Document:

Exhibit 10.27

 

	
  WELLS FARGO

  	
   

  	
  REVOLVING LINE OF CREDIT NOTE

  

 

	
  $5,000,000.00

  	
   

  	
  Irvine,
  California

  
	
   

  	
   

  	
  May 27,
  2004

  

 

FOR
VALUE RECEIVED, the undersigned Iteris, Inc. (“Borrower”) promises to pay
to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office
at Orange County RCBO, 2030 Main Street, Suite #900, Irvine, CA 92614, 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 $5,000,000.00, 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.

 

1.                                      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:

 

1.1                                 “Business
Day” means any day except a Saturday, Sunday or any other day on which
commercial banks in California are authorized or required by law to close.

 

1.2                                 “Fixed Rate
Term” means a period commencing on a Business Day and continuing for 1, 2 or 3
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; 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.

 

1.3                                 “LIBOR”
means the rate per annum (rounded upward, if necessary, to the nearest whole
1/8 of 1%) determined by dividing Base LIBOR by a percentage equal to 100% less
any LIBOR Reserve Percentage.

 

(a)                                  “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.

 

(b)                                 “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.

 

1.4                                 “Prime Rate”
means at any time 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.

 

1

 

2.                                      INTEREST:

 

2.1                                 Interest.  The outstanding principal balance of this
Note shall bear interest (computed on the basis of a 360-day year, actual days
elapsed) either (a) at a fluctuating rate per annum equal to the Prime
Rate in effect from time to time, or (b) at a fixed rate per annum
determined by Bank to be 2.75000% 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 option selected 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.

 

2.2                                 Selection of
Interest Rate Options. 
At any time any portion of this Note bears interest determined in
relation to LIBOR, it may be 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: (a) the interest rate option selected by Borrower; (b) the
principal amount subject thereto; and (c) 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, (i) if
requested by Bank, Borrower provides to Bank written confirmation thereof not
later than 3 Business Days after such notice is given, and (ii) 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 Borrower’s 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.

 

2.3                                 Taxes and
Regulatory Costs. 
Borrower shall pay to Bank immediately upon demand, in addition to any
other amounts due or to become due hereunder, as applicable during any Fixed
Rate Term selection, any and all (a) 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 (b) 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.

 

2.4                                 Payment of
Interest.  Interest accrued on
this Note shall be payable on the 1st day of each month, commencing June 1,
2004.

 

2.5                                 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 4% above the rate of interest from time to time applicable to
this Note.

 

2

 

3.                                      BORROWING AND REPAYMENT:

 

3.1                                 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, subject to
all of the limitations; terms and conditions of this Note end of the Credit
Agreement between Borrower and Bank defined below; provided however, that the
total outstanding borrowings under this Note shall not at any time 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 this Note shall be due and payable in full on August 1,
2005.

 

3.2                                 Advances.  Advances hereunder, to the total amount of
the principal sum available hereunder, may be made by the holder at the oral or
written request of (a) Jack Johnson or Abbas Mohaddes or James S.
Miele, 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 (b) any
person, with respect to advances deposited to the credit of any deposit account
of any Borrower 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.

 

3.3                                 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 first, to the outstanding principal balance of this Note which bears
interest determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

 

4.                                      PREPAYMENT:

 

4.1                                 Prime Rate.  Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to the Prime Rate at
any time, in any amount and without penalty.

 

4.2                                 LIBOR.  Borrower may prepay principal on any portion
of this Note which bears interest determined in relation to LIBOR at any time
and in the minimum amount of $100,000.00; 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:

 

(a)                                  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.

 

(b)                                 Subtract from the
amount determined in (a) 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.

 

(c)                                  If the
result obtained in (b) for any month is greater than zero, discount that
difference by LIBOR used in (b) above.

 

3

 

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.  Each 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 2.000% 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.

 

5.                                      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 May 27,
2004, as amended 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.

 

6.                                      MISCELLANEOUS:

 

6.1                                 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 holder’s in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder’s 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 any way
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.

 

6.2                                 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.

 

6.3                                 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.

 

	
  Iteris, Inc.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ Jack Johnson

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Abbas
  Mohaddes

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Secretary

  	
   

  
						

 

4Exhibit 10.28

 

	
  WELLS FARGO

  	
   

  	
  TERM NOTE

  
	
   

  	
   

  	
   

  
	
  $5,000,000.00

  	
   

  	
  Irvine,
  California

  
	
   

  	
   

  	
  May 27,
  2004

  

 

FOR
VALUE RECEIVED, the undersigned Iteris, Inc. (“Borrower”) promises to pay
to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office
at Orange County RCBO, 2030 Main Street, Suite #900,
Irvine, CA 92614, 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 $5,000,000.00,
with interest thereon as set forth herein.

 

1.                                       INTEREST:

 

1.1                                 Interest.  The outstanding principal balance of this
Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a rate per annum .50000% above the Prime Rate in effect from
time to time.  The “Prime Rate” is a base
rate that Bank from time to time establishes and which serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto.  Each change in the
rate of interest hereunder shall become effective on the date each Prime Rate
change is announced within Bank.

 

1.2                                 Payment of
Interest.  Interest accrued on
this Note shall be payable on the 27th
day of each month, commencing June 27,
2004.

 

1.3                                 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 4% above the rate
of interest from time to time applicable to this Note.

 

2.                                       REPAYMENT AND PREPAYMENT:

 

2.1.                              Repayment.  Principal shall be payable on the 27th day of
each month in installments of $104,166.57
each, commencing June 27, 2004,
and continuing up to and including April 27,
2008, with a final installment consisting of all remaining unpaid
principal due and payable in full on May 27,
2008.

 

2.2                                 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.

 

2.3                                 Prepayment.  Borrower may prepay principal on this Note at
any time, in any amount and without penalty. 
All prepayments of principal shall be applied on the most remote
principal installment or installments then unpaid.

 

3.                                       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 May 27, 2004, as amended 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.

 

1

 

4.                                       MISCELLANEOUS:

 

4.1                                 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 holder’s in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder’s 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 any way
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.

 

4.2                                 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.

 

4.3                                 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.

 

	
  Iteris, Inc.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ Jack Johnson

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Abbas
  Mohaddes

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Secretary

  	
   

  
						

 

2

 

ADDENDUM TO PROMISSORY
NOTE

(PRIME RATE PRICING ADJUSTMENTS)

 

THIS
ADDENDUM is attached to and made a part of that certain term note executed by
Iteris, Inc. (“Borrower”) and payable to WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”), or order, dated as of May 27, 2004, in the principal
amount of Five Million Dollars ($5,000,000.00) (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
Prime Rate Margin. 
The initial Prime Rate margin applicable to this Note shall be as set
forth in the “interest” paragraph herein.

 

(b)                                 Prime Rate
Adjustments. 
In addition to any interest rate adjustments resulting from changes in
the Prime Rate, Bank shall adjust the Prime Rate margin applicable to Prime
Rate options selected by Borrower under this Note on a quarterly basis,
commencing with the Borrower’s fiscal quarter ending June 30, 2004, if
required to reflect a change in Borrower’s ratio of Senior Funded Debt to
EBITDA (as defined in the Credit Agreement referenced herein), in accordance
with the following grid:

 

	
  Senior Funded Debt to

  EBITDA

  	
   

  	
  Applicable

  Prime Rate

  Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.50 to 1.0 or greater

  	
   

  	
  .50

  	
  %

  
	
  less than 3.50 to 1.0

  	
   

  	
  .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.

 

	
  ITERIS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ Jack Johnson

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Abbas
  Mohaddes

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
  Secretary

  	
   

  
						

 

1

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