VARIABLE RATE INSTALLMENT NOTE
- ------------------------------- -------------------------------- AMOUNT $4,000,000.00 (U.S.) NOTE DATE October 14, 1997
MATURITY DATE October 1, 2002 TAX IDENTIFICATION # 39-1679918 - ------------------------------- --------------------------------
For Value Received, the undersigned promise(s) to pay to the order of Comerica Bank - California ("Bank"), at any office of the Bank in the State of California, Four Million Dollars and No Cents ($4,000,000.00) (U.S.) in installments in the amounts set forth in the next succeeding sentence, plus interest on the unpaid balance from the date of this Note at a per annum rate equal to the Bank's base rate from time to time in effect from time to time, plus one- and-one-half percentage points (1.500%) per annum until maturity, whether by acceleration or otherwise, or until Default, as later defined, and after that at a default rate equal to the rate of interest otherwise prevailing under this Note plus 3% per annum. (but in no event in excess of the maximum rate permitted by law). Payments of principal on the Note shall be made in monthly payments as follows: (i) $41,667.00 beginning on November 1, 1997 and on the first day of each calendar month thereafter until October 1, 1998; (ii) $50,000.00 beginning on November 1, 1998 and on the first day of each calendar month thereafter until October 1, 1999; (iii) $58,333.00 beginning on November 1, 1999 and on the first day of each calendar month thereafter until October 1, 2000; (iv) $66,667.00 beginning on November 1, 2000 and on the first day of each calendar month thereafter until October 1, 2001; and (v) $116,666 beginning on November 1, 2001 and on the first day of each calendar month thereafter until September 1, 2002 (each of the payment dates described in clauses (i) through (v), a "Payment Date"); and (vi) a final payment of all remaining principal on October 1, 2002, or such earlier Payment Date as all of the principal on the Note shall have been paid in full (the "Maturity Date"). Each such payment of principal on the Note shall be accompanied by a payment of accrued interest thereon, and all accrued but unpaid interest, fees and costs shall be due on the Maturity Date. Interest shall be calculated for the actual number of days the principal is outstanding on the basis of a 360 day year if this Note evidences a business or commercial loan or a 365 day year if a consumer loan. The Bank's "base rate" is that annual rate of interest so designated by the Bank and which is changed by the Bank from time to time. Interest rate changes will be effective for interest computation purposes as and when the Bank's base rate changes. If the frequency of principal and interest installments is not otherwise specified, installments of principal and interest due under this Note shall be payable monthly on the first day of each month.
In addition to the payments of principal set forth above, the undersigned agrees to make additional mandatory prepayments of principal as follows:
(a) on April 1, 1999, on each anniversary date thereafter in 2000 and 2001, and on the Maturity Date, equal on each such date to thirty-five percent (35%) of Adjusted Cash Flow during the immediately preceding fiscal year of the Borrower (each such payment, a "Profit Recapture Payment"). As used in this Note, the term Adjusted Cash Flow for such fiscal year means Cash Flow, as defined below, for such fiscal year less the aggregate sum of all scheduled payments during such fiscal year of principal of this Note (which, for the avoidance of doubt, shall not include the Profit Recapture Payment described in this paragraph (a) or the Mandatory Principal Repayments described in paragraphs (b), (c) and (d) below). As used in this Note, the term Cash Flow means Net Income (after deduction for income taxes and other taxes of such person determined by reference to income or profits of such person) for such period, plus, to the extent deducted in computation of such Net Income, the amount of depreciation and amortization expense and the amount of deferred tax liability during such period, all as determined in accordance with GAAP and Net Income means the net income (or loss) of a person for any period determined in accordance with GAAP but excluding in any event (i)any gains or losses on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and any taxes on the excluded gains and any tax deductions or credits on account on any excluded losses; and (ii) net earnings of any Person in which Borrower has an ownership interest, unless such net earnings shall have actually been received by Borrower in the form of cash distributions; and
(b) within five business days of repayment of the indebtedness of the undersigned to ERLY Industries, Inc., 100 percent of the amount by which the amount advanced under this Note exceeds the amount paid to ERLY Industries, Inc. in settlement of such indebtedness minus the reasonable legal fees and expenses of the undersigned incurred in any litigation to determine the amount of such repayment; and
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(c) within five business days of any sale or other transfer of any capital assets of the undersigned, 100 percent of the proceeds thereof, net of reasonable transaction costs of such transaction provided, however, that the foregoing shall not be deemed a waiver by the Bank of the requirement that the undersigned obtain the prior written consent of the Bank in connection with any such sale; and
(d) within five business days of any sale of equity securities of the undersigned, 100 percent of the proceeds of such sale net of reasonable costs of such transaction.
The additional mandatory principal prepayments described in subparagraphs (a) through (d) of the preceding paragraph are referred to as Mandatory Principal Prepayments. Each Mandatory Principal Prepayment shall be applied to the payment of principal last coming due, and accordingly shall not reduce the amount of any scheduled prior payment of principal due on this Note.
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