EXECUTION
CREDIT AND SECURITY AGREEMENT
By and Between
COMPUTER OUTSOURCING SERVICES, INC.
as Borrower
and
FLEET BANK, NATIONAL ASSOCIATION
as Lender
Dated October 29, 1999
in respect of a
$5,000,000 Secured Committed Line of Credit Note
Lane & Xxxxxxxxxx, LLP
New York, New York
THIS CREDIT AND SECURITY AGREEMENT (this "Agreement") is entered
into and takes effect October 29, 1999 by and between COMPUTER OUTSOURCING
SERVICES, INC., a Delaware corporation (together with its successors and
assigns, the "Borrower"), and FLEET BANK, NATIONAL ASSOCIATION, (together with
its successors and assigns, the "Lender"). Capitalized terms used but not
otherwise defined herein have the meanings ascribed to them in Section 9.1
hereof.
RECITALS
WHEREAS, the Borrower desires to obtain from the Lender, from
time to time, a secured advised line of credit in the maximum principal amount
of $5,000,000 to finance working capital needs and for other corporate purposes;
and
WHEREAS, the Lender desires to provide the line of credit sought
by the Borrower, in each case on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises, and for other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. CREDIT FACILITY.
Section 1.1. Committed Line of Credit. (a) Subject to the
terms, covenants and conditions hereinafter set forth, the Lender hereby agrees
to hold available for the use of the Borrower, commencing on the effective date
hereof and continuing for so long as the Lender, in its sole discretion, may
agree, a secured committed line of credit in an aggregate principal amount of up
to $5,000,000 (the "Line of Credit").
Section 1.2 Issuance of the Line of Credit Note. The
Borrower shall issue, on the effective date hereof, a secured committed line of
credit promissory note in the form of Exhibit A hereto (the "Note") being in the
aggregate amount of $5,000,000. The Note shall be dated the date of issue, to
bear interest from the date of each Loan thereunder at either: (i) the Prime
Rate, or, subject to availability at the Lender from time to time in its sole
discretion, (ii) a rate of 1.25% per annum plus, at the Borrower's option at the
time the Loan is made, either 30-day, 60-day or 90-day LIBOR (the "Elected LIBOR
Rate") for an Interest Period of like term, payable monthly in arrears on the
outstanding principal balance (the "Principal") on the first day of each month
following the Closing Date and on the date the Principal shall be demanded by
the Lender to be paid (the "Demand Date"). The Note shall be subject to a late
fee on overdue Principal and overdue premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, in each case commencing
fifteen (15) days after any such overdue payment became due, at a monthly rate
equal to five percent (5%) per annum, after the date due, and for so long as an
Event of Default shall exist or be continuing, to bear interest at the Line of
Credit Rate plus four percent (4%) per annum, until paid. Interest on each Loan
under the Note shall be computed on the basis of a 360-day year and paid for the
actual number of days elapsed. In case the due date of any payment falls on a
day that is not a Business Day, such payment shall instead be due on the next
succeeding Business Day, and interest shall continue to accrue. Upon the
termination of the Interest Period in respect any Loan subject to an Elected
LIBOR Rate, the same shall automatically become a Prime Rate Loan unless, at
least one (1) Business Day prior to the termination of the applicable Interest
Period the Borrower shall submit to the Lender a Borrowing Request (as defined
below) referencing the Loan and requesting an Elected LIBOR Rate in respect of
the same. If the Lender does not grant the requested rate then the Loan shall
automatically become subject to the Prime Rate. The Note is subject to
repayment and reborrowing at the option of the Borrower on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
2 of this Agreement.
Section 1.3. Manner of Borrowing. (a) the manner of borrowing
shall be as follows:
(i) The Borrower shall give the Lender written notice
of its desire for an advance under the Line of Credit not later than 10:00 a.m.
New York City time on the date (which must be a Business Day) that shall be
three (3) Business Days prior to the date on which the Loan is requested to be
made (such notice, a "Borrowing Request"). Each Borrowing Request shall
contain: (A) the requested date for the making of the Loan, which shall be a
Business Day, (B) the amount of the Loan requested, and (C) a request that the
Loan bear interest at either the Prime Rate or at an Elected LIBOR Rate, in the
latter case specifying 30-day, 60-day or 90-day tenor in respect of such rate.
(ii) Upon receipt of a Borrowing Request the Lender
shall determine, in its sole judgment, whether each of the conditions to lending
set forth in Section 5.3 hereof have been satisfied or may, in the Lender's sole
discretion, be waived. If the Lender determines that the foregoing conditions
are satisfied or should be waived, and, if the requested rate is an Elected
LIBOR Rate, that such requested rate is available at the Lender, then the Lender
shall make the Loan in the amount requested. If the Borrowing request sets
forth a request for an Elected LIBOR Rate that is not available at the Lender
then the Lender shall promptly contact the Borrower so that the Borrower may
elect an available rate. If no Elected LIBOR Rate satisfactory to the Borrower
is then available then the Borrower may withdraw its Borrowing Request or
request a Prime Rate Loan.
Section 1.4. Closing Date. (a) Delivery of the Note on the
Closing Date will be made at the offices of Lane & Xxxxxxxxxx LLP, 000 Xxxx
Xxxxxx, 00xx xxxxx, Xxx Xxxx, Xxx Xxxx 00000, together with this Agreement and
such other and further documentation as may be required by the Lender in its
sole discretion (the completion of such delivery, the "Closing"). Delivery of
the Note will be made at or prior to 5:00 p.m., New York time, on October 29,
1999 (the "Closing Date"), or such other date and time as the parties hereto may
agree. The Note delivered to the Lender on the Closing Date will be registered
in the Lender's name or in the name of the Lender's nominee, all as the Lender
may specify at any time prior to the date fixed for delivery. Thereafter, on
the date of each payment or prepayment of principal under the terms hereof and
under the Note, the Lender shall adjust its corresponding computer records with
respect to the Note to reflect such payment or prepayment of principal, as the
case may be, and shall make notations on the computer records from time to time
to reflect the accrual of interest and overdue interest thereon. Each such
notation on the computer records by the Lender shall be conclusive as to the
amount of principal and interest due by the Borrower to the Lender under the
Note from time to time, absent manifest error.
(b) The commitment of the Lender to make the Line of Credit
available is subject to satisfaction or waiver of the conditions set forth
herein and to receipt by the Lender, on or before the Closing Date, of a
nonrefundable facility fee in the amount of $15,000. The foregoing facility
fees shall be paid by electronic funds transfer to the account of the Lender or
as the Lender may otherwise direct.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Repayment and Reborrowing. The Borrower may
repay and reborrow under the Line of Credit, in each case subject to the terms
of Section 5.3 hereof. Borrower may prepay a LIBOR Loan only upon at least
three (3) Business 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 Loan. Borrower shall pay 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 Loan on a date other than the last day of
the Interest Period for such Loan; (ii) any failure by Borrower to borrow a
LIBOR Loan on the date specified by Borrower's written notice; (iii) any failure
by Borrower to pay a LIBOR Loan on the date for payment specified in Borrower's
written notice. Without limiting the foregoing, Borrower shall pay to Bank a
"yield maintenance fee" 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 Elected LIBOR Rate 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 Elected LIBOR Rate 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 in the Elected LIBOR Rate as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to Bank upon the payment of a LIBOR Loan. 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 Loan shall become due and payable
in the same manner as though the Borrower had exercised such right of
prepayment.
Section 2.2 Increased Costs. If in the determination of the
Lender (a) any Regulatory Change shall directly or indirectly (i) reduce the
amount of any sum received or receivable by the Lender with respect to any Loan
or the return to be earned by the Lender on any Loan, (ii) impose a cost on the
Lender or any Affiliate of the Lender that is attributable to the making or
maintaining of, or the Lender's commitment to make, any Loan, (iii) require the
Lender or any Affiliate of the Lender to make any payment on or calculated by
reference to the gross amount of any amount received by the Lender hereunder or
under the Note or (iv) reduce, or have the effect of reducing, the rate of
return on the capital of the Lender or any Affiliate of the Lender allocable to
any Loan or the Lender's commitment to make any Loan and (b) such reduction,
increased cost or payment shall not be fully compensated for by an adjustment in
the applicable rates of interest payable hereunder, then, within fifteen (15)
days after request by the Lender, the Borrower shall pay to the Lender such
additional amount or amounts as the Lender determines will, together with any
adjustment in the applicable rates of interest payable hereunder, fully
compensate for such reduction, increased cost or payment. The Lender will
promptly notify the Borrower of any Regulatory Change of which it has knowledge
that will entitle the Lender to compensation pursuant to this Section 2.2, but
the failure to give such notice shall not affect the Lender's right to such
compensation.
Section 2.3. Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Note, in the case of the Note, the
Borrower shall punctually pay when due the principal thereof, interest thereon
and premium, if any, due with respect to said principal, without any presentment
thereof, directly to the Lender from an operating account with the Lender (the
"Operating Account"), which the Borrower shall have established prior to the
Closing Date as a condition to the Loans hereunder and which shall be maintained
until the Obligations (defined below) shall have been paid and performed in full
by the Borrower. The Borrower will make all payments due hereunder in lawful
money of the United States in immediately available funds.
SECTION 3. GRANT OF SECURITY INTEREST.
Section 3.1. Security Interest. As security for the prompt
payment in full by the Borrower of every amount due to the Lender under this
Agreement and under the Note and for the performance in full of every other
obligation of the Borrower hereunder and under the Note to the Lender
(collectively, the "Obligations"), the Borrower hereby irrevocably grants to the
Lender, a continuing security interest in and lien upon all of the Borrower's
Accounts Receivable (as such term is defined in the UCC) (the "Collateral")
whether now owned or existing or hereafter acquired, owned, existing or arising
(whether acquired by contract or operation of law) and wherever located, which
shall be retained by the Lender, until the Obligations have been indefeasibly
paid in full in cash and otherwise performed in full and this Agreement
terminated. The Borrower covenants and agrees that it shall procure that the
security interest granted hereunder in the Collateral shall at all times be a
valid, first-priority perfected security interest, enforceable against the
Borrower and all third parties in accordance with the terms hereof as security
for the Obligations. For the purposes of this Section 3, capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the UCC.
The definition of Collateral for the purposes hereof includes, without
limitation, the following property of the Borrower:
(a) All Receivables and Accounts, Chattel Paper,
Instruments, contract rights, General Intangibles (such term as used in this
Agreement to exclude all computer software, related documentation, and other
intellectual property arising therefrom) and all proceeds therefrom and all
other rights of the Borrower to the payment of money including, without
limitation, amounts due from Affiliates of the Borrower, tax refunds and
insurance proceeds; all rights of Borrower to enforce, collect and receive
payments on such Receivables, Accounts, Chattel Paper, Instruments, contract
rights and General Intangibles and the Borrower's rights thereunder, whether at
law or in equity, including, without limitation, any rights of the Borrower to
bring an action to enforce rights to repossess, sequester, replevy, seize and
foreclose upon the Equipment, Inventory, Goods, Chattel Paper or properties
whose sale, lease or use gave rise to, or is governed by, the Receivables,
Accounts, Chattel Paper, Instruments, contract rights and General Intangibles,
or which otherwise secure the performance of any obligation due and owing to the
Borrower under the Receivables, Chattel Paper, Accounts Receivable, Instruments,
contract rights and General Intangibles.
Section 3.2. Lender's Right of Set-off. The Borrower hereby
grants to the Lender, a lien, security interest and right of setoff as security
for the Obligations and for all other obligations of the Borrower to the Lender
whether now existing or hereafter arising, upon and against any and all deposits
or other sums at anytime credited by or due from the Lender to the Borrower and
any and all monies, securities and other property of the Borrower, and the
proceeds thereof now or hereafter held or received by or in transit to the
Lender or any entity under the control of Fleet Financial Group, Inc., from or
for the Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise. At any time, without demand or notice, if permitted by
applicable law, the Lender may setoff all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
the Lender or any of its Affiliates, or in transit to any of them, or any part
thereof and apply the same to any of the Obligations even though unmatured and
regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE THE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.
Section 3.3. Borrower's Obligations and Collateral. The
Borrower assumes all liability and responsibility in connection with all
Collateral acquired by the Borrower; and the obligation of the Borrower to pay
and perform all Obligations shall in no way be affected or diminished by reason
of the fact that any such Collateral may be lost, destroyed, stolen, damaged or
for any reason whatsoever unavailable to the Borrower.
Section 3.4. Borrower's Covenants Concerning Collateral. The
Borrower shall take all action that may be necessary or desirable, or that the
Lender may reasonably request, so as to maintain the validity, perfection,
enforceability, and priority of the Lender's security interest in the
Collateral.
Section 3.5. Lender Appointed Attorney-in-Fact. The Borrower
hereby irrevocably appoints the Lender its attorney-in-fact and agent coupled
with an interest, with full authority in its place and stead and in its name or
otherwise, from time to time upon the occurrence and during the continuance of a
Default or an Event of Default or otherwise to the extent that the Lender shall
reasonably deem any action to be necessary in order to maintain its security
interest in the Collateral, in the Lender's discretion, to take any action and
to execute any instrument that may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to ask, demand,
collect, xxx for, recover, compound, receive, and give acquittance and receipts
for moneys due and to become due under or in connection with the Collateral, to
receive, indorse, and collect any drafts or other instruments, documents, and
chattel paper in connection therewith, and to file any claims or take any action
or institute any proceedings that may be deemed to be necessary or desirable for
the collection thereof. The Lender shall promptly notify the Borrower of any
actions taken by the Lender pursuant to this Section; provided, however, that
the failure to provide such notice shall not affect the validity or binding
effect of any such action.
Section 3.6 The Lender May Perform. If the Borrower fails
to perform any agreement contained herein, then, upon ten (10) days prior
written notice, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable and documented expenses of the Lender incurred in
connection therewith shall be payable by the Borrower.
Section 3.7. The Lender's Duties. The powers conferred on
the Lender hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Lender shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
To induce the Lender to enter into this Agreement and to make
the Loan pursuant to the terms hereof the Borrower hereby continuously
represents and warrants to the Lender as follows:
Section 4.1. Legal Existence. The Borrower is a corporation,
validly existing and is in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing as a foreign
entity in all other states where such qualification is required, and has all
necessary power and authority to enter into this Agreement, to execute, deliver
and perform each of the Loan Documents to which it is a party, to perform all of
its obligations hereunder and thereunder, and to operate its businesses.
Section 4.2. Business Name. Except as disclosed by the
Borrower to the Lender on or prior to the date hereof, or within ninety (90)
days after any change in respect thereof hereafter, the Borrower operates its
business only under its name as set forth in the preamble hereto and has not
used any assumed name for the operation of its business activities since its
organization.
Section 4.3. Authorization. The Borrower has taken all
requisite action to authorize the execution and delivery of, and performance of
the Borrower's obligations under, the Loan Documents. Each of the Loan
Documents to which Borrower is a party constitutes the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles related to enforceability.
Section 4.4. No Conflict. The execution, delivery and
performance by the Borrower of any of the Loan Documents does not and will not
conflict with or violate any provision of (i) any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to the Borrower; (ii) the Articles of Incorporation or
By-Laws of the Borrower, or (iii) any indenture or loan or credit agreement or
any other material agreement, lease or instrument to which the Borrower is a
party or by which the Borrower or any of its assets or properties may be bound.
Section 4.5. Consent. No consent, approval, license,
exemption of or filing or registration with, giving of notice to, or other
authorization of or by, any court, administrative agency, other governmental
authority or other Person is or will be required in connection with the
execution, delivery and performance by the Borrower of this Agreement and the
other Loan Documents or for consummation of the transactions contemplated
thereby, except for (i) those licenses that have been obtained and those
registrations that have been made as required by applicable law, (ii) those
consents that have been obtained, and (iii) the filing with appropriate
governmental authorities of financing statements necessary to perfect the
Lender's security interests hereunder.
Section 4.6. Taxes. The Borrower is not in default in the
payment of any material taxes, assessments or other governmental fees levied or
assessed against its respective incomes or any of its assets or properties,
except for (i) taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in conformity with
GAAP, and (ii) taxes paid immediately upon the Borrower becoming aware thereof.
The Borrower has filed all federal, state and local tax returns and other
reports, in respect of material tax liabilities, that it is required by law to
file (which returns properly reflect the Borrower's income and taxes for the
periods covered thereby) and has paid, to the extent due and payable, all
material taxes, levies, assessments, charges, liens, claims or encumbrances upon
or relating to the Collateral, the Obligations, its employees, payroll, income,
and gross receipts, its ownership or use of any of its assets, and any other
aspect of its business.
Section 4.7. Solvency. After giving effect to the Loan, the
transactions contemplated by this Agreement and the other Loan Documents, and
the payment of all estimated legal, accounting and other fees related hereto and
thereto, the Borrower will be solvent as of the Closing Date.
Section 4.8. Statements and Omissions. No information
contained in this Agreement, the other Loan Documents, any financial statements
delivered hereunder or any written statement furnished by or on behalf of the
Borrower pursuant to the terms of this Agreement and which has previously been
delivered to the Lender by or on behalf of the Borrower, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading at the time and in
light of the circumstances under which made.
Section 4.9. Collateral. The Borrower has good, indefeasible
and merchantable title to and ownership of the Collateral, free and clear of all
Liens, except the Permitted Encumbrances.
Section 4.10. Locations. The Borrower's chief executive
office and principal place of business is located at the address of Borrower
described on the signature page hereof below Borrower's name. Borrower will not
commence or transact business (whether directly or through Affiliates) at other
locations or cease to do business at its current locations without providing the
Lender at least thirty (30) days' prior written notice thereof.
Section 4.11. Compliance. The Borrower is in compliance with
all laws, rules, regulations, orders and decrees that are applicable to the
Borrower or the Collateral or any of its properties or assets, including,
without limitation, and other labor and environmental laws and regulations and
all laws and regulations relating to the conduct of the Borrower's business and
is current and in good standing in all material respects with respect to all
governmental approvals, permits, certificates, inspections, consents and
franchises necessary to continue to conduct its business as heretofore
conducted, and to own or lease and operate the properties now owned or leased by
it. The Borrower is not in default in any material respect with respect to any
indenture, loan agreement, Mortgage, lease, deed or other similar agreement
relating to the borrowing of monies to which it is a party or by which it is
bound.
Section 4.12. Security Interest. The UCC-1 forms filed
pursuant to the UCC and in connection with the Loans completely and accurately
describe the Collateral, and will, when filed in the appropriate filing offices,
give the Lender a first-priority, perfected security interest in the Collateral.
Section 4.13. Licenses. The Borrower possesses adequate
assets, licenses, patents, patent applications, copyrights, trademarks,
trademark applications, service marks, service xxxx applications and trade names
to conduct its business.
Section 4.14. Pending Litigation. There are no material
actions, suits or proceedings pending, or, to the best of the Borrower's
knowledge, threatened against or affecting Borrower or any assets of the
Borrower or the consummation of the transactions contemplated hereby, at law or
in equity or before or by any Governmental Authority or before any arbitrator of
any kind. The Borrower is not subject to any judgment, order, writ, injunction
or decree of any court or governmental agency. There is no proceeding pending
in which the Borrower is a party which, if adversely determined, would,
individually or in the aggregate with any other proceedings, have a material
adverse effect.
Section 4.15. Tax Returns. The Borrower has filed all United
States, state, local and foreign tax returns, in respect of material tax
liabilities, that are required to be filed by it, and has paid, or made
provision for the payment of, all taxes that have become due pursuant to said
returns or pursuant to any statement received by it, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided. Such tax returns properly reflect the Borrower's income and taxes for
the periods covered thereby.
SECTION 5. CONDITIONS TO CLOSING; CONDITIONS TO LENDING.
Section 5.1. Conditions to Closing. The obligation of the
Lender to make available the Line of Credit on the Closing Date and thereafter,
shall be subject to the performance by the Borrower of its agreements hereunder
and to the performance in full on or prior to the Closing Date of the following
further conditions precedent:
(a) Loan Documents. The Loan Documents shall have
been validly executed and delivered by each party thereto.
(b) Accountants. The Borrower shall have retained
accountants reasonably acceptable to the Lender.
(c) Financial Statements. On or prior to the
Closing Date, the Lender shall have received copies of the October 31, 1998
financial statements prepared by the accountants referenced in Section 5.1(b)
above, each certified by an officer of the Borrower to be true, correct and
complete, and each dated and in the form and substance as the Lender reasonably
shall require.
(d) Legal Fees. The Borrower shall pay on the
Closing Date, as set forth in an invoice rendered by the same, the documented
fees and disbursements of Lender's counsel, which fees shall be in the amount of
$5000.
(e) Other Financing Statements. There shall be no
Financing Statements in effect in any jurisdiction in respect of the Collateral
or any parts thereof that evidence a security interest prior in priority to that
of the Lender. Any such conflicting Financing Statement shall be terminated by
the Borrower prior to the Closing Date, or, in any event, prior to any borrowing
under the Line of Credit. Any conflicting Financing Statement in respect of the
Collateral that shall be discovered after the Closing Date shall be terminated
within thirty (30) days after the Borrower shall have notice of the same or the
Line of Credit shall thereafter be suspended by the Lender until such time as
the conflicting Financing Statement shall be terminated.
(f) Operating Account. The Borrower shall have
opened the Operating Account with the Lender.
(g) Satisfactory Proceedings. All proceedings
taken in connection with the transactions contemplated by this Agreement, and
all documents necessary to the consummation thereof, shall be reasonably
satisfactory in form and substance to the Lender and the Lender's counsel, and
the Lender shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with the
consummation of said transactions.
Section 5.2. Failure to Deliver; Waiver of Conditions. If,
on the Closing Date, the conditions specified in Section 5.1 have not been
fulfilled, the Lender may thereupon elect to be relieved of all further
obligations under this Agreement. Without limiting the foregoing, if the
conditions specified in Section 5.1 have not been fulfilled on the Closing Date,
the Lender may waive compliance by the Borrower with any such condition to such
extent as the Lender may in its sole discretion determine and as it may agree.
Nothing in this Section 5 shall operate to relieve the Borrower of any of its
obligations hereunder or to waive the Lender's rights against the Borrower.
Section 5.3. Conditions to Line of Credit Loans. The making
of any Loan under the Line of Credit by the Lender is subject to the Lender's
sole discretion and the satisfaction in full of the following conditions in each
case:
(a) The delivery by the Borrower to the Lender of a
certificate executed by an officer of the Borrower, certifying the absence of a
Default or an Event of Default;
(b) The delivery by the Borrower of a Borrowing
Request;
(c) The Loan amount requested being equal to or less
than Availability;
(d) There being no Financing Statement then in
effect that conflicts with the Lender's first-priority security interest in the
Collateral.
SECTION 6. BORROWER COVENANTS.
Section 6.1. Affirmative Covenants. During the term of this
Agreement and so long as any of the Obligations remain unpaid or unperformed,
the Borrower agrees and covenants that it shall:
(a) Payment of Taxes, Debt and Charges. (i) timely
file all required tax returns; (ii) timely pay all taxes, assessments, and other
government charges or levies imposed upon it or upon its income, profits or
property, except for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in conformity with
GAAP; (iii) pay all Debt owed by it on ordinary trade terms to vendors,
suppliers and other Persons providing goods and services used by it in the
ordinary course of its business; (iv) pay and discharge when due all other Debt
now or hereafter owed by it; (v) maintain appropriate accruals and reserves for
all of the foregoing Debt in accordance with GAAP; and (vi) pay, and cause its
Subsidiaries to pay, promptly when due, all of the charges, and promptly
discharge all Liens, encumbrances or other claims against the Collateral, except
for Permitted Encumbrances.
(b) Maintenance. Maintain, preserve and protect the
Collateral and its other properties and assets, including but not limited to,
the maintenance of insurance coverage customary to the Borrower's industry and
adequate for the particular risks presented.
(c) Business. Carry on and conduct its business in
the same manner and in the same field of enterprise as it is currently engaged,
and do all things necessary to preserve the Borrower's existence, licenses,
standing or qualifications as a domestic corporation in the jurisdiction of its
organization and as a foreign corporation in every jurisdiction in which the
character of its assets or properties or the nature of the business transacted
by it at any time makes such qualification necessary.
(d) Transactions Among Affiliates. Ensure that all
transactions and courses of dealing between (or among) any of the Borrower and
its shareholders, officers, directors, Subsidiaries and Affiliates will be: (a)
in the ordinary course of business or (b) in an amount (in each case) not to
exceed $250,000; and on the terms and conditions which are fully disclosed to
the Lender and not more favorable than those prevailing in the marketplace
between (or among) businessmen dealing with each other at arm's length with
regard to like or similar transactions. Any loans, extensions of credit or
financial accommodations from any of the Borrower's officers, directors or
shareholders to the Borrower, whether now or hereafter existing, shall be
subordinated to the Obligations.
(e) Compliance with Laws. Comply in all material
respects with all federal, state and local laws, ordinances, governmental rules
and regulations to which it is subject to obtain and keep in force any and all
licenses, permits, franchises, or other governmental authorization necessary to
the ownership of its assets, prospects or to the conduct of its business, which
violation or failure to obtain could reasonably be expected to have a material
adverse effect.
(f) Collection of Receivables. At its sole cost and
expense, promptly and diligently collect and enforce, or cause its third party
billing agency to promptly and diligently collect and enforce, full payment of
all receivables in accordance with its collection practices, which shall at all
times be commercially reasonable, and Borrower will defend and hold the Lender
and its officers, directors, employees and agents harmless from any and all
loss, damage, penalty, fine or expense arising from such collection or
enforcement.
(g) Cash Balance Reconciliation. Maintain
procedures, satisfactory to Lender and in accordance with GAAP, to ensure that
cash is accurately reflected and reconciled to Borrower's general ledger on a
timely basis, which in no event shall be less often than once each month.
(h) Operating Account. The Borrower shall
maintain the Operating Account at all times such that the Lender may timely
debit the same for all amounts due hereunder from time to time.
(i) Annual 30-Day Clean Up. The Borrower shall
reduce the principal balance of the Note to zero for a thirty (30) consecutive-
day period at least once each year commencing on the Closing Date and continuing
as an annual obligation until the Demand Date.
(j) ERISA. (i) No fact, including, but not limited
to, any Reportable Event, exists in connection with any Plan which might
constitute grounds for the termination of any such Plan by the PBGC or for the
appointment by the appropriate United States district court of a trustee to
administer any such Plan; (ii) Borrower maintains no Plan which has an
"accumulated funding deficiency" (as defined in Section 412 of the Internal
Revenue Code), or has any material liability to the PBGC; (iii) Borrower has no
Plan with an actuarial present value of accrued plan benefits which exceeds the
net assets available for such benefits (determined as of such Plan's most recent
actuarial valuation within the last twelve months); (iv) if Borrower is a party
to any Plan which is a Multi-Employer Plan, with respect to each such Plan of
Borrower which is a Multi-Employer Plan, Borrower has paid or accrued all
contributions pursuant to the terms of the applicable collective bargaining
agreement required to be paid or accrued by it in respect of its employees, and
there has been no complete or partial withdrawal by Borrower from any Multi-
Employer Plan within the contemplation of ERISA; and (v) neither Borrower, nor
any fiduciary designated by Borrower, has engaged in a "prohibited transaction"
within the meaning of Section 4975 of the Internal Revenue Code or Section 406
of ERISA with respect to any "employee benefit plan," as defined in Section 3
of ERISA. Capitalized terms used in this Section 6.1(j) shall, to the extent
not defined herein, have the meanings ascribed thereto in ERISA.
Section 6.2. Negative Covenants. During the term of this
Agreement and until the Obligations have been paid and performed in full, the
Borrower covenants and agrees that the Borrower shall not, without the Lender's
prior written consent, do, or permit any Subsidiary of Borrower to do, any of
the following:
(a) Liens. Incur or permit to exist any mortgage,
pledge, title retention lien or other lien, encumbrance or security interest
with respect to any of the Borrower's assets, including without limitation, the
Collateral, now owned or hereafter acquired by it, except Permitted
Encumbrances.
(b) Sale. Sell, transfer, lease, pledge or dispose
of any Collateral or any interest therein.
(c) Debt. Incur or assume any Debt other than (i)
the Obligations, (ii) unsecured trade accounts payable and contractual
obligations (including, without limitation, to suppliers and customers) incurred
in the ordinary course of business, and (iii) indebtedness in respect of leased
equipment in the ordinary course of business.
(d) Capital Structure. Create any Subsidiary
without fifteen (15) Business Days prior written notice to the Lender.
(e) Loans. Directly or indirectly loan to, invest
in, or guaranty the Debt of, any Person in an amount exceeding $250,000, other
than loans to, investments in, or guarantees of the Debt of any Subsidiary
provided that the same occurs in the ordinary course of business.
(f) Acquisitions. Acquire all or substantially all
of the assets or capital stock of another Person or merge or consolidate with
any Person where the cost of such transaction exceeds $1,000,000 or where the
surviving entity is not the Borrower.
(g) No Loss. Experience, in any fiscal quarter, a
material financial loss on an Operating Profit Basis (as defined in GAAP).
(h) Change of Fiscal Year. Change its fiscal year
from that in effect on the Closing Date.
(i) Change of Business. Except as disclosed on or
prior to the effective date hereof or thereafter on twenty (20) days' prior
written notice, enter into any new line of business or make any material change
in any of the Borrower's business objectives, purposes and operations, or
continue in operation.
(j) Pledge Subsidiary Shares. Pledge the shares of
any Subsidiary, now existing or later formed, to secure the Debt of the Borrower
or any other Person, or permit any such shares to be subjected to any Lien,
excluding any Lien of the Lender.
Section 6.3 Reporting Requirements. The Borrower hereby
further covenants and agrees as follows:
(a) Accounting Practices. The Borrower will
maintain and will cause each of its Subsidiaries, if any, to maintain (i) a
system of accounting in accordance with GAAP, (ii) complete and accurate books
of account and records, and (iii) standard operating procedures applicable to
all of its locations with respect to the handling and disposition, of each cash
receipts on a daily basis, including the depositing thereof, aging of
Receivables on a monthly basis, record keeping and such other matters as the
Lender may request from time to time.
(b) Reports. The Borrower will furnish the
following statements and reports to the Lender at the Borrower's expense:
(i) Annual Statements. As soon as available
and in any event within 90 days after the end of each fiscal year of the
Borrower, a copy of the consolidated financial statements of the Borrower for
such year, including the consolidated and consolidating balance sheet,
statements of income and retained earnings and cash flows of the Borrower, each
such statement to be prepared in accordance with general accepted accounting
principles consistently applied and audited by a firm of independent certified
public accountants satisfactory to the Lender. The Borrower may satisfy the
requirements of this Section 6.3(b)(i) by submitting annually and within the
above time period its Form 10-K conforming to the requirements of the Securities
Exchange Act of 1934, as amended, (the " '34 Act").
(ii) Quarterly Financial Statements. As soon
as available and in any event within 45 days after the end of each quarter of
the Borrower, a copy of the financial statements of the Borrower for such
quarterly period, including the consolidated and consolidating balance sheet,
statements of income and retained earnings and cash flows of the Borrower, each
such statement to be prepared by the Borrower in accordance with generally
accepted accounting principles consistently applied and signed by the Borrower's
Chief Financial Officer. The Borrower may satisfy the requirements of this
Section 6.3(b)(ii) by submitting quarterly and within the above time period its
Form 10-Q conforming to the requirements of the '34 Act.
(iii) Aging Accounts Receivable Report. As
soon as available and in any event within twenty (20) days after the end of each
month, an aging of the Borrower's consolidated accounts receivable report in a
form satisfactory to the Lender.
(iv) Other Data. Promptly upon the Lender's
request such other statements and reports as shall be reasonably requested by
the Lender.
Each of the statements set forth in paragraphs (i) and (ii)
above shall be accompanied by a compliance certificate prepared by the Borrower
and signed by the Borrower's Chief Financial Officer which shall outline the
actual calculation of the financial covenant ratios and verifying the Borrower's
compliance with the same.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1. Events of Default. Any one or more of the
following shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest
on the Note when the same shall have become due and such default shall continue
for more than ten (10) days; or
(b) Default shall occur in the making of any payment
of the principal of the Note or premium, if any, thereon on demand by the Lender
and such default shall continue for more than fifteen (15) days; or
(c) Default shall occur in the making of any other
payment due under this Agreement and such default shall continue for more than
fifteen (15) days after the day on which written notice thereof is given to the
Borrower by the Lender; or
(d) Default shall occur in the observance or
performance of any covenant or agreement contained in Section 6.2(d) through
Section 6.2(g); or
(e) Default shall occur in the observance or
performance of any other covenant or any other provision of this Agreement which
is not remedied within 30 days after the earlier of (i) the day on which the
Borrower first obtains knowledge of such default, or (ii) the day on which
written notice thereof is given to the Borrower by the Lender; or
(f) any representation or warranty made by the
Borrower herein, or made by the Borrower in any statement or certificate
furnished by the Borrower in connection with the consummation of the issuance
and delivery of the Note or furnished by the Borrower pursuant hereto, is untrue
in any material respect as of the date of the issuance or making or renewal
thereof; or
(g) final judgment or judgments for the payment of
money aggregating in excess of $200,000 is or are outstanding against the
Borrower or any Subsidiary or against any Property or assets of either and any
one of such judgments has remained unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of 30 days from the date of its entry; or
(h) a custodian, liquidator, trustee, administrator
or receiver is appointed for the Borrower or any Subsidiary or for the major
part of the Property of either and is not discharged within 30 days after such
appointment; or
(i) the Borrower or any Subsidiary becomes insolvent
or bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Borrower or any Subsidiary
applies for or consents to the appointment of a custodian, liquidator, trustee
or receiver for the Borrower or such Subsidiary or for the major part of the
Property of any thereof; or
(j) bankruptcy, reorganization, arrangement or
insolvency proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against the
Borrower or any Subsidiary and, if instituted against the Borrower or any
Subsidiary, are consented to or are not dismissed within 60 days after such
institution;
Section 7.2 Notice to Lender. When any Event of Default
described in the foregoing Section 7.1 has occurred, or if the Lender or the
holder of any other evidence of Debt of the Borrower gives any notice or takes
any other action with respect to a claimed default, the Borrower agrees to give
notice within five (5) Business Days of such event to the Lender, in the manner
set forth in Section 10.5.
Section 7.3 Acceleration of Maturity; Other Remedies. When
any Event of Default described in paragraph (a) through (h) of Section 7.1 has
occurred and is continuing, the Lender may, by notice to the Borrower, declare
the entire principal and all interest accrued on the Note to be, and the Note
shall thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived. When any Event of Default described in paragraph (i), (j), or (k) of
Section 7.1 has occurred, then the Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes
becoming due and payable as a result of any Event of Default as aforesaid, the
Borrower will forthwith pay to the Lender, the entire principal and interest
accrued on each Note. No course of dealing on the part of the Lender nor any
delay or failure on the part of the Lender to exercise any right shall operate
as a waiver of such right or otherwise prejudice the Lender's rights, powers and
remedies. The Borrower hereby acknowledges and agrees that the Lender retains
all default rights and remedies with respect to the Collateral provided to
secured parties under the UCC, except to the extent the same are expressly
modified by the terms hereof. The Borrower further agrees, to the extent
permitted by law, to pay to the Lender all documented expenses incurred by it in
the collection of the Notes upon any default hereunder or thereon, including all
documented fees and expenses of the Lender's attorneys for all services rendered
in connection therewith.
Section 7.4 Rescission of Acceleration. The provisions of
Section 7.3 are subject to the condition that if the principal of and accrued
interest on the Notes or either of them has been declared immediately due and
payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (h), inclusive, of Section 7.1, the Lender may, by
written instrument filed with the Borrower, rescind and annul such declaration
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:
(a) no judgment or decree has been entered for the
payment of any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon the Note and all
other sums payable under the Note and under this Agreement (except any
principal, interest or premium on the Note or either of them that has become due
and payable solely by reason of such declaration under Section 7.3) shall have
been duly paid; and
(c) each and every other Default and Event of
Default shall have been made good, cured or waived pursuant to Section 7; and
provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS.
Section 8.1. Consent Required. Any term, covenant, agreement
or condition of this Agreement may, with the consent of the Borrower, be amended
or compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Borrower shall have
obtained the consent in writing of the Lender.
Section 8.2 Effect of Amendment or Waiver. Any such
amendment or waiver shall apply to the Lender and shall be binding upon it, upon
each successor or transferee thereof and upon the Borrower, whether or not the
Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 9. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 9.1 Definitions. Unless the context otherwise
requires or such term is otherwise defined herein, the terms hereinafter set
forth when used herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and plural forms of
any of the terms herein defined:
"Accountants" shall mean the Borrower's certified public
accountants, or any other firm of independent, certified public accounts of
recognized regional or national standing selected by Borrower subsequent to the
Closing Date to audit its financial statements, and approved by the Lender for
such purpose.
"Affiliate" shall mean any Person (other than a Subsidiary)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Borrower. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of partners' equity, by contract or otherwise.
"Agreement" shall mean this Credit and Security Agreement.
"Availability" shall mean the dollar amount equal to the
unborrowed principal amount under the Line of Credit, from time to time.
"Borrower" shall mean Computer Outsourcing Services, Inc., a
Delaware corporation, and its successors and assigns.
"Borrowing Request" shall have the meaning set forth in
Section 1.5.
"Business Day" or "business day" shall mean any day on which
commercial banks are required or permitted by law to be open for business in New
York, New York.
"Closing" and "Closing Date" shall have the meaning set forth in
Section 1.6(a).
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall have the meaning set forth in Section 3.1
hereof.
"Cost of Funds" shall mean the per annum rate of interest that
the Lender is required to pay, or is offering to pay, for wholesale liabilities
of like tenor, adjusted for reserve requirements and such other requirements as
may be imposed by federal, state, or local government and regulatory agencies,
as determined by the Lender.
"Debt" of any Person shall mean (i) all obligations of such
Person for borrowed money (including, but not limited to, the Notes) or which
has been incurred in connection with the acquisition of assets and (ii) all
Guarantees by such Person of Debt of others.
"Default" shall mean any event or condition, the occurrence of
which would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"Event of Default" shall have the meaning set forth in
Section 7.1.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity operating in the United States as may be
approved by a significant segment of the accounting profession that are
applicable to the circumstances as of the date of determination, applied on a
consistent basis.
"Guarantee" shall mean a binding promise by the Borrower or any
Subsidiary to pay the obligations of another person, in each case as the context
requires.
"Interest Period" shall mean, in respect of any Prime Rate Loan,
the period from the making of such Loan until the next payment monthly date in
respect of the same, and in respect of any LIBOR Loan, shall mean the period
from the making of such Loan until the first monthly payment date that shall
follow the end of the term associated with the applicable Elected LIBOR Rate.
"Lender" shall mean Fleet Bank, National Association and its
successors and assigns.
"LIBOR" for any Interest Period means the London Inter Bank
Offered Rate, being the rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined on the basis of the offered rates for
deposits in U.S. dollars, for such Interest Period which appears on the Telerate
page 3750 as of 11:00 a.m. London time on the day that is two (2) London Banking
Days preceding making of any LIBOR Loan and each payment date in respect thereof
hereunder; 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 upwards as described above, if necessary) for
deposits in dollars for a period substantially equal to such Interest Period on
the Reuters Page "LIBO" (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00 a.m. (London
Time), on the day that is two (2) London Banking Days prior to the beginning of
such Interest Period. "London Banking Day" shall mean any date on which
commercial banks are open for business in London. If both the Telerate and
Reuters system are unavailable, then the rate for that date will be determined
on the basis of the offered rates for deposits in U.S. dollars for a period of
time comparable to the LIBOR 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 the LIBOR Loan as
selected by the Lender. 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 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 (2) London Banking Days preceding the making of the LIBOR Loan. In the
event that the Lender is unable to obtain any such quotation as provided above,
it will be deemed that LIBOR pursuant to the 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 the Lender (the "Reserve
Percentage") 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) that is imposed on member banks of the Federal
Reserve System against "Euro-currency Liabilities" as defined in Regulation D.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or contract,
and including, but not limited to, the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of this Agreement, the Borrower or a
Subsidiary shall be deemed to be the owner of any Property which it has acquired
or holds subject to a conditional sale agreement, capitalized lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes, and such retention or vesting
shall constitute a Lien.
"Line of Credit" shall have the meaning set forth in
Section 1.3.
"Loan" shall mean the Term Loan or a loan under the Line of
Credit, as the context may require.
"Loan Documents" shall mean this Agreement, the Notes, the
Subsidiary Security Agreement, and such other agreements and documents as the
Lender may require as a condition to Closing.
"Mortgage" shall mean any mortgage on real property granted or
held by the Borrower or any of its Subsidiaries.
"Note" shall mean that certain secured line of credit promissory
note issued by the Borrower to the Lender Pursuant to Section 1.4 and any note
delivered in exchange or replacement therefor pursuant to the terms hereof.
"Obligations" shall mean the meaning set forth in Section 3.1.
"Permitted Encumbrances" shall mean (i) Liens for current taxes,
assessments or governmental charges not delinquent or for taxes being contested
in good faith and by appropriate proceedings for which adequate reserves have
been set aside in conformity with GAAP; (ii) Liens arising in the ordinary
course of business for sums not due or sums being contested in good faith and by
appropriate proceedings and not involving any deposits, advances or borrowed
money; (iii) Liens of landlords, carriers, warehousemen, mechanics, laborers or
materialman arising in the ordinary course of business for sums not due or sums
being contested in good faith and by appropriate proceedings; (iv) Liens in
respect of leases of equipment used in the ordinary course of the Borrower's
business; and (v) Liens in favor of the Lender.
"Person" shall mean an individual, partnership, (including,
without limitation, any limited liability partnership) corporation, trust,
limited liability company, joint venture, association, joint stock company or
unincorporated organization, and a government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Prime Rate" shall mean the variable per annum rate of interest
so designated from time to time by the Lender 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.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or intangible.
"Regulatory Change" means any applicable law, interpretation,
directive, request or guideline (whether or not having the force of law), or any
change therein or in the administration or enforcement thereof, that becomes
effective or is implemented or first required or expected to be complied with
after the Closing Date, whether the same is (i) the result of an enactment by a
government or any agency or political subdivision thereof, a determination of a
court or regulatory authority, or otherwise or (ii) enacted, adopted, issued or
proposed before or after the Closing Date, including any such that imposes,
increases or modifies any tax (except any income, real property, sales and use,
franchise tax, or excise tax (other than any excise tax that shall be imposed
solely upon lending institutions)) reserve requirement, insurance charge,
special deposit requirement, assessment or capital adequacy requirement, but
excluding any such that imposes, increases or modifies any income or franchise
tax imposed upon the Bank by any jurisdiction (or any political subdivision
thereof) in which the Lender is located.
"Subsidiary" or "subsidiary" shall mean with respect to any
Person any other person directly or indirectly under the control of such person,
whether through voting stock or otherwise.
"Subsidiary Security Agreement" shall mean that certain security
agreement of even date herewith between each of the Subsidiaries and Fleet
securing the Borrower's Obligations.
"UCC" shall mean the Uniform Commercial Code in effect in the
State of New York on the Closing Date.
Section 9.2. Accounting Principles. Where the character or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
Section 9.3. Directly or Indirectly. Where any provision in
this Agreement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
SECTION 10. MISCELLANEOUS.
Section 10.1. Transfer of Note. At any time and from time to
time, upon not less than ten days' notice to that effect given by the Lender,
upon surrender of the Note at its office, the Borrower will deliver in exchange
therefor, without expense to the Lender, except as set forth below, a Note or
Notes, for the same aggregate principal amount as the then unpaid principal
amount of the Note so surrendered and for the same aggregate amount of the
Commitment as the Note or Notes so surrendered, dated as of the date to which
interest has been paid on the Note so surrendered or, if such surrender is prior
to the payment of any interest thereon, then dated as of the date of issue,
registered in the name of such Person or Persons as may be designated by the
Lender, and otherwise of the same form and tenor as the Note so surrendered for
exchange. The Borrower may require the payment of a sum sufficient to cover any
stamp tax or governmental charge imposed upon such exchange or transfer.
Section 10.2. Loss, Theft, Etc. of Notes. Upon receipt of
evidence satisfactory to the Borrower of the loss, theft, mutilation or
destruction of the Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Borrower, or in the event of such mutilation upon
surrender and cancellation of the Note, the Borrower will make and deliver
without expense to the Lender a new Note, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Note.
Section 10.3. Expenses, Stamp Tax Indemnity.
(a) If the Closing does not occur, the Borrower
shall promptly pay all of the Lender's reasonable fees and other expenses
(including out-of-pocket costs and travel expenses) in connection with the
consideration, preparation, negotiation, execution or delivery of this Agreement
or of any amendments, waivers or consents pursuant to the provisions hereof,
including but not limited to the documented fees and disbursements of Lane &
Xxxxxxxxxx LLP, counsel to the Lender.
(b) If the Closing does occur, the Borrower shall
promptly pay all of the Lender's reasonable fees and other expenses (including
out-of-pocket costs and reasonable travel expenses) in connection with the
consideration, preparation, negotiation, execution or delivery of this Agreement
and the transactions contemplated hereby, including but not limited to the
documented fees and disbursements of Lane & Xxxxxxxxxx LLP, counsel to the
Lender, and all such reasonable expenses of the Lender relating to any
amendment, waivers or consents pursuant to the provisions hereof, including,
without limitation, any amendments, waivers, or consents resulting from any
work-out, renegotiation or restructuring relating to the performance by the
Borrower of its obligations under this Agreement and the Notes.
(c) The Borrower also agrees that it will pay and
hold the Lender harmless against any and all liability with respect to stamp and
other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement or the
Note, whether or not the Note is then outstanding, provided that the Lender
shall remain liable for any income tax in respect of the Note.
(d) The Borrower agrees to protect and indemnify the
Lenders against any liability for any and all brokerage fees and commissions
payable or claimed to be payable to any Person in connection with the
transactions contemplated by this Agreement to the extent such fees or
commissions are being claimed through the Borrower.
(e) Without limiting the generality of the
foregoing, it is agreed and understood that the Borrower will, upon presentation
of a writing evidencing such amounts in reasonable detail, pay at the Closing
(if it shall occur) and upon receipt of any statement therefor, all of the
foregoing reasonable expenses arising in connection with or relating to this
Agreement. The obligations of the Borrower under this Section 10.3 shall
survive the termination of this Agreement.
Section 10.4. Powers and Rights Not Waived; Remedies
Cumulative. No delay or failure on the part of the Lender in the exercise of
any power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
Lender are cumulative to, and are not exclusive of, any rights or remedies the
Lender would otherwise have.
Section 10.5. Notices. All communications provided for
hereunder shall be in writing and, if to the Lender, delivered or mailed prepaid
by registered or certified mail or overnight air courier, or by facsimile
communication, in each case addressed to the Lender at its address appearing
beneath its signature at the foot of this Agreement or such other address as the
Lender may designate to the Borrower in writing, and if to the Borrower,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Borrower at the address beneath its signature
at the foot of this Agreement or to such other address as the Borrower may in
writing designate to the Lender; provided, however, that a notice to the Lender
by overnight air courier shall only be effective if delivered to the Lender at a
street address designated for such purpose in accordance with this Section 10.5,
and a notice to the Lender by facsimile communication shall only be effective if
made by confirmed transmission to the Lender at a telephone number designated
for such purpose in accordance with this Section 10.5 and promptly followed by
the delivery of such notice by registered or certified mail or overnight air
courier, as set forth above.
Section 10.6. Successors and Assigns. This Agreement shall be
binding upon the Borrower and the Lender and their respective successors and
assigns and shall inure to the benefit of the Borrower and the Lender and their
respective successor and assigns.
Section 10.7. Survival of Covenants and Representations. All
covenants, representations and warranties made by the Borrower herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Note.
Section 10.8. Severability. Should any part of this Agreement
for any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been executed
with the invalid or unenforceable portion thereof eliminated and it is hereby
declared the intention of the parties hereto that they would have executed the
remaining portion of this Agreement without including therein any such part,
parts or portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 10.9. Governing Law; Consent to Jurisdiction; Waiver of
Jury Trial. This Agreement and the Note issued and sold hereunder shall be
governed by and construed in accordance with the laws of the State of New York,
without reference to the laws thereof regarding conflicts of laws. Each of the
parties hereto submits irrevocably to the non-exclusive jurisdiction of the
United States District Court for the Southern District of New York, any court in
the State of New York located in the Borough of Manhattan, City of New York, and
any appellate court from any thereof, in any action, suit or proceeding brought
against it and related to or in connection with this Agreement, the Note, or the
transactions contemplated thereby. To the extent permitted by applicable law,
each party hereto hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement, the Note or the subject
matter hereof or thereof may not be litigated in or by such courts. THE
BORROWER AND THE LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY, AND THE BORROWER WAIVES THE
RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM, IN ANY LITIGATION IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, THE NOTE OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE LENDER TO ACCEPT THIS AGREEMENT AND THE NOTE AND
EXTEND CREDIT TO THE BORROWER.
Section 10.10. Year 2000 Issues. This Agreement is subject to,
among the other conditions contained herein, the Borrower's demonstration to the
satisfaction of the Lender that (a) the Borrower has taken and is taking all
necessary and appropriate steps to ascertain the extent of and successfully
address business and financial risks facing the Borrower as a result of the Year
2000 Risk (that is the risk that computer applications used by Borrower and/or
by its suppliers, vendors and customers may be unable to recognize and perform
without error date-sensitive functions involving certain dates prior to and any
date after December 31, 1999) and (b) the Borrower's material computer
applications and those of its key vendors and suppliers will, on a timely basis,
adequately address the Year 2000 Risk in all material respects.
Section 10.11. Captions. The descriptive headings of the
various Sections or parts of this Agreement are for convenience only and shall
not affect the meaning or construction of any of the provisions hereof.
Section 10.12. Contract Created; Counterparts. The execution
hereof by the Lender shall constitute a contract between the Borrower and the
Lender for the uses and purposes hereinabove set forth. This Agreement may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.
[Signature page follows.]
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement on the date first above written.
COMPUTER OUTSOURCING SERVICES, INC.
By:_____________________________
Name:
Title:
Notices to the Borrower:
COMPUTER OUTSOURCING SERVICES, INC.
0 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxxxx X. Xxxxxxx
Telefacsimile: (000) 000-0000
Confirmation: (000) 000-0000
FLEET BANK, NATIONAL ASSOCIATION
By:___________________________
Name:
Title:
EXHIBIT A
FORM OF LINE OF CREDIT NOTE
