS SECOND AMENDMENT. This Second Amendment shall
become effective as of the date hereof when, and only when, Bank shall have
received all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this Second Amendment, duly executed by ▇▇▇▇▇▇▇▇;
(b) A Term Note B-1, duly executed by ▇▇▇▇▇▇▇▇;
(c) A Term Note B-2, duly executed by ▇▇▇▇▇▇▇▇;
(d) An Authorization to Disburse, on Bank's standard form therefor,
with respect to the disbursement of the proceeds of Term Loan B Disbursed
Portion, duly executed by ▇▇▇▇▇▇▇▇;
(e) An Authorization to Disperse, on Bank's standard form therefor,
with respect to the disbursement of the proceeds of Term Loan B Undisbursed
Portion, duly executed by ▇▇▇▇▇▇▇▇; and
(f) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
6. RATIFICATION.
(a) Except as specifically amended hereinabove, the Agreement shall
remain in full force and effect and is hereby ratified and confirmed;
(b) Upon the effectiveness of this Second Amendment, (i) each reference
in the Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Agreement shall mean and be a reference
to the Agreement as amended by this Second Amendment, and (ii) each reference
in the Agreement to "Term Note B" or words of like import referring to Term
Note B shall mean and be a reference to Term Note B-1 and Term Note B-2
issued pursuant to this Second Amendment; and
(c) Upon the effectiveness of this Second Amendment, Term Note B-1 and
Term Note B-2 shall replace and supercede Term Note B in its entirety.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in Section 3
of the Agreement, as amended hereby, is hereby reaffirmed as of the date
hereof, each as if set forth herein;
(b) The execution, delivery and performance of this Second Amendment
are within Borrower's corporation powers, have been duly authorized by all
necessary corporate action, have received all necessary approvals, if any,
and do not contravene any law or any contractual restriction binding on
Borrower;
4
(c) This Second Amendment is, and Term Note B-1 and Term Note B-2 when
delivered for value received will be, the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their terms; and
(d) No event has occurred and is continuing or would result from this
Second Amendment which constitutes an Event of Default under the Agreement,
or would constitute an Event of Default but for the requirement that notice
be given or time elapse or both.
8. GOVERNING LAW. This Second Amendment shall be deemed a contract under and
subject to, and shall be construed for all purposes and in accordance with,
the laws of the State of California.
9. COUNTERPARTS. This Second Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
SPECIALTY LABORATORIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President Finance and Treasurer
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UNION BANK OF CALIFORNIA, N.A.
By:
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Title:
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5
THIRD AMENDMENT
TO AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Third
Amendment"), dated as of August 30, 1999, is made and entered into by and
between SPECIALTY LABORATORIES, INC., a California corporation ("Borrower"),
and UNION BANK OF CALIFORNIA, N.A., a national banking association ("Bank").
RECITALS:
▇. ▇▇▇▇▇▇▇▇ and Bank are parties to that certain ▇▇▇▇▇▇▇ and Restated Loan
Agreement dated as of April 7, 1997, as amended by that certain First
Amendment dated as of January 23, 1998 and that certain Second Amendment and
Waiver dated as of February 17, 1999 (as so amended and as amended prior to
the date of this Third Amendment, the "Agreement"), pursuant to which Bank
agreed to extend credit to Borrower in the amounts provided for therein.
▇. ▇▇▇▇▇▇▇▇ and Bank desire to amend the Agreement, but subject to the terms
and conditions of this Third Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. AMENDMENTS TO THE AGREEMENT.
(a) Section 1.1.1 of the Agreement is hereby amended by substituting the
date "September 3, 2002" for the date "August 30, 1999" appearing in the
fourth line thereof.
(b) Section 1.1.2 of the Agreement is hereby amended by substituting the
date "September 3, 2002" for the date "August 30, 1999" appearing in the
eighth line thereof.
(c) Section 4.5(a) of the Agreement is hereby amended to read in full as
follows:
"(a) Within thirty (30) days after the close of each fiscal month,
its unaudited income and expense statement with supportive schedules and
statement of retained earnings for that fiscal month, prepared in accordance
with generally accepted accounting principles."
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(d) Section 4.5(b) of the Agreement is hereby amended to read in full as
follows:
"(b) Within one hundred twenty (120) days after the close of each
fiscal year, a copy of the consolidated and consolidating statement of
financial condition of Borrower and its subsidiaries, including at least the
consolidated and consolidating balance sheet of Borrower and its subsidiaries
as of the close of such fiscal year, the consolidated and consolidating
income and expense statement of Borrower and its subsidiaries for such fiscal
year and the consolidated and consolidating retained earnings statement of
Borrower and its subsidiaries for such fiscal year, each examined and
prepared on an audited basis by independent certified public accountants
selected by Borrower and reasonably satisfactory to Bank in accordance with
generally accepted accounting principles applied on a basis consistent with
that of the previous fiscal year."
(e) Section 4.6 of the Agreement is hereby amended to read in full as
follow:
"4.6 TANGIBLE NET WORTH. Borrower shall achieve Tangible Net Worth
of not less than Sixteen Million Dollars ($16,000,000) for the fiscal year
ending December 31, 1999. As at the end of each fiscal year thereafter,
Borrower shall achieve Tangible Net Worth that increases from the minimum
Tangible Net Worth required hereunder for the prior fiscal year by the sum of
(a) seventy-five percent (75%) of the positive net profit, after provision
for income taxes, for such prior fiscal year, plus (b) one hundred percent
(100%) of any new equity issued during such prior fiscal year. Compliance
with this subsection shall be measured as of the end of each fiscal quarter
for the portion of the fiscal year then ended. As used in this Agreement,
`Tangible Net Worth' shall mean Borrower's net worth, increased by
indebtedness of Borrower subordinated to Bank and decreased by patents,
licenses, trademarks, trade names, goodwill, and other similar intangible
assets, organizational expenses, investments in affiliates (including,
without limitation, the investment in the Specialty Family Limited
Partnership, but only to the extent such item is not already deducted from
Borrower's net worth), and monies due from affiliates (including officers,
shareholders, and directors)."
(f) The last sentence of Section 4.7 of the Agreement is hereby amended
to read in full as follows:
"As used in this Agreement, the term `EBITDA' shall mean
Borrower's earnings before interest, taxes, depreciation, amortization and
other non-cash charges to the extent deducted therefrom for the twelve (12)
months preceding the date of calculation.
(g) Section 4.8 of the Agreement is hereby amended to read in full as
follows:
"4.8 PROFITABILITY. Borrower will achieve net profit, after
provision for income taxes, of not less than Two Million Dollars ($2,000,000)
for each fiscal year; provided, however, that in the event that ▇▇▇▇▇▇▇▇
writes off the remaining account receivable from Specialty Laboratories Asia
Private, Ltd., for the fiscal year ending December 31, 1999 or December
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31, 2000. Borrower will achieve net profit, after provision for income taxes,
of not less than One Million Dollars ($1,000,000) for such fiscal year."
(h) The last sentence of Section 4.9 of the Agreement is hereby amended
to read in full as follows:
"As used herein, the term `Debt Service' shall mean the sum of that
portion of the term obligations of Borrower coming due within twelve (12)
months after the date of calculation, plus interest for the twelve (12) month
period immediately preceding the date of calculation."
(i) Section 5.4 of the Agreement is hereby amended to read in full as
follows:
"5.4 LOANS, ADVANCES AND GUARANTIES. Borrower will not, except in
the ordinary course of business as currently conducted, make any loans or
advances, become a guarantor or surety, pledge its credit or properties in
any manner or extend credit, except for Permitted Indebtedness. As used
herein, the term `Permitted Indebtedness' shall mean (a) loans or advances
to, and guaranties of the obligations of, BVI Specialty Laboratories
International, Ltd. and any of its direct or indirect subsidiaries in an
aggregate amount, when added to the amount of any investments made as
permitted under Section 5.5 hereof, not to exceed Two Million Dollars
($2,000,000) and (b) loans or advances to, and guaranties of the obligations
of, Specialty Laboratories International-Egypt in an aggregate amount, when
added to the amount of investments made as permitted under Section 5.5
hereof, not to exceed Four Million Two Hundred Thousand Dollars ($4,200,000)
for the fiscal year ending December 31, 1999."
(j) Section 5.5 of the Agreement is hereby amended to read in full as
follows:
"5.5 INVESTMENTS. Borrower will not purchase the debt or equity of
another person or entity, except for Permitted Investments. As used herein,
the term `Permitted Investments' shall mean, without duplication, (a)
investments made with the proceeds of the Revolving Loan as contemplated by
this Agreement, (b) savings accounts and certificates of deposit of Bank, (c)
direct U.S. government obligations and commercial paper issued by
corporations with the top ratings of ▇▇▇▇▇'▇ or Standard & Poor's, provided
that all such permitted investments shall mature within one (1) year of
purchase, (d) investments by Borrower in its foreign subsidiaries and
affiliates in an aggregate amount, when added to the amount of any
guaranties, loans or advances made as permitted under Section 5.4 hereof, not
to exceed Five Hundred Thousand Dollars ($500,000) in any one fiscal year,
and (e) the investment by Borrower in the Specialty Family Limited
Partnership as contemplated by Section 1.4(a) hereof. Notwithstanding
anything to the contrary contained in subparagraph (d) of this Section 5.5,
Borrower may make (i) investments in BVI Specialty Laboratories
International, Ltd. and any of its direct or indirect subsidiaries in an
aggregate amount, when added to the amount of any guaranties, loans or
advances made as permitted under Section 5.4 hereof, not to exceed Two
Million Dollars ($2,000,000), but without giving any effect to any
write-downs of such investments, and (ii) investments in Specialty
Laboratories International-Egypt in an
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aggregate amount, when added to the amount of any guaranties, loans or
advances made as permitted under Section 5.4 hereof, not to exceed Four
Million Two Hundred Thousand Dollars ($4,200,000) for the fiscal year ending
December 31, 1999, but without giving any effect to any write-downs of such
investments."
3. EFFECTIVENESS OF THIS THIRD AMENDMENT. This Third Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this Third Amendment, duly executed by ▇▇▇▇▇▇▇▇;
(b) A replacement Revolving Note, duly executed by ▇▇▇▇▇▇▇▇;
(c) An Authorization to Disburse, on Bank's standard form, authorizing
the disbursement of the proceeds of the Revolving Loan as provided for herein;
(d) A fee in connection with this Third Amendment in the sum of Seven
Thousand Five Hundred Dollars ($7,500), which fee shall not be reimbursable;
and
(e) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
4. RATIFICATION. Except as specifically amended hereinabove, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
(a) Each of the representations and warranties contained in Section 3 of
the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of this Third Amendment and
any other instruments or documents in connection herewith are within
Borrower's corporate power, have been duly authorized, are legal, valid and
binding obligations of Borrower, and are not in conflict with the terms of
any charter, bylaw or other organizational papers of Borrower or with any
law, indenture, agreement or undertaking to which Borrower is a party or by
which ▇▇▇▇▇▇▇▇ is bound or affected; and
(c) No event has occurred and is continuing or would result from this
Third Amendment which constitutes or would constitute an Event of Default
under the Agreement.
6. GOVERNING LAW. This Third Amendment and all other instruments or
documents in connection herewith shall be governed by and construed in
accordance with the laws of the State of California.
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7. COUNTERPARTS. This Third Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
SPECIALTY LABORATORIES, INC.
By: /s/ ILLEGIBLE
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Title: Chairman and CEO
By: /s/ ILLEGIBLE
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Title: V.P. Finance and Treasurer
UNION BANK OF CALIFORNIA, N.A.
By:
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Title:
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