EXHIBIT 10.19
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of September 4, 2001, by and between
THE KEITH COMPANIES, INC., a California corporation ("Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
CREDIT TERMS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to an aggregate maximum outstanding principal balance of $10,000,000.00 (the
"Line of Credit"), the proceeds of shall be used for working capital
requirement, acquisitions and equipment and vehicles purchases, provided,
however, that advances (i) up to a maximum outstanding principal balance of
$5,000,000.00 may be used to finance acquisitions ("Acquisition Advances"), (ii)
up to a maximum outstanding principal balance of $3,000,000.00 (less the amount
of Lease Obligations, as defined below) may be used for equipment and vehicle
purchases ("Equipment Advances", which shall be available until September 1,
2002), and (iii) up to a maximum outstanding principal balance of $10,000,000.00
less the aggregate outstanding principal balance of Equipment Advances and
Acquisition Advances may be used for working capital purposes, other than the
purposes set forth in clauses (i) and (ii) hereof ("Working Capital Advances").
Acquisition Advances and Working Capital Advances shall be available to and
including June 15, 2003. Borrower's obligation to repay Acquisition Advances,
Equipment Advances and Working Capital Advances shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto ("Line of
Credit Note"), all terms of which are incorporated herein by this reference. The
term "Lease Obligations" means the aggregate amount of all lease obligations
under leases entered into between any of Bank's equipment leasing affiliates or
divisions as lessor and Borrower as lessee during the period when Equipment
Advances are available.
(b) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit with respect to Working Capital Advances and
Acquisition Advances, borrow, partially or wholly repay its outstanding
borrowings, and reborrow, and, with respect to Equipment Advances, borrow,
partially or wholly repay its outstanding borrowings, but not reborrow, subject
to all of the limitations, terms and conditions contained herein or in the Line
of Credit Note; provided however, that the total outstanding borrowings under
the Line of Credit shall not at any time exceed the maximum principal amount
available thereunder set forth above. As of and after September 1, 2002, (i) no
new Equipment Advances shall be available, and (ii) the availability for Working
Capital Advances shall be limited to an amount equal to $10,000,000.00 less the
aggregate outstanding principal balance of Acquisition Advances (which shall
remain subject to the $5,000,000.00 limitation set forth above) and Equipment
Advances from time to time. Repayments of principal received by Bank shall be
applied, prior to September 1, 2002 (unless Bank receives written instructions
to the contrary prior to each payment), first to outstanding Working Capital
Advances, then to outstanding Acquisition Advances and finally to outstanding
Equipment Advances, and after September 1, 2002, first to the scheduled
installment of the Equipment Advances if such an installment is then due and
payable, second to outstanding Working Capital Advances, third to outstanding
Acquisition Advances and then as a prepayment of Equipment Advances (subject to
the prepayment provisions set forth in the Line of Credit Note).
(c) Advances. (i) Each request for an Equipment Advance shall be in
writing, shall specify the amount and date of the requested advance and shall be
accompanied by an invoice or appraisal (as required below) in form and content
acceptable to Bank. The principal amount of each Equipment Advance shall not
exceed 90% of the purchase price of the applicable equipment (if such equipment
is new or has been acquired within 90 days preceding the date of the requested
advance) as evidenced by invoice delivered to Bank, or 80% of the value of the
applicable equipment (if such equipment is used or has been acquired more than
90 days prior to the date of the requested advance) as evidenced by appraisal
delivered to Bank. (ii) Each request for an Acquisition Advance or Working
Capital Advances shall be available in the manner set forth in the Line of
Credit Note.
Bank is hereby authorized to note the original principal amount of and
any payments made on Working Capital Advances, Acquisition Advances and
Equipment Advances on Bank's books and records (either manually or by electronic
entry) and/or on any schedule attached to this Agreement or to the Line of
Credit Note, which notations shall be prima facie evidence of the accuracy of
the information noted.
SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of each credit subject
hereto shall bear interest at the rate of interest set forth in each promissory
note or other instrument executed in connection therewith.
(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument required hereby.
(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-eighth percent (0. 125%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on the first day of each March, June, September
and December, commencing December 1, 2001.
SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each credit subject hereto by
charging Borrower's deposit account number (number omitted) with Bank, or any
other deposit account maintained by Borrower with Bank, for the full amount
thereof. Should there be insufficient funds in any such deposit account to pay
all such sums when due, the full amount of such deficiency shall be immediately
due and payable by Borrower.
SECTION 1.4. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed jointly and severally by Hook Engineering, Inc., Crosby, Mead, Benton
& Associates and all other Subsidiaries in the principal amount of Ten Million
Dollars ($10,000,000.00), as evidenced by and subject to the terms of guaranties
in form and substance satisfactory to Bank. The term "Subsidiaries" means Hook
Engineering, Inc., Crosby, Mead, Benton & Associates and each other entity in
which Borrower purchases all or substantially all of the ownership interest,
subject to the terms of Section 5.4.
SECTION 1.5. SUBORDINATION OF DEBT. All obligations of Borrower and HEA
Acquisition, Inc. (now known as Hook Engineering, Inc.) to Hook & Associates
Engineering, Inc. shall be subordinated in right of repayment to all obligations
of Borrower to Bank, as evidenced by and subject to the terms of subordination
agreements in form and substance satisfactory to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
"Loan Documents") have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrowers knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated June 30, 2001, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof and to the best of Borrower's
knowledge, Borrower is in compliance in all material respects with all
applicable federal or state; environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which govern or
affect any of Borrowers operations and/or properties, including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act as any of the same may be amended, modified or
supplemented from time to time. None of the operations of Borrower is the
subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of any
toxic or hazardous waste or substance into the environment. Borrower has no
material contingent liability in connection with any release of any toxic or
hazardous waste or substance into the environment.
SECTION 2.12. SUBSIDIARIES. As of the date hereof, the only Subsidiaries
in existence are Hook Engineering, Inc. and Crosby, Mead, Benton & Associates.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other instrument
required hereby.
(ii) Corporate Borrowing Resolution.
(iii) Certificates of Incumbency.
(iv) Articles of Incorporation.
(v) Continuing Guaranty.
(vi) Resolution Authorizing Execution of Continuing Guaranty.
(vii) Subordination Agreement.
(viii) Corporate Resolution: Subordination.
(ix) Such other documents as Bank may require under any other Section
of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower and Subsidiaries, taken as a whole, nor any material decline, as
determined by Bank, in the market value of a substantial or material portion of
the assets of Borrower and Subsidiaries, taken as a whole.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, and shall cause each Subsidiary to,
unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower or any Subsidiary.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal year, a
copy of Borrower's consolidated 10K report filed with the Securities Exchange
Commission, audited by a certified public accountant acceptable to Bank;
(b) not later than 45 days after and as of the end of each fiscal
quarter, a copy of Borrower's consolidated 10Q report filed with the Securities
Exchange Commission, reviewed by a certified public accountant acceptable to
Bank;
(c) not later than 30 days after and as of the end of each fiscal
quarter, a work-in-progress or job status report;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower and each Subsidiary is organized and/or which govern
Borrower's and each Subsidiary's continued existence and with the requirements
of all laws, rules, regulations and orders of any governmental authority
applicable to Borrower, each Subsidiary and/or their business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower and each Subsidiary, including but not limited to fire, extended
coverage, public liability, flood, property damage and workers' compensation,
with all such insurance carried with companies and in amounts satisfactory to
Bank, and deliver to Bank from time to time at Bank's request schedules setting
forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's and each Subsidiary's business in good repair and condition, and from
time to time make necessary repairs, renewals and replacements thereto so that
such properties shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower or any Subsidiary
may in good faith contest or as to which a bona fide dispute may arise, and (b)
for which Borrower or such Subsidiary has made provision, to Bank's
satisfaction, for eventual payment thereof in the event Borrower or such
Subsidiary is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower or any Subsidiary with a claim
in excess of $200,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's consolidated
financial condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices (except to the
extent modified by the definitions herein):
(a) Ratio of Total Liabilities to Tangible Net Worth not greater than
0.90 to 1.0, determined as of the end of each fiscal quarter, with "Total
Liabilities" defined as the aggregate of current liabilities and non-current
liabilities less subordinated debt, and with "Tangible Net Worth" defined as the
aggregate of total stockholders' equity plus subordinated debt less any
intangible assets.
(b) Quick Ratio not less than 1.5 to 1.0, determined as of the end of
each fiscal quarter, with "Quick Ratio" defined as the aggregate of unrestricted
cash, unrestricted marketable securities and receivables convertible into cash
divided by total current liabilities, including without limitation, the
outstanding principal balance of the Line of Credit notwithstanding the fact
that advances thereunder may mature more than one (1) year beyond the date of
computation.
(c) Net income after taxes not less than $1.00, determined as of the end
of each fiscal quarter on a rolling four-quarter basis.
(d) EBITDA Coverage Ratio not less than 2.75 to 1.0 determined as of the
end of each fiscal quarter on a rolling four-quarter basis, with "EBITDA"
defined as net profit before tax plus interest expense (net of capitalized
interest expense), depreciation expense and amortization expense, and with
"EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of total
interest expense plus the prior period current maturity of long-term debt and
the prior period current maturity of subordinated debt. "Current maturity of
long-term debt" shall not include Working Capital Advances or Acquisition
Advances under the Line of Credit notwithstanding the fact that the maturity
date thereof may extend more than 1-year beyond the date of computation.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower or any Subsidiary; (c) the occurrence
and nature of any Reportable Event or Prohibited Transaction, each as defined in
ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance policy which Borrower or any
Subsidiary is required to
maintain, or any uninsured or partially uninsured loss in excess of $100,000.00
through liability or property damage, or through fire, theft or any other cause
affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not, and will not cause or permit any
Subsidiary to, without Bank's prior written consent:
SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated -in Article I hereof.
SECTION 5.2. CAPITAL AND LEASE EXPENDITURES. Make any additional
investment in, incur new lease expenditures, or incur purchase money
indebtedness with respect to fixed assets in any fiscal year in excess of an
aggregate of $3,750,000.00, of which no more than $850,000.00 may be under
vehicle leases.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower or any Subsidiary to
Bank, (b) any other liabilities of Borrower or any Subsidiary existing as of,
and disclosed to Bank prior to, the date hereof, (c) leases and purchase money
indebtedness permitted under Section 5.2 above, (d) the subordinated
indebtedness described in Section 1.5 above, and (e) trade liabilities incurred
in the ordinary course of business.
SECTION 5.4 MERGER, CONSOLIDATION, INVESTMENTS. Merge into or consolidate
with any other entity, nor acquire all or substantially all of the assets of any
other entity, nor purchase or otherwise acquire any stock or other ownership
interests, or otherwise invest, in other entities.
SECTION 5.5. LOANS, ADVANCES, TRANSFER OF ASSETS. Make any loans or
advances to any person or entity, except (a) any loans and advances existing as
of, and disclosed to Bank prior to, the date hereof, and (b) loans and advances
to Subsidiaries in the ordinary course of Borrower's business; nor make any
substantial change in the nature of Borrower's or any Subsidiary's business as
conducted as of the date hereof; nor sell, lease, transfer or otherwise dispose
of all or a substantial or material portion of Borrower's assets except in the
ordinary course of its business.
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower or any
Subsidiary as security for, any liabilities or obligations of any other person
or entity, except any of the foregoing in favor of Bank.
SECTION 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrowers stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding;
provided that Borrower is permitted to (a) make distributions of its stock as
required under (i) a Stock Purchase Agreement dated as of October 13, 2000 by
and among The Keith Companies, Inc., as Buyer, Crosby, Mead, Benton & Associates
as Company, and certain shareholders, and (ii) an Asset Purchase Agreement dated
as of January 31, 2001 by and among The Keith Companies, Inc., as Buyer, Hook &
Associates Engineering, Inc. as Company and certain shareholders, and (b)
repurchase Borrower's outstanding common stock, in an aggregate amount, of
$750,000.00 during the term of this Agreement. This covenant shall not be
construed so as to prohibit Borrower from engaging in a stock split, a reverse
stock split, a stock dividend or any other similar capital reorganization
whereby the aggregate value of all capital stock outstanding after such
transaction is not less than the value of all such capital stock before such
transaction.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist
a security interest in, or lien upon, all or any portion of Borrower's or any
Subsidiary's assets now owned or hereafter acquired, except any of the foregoing
in favor of Bank or which is existing as of, and disclosed to Bank in writing
prior to, the date hereof, or as permitted under Section 5.2 hereof.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower, any
Subsidiary or any other party under this Agreement or any other Loan Document
shall prove to be incorrect, false or misleading in any material respect when
furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any Subsidiary has
incurred any debt or other liability to any person or entity, including Bank,
and, if the debt or other liability is owed to a party other than Bank, the
amount thereof exceed $50,000
(e) The filing of a notice of judgment lien against Borrower or any
Subsidiary; or the recording of any abstract of judgment against Borrower or any
Subsidiary in any county in which Borrower or such Subsidiary has an interest in
real property; or the service of a notice of levy and/or of a writ of attachment
or execution, or other like process, against the assets of Borrower or any
Subsidiary; or the entry of a judgment against Borrower or any Subsidiary; and
with respect to each of the foregoing, the amount thereof exceeds $50,000.00.
(f) Borrower or any Subsidiary shall become insolvent, or shall suffer or
consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Subsidiary shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Subsidiary, or Borrower or any
Subsidiary shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any Subsidiary
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower or any Subsidiary by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(g) The dissolution or liquidation of Borrower or any guarantor
hereunder; or Borrower or any such guarantor, or any of their directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such guarantor.
(h) Any change in the Senior Management (defined as Chairman or Chief
Executive Officer) of Borrower.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law. All rights,
powers and remedies of Bank may be exercised at any time by Bank and from time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: THE KEITH COMPANIES, INC.
2955 Red Hill Avenue
Costa Mesa, CA 92626
Attn: Chief Financial Officer
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
Orange Coast Regional Commercial Banking Office
2030 Main Street, Suite 900
Irvine, CA 92614
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents (to a maximum of $2,000.00), Bank's
continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights
and/or the collection of any amounts which become due to Bank under any of the
Loan Documents, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or any Subsidiary or its
business.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them (and their respective employees, officers, directors, attorneys, and
other agents), whether in tort, contract or otherwise arising out of or relating
to in any way (i) the loan and related Loan Documents which are the subject of
this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for additional
credit.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in California selected by the American Arbitration Association ("AAA")
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or
any similar applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be permitted
in accordance with the Rules. All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA. Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a
showing that the request for discovery is essential for the party's presentation
and that no alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference. Notwithstanding
anything herein to the contrary, no dispute shall be submitted to arbitration if
the dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK,
THE KEITH COMPANIES, INC. NATIONAL ASSOCIATION
By: /s/ Gary Campanaro by: /s/ Elliot E. Ichinose
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Chief Financial Officer Vice President