EXHIBIT 10.20
LINE OF CREDIT NOTE
$10,000,000.00 Irvine, California
September 4, 2001
FOR VALUE RECEIVED, the undersigned THE KEITH COMPANIES, INC ("Borrower")
promise to pay to the order of Wells Fargo Bank, National Association ("Bank")
at its Orange Coast Regional Commercial Banking Office at 2030 Main Street,
Suite 900, Irvine, California 90071, or at such other place as the holder hereof
may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of Ten Million Dollars
($10,000,000.00), or so much thereof as may be advanced and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in California are authorized or required bylaw to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 1, 2, 3, or 6 months, as designated by Borrower, during which all
or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal, amount less than $100,000.00 with respect to
Working Capital Advances or $100,000.00 with respect to Equipment Advances; and
provided further, that no Fixed Rate Term shall extend beyond the scheduled
maturity date hereof. If any Fixed Rate Term would end on a day which is not a
Business Day, then such Fixed Rate Term shall be extended to the next succeeding
Business Day.
(c) "LIBOR" means the rate per annum and determined pursuant to the
following formula:
LIBOR = Base LIBOR
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100% - LIBOR Reserve Percentage
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at anytime the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum equal to the Prime Rate in effect from time
to time, or (ii) at a fixed rate per annum determined by Bank to be one and one
quarter percent (1.25%) above LIBOR in effect on the first day of the applicable
Fixed Rate Term. When interest is determined in relation to the Prime Rate, each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within Bank. With
respect to each LIBOR selection hereunder, Bank is hereby authorized to note the
date, principal amount, interest rate and Fixed Rate Term applicable thereto and
any payments made thereon on Bank's books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At anytime any portion of this
Note bears interest determined in relation to LIBOR, it maybe continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it's, sole option
but without obligation to do so, accepts Borrowers notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.
(c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately
upon demand, in addition to any other amounts due or to become due hereunder,
any and all (i) withholdings, interest equalization taxes, stamp taxes or other
taxes (except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable
on the third day of each month, commencing October 3, 2001.
(e) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow Working Capital Advances and Acquisition Advances, subject to all
of the limitations, terms and conditions of this Note and of any document
executed in connection with or governing this Note; provided however, that the
total outstanding borrowings under this Note shall not at anytime exceed the
principal amount stated above. The unpaid principal balance of this obligation
at any time shall be the total amounts advanced hereunder by the holder hereof
less the amount of principal payments made hereon by or for any Borrower, which
balance may be endorsed hereon from time to time by the holder. The outstanding
principal balance of Equipment Advances on September 1, 2002 shall be due and
payable on the third day of each month in 48 equal consecutive installments,
each equal to 1/48th of such outstanding principal balance, commencing on
October 3, 2002 to and including September 3, 2006. The outstanding principal
balance of Working Capital Advances and Acquisition Advances shall be due and
payable in full on June 15, 2003.
(b) Advances. Acquisition Advances and Working Capital Advances, subject
to the limitations set forth in the Credit Agreement (defined below), may be
made by the holder at the oral or written request of (i) Aram Keith or Gary
Campanaro, any one acting alone, who are authorized to request advances and
direct the disposition of any advances
until written notice of the revocation of such authority is received by the
holder at the office designated above, or (ii) any person, with respect to
advances deposited to the credit of any account of any Borrower with the holder,
which advances, when so deposited, shall be conclusively presumed to have been
made to or for the benefit of each Borrower regardless of the fact that persons
other than those authorized to request advances may have authority to draw
against such account. The holder shall have no obligation to determine whether
any person requesting an advance is or has been authorized by any Borrower.
Equipment Advances shall be available in the manner set forth in the Credit
Agreement.
(c) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof All payments credited to principal shall be applied to
Working Capital Advances, Acquisition Advances and/or Equipment Advances as
described in the Credit Agreement, and shall be so applied first, to the
outstanding principal balance of applicable advances which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of the advances which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at anytime, in any
amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at anytime and in the
minimum amount of $500,000.00; provided however, that if the outstanding
principal balance of such portion of this Note is less than said amount, the
minimum prepayment amount shall be the entire outstanding principal balance
thereof. In consideration of Bank providing this prepayment option to Borrower,
or if any such portion of this Note shall become due and payable at any time
prior to the last day of the Fixed Rate Term applicable thereto by acceleration
or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is
the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:
(i) Determine the amount of interest which would have accrued each month
on the amount prepaid at the interest rate applicable to such amount had
it remained outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect
on the date of prepayment for new loans made for such term and in a
principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum 2.00% above the Prime Rate in
effect from time to time (computed on the basis of a 360-day year, actual days
elapsed). Each change in the rate of interest on any such past due prepayment
fee shall become effective on the date each Prime Rate change is announced
within Bank. Prepayments of principal applied to Equipment Advances after
September 1, 2002 shall be applied to the scheduled installments in inverse
order of maturity.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of that certain Credit Agreement between Borrower and Bank dated as of September
4, 2001, as amended or restated from time to time (the "Credit Agreement"). Any
default in the payment or performance of any obligation under this Note, or any
defined event of default under the Credit Agreement, shall constitute an "Event
of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
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 the holders in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holders
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in anyway related to
this Note, 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.
(b) Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
(c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
THE KEITH COMPANIES, INC.
By: /s/ Gary Campanaro
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Title: CFO
ADDENDUM TO PROMISSORY NOTE
(PRIME/LIBOR PRICING ADJUSTMENTS)
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by THE KEITH COMPANIES, INC. ("Borrower") and payable to WELLS
FARGO BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of September 4,
2001, in the principal amount of Ten Million Dollars ($10,000,000.00) (the
"Note").
The following provisions are hereby incorporated into the Note to reflect
the interest rate adjustments agreed to by Bank and Borrower:
INTEREST RATE ADJUSTMENTS:
(a) Initial Interest Rates. The initial interest rates applicable to this
Note shall be the rates set forth in the "Interest" paragraph herein.
(b) Interest Rate Adjustments. In addition to any interest rate
adjustments resulting from changes in the Prime Rate, Bank shall adjust the
Prime Rate and LIBOR margins used to determine the rates of interest applicable
to this Note on a quarterly basis, commencing with Borrower's fiscal quarter
ending June 30, 2001, if required to reflect a change in Borrower's ratio of
Total Liabilities to Tangible Net Worth (as defined in the Credit Agreement
referenced herein), in accordance with the following grid:
Applicable Applicable
Total Liabilities to Prime Rate LIBOR
Tangible Net Worth Margin Margin
------------------ ---------- ----------
0.65 to 1.0 or greater 0% 1.75%
at least 0.40 to 1.0 but
less than 0.65 to 1.0 0% 1.50%
less than 0.40 to 1.0 -0.25% 1.25%
Each such adjustment shall be effective on the first Business Day of Borrower's
fiscal quarter following the quarter during which Bank receives and reviews
Borrower's most current fiscal quarter-end financial statements in accordance
with any requirements established by Bank for the preparation and delivery
thereof.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date
as the Note.
THE KEITH COMPANIES, INC.
By: /s/ Gary Campanaro
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Chief Financial Officer