EXHIBIT 10.17
March 28, 2005
KSW, Inc.
37-16 23rd Street
Long Island City, New York 11101
Gentlemen:
We are pleased to advise you that Fleet National Bank, a Bank
of
America company (the "Bank") holds
available for the use of KSW, Inc., a
Delaware corporation (the "Company") a
partially secured line of credit in the
amount of up to TWO MILLION AND 00/100
DOLLARS ($2,000,000.00) upon the
following terms and conditions:
1. Facility. (a) A line of credit facility (the "Line") available
for
short-term loans to the Company to support
temporary working capital needs for
contracts in process (collectively, the
"Loans"), provided that the aggregate
principal amount at any time outstanding
shall not exceed the lesser of
$2,000,000.00 or the Collateral Value, as
hereinafter defined, of the Investment
Securities held in the Collateral Account,
each as hereinafter defined.
(b) Loans shall be
extended upon the Company's prior
written notice to the Bank (duly executed
by an authorized officer of the
Company), such notice to be in a form
satisfactory to the Bank which may be
accomplished by facsimile transmission.
Each such notice shall be accompanied by
detailed information satisfactory in all
respects to the Bank regarding (if
applicable) the proposed uses by the
Company for the proceeds of any Loan then
being requested. Such notice shall be given
at least one Business Day prior to
any requested Prime Based Loan, as
hereinafter defined, and at least three
Business Days prior to any requested LIBOR
Based Loan, as hereinafter defined.
Such notice shall specify whether the
requested Loan is a Loan under the secured
portion of this Line or the unsecured
portion of same. The Bank shall not be
obligated to advance any Loans under this
Line while the Company is in default
hereunder.
2. Credit Period. The Line shall be available for the period
commencing with the date of the Company's
acceptance and satisfaction of the
terms hereof and ending April 1, 2006 (the
"Credit Period"). All Loans shall
mature on the last day of the Credit
Period.
3. Clean-up Requirement. Notwithstanding the foregoing, during
a
single clean up period elected by the
Company comprised of any thirty (30)
consecutive days during the Credit Period
there shall be no unsecured Loans
outstanding under the Line.
<PAGE>
KSW, Inc. -2- March 28, 2005
4. Interest and Fees. The Bank shall charge and shall be entitled
to
receive the following (which amounts,
together with any other amounts owing by
the Company to the Bank, may be charged to
any demand deposit account maintained
by the Company with the Bank):
(a)(i) For that portion of the Loans fully secured by the
Collateral Requirement without reference to
any Excess, as hereinafter
defined: Loans shall bear interest at a
rate per annum to be elected by the
Company in accordance with the notice
provisions in 1(b) above (at the Company's
option subject to availability) equal to
the following: (y) the Prime Rate, as
defined in Schedule I attached hereto plus
one-quarter of one (.25%) percent
(the "Variable Rate"), or (z) the LIBOR
Rate, as defined in Schedule I attached
hereto, plus one and one-quarter (1.25%)
percent per annum (the "Adjusted LIBOR
Rate")
(ii) For Loans, if any, expressly authorized by the terms
hereof, in excess of the Collateral
Requirement, a rate of interest equal to
the Variable Rate plus three-quarters of
one (.75%) percent ("Variable Rate
Unsecured", together with the Variable Rate
Loans hereinafter, the "Prime Based
Loans") or (z) the Adjusted LIBOR Rate plus
one and one-quarter (1.25%) percent
("Adjusted LIBOR Rate Unsecured", together
with the Adjusted LIBOR Rate Loans,
the "LIBOR Based Loans").
(iii) In determining whether a Loan is fully secured,
reference shall be made to the last
available account statement for the
Collateral
Account.
(b) LIBOR Based Loans shall be available for an interest
period of one month (the "Interest
Period"). In no event shall any LIBOR Based
Loan Interest Period continue beyond the
expiration of the Credit Period. Loans
shall be in minimum amounts of $100,000.00
with respect to Prime Based Loans and
$250,000.00 with respect to LIBOR Based
Loans, or an integral multiple of
$100,000 in excess thereof. The outstanding
principal balance of any Loan may be
converted from a Prime Based Loan to a
LIBOR Based Loan, or from a LIBOR Based
Loan to a Prime Based Loan, provided that
LIBOR Based Loans may only be
converted on the last day of the Interest
Period applicable thereto and the
required prior notice must be provided in
connection with the conversion of a
Prime Based Loan to a LIBOR Based Loan.
Loans under the Line shall be evidenced
by a note in an amount equal to the maximum
aggregate amount of Loans hereunder
(the "Note"). The Note shall contain
standard provisions with regard to LIBOR
Based Loans for illegality, inability to
determine rate, indemnification for
break funding, and increased cost or
reduced return.
(c) Interest shall be computed on the basis of a 360-day
year for actual days elapsed and shall be
payable monthly in arrears on the
first day of each month.
(d) If the entire amount of any required principal and/or
interest payment under the Loans is not
paid in full within ten (10) days after
the same is due, the Company shall pay to
the Bank a late fee equal to five (5%)
percent of the required payment. Upon
default or after maturity or after
judgment has been rendered, or if any Event
of Default has occurred and is
<PAGE>
KSW, Inc. -3- March 28, 2005
continuing, the Company's right to select
pricing options shall cease and the
unpaid principal of all Loans (excluding
any defaulted payment of principal
accruing interest in accordance with the
preceding sentence) shall, at the
option of the Bank, bear interest at a rate
which is four (4) percentage points
per annum greater than the otherwise
applicable rate.
(e) Loans may be prepaid in whole or in part in a minimum
amount of $250,000.00 for LIBOR Based Loans
and $100,000.00 for Prime Based
Loans, provided however, that any
prepayment of any LIBOR Based Loan shall be
upon at least three (3) Business days prior
written notice to the Bank (which
notice shall be irrevocable) and any such
prepayment shall occur only on the
last day of the Interest Period for such
LIBOR Based Loan and is subject to the
LIBOR Indemnification Provisions described
on Schedule I attached hereto.
(f) An underwriting fee of $5,000.00 and all reasonable
fees and disbursements of the Bank's
counsel in connection with the preparation
of any documentation, enforcement of the
Bank's rights or otherwise in
connection with the Line, are due upon
presentment of an invoice therefor.
5. Guarantee. All obligations of the Company owing to the Bank
under
the Line shall be unconditionally
guaranteed by KSW Mechanical Services, Inc.
(the "Guarantor") pursuant to the Bank's
standard form of guarantee of payment
(the "Guarantee").
6. Collateral. (a) Loans under the Line shall be secured by a
first
priority security interest in all
investment securities (the "Investment
Securities") in an account owned by the
Company and held with the Bank (the
"Collateral Account"). The Company will
covenant to maintain a minimum amount of
Investment Securities in the Collateral
Account equal to the "Collateral
Requirement", as hereinafter defined. The
Collateral Requirement shall mean that
the (i) product of the applicable
percentage advance rate indicated on the
attached Schedule II multiplied by the
aggregate fair market value of each
corresponding type or category of
Investment Securities indicated therein and
held in the Collateral Account plus the
Applicable Excess, if any, shall be at
least equal to (ii) the aggregate principal
amount of the Loans. The Applicable
Excess, if any, shall be determined by
reference to the Grid set forth below.
<PAGE>
KSW, Inc. -4- March 28, 2005
<TABLE>
<CAPTION>
Applicable
Consecutive Profitable
Minimum TNW
Unencumbered Cash
Excess
Fiscal Quarters
at end of period
at end of period
-----------
after 9/30/04
----------------
----------------
-------------
<S>
<C>
<C>
<C>
$300,000
2
$6,900,000
$550,000
$750,000
3
$7,200,000
$700,000
$850,000
4
$7,400,000
$850,000
</TABLE>
The Applicable Excess shall be established beginning with the
fiscal
quarter ended March 31, 2005, provided the
Company has achieved two (2)
consecutive profitable quarters as at the
end of such quarter and has continued
to achieve profitable quarters as at the
end of each subsequent quarter
thereafter and the Company has achieved, as
at the end of the relevant quarter,
the corresponding minimum TNW, as
hereinafter defined, and minimum Unencumbered
Cash, as hereinafter defined, each as
indicated in the Grid above, as at the end
of the corresponding period. The Applicable
Excess shall be effective for the
Applicable Excess Period as determined by
reference to the Company's
corresponding financial statements
indicated in the table below:
Financial
Statements
Applicable Excess Period
--------------------
------------------------
First
Fiscal Quarter
5/15 - 8/15
Second
Fiscal Quarter
8/16 - 11/15
Third
Fiscal Quarter
11/16 - 2/28
Fourth
Fiscal Quarter
3/1 - last day of Credit Period
If for any reason the Company fails to provide the relevant
financial
statements by the beginning of the
corresponding Applicable Excess Period, the
Applicable Excess shall be deemed to be
zero.
As used herein, "Tangible Net Worth" (hereinafter, "TNW") shall
mean
Total Assets minus the sum of (i)
Intangible Assets, and (ii) Total Liabilities.
"Total Assets" means total assets
determined in accordance with generally
accepted accounting principles ("GAAP").
"Intangible Assets" means assets that
in accordance with GAAP are properly
classifiable as intangible assets
including, but not limited to, goodwill,
franchises, licenses, patents,
trademarks, trade names, copyrights and
"soft assets" such as assets due from
officers, employees, stockholders,
affiliates and related parties. "Total
Liabilities" means total Indebtedness
determined in accordance with GAAP.
"Unencumbered Cash" means presently owned
or hereafter acquired or created cash
deposits and marketable securities,
verified via brokerage and other statements
and held in the Company's individual name
and capacity.
<PAGE>
KSW, Inc. -5- March 28, 2005
7. Mandatory Payments. At any time the Company has knowledge that
the
aggregate Loans then outstanding under the
Line are in excess of the borrowing
limitations set forth in 1 (a) hereof, the
Company shall then pay such excess to
the Bank to be applied against the
obligations then outstanding to the Bank in
such manner as the Bank in its sole
discretion may determine.
8. Other Conditions. In addition to the foregoing, at all times
during the Credit Period and as long as any
Loans remain outstanding, the
Company shall:
(a) Furnish to the Bank:
(i) Within ninety (90) days of the
close of its fiscal year, the consolidated
balance sheets and related consolidated income
statements of the Company as of the last day of
and for such fiscal year, each such statement to
be prepared in accordance with GAAP consistently
applied, such statements to contain schedules of
completed contracts and contracts in process and
be audited by a firm of independent certified
public accountants satisfactory to the Bank;
(ii) Within forty-five (45) days of
the close of the first, second and third
quarters of the Company's fiscal year
throughout the Credit Period, the consolidated
balance sheet and related consolidated income
statement of the Company as of the last day of
and for such quarterly periods, each such
statement to be prepared in accordance with
GAAP, consistently applied, such statements to
contain schedules of completed contracts and
contracts in process, and reviewed by a firm of
independent certified public accountants
satisfactory to the Bank;
(iii) at the same time that the
financial statements are provided in
subparagraphs (i) and (ii) above, an aging of
the accounts receivable and an accounts payable
report of the Company, (in a format
satisfactory to the
Bank), each as of the last
day of and for such period. The accounts
receivable aging shall include retainage
receivables and any allowance for doubtful
accounts;
(iv) At the same time as items (i),
(ii) and (iii) above are delivered, a schedule
of all construction projects in which the
Company is then involved and contracts which
have been completed during such period (each a
"Work-in-Progress Schedule"), in form and
substance satisfactory to the Bank and
including, without limitation: (A) an
identification of each project by name, and (B)
the contract price for each such Project
(including any change orders), the costs
incurred to date, gross profit to date,
<PAGE>
KSW, Inc. -6- March 28, 2005
contract billings to date, costs and estimated
earnings in excess of billings and billings in
excess of costs and estimated earnings, and costs
to complete. The Work-In-Progress Schedule will
include contract revenues earned and contract
costs for the period reported. Each such
semi-annual Work-in-Progress Schedule shall be
certified by a duly authorized officer of the
Company as being true, correct and complete;
(v) Such other statements and reports
as shall be
reasonably requested by the Bank.
(b) maintain insurance with responsible and reputable
insurance companies or associations in such
amounts and covering such risks
as is usually carried by companies engaged
in similar businesses and owning
similar properties in the same general
areas in which the Company operates and
naming the Bank as additional insured and
loss payee thereon as its interests
may appear.
9. Special Conditions: The initial funding of the Loans is subject
to
the following special requirements: (a) the
Bank shall have received
satisfactory lien, litigation, bank and
trade checkings; and (b) the Company
will have established its primary operating
accounts with the Bank.
10. Events of Default. Upon the occurrence of any of the
following
events:
(a) the usual credit factors not remaining favorable with
respect to the Company in the determination
of the Bank, or one or more
conditions existing or events occurring
which have resulted or may result in a
material adverse change in the business,
properties or financial condition of
the Company, the Guarantor or the
Collateral securing the Loans, each as
determined in the discretion of the
Bank;
(b) the Company or the Guarantor failing to perform any
condition or obligation described in this
line letter or in any other
agreement, document or instrument executed
and delivered pursuant to or in
connection with this agreement within the
time periods specified inclusive of
any applicable grace or cure period;
(c) default beyond any applicable grace or cure period by
the Company or the Guarantor under any
agreement, document or
instrument executed and delivered pursuant
to or in connection with this
agreement (whether executed prior or
subsequent to the date hereof) or in
connection with any other obligation then
outstanding with the Bank;
(d) the Company or the Guarantor defaulting in any payment
of principal of or interest on any
indebtedness or obligation for
borrowed money (other than the Loans) or
for the deferred purchase price of
property or defaulting in the performance
of any other agreement, term or
condition contained in any such obligation
or in any agreement relating thereto,
if the effect of such default is to cause,
or to permit the holder or holders of
<PAGE>
KSW, Inc. -7- March 28, 2005
such obligation (or a trustee on behalf of
such holder or holders) to cause,
such obligation to become due prior to its
stated maturity;
(e) the filing by the Company or the Guarantor of a request
or petition for liquidation,
reorganization, arrangement, adjustment
of debts, adjudication as a bankrupt,
relief as a debtor or other relief under
the bankruptcy, insolvency, or similar laws
of the United States or any state or
territory thereof or any foreign
jurisdiction, now or hereafter in effect;
(f) the filing against the Company or the Guarantor of a
request or petition for liquidation,
reorganization, arrangement,
adjustment of debts, adjudication as a
bankrupt, relief as a debtor or other
relief under the bankruptcy, insolvency, or
similar laws of the United States or
any state or territory thereof or any
foreign jurisdiction, now or hereafter in
effect which remains undismissed,
undischarged or unbonded for a period of
forty-five (45) days;
(g) the making of any general assignment by the Company or
the Guarantor for the benefit of
creditors;
(h) the appointment of a receiver or trustee for the
Company or the Guarantor or for any assets
thereof, including, without
limitation, the appointment of, or taking
possession by, a "custodian", as
defined in the Federal Bankruptcy Code;
(i) if any certificate, statement, representation, warranty
or audit heretofore or hereafter furnished
by or on behalf of the Company or the
Guarantor as an inducement to the Bank to
extend any credit to, or for entry
into any agreement with, the Company or the
Guarantor proves to have been false
in any material respect at the time of
which the facts therein set forth were
stated or certified, or to have omitted any
substantial contingency or
unliquidated liability or claim against the
Company or the Guarantor;
(j) rendering against the Company or the Guarantor of a
final judgment, decree or order for the
payment of money and the continuance of
such judgment, decree or order unsatisfied
and in effect for a period of
forty-five (45) consecutive days without a
stay of execution;
(k) mortgage or pledge of or creation of a security
interest in any assets of the Company
without the prior written consent of the
Bank other than purchase money security
interests and the security interest of
the surety providing the bonding program
for the Company;
(l) the Guarantee or Pledge Security Agreement shall cease
to be in effect or the party obligated
thereunder shall assert that it has no
further obligation to the Bank
thereunder.
then, in any such event (each an "Event of
Default" and, collectively, the
"Events of Default"), any or all of the
following actions may be taken: the Bank
<PAGE>
KSW, Inc. -8- March 28, 2005
may in its sole discretion upon notice to
the Company, (i) declare all sums
outstanding under the Loans and all
indebtedness, obligations and liabilities
owing in connection therewith due and
payable and the same shall forthwith
become due and payable, (ii) curtail or
eliminate the Line and/or any or all of
the Loans, and (iii) take whatever other
action it shall deem appropriate as
permitted by applicable law or by any
agreement, document or instrument executed
and delivered pursuant to or in connection
with the Loans, without, in each
instance, presentment, demand, protest or
further notice of any kind, all of
which are hereby expressly waived by the
Company.
11. Documentation. The Bank's obligation hereunder shall be
subject
to preparation and execution of formal
documentation acceptable to the Bank and
its counsel, which shall include without
limitation provisions reflecting the
terms hereof, together with such
representations, warranties, events of default
(including cross default provisions) and
other covenants acceptable to the Bank.
There shall be no extension of credit
hereunder unless and until there shall
have been executed documentation acceptable
to the Bank, including without
limitation, the Line Letter, the Note, the
Pledge Security Agreement, the
account documentation for the Collateral
Account and the Guarantee. It is also a
requirement that the Investment Securities
have been transferred to the
Collateral Account. The Bank shall also be
furnished upon the Bank's request
with (i) a security agreement questionnaire
for the Company in the form provided
by the Bank's counsel, (ii) UCC-11 searches
for the Company, (iii) certificate
of incorporation, bylaws and good standing
certificate for the Company and the
Guarantor, and (iv) such other items or
documentation as requested by the Bank
or its counsel to fully effectuate and
document the Line and the security
therefor.
12. Legal Opinion. The Company shall furnish the Bank upon
request
with an opinion of counsel, in form and
substance acceptable to the Bank and its
counsel, with respect to the Line, the
Company and the Guarantor, including any
litigation against the Company or the
Guarantor.
13. Successors and Assigns. This Agreement shall be binding upon
and
inure to the benefit of the Company and the
Bank and their respective successors
and assigns, except that the Company may
not assign or transfer any of its
rights under this Agreement without the
prior written consent of the Bank. The
term "Bank" as used herein shall be deemed
to include the Bank and its
successors, endorsees and assigns.
14. Governing Law. This letter agreement and each extension of
credit
hereunder shall be governed by and
construed in accordance with the laws of the
State of New York and the Company hereby
submits to the jurisdiction of the
United States Federal Courts and the Courts
of the State of New York located in
any county or city as selected by the Bank
within the State of New York.
IN ANY ACTION, SUIT OR PROCEEDING, IN
RESPECT OF OR ARISING OUT OF THIS
AGREEMENT, THE NOTE, OR ANY OTHER DOCUMENTS
RELATING TO THE LINE, THE COMPANY
AND THE BANK MUTUALLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, TRIAL BY
JURY, COUNTERCLAIM AND ANY CLAIM FOR
CONSEQUENTIAL, PUNITIVE, OR SPECIAL
DAMAGES.
<PAGE>
KSW, Inc. -9- March 28, 2005
15. Miscellaneous. The Bank reserves the right to sell
participations
in the Line to other lenders and the
Company agrees that its financial
statements and other information submitted
to the Bank may be distributed to
other potential participants. The Bank
shall have the unrestricted right at any
time and from time to time, and without the
consent of or notice to the Company,
to grant to one or more banks or other
financial institutions (each, a
"Participant") participating interests in
the Bank's obligation to lend
hereunder and or any or all of the loans
held by the Bank hereunder. In the
event of any such grant by the Bank of a
participating interest to a
Participant, whether or not upon notice to
the Company, the Bank shall remain
responsible for the performance of its
obligations hereunder and the Company
shall continue to deal solely and directly
with the Bank in connection with the
Bank's rights and obligations hereunder.
The Bank may furnish any information
concerning the Company in its possession
from time to time to prospective
Participants, provided that the Bank shall
require any such prospective
participant to agree in writing to maintain
the confidentiality of such
information. This letter shall not be
assignable by operation of law or
otherwise, without the prior written
consent of the Bank. Time shall be of the
essence regarding any time period stated
herein. No waiver of any of the terms
and provisions hereof shall be effective
unless in writing, and no waiver
furnished in writing shall be deemed a
waiver of any future condition. All
notices shall be in writing. The Company
shall indemnify the Bank and hold it
harmless against loss or damage suffered by
it as a result of any claim by any
person, firm or corporation for any
brokerage or other commissions alleged to be
due as a result of the transactions
contemplated by this letter. This letter
supersedes all prior agreements regarding a
line of credit with the Company. The
Bank may at any time pledge or assign all
or any portion of its rights under the
loan documents to any of the twelve (12)
Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge
shall release the Bank from its obligations
under any of the Line documents.
<PAGE>
KSW, Inc. -10- March 28, 2005
16. Acceptance. If the foregoing is acceptable, please have the
enclosed copy of this letter signed by a
duly authorized officer of the Company
and the Guarantor in the space provided
below and returned to the Bank together
with the underwriting fee specified in
Section 4(f) hereof on or before March
31, 2005. This letter shall be of no force
or effect and shall be unenforceable
against the Bank: (i) unless fully signed
and returned to the Bank by such date;
and (ii) unless the documentation specified
in Section 11 is signed and returned
to the Bank by April 11, 2005.
Very truly yours,
FLEET NATIONAL BANK,
a Bank of America company
By: /s/ Russell K.
Guter
-------------------------------
Russell K. Guter
Senior Vice-President
Accepted and Agreed this 28th day of March,
2005
Borrower:
KSW, INC.
By: /s/ Floyd Warkol
-----------------------------------
Name: Floyd Warkol
Title: Chief Executive
Officer
Guarantor:
KSW MECHANICAL SERVICES, INC.
By: /s/ Floyd Warkol
-----------------------------------
Name: Floyd Warkol
Title: Chief Executive Officer
<PAGE>
KSW, Inc. -11- March 28, 2005
SCHEDULE I: DEFINITIONS
-----------------------
1. Prime Rate: The term "Prime Rate" means the variable per
annum
rate of interest so designated from time to
time by Fleet National Bank as its
prime rate. The Prime Rate is a reference
rate and does not necessarily
represent the lowest or best rate being
charged to any customer. Changes in the
rate of interest resulting from changes in
the Prime Rate shall take place
immediately without notice or demand of any
kind.
2. LIBOR Rate: The term "LIBOR" shall mean, as applicable to
any
LIBOR Based Loan, the rate per annum as
determined on the basis of the offered
rates for deposits in U.S. Dollars, for a
period of time comparable to such
LIBOR Based Loan which appears on the
Telerate page 3750 as of 11:00 a.m. London
time on the day that is two London Banking
Days preceding the first day of such
LIBOR Based Loan; provided, however, if the
rate described above does not appear
on the Telerate System on any applicable
interest determination date, the LIBOR
rate shall be the rate (rounded upward, if
necessary, to the nearest one
hundred-thousandth of a percentage point),
determined on the basis of the
offered rates for deposits in U.S. dollars
for a period of time comparable to
such LIBOR Based Loan which are offered by
four major banks in the London
interbank market at approximately 11:00
a.m. London time, on the day that is two
(2) London Banking Days preceding the first
day of such LIBOR Based Loan as
selected by Bank. The principal London
office of each of the four major London
banks will be requested to provide a
quotation of its U.S. Dollar deposit
offered rate. If at least two such
quotations are provided, the rate for that
date will be the arithmetic mean of the
quotations. If fewer than two quotations
are provided as requested, the rate for
that date will be determined on the
basis of the rates quoted for loans in U.S.
dollars to leading European banks
for a period of time comparable to such
LIBOR Based Loan offered by major banks
in New York City at approximately 11:00
a.m. New York City time, on the day that
is two London Banking Days preceding the
first day of such LIBOR Based Loan. In
the event that Bank is unable to obtain any
such quotation as provided above, it
will be deemed that LIBOR pursuant to an
LIBOR Based Loan cannot be determined.
In the event that the Board of Governors of
the Federal Reserve System shall
impose a Reserve Percentage with respect to
LIBOR deposits of Bank, then for any
period during which such Reserve Percentage
shall apply, LIBOR shall be equal to
the amount determined above divided by an
amount equal to 1 minus the Reserve
Percentage. "Reserve Percentage" shall mean
the maximum aggregate reserve
requirement (including all basic,
supplemental, marginal and other reserves)
which is imposed on member banks of the
Federal Reserve System against
"Euro-currency Liabilities" as defined in
Regulation D.
3. Banking Day: The term "Banking Day" shall mean, in respect of
any
city, any day on which commercial banks are
open for business in that city.
4. LIBOR Indemnification Provisions: Company may prepay a LIBOR
Based
Loan only upon at least three (3) Banking
Days prior written notice to Bank
(which notice shall be irrevocable), and
any such prepayment shall occur only on
the last day of the Interest Period for
such LIBOR Based Loan. Company shall pay
<PAGE>
KSW, Inc. -12- March 28, 2005
to Bank, upon request of Bank, such amount
or amounts as shall be sufficient (in
the reasonable opinion of Bank) to
compensate it for any loss, cost, or expense
incurred as a result of: (i) any payment of
a LIBOR Based Loan on a date other
than the last day of the Interest Period
for such Loan; (ii) any failure by
Company to borrow a LIBOR Based Loan on the
date specified by Company's written
notice; (iii) any failure by Company to pay
a LIBOR Based Loan on the date for
payment specified in Company's written
notice. Without limiting the foregoing,
Company shall pay to Bank a "yield
maintenance fee", if any, in an amount
computed as follows: The current rate for
United States Treasury securities
(bills on a discounted basis shall be
converted to a bond equivalent) with a
maturity date closest to the term chosen
pursuant to the LIBOR Rate Election as
to which the prepayment is made, shall be
subtracted from the LIBOR in effect at
the time of prepayment. If the result is
zero or a negative number, there shall
be no yield maintenance fee. If the result
is a positive number, then the
resulting percentage shall be multiplied by
the amount of the principal balance
being prepaid. The resulting amount shall
be divided by 360 and multiplied by
the number of days remaining in the term
chosen pursuant to the LIBOR Rate
Election as to which the prepayment is
made. Said amount shall be reduced to
present value calculated by using the above
referenced United States Treasury
securities rate and the number of days
remaining in the term chosen pursuant to
the LIBOR Rate Election as to which
prepayment is made. The resulting amount
shall be the yield maintenance fee due to
Bank upon the prepayment of a LIBOR
Based Loan. Each reference in this
paragraph to "LIBOR Rate Election" shall mean
the election by Company of the LIBOR Rate.
If by reason of an Event of Default,
Bank elects to declare the Note to be
immediately due and payable, then any
yield maintenance fee with respect to a
LIBOR Based Loan shall become due and
payable in the same manner as though
Company had exercised such right of
prepayment. In the event that the Bank
shall be entitled to compensation
pursuant to this provision, it shall
promptly notify the Company of the event by
reason of which it has become so entitled.
The Company shall pay the Bank the
amount shown as due on any such
notification within fifteen (15) days after
receipt thereof.
<PAGE>
KSW, Inc. -13- March 28, 2005
SCHEDULE II
Types of Collateral
Loan Rate
-------------------
---------
U.S. Treasury Obligations (bills,
notes and bonds)
90%
Investment Grade Commercial Paper
80%
Federal Government or Quasi-Government
Agency Securities, to include those
issued by GNMA, FNMA, or FHLMC
80%
Municipal Bonds
80%
Investment Grade Bonds (Moody's Aaa
down
through Baa3; S&P AAA down through BBB)
70%
Non-Investment Grade Bonds (Moody's Ba1
down through B1; S&P BB+ down through
B+)
50%
Non-Investment Grade Bonds (Moody's B2
or lower; S&P B or lower)
0%
U.S. Treasury Savings Bonds
0%
NYSE and AMEX and NASDAQ National
Market Issues and ADR's
70%
NASDAQ Small Cap Stocks and ADR's
50%
Stock trading at less than $10 per share
0%
<PAGE>
LINE OF CREDIT NOTE
Date: __________, 2005
$2,000,000.00
Office Address: 300
Broad Hollow Road
Melville, New York 11747
On April 1, 2006 (maturity date) for value received, the
undersigned
jointly and severally promise(s) to pay to
the order of FLEET NATIONAL BANK, a
Bank of America company, a national banking
association, (hereinafter called the
Bank) at its Office in the place first
above stated, or such other address as
the holder hereof may designate, in
immediately available funds, the sum of TWO
MILLION AND 00/100 ($2,000,000.00) DOLLARS,
or, the aggregate unpaid principal
amount of all loans made by the Bank to the
undersigned hereunder, whichever is
less. The undersigned also promises to pay
interest at said office in like money
on the unpaid principal amount hereof from
time to time outstanding prior to
maturity at an annual rate equal to the
rate(s) specified in paragraph 1 of the
attached Rider. Interest shall be payable
on the 1st day of each month
commencing on April 1, 2005 and on the
maturity hereof. Interest shall be
calculated on the basis of a 360-day year
and actual days elapsed, provided that
any interest so calculated hereunder shall
in no event be in excess of the
maximum permitted under applicable law.
Upon and following an Event of Default
(as defined below) and/or after maturity,
whether after stated maturity,
acceleration or otherwise, and/or after
judgment has been rendered on this note,
this note, and, to the extent not
specifically provided elsewhere to the
contrary and to the extent permitted by
applicable law, any interest, fee or
other amount due in connection with the
Liabilities (as hereinafter defined),
shall bear interest at a per annum rate
determined daily and payable on demand
which shall be 4% in excess of the rate
hereinbefore provided, but in no event
in excess of the maximum rate of interest
permitted under applicable law. All
payments made in connection with this note
and the documents, instruments and
agreements executed pursuant hereto or in
connection herewith (collectively the
"Loan Documents") shall be in lawful money
of the United States of America in
immediately available funds, without
counterclaim or setoff and free and clear
of, and without any deduction for, any
taxes or other payments. All payments
shall be applied first to the payment of
all fees, expenses and other amounts
due to the Bank (excluding principal and
interest), then to accrued interest,
and the balance on account of outstanding
principal; provided, however, that
after default, payments will be applied to
the obligations of the undersigned to
the Bank as Bank determines in its sole
discretion. If this note or any payment
hereunder becomes due on a day which is not
a Business Day, the due date of this
note or payment shall be extended to the
next succeeding Business Day, and such
extension of time shall be included in
computing interest and fees in connection
with such payment. If the entire amount of
principal and/or interest required to
be paid pursuant to this note or the Loan
Documents is not paid in full within
ten (10) days after the same is due,
whether at maturity, upon acceleration or
otherwise, if permitted by applicable law,
the undersigned shall pay to the Bank
a late fee equal to five percent (5%) of
the required payment. The Bank is
authorized (but not required) to charge
principal and interest and all other
amounts due under this note to any account
of the Borrower with the Bank when
and as it becomes due.
The making of a loan, at any time, shall
not be deemed a waiver of, or consent,
agreement or commitment by the Bank to the
making of any future loan to the
undersigned.
Subject to the terms of this note, the
undersigned may borrow, repay and
reborrow hereunder, provided that all
outstanding principal and interest and any
other amounts due hereunder are paid in
full on maturity. If any loan is made
hereunder, the Bank shall record on the
books and records of the Bank an
appropriate notation evidencing any such
loan, the rate of interest thereon,
each repayment on account of the principal
thereof, and the amount of interest
paid, and the undersigned authorizes the
Bank to maintain such records or make
such notations and agrees that the amount
shown on the books and records as
outstanding from time to time shall
constitute the amount owing to the Bank
pursuant to this note, absent manifest
error; provided, however, the failure to
make any such record or notation with
respect to any loan or payment shall not
limit or otherwise affect the obligations
of the undersigned hereunder. No
portion of the proceeds of any loan shall
be used, in whole or in part, for the
purpose of purchasing or carrying any
"margin stock" as such term is defined in
Regulation U of the Board of Governors of
the Federal Reserve System.
Any loan may be prepaid in whole or in part
at any time and from time to time
without premium or penalty together with
interest accrued on the amount prepaid
to the date of any such prepayment.
<PAGE>
As collateral security for the payment of
this note and for all other notes
and/or obligations or Liabilities (as
hereinafter defined) of the Obligors
(which term as used herein shall be deemed
to include each and all of the
undersigned), or any one or more of them,
now or hereafter owed to, or held by,
the Bank (and/or any entity controlling,
controlled by or under common control
with the Bank, each such entity referred to
herein as an "Affiliate"), the
undersigned hereby grants to the Bank a
security interest in and transfers and
assigns to the Bank the following property:
(i) any and all monies and/or other
property now or hereafter held by the Bank
and/or any Affiliate on deposit, in
safekeeping, or otherwise, for the account
of or to the credit of or belonging
to any Obligor or in which any Obligor
shall have any interest and (ii) any and
all property described on the "Schedule of
Specific Possessory Collateral" on
the reverse side hereof, together with any
additions and accessions thereto and
substitutions therefor and the products and
proceeds thereof. This note and all
of the aforementioned obligations and
Liabilities are also secured by (a) any
and all property of any Obligor now or
hereafter subject to a security
agreement, pledge agreement, assignment,
hypothecation or other document
granting the Bank or any Affiliate a
security interest or other lien or
encumbrance with respect to the Liabilities
evidenced by this note and (b) any
and all collateral described in any and all
credit accommodations, notes, loan
agreements, and any other agreements and
documents, now or hereafter existing,
creating, evidencing, guaranteeing,
securing or relating to any or all of the
Liabilities evidenced by this note,
together with all amendments, modifications,
renewals, or extensions thereof. All of the
property described in clauses (i),
(ii), (a) and (b) shall be collectively
referred to herein as the "Collateral".
At any time, without demand or notice (any
such notice being expressly waived by
the undersigned), if permitted by
applicable law, the Bank may setoff all
deposits, credits, collateral and property,
now or hereafter in the possession,
custody, safekeeping or control of the Bank
or any of its Affiliates, or in
transit to any of them, or any part thereof
and apply the same to any of the
Liabilities even though unmatured and
regardless of the adequacy of any other
collateral securing the Liabilities. ANY
AND ALL RIGHTS TO REQUIRE THE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LIABILITIES, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF
ANY OBLIGOR, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED. The
term "Liabilities" shall include this
note and all other indebtedness and
obligations and liabilities of any kind of
any Obligor to the Bank, now or hereafter
existing, arising directly between any
Obligor and the Bank or acquired by
assignment, conditionally or as collateral
security by the Bank, absolute or
contingent, joint and/or several, secured or
unsecured, due or not due, contractual or
tortious, liquidated or unliquidated,
arising by operation of law or otherwise,
direct or indirect, including, but
without limiting the generality of the
foregoing, indebtedness, obligations or
liabilities to the Bank or any Obligor as a
member of any partnership,
syndicate, association or other group, and
whether incurred by any Obligor as
principal, surety, endorser, guarantor,
accommodation party or otherwise. Each
Obligor (if more than one, jointly and
severally) hereby agrees that on demand
at any time and from time to time they will
deposit and pledge with the Bank
additional collateral of a kind and of a
market value required by it further to
secure any indebtedness or liabilities
aforesaid.
If any of the following events shall occur
(each an "Event of Default"):
(i) the occurrence of an "event of default" as such term is
defined in the line letter dated March __, 2005 of the Bank to
the
undersigned; or
(ii) the undersigned fails to comply with any of the terms
and provisions of this note.
the Liabilities shall become absolute, and
immediately due and payable without
demand or notice to any Obligor. Upon
default in the due payment of this note or
any other Event of Default or whenever this
note or any payment of principal or
interest hereof shall become due in
accordance with any of the provisions
hereof, the Bank may, but shall not be
required to (1) proceed to apply to the
payment hereof the balance of any account
or accounts maintained with the Bank
or any Affiliate by any Obligor and (2)
sell (without demand of performance,
advertisement, notice of intention to sell,
notice of time or place of sale,
notice to redeem or other notice
whatsoever, all of which are hereby waived) all
or any part of the Collateral (on all of
which the Obligor does hereby give to
the Bank a continuing lien, security
interest and/or right of setoff) at public
or private sale or sales, or at any
exchange or broker's board, or at the Bank's
2
<PAGE>
office, at such prices as it shall deem
best, for cash or credit, with the right
of the Bank at such sale to purchase all or
any part thereof, free from any
right or equity of redemption, applying the
net proceeds of such sale to the
payment of this note and of any other
liabilities, claims or obligations to the
Bank of any of the Obligors, or of any
partnership in which any of the Obligors
is a partner, all of whom together with any
endorser or guarantor hereby
expressly agree to remain jointly and
severally liable for any deficiency. The
Bank may exercise any other right or remedy
hereby granted or allowed to it by
law, including but not limited to, the
rights and remedies of a Secured Party
under the Uniform Commercial Code of the
Governing State (which term as used in
this note shall mean the state in which the
office indicated above opposite
"Office Address" is located; provided,
that, if no such office is so indicated
then Governing State shall mean the state
where the Bank's office that
originated the loan evidenced by this note
is located), and each and every right
and remedy hereby granted to the Bank or
allowed to it by law shall be
cumulative and not exclusive of one of the
other rights or remedies, and may be
exercised by the Bank from time to time and
as often as may be necessary. The
Bank shall have at any time in its
discretion the right to enforce collection
and payment or liquidation of any of the
Collateral by appropriate action or
proceedings, and the net amounts received
therefrom, after deducting all costs
and expenses incurred in connection
therewith, shall be applied on account of
this note and any other indebtedness or
liabilities of the Obligor aforesaid,
all without notice to any Obligor. Any
demand or notice, if made or given, shall
be sufficiently made upon or given to any
Obligor if left at or mailed to the
last address of such Obligor known to the
Bank or if made or given in any other
manner reasonably calculated to come to the
attention of such Obligor or the
personal representatives, successors or
assigns of such Obligor, whether or not
in fact received by them respectively.
Unless the Collateral is perishable or
threatens to decline speedily in value or
is of a type customarily sold on a
recognized market, the Bank will give the
undersigned reasonable notice of the
time and place of any public sale thereof
or of the time after which any private
sale or other intended disposition is to be
made. Ten (10) days prior notice
shall be deemed reasonable notice. The Bank
may assign and transfer this note to
any other person, firm or corporation and
may deliver and repledge the
Collateral or any part thereof to the
assignee or transferee of this note, who
shall thereupon become vested with all the
powers and rights above given to the
Bank in respect thereof, and the Bank shall
thereafter be forever released and
discharged of and from all responsibility
or liability to the Obligor for or on
account of the Collateral so delivered. If
an attorney is used to enforce or
collect this note, the undersigned agrees
to pay the Bank's reasonable attorneys
fees. The undersigned jointly and severally
promises to pay on demand all
expenses of any nature as soon as incurred
whether in or out of court and
whether incurred before or after this note
shall become due at its maturity date
or otherwise and costs which the Bank may
deem necessary or proper in connection
with the satisfaction of the indebtedness
or the administration, supervision,
preservation, protection (including but not
limited to maintenance of adequate
insurance) or of the realization upon the
Collateral. THE BANK (BY ACCEPTANCE OF
THIS NOTE) AND THE UNDERSIGNED MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER
LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY, INCLUDING, WITHOUT
LIMITATIONS, ANY COURSE OF CONDUCT, COURSE
OF DEALINGS, STATEMENTS OR ACTIONS OF
THE BANK RELATING TO THE ADMINISTRATIONS OF
THE LOAN OR ENFORCEMENT OF THE LOAN
DOCUMENTS, AND AGREE THAT NEITHER PARTY
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED.
THE UNDERSIGNED CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE BANK
HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE BANK WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE BANK TO ACCEPT
THIS NOTE AND MAKE THE LOAN. THIS
WAIVER CONSTITUTES A MATERIAL INDUCEMENT
FOR THE BANK TO ACCEPT THIS NOTE AND
ENTER INTO THE LOAN TRANSACTION EVIDENCED
BY THIS NOTE. The note shall be deemed
to have been made and delivered in the
Governing State. The undersigned consents
to the jurisdiction of the state and
federal courts of the Governing State in
any action brought to enforce any rights of
the Bank under this note. The rights
and obligations of the parties under this
note shall be construed and
interpreted in accordance with the laws of
the Governing State (excluding the
laws applicable to conflicts or choice of
law). This note and any other
agreements, documents and instruments
executed and delivered pursuant to or in
3
<PAGE>
connection with the Liabilities contain the
entire agreement between the parties
relating to the subject matter hereof and
thereof. All prior or contemporaneous
promises, agreements and understandings,
whether oral or written, are deemed to
be superseded by the Loan Documents, and no
party is relying on any promise,
agreement or understanding not set forth in
the Loan Documents. The undersigned
expressly acknowledges that the Bank has
not made and the undersigned is not
relying on any oral representations,
agreements or commitments of the Bank or of
any officer, employee, agent or
representative thereof. No change, modification,
termination, waiver, or discharge, in whole
or in part, of this instrument shall
be effective unless in writing and signed
by the party against whom such change,
modification, termination, waiver, or
discharge is sought to be enforced.
All agreements between the Obligors and the
Bank are hereby expressly limited so
that in no contingency or event whatsoever,
whether by reason of acceleration of
maturity of the indebtedness evidenced
hereby or otherwise, shall the amount
paid or agreed to be paid to the Bank for
the use or the forbearance of the
indebtedness evidenced hereby exceed the
maximum permissible rate under
applicable law. As used herein, the term
"applicable law" shall mean the law in
effect as of the date hereof provided,
however, that in the event there is a
change in the law which results in a higher
permissible rate of interest, then
this note shall be governed by such new law
as of its effective date. In this
regard, it is expressly agreed that it is
the intent of the undersigned and the
Bank in the execution, delivery and
acceptance of this note to contract in
strict compliance with the laws of the
Governing State from time to time in
effect. If, under or from any circumstances
whatsoever, fulfillment of any
provision hereof or of any of the Loan
Documents at the time of performance of
such provision shall be due, shall involve
transcending the limit of such
validity prescribed by applicable law, then
the obligation to be fulfilled shall
automatically be reduced to the limits of
such validity, and if under or from
circumstances whatsoever the Bank should
ever receive as interest an amount
which would exceed the highest lawful rate,
such amount which would be excessive
interest shall be applied to the reduction
of the principal balance evidenced
hereby and not to the payment of interest.
This provision shall control every
other provision of all agreements between
each and every Obligor and the Bank.
There being more than one Obligor, the
following provisions shall apply: (a)
Each Obligor agrees that it is jointly and
severally, directly, and primarily
liable to Bank for payment in full of the
Liabilities and that such obligation
is independent of the duties, obligations,
and liability of each and all of the
other joint and several Obligors. Bank may
bring a separate action or actions on
the Liabilities against each, any, or all
of the Obligors, whether action is
brought against any other or all of such
Obligors or any one or more of the
Obligors is or is not joined therein; (b)
Each Obligor agrees that any release
that may be given by Bank to any one or
more of the Obligors or any guarantor of
the Liabilities shall not release any other
Obligor from its obligations
hereunder; (c) Each Obligor hereby waives
any right to assert against Bank any
defense (legal or equitable), setoff,
counterclaim, or claims that such Obligor
individually may now or any time hereafter
have against another Obligor or any
other party liable to Bank in any manner or
way whatsoever; (d) Any and all
present and future debt and other
obligations of any Obligor to any other
Obligor are hereby subordinated to the full
payment and performance of the
Liabilities; provided, however, such debt
and other obligations may be incurred
and repaid, subject to the terms of this
Note, as long as no Event of Default
shall have occurred and not have been
waived; (e) Each Obligor is presently
informed as to the financial condition of
each of the other Obligors and of all
other circumstances that a diligent inquiry
would reveal and that bear upon the
risk of nonpayment of the Liabilities. Each
Obligor hereby covenants that it
will continue to keep itself informed as to
the financial condition of all other
Obligors, the status of all other Obligors,
and of all circumstances that bear
upon the risk of nonpayment. Absent a
written request from any of the Obligors
to Bank for information, each Obligor
hereby waives any and all rights it may
have to require Bank to disclose to such
Obligor any information that Bank may
now or hereafter acquire concerning the
condition or circumstances of any of the
Obligors; (f) Each Obligor waives all
rights to notices of default, existence,
creation, or incurring of new or additional
indebtedness and all other notices
of formalities to which such Obligor may,
as a joint and several Obligor
hereunder, be entitled; and (g)The term
"Obligor" shall mean "the Obligors and
each of them individually and
collectively".
Upon receipt of an affidavit of an officer
of the Bank as to the loss, theft,
destruction or mutilation of this note or
any other security document which is
not of public record, and, in the case of
any such loss, theft, destruction or
mutilation, upon cancellation of such note
or other security document, the
undersigned will issue, in lieu thereof, a
replacement note or other security
document in the same principal amount
thereof and otherwise of like tenor.
4
<PAGE>
The Bank shall have the unrestricted right
at any time or from time to time, and
without the undersigned's or any Obligor's
consent, to assign all or any portion
of its rights and obligations hereunder to
one or more banks or other financial
institutions (each, an "Assignee"), and the
undersigned and each Obligor agrees
that it shall execute, or cause to be
executed, such documents, including
without limitation, amendments to this note
and to any other Loan Documents as
the Bank shall deem necessary to effect the
foregoing. In addition, at the
request of the Bank and any such Assignee,
the undersigned shall issue one or
more new promissory notes, as applicable,
to any such Assignee and, if the Bank
has retained any of its rights and
obligations hereunder following such
assignment, to the Bank, which new
promissory notes shall be issued in
replacement of, but not in discharge of,
the liability evidenced by the
promissory note held by the Bank prior to
such assignment and shall reflect the
amount of the respective commitments and
loans held by such Assignee and the
Bank after giving effect to such
assignment. Upon the execution and delivery of
the appropriate assignment documentation,
amendments and any other documentation
required by the Bank in connection with
such assignment, and the payment by
Assignee of the purchase price agreed to by
the Bank, and such Assignee, such
Assignee shall be a payee of this note and
shall have all of the rights and
obligations of the Bank hereunder (and
under any and all other Loan Documents)
to the extent that such rights and
obligations have been assigned by the Bank
pursuant to the assignment documentation
between the Bank and such Assignee, and
the Bank shall be released from its
obligations hereunder and thereunder to a
corresponding extent.
The Bank shall have the unrestricted right
at any time and from time to time,
and without the consent of or notice to the
undersigned or any Obligor, to grant
to one or more banks or other financial
institutions (each, a "Participant")
participating interests in this note. In
the event of any such grant by the Bank
of a participating interest to a
Participant, whether or not upon notice to the
undersigned, the Bank shall remain
responsible for the performance of its
obligations hereunder and the undersigned
shall continue t
