SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 26, 1998
ASD GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-12873 14-1483460
State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1 INDUSTRY STREET, POUGHKEEPSIE, NEW YORK 12603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 452-3000
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Item 5. OTHER EVENTS.
On June 26, 1998, ASD Group, Inc. ("ASD") entered into a definitive
agreement with an investor group for a $1,900,000 capital infusion and
agreements with its primary lenders to restructure ASD's debt.
As previously disclosed, ASD's sales had been adversely affected by a
reduction in orders by several customers, principally those in the Asian market,
and as a result it was no longer in compliance with the covenants governing
certain of its debt agreements and announced it was seeking additional
financing. Management expects that this trend will continue through the fourth
quarter of 1998 and will result in a loss for that quarter and the year.
An investment group led by Cameron Worldwide Ltd. (the "Investors") has
agreed to purchase $1,900,000 of Common Stock and Convertible Preferred Stock.
$1,500,000 of such purchase has been funded, for which the Investors have
purchased 392,017 shares of Common Stock, 216,207 shares of Series A Convertible
Preferred Stock ("Series A Stock") and 330,799 shares of Series B Convertible
Preferred Stock ("Series B Stock"). The balance is scheduled to be funded by
July 25, 1998, for which the Investors will receive approximately an additional
113,792 shares of Series A Stock. The Series A Stock and Series B Stock will
convert into Common Stock at the rate of 10 shares of Common Stock for each
share of preferred stock (subject to adjustment under certain circumstances).
Upon and assuming conversion of the Preferred Stock, the Investors will own
7,000,000 shares of Common Stock. The Investors will also receive five-year
warrants to purchase an additional 4,000,000 shares at an exercise price of $.75
per share.
In connection with the investment, two of ASD's existing management
directors, Gregory Horne and Stanley Zuk, resigned and three new directors,
Peter Zachariou, Mark Karasick and Jay Solomont were appointed to the Board.
ASD also reached agreement with PNC Bank, Bankers Trust Company and a
group of private noteholders (the "Noteholder Group"), its three primary
lenders, to restructure its outstanding indebtedness.
ASD and PNC Bank agreed that PNC Bank will keep ASD's existing credit
facility in place at least through June 2000, with a one-year extension,
provided certain conditions are met and no events of default occur. PNC Bank
also agreed not to charge a default rate of interest.
Bankers Trust was paid $250,000 at the closing in exchange for agreeing
to defer the balance of the outstanding principal amount owed Bankers Trust
until nine months from closing. ASD will not be required to make payments of
principal and interest to Bankers Trust during this period, although the amounts
owing will continue to accrue interest. Nine months from the closing, Bankers
Trust will either (i) be paid $1,500,000 in satisfaction of all amounts due, or
(ii) in exchange for a payment of $100,000, grant ASD another extension to 15
months from the closing at which time ASD will be required to pay Bankers Trust
$1,550,000 in satisfaction for all amounts due. If Bankers Trust is not paid in
full by such time, the total outstanding indebtedness reverts back to
approximately $2,800,000, the current amount owed, plus any accrued but unpaid
interest. The warrants previously issued to Bankers Trust will be cancelled.
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The Noteholder Group agreed to convert $880,000 of debt into Series C
Convertible Preferred Stock ("Series C Stock"). The Series C Stock will be
convertible, upon receipt of stockholder approval, into approximately 735,000
shares of Common Stock. In addition, the Noteholder Group will exchange their
existing warrants for warrants to purchase 418,711 shares of Common Stock at an
exercise price of $1.50 per share.
In addition to the foregoing, holders of outstanding warrants to
purchase an aggregate of 123,750 shares at $2.69 per share have agreed to
exchange these warrants for new warrants for the purchase of 400,000 shares at
$1.50 per share. The financing would have triggered anti-dilution provisions of
the outstanding warrants resulting in such warrants representing the right to
purchase at least 478,198 shares at an exercise price of $.77 per share.
The conversion of the Series A Stock, the Series B Stock and the Series
C Stock and the exercise of the newly issued warrants are subject to approval by
the stockholders of ASD of the transaction and an amendment to ASD's certificate
of incorporation to increase the number of authorized shares of Common Stock.
ASD has agreed to prepare and file, as soon as practicable after the closing, a
proxy statement with respect to a meeting of stockholders to approve the terms
of the transaction and such amendment.
With respect to this transaction, management of ASD requested a
fairness opinion from H.J. Meyers & Co., Inc. ("H.J. Meyers"), the underwriter
of the Company's initial public offering. In exchange therefor, ASD paid H.J.
Meyers a $25,000 fee and agreed to an amendment to the 94,500 underwriters'
warrants currently held by H.J. Meyers to lower the exercise price from $8.3375
per share to $1.50 per share. In addition, H.J. Meyers will receive 10,000
shares of ASD's Common Stock.
Catalyst Financial Corp., an investment banking firm ("Catalyst"),
advised the Investors with respect to the transaction. The Investors were party
to a financial advisory agreement with Catalyst in connection with the financing
for ASD, the obligations of which were assumed by ASD. Pursuant thereto, ASD
paid Catalyst approximately $121,000 and issued to Catalyst's designees warrants
to purchase shares of Common Stock at an exercise price of $.35 per share. In
addition, ASD has entered into a two-year advisory agreement with Catalyst
pursuant to which Catalyst is paid $5,000 per month. Catalyst also has a right
of first refusal with respect to future financing and a right to receive a
finders' fee under certain circumstances.
ASD's existing management will be retained. However, the employment
contracts of Gary D. Horne and Stanley F. Zuk, its Chairman and President,
respectively, were amended so that, among other things, such officers reduced
their salaries by 50% until ASD becomes profitable. The term of the employment
agreements will also be changed from three years to one year.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
1. Securities Purchase Agreement dated as of June 26,
1998 by and among ASD Group, Inc. or; the parties
listed on Schedule 1 to the Agreement and Gary D.
Horne
2. Agreement dated as of June 26, 1998 by and among
Automatic Systems Developers, Inc.; High Technology
Computers, Inc.; ASD Group, Inc.; the financial
institutions which are now or hereafter become a
party to the Credit Agreement; and PNC Bank, National
Association
3. Option and Forbearance Agreement dated as of June 26,
1998 by and among Bankers Trust Company; Automatic
Systems Developers, Inc. and ASD Group, Inc.
4. Form of Agreement with holders of: (i) 10% senior
promissory notes due June 19, 1998 and/or (ii)
warrants to purchase common stock
5. Form of Letter Agreement with holders of warrants to
purchase an aggregate of 122,750 shares of the
Company's common stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ASD GROUP, INC.
By: /S/ GARY D. HORNE
-----------------------------
Gary D. Horne,
Chief Executive Officer
Dated: July 9, 1998
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1. Securities Purchase Agreement dated as of June 26, 1998 by and
among ASD Group, Inc. or; the parties listed on Schedule 1 to
the Agreement and Gary D. Horne
2. Agreement dated as of June 26, 1998 by and among Automatic
Systems Developers, Inc.; High Technology Computers, Inc.; ASD
Group, Inc.; the financial institutions which are now or
hereafter become a party to the Credit Agreement; and PNC
Bank, National Association
3. Option and Forbearance Agreement dated as of June 26, 1998 by
and among Bankers Trust Company; Automatic Systems Developers,
Inc. and ASD Group, Inc.
4. Form of Agreement with holders of: (i) 10% senior promissory
notes due June 19, 1998 and/or (ii) warrants to purchase
common stock
5. Form of Letter Agreement with holders of warrants to purchase
an aggregate of 122,750 shares of the Company's common stock
EXHIBIT 1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of June
26, 1998 is by and among ASD GROUP, INC., a Delaware corporation (the
"Company"); the parties listed on SCHEDULE 1 to this Agreement (individually, a
"Purchaser" and collectively, the "Purchasers"); and GARY D. HORNE ("Horne").
R E C I T A L S:
A. The Company is effecting a financial restructuring (the
"Restructuring"). In connection therewith, the Company desires to sell shares of
the Company's Series A Convertible Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"), Series B Convertible Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock") and Common Stock, par
value $.01 per share (the "Common Stock," and together with the Series A
Preferred Stock and Series B Preferred Stock, the "Shares"), to the Purchasers
pursuant to this Agreement on the terms and conditions set forth herein.
B. The Purchasers desire to purchase Shares pursuant to this Agreement
on the terms and subject to the conditions set forth herein.
C. Automated Systems Developers, Inc., a New York corporation ("ASD"),
and High Technology Computers, Inc., a New York corporation ("HTC"), are both
wholly owned subsidiaries of the Company. Unless the context otherwise requires,
all references to the Company include the Company, ASD and HTC.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchasers hereby agree as follows:
1. PURCHASE OF SHARES. The Company hereby sells, conveys and transfers
to the Purchasers and the Purchasers hereby purchase from the Company the number
of shares of Series A Preferred Stock, Series B Preferred Stock and/or Common
Stock set forth beside their respective names on Schedule I hereto at the prices
described on Schedule 1. The terms of the Series A Preferred Stock and Series B
Preferred Stock are as set forth in the Certificates of Designations,
Preferences, Rights and Limitations (the "Certificates of Designation"), the
forms of Certificates of Designation are attached as Exhibit A hereto. The
purchase price for the Series A Preferred Stock, the Series B Preferred Stock
and the Common Stock (the "Purchase Price") is as set forth on Schedule I
hereof.
2. CLOSING. Subject to the terms of this Agreement, an initial closing
shall occur simultaneously with the execution of this Agreement, at the offices
of Zane & Rudofsky, 152 West 57th Street, New York, New York 10019, at which
time the Purchasers will purchase $1,500,000 in Shares (the "Initial Closing").
A subsequent closing shall occur 30 days after the Initial Closing at such
location as shall be mutually agreed upon between the parties, at which time the
Purchasers will purchase an additional $400,000 in Shares (the "Second
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Closing" and, with the Initial Closing, the "Closings"). Notwithstanding
anything contained herein to the contrary, if the Second Closing does not occur
30 days after the Initial Closing, the purchase price for the additional
$400,000 in Shares shall increase by 10%.
3. DELIVERIES BY THE PARTIES. At the Closing:
(a) DELIVERIES BY THE COMPANY: The Company will deliver the
following documents in form and substance reasonably acceptable to counsel for
the Purchasers;
(i) Certificates evidencing the Shares;
(ii) Good Standing Certificate for the Company and
each of its subsidiaries issued by the Secretary of State of their
respective jurisdictions of incorporation;
(iii) Certified copy of resolutions of the Board of
Directors authorizing, among other things, the execution and delivery
of this Agreement, consummation of the transactions contemplated hereby
and the Restructuring;
(iv) Legal opinion of Broad and Cassel, counsel to
the Company, in form and substance reasonably satisfactory to the
Purchaser and Purchaser's counsel;
(v) Executed copies of the following additional
documents to be entered into in connection with the Restructuring
(collectively, the "Restructuring Documents"):
(A) Option and Forbearance Agreement (the
"Option") between the Company and Bankers Trust Company
("BT");
(B) Amendments to Employment Agreements
between the Company and each of Horne and Stanley F. Zuk
("Zuk");
(C) Agreements of Horne, Zuk, Gregory Horne
and Marion L. Horne Turcot to vote in favor of the
Restructuring;
(D) Financial Consulting Agreement (the
"Catalyst Agreement") between the Company and Catalyst
Financial Corp. ("Catalyst");
(E) Warrant to be issued to Catalyst and/or
its assigns pursuant to the Catalyst Agreement (the Catalyst
Warrant");
(F) Letter Agreement between the Company and
a group of investors restructuring the Company's debt to such
investor group (the "Becker Agreement");
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(G) Certificate of Designation, Preferences,
Rights and Limitations of Series C Convertible Preferred Stock
(the "Series C Preferred Stock") to be issued pursuant to the
Becker Agreement;
(H) Warrants to be issued pursuant to the
Becker Agreement (the "Becker Warrants");
(I) Letter Agreement with a group of
investors modifying the terms of their existing warrants (the
"BlueStone Agreement");
(J) Warrants to be issued pursuant to the
BlueStone Agreement (the "BlueStone Warrants");
(K) Letter Agreement (the "Meyers
Agreement") with H.J. Meyers & Co., Inc. ("Meyers");
(L) Warrant to be issued pursuant to the
Meyers Agreement (the "Meyers Warrant");
(M) Warrant to be issued to Cameron
Worldwide Ltd. (the "Cameron Warrant");
(N) Warrant to be issued to Peter Zachariou
(the "Zachariou Warrant");
(O) Forbearance Agreement (the "PNC
Agreement") with PNC Bank, National Association ("PNC"); and
(P) Warrant to be issued to PNC pursuant to
the PNC Agreement (the "PNC Warrant")
(vi) Disbursement Authorization Letter; and
(vii) Such other documents as shall be reasonably
requested by the Purchasers and their counsel.
(b) DELIVERIES BY THE PURCHASERS: The Purchasers will deliver
to the Company the following:
(i) Payment by wire transfer, of the Purchase Price;
(ii) Disbursement Authorization Letter; and
(iii) Such other documents as shall be reasonably
requested by the Company and its counsel.
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4. USE OF PROCEEDS. The Company agrees that the net proceeds to the
Company from the sale of the Shares hereunder will be used to pay the following:
$110,000.00 to the Becker Group pursuant to the Becker Agreement; $250,000 to BT
pursuant to the Option; $121,282.26 to Catalyst pursuant to the Catalyst
Agreement; $25,000 to Meyers pursuant to the Meyers Agreement; $65,000 to Broad
and Cassel for the Company's legal fees; $35,000.00 to Zane and Rudofsky for the
Purchasers' legal fees; and $7,500 to PNC pursuant to the PNC Agreement. The
balance of such net proceeds will generally be used to pay other expenses of the
Reorganization and as described on SCHEDULE 3 attached hereto, subject to Board
approval and right to modify. However, the attached Schedule represents the
Company's estimate of the allocation of the net proceeds based upon the current
status of its operations and anticipated business needs. It is possible,
however, that the application of funds will differ considerably from the
estimates set forth herein due to changes in the economic climate and/or the
Company's business operations or unanticipated complications, delays and
expenses.
5. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser, severally and not
jointly, acknowledges, represents and warrants as of each Closing Date:
(a) RECEIPT OF CORPORATE INFORMATION. All requested documents,
records and books pertaining to the Company and the offer and sale hereby of the
Shares and the Common Stock into which the Series A Preferred Stock and Series B
Preferred Stock are convertible (the "Conversion Shares" and, together with the
Shares, the "Securities"), including, without limitation, the Restructuring
Documents and the Company's Annual Report on Form 10-KSB for the year ended June
30, 1997, as amended (the "Form 10-KSB"), and Quarterly Reports on Form 10-QSB
for the quarters ended September 30, 1997, December 31, 1997 and March 31, 1998,
as amended (the "Form 10-QSBs"; the Form 10-KSB and the Form 10-QSBs are
collectively referred to herein as the "SEC Documents"), have been delivered to
the Purchaser and/or the Purchaser's advisors, and all of the Purchaser's
questions and requests for information have been answered to the Purchaser's
satisfaction. Moreover, over the course of the several weeks leading up to the
consummation of this transaction, the Purchaser has received additional
information regarding the Company's financial situation and, particularly, the
existing defaults on lines of credit, lack of cash flow to meet current
obligations without infusion of capital which may result in the Company being
characterized as insolvent and the terms of the Restructuring.
(b) RISKS. The Purchaser acknowledges and understands that the
purchase of the Securities involves a high degree of risk and is suitable only
for persons of adequate financial means who have no need for liquidity in this
investment in that (i) the Purchaser may not be able to liquidate the investment
in the event of an emergency; (ii) transferability is extremely limited; and
(iii) in the event of a disposition, the Purchaser could sustain a complete loss
of its entire investment. The Purchaser is sufficiently experienced in financial
and business matters to be capable of evaluating the merits and risks of an
investment in the Company; has evaluated such merits and risks, including risks
particular to the Purchaser's situation; and the Purchaser has determined that
this investment is suitable for the Purchaser.
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The Purchaser has adequate financial resources and can bear a complete loss of
the Purchaser's investment.
(c) ACCREDITED INVESTOR STATUS. The Purchaser is an
"accredited investor" as defined in Rule 501(a) of Regulation D promulgated by
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act").
(d) INVESTMENT INTENT. The Purchaser hereby represents that
the Securities being purchased hereunder are being acquired for the Purchaser's
own account with no intention of distributing such securities to others. The
Purchaser has no contract, undertaking, agreement or arrangement with any person
to sell, transfer or otherwise distribute to any person or to have any person
sell, transfer or otherwise distribute for the Purchaser the Securities being
purchased hereunder or any interest therein. The Purchaser is presently not
engaged, nor does the Purchaser plan to engage within the presently foreseeable
future, in any discussion with any person regarding such a sale, transfer or
other distribution of the securities being purchased hereunder or any interest
therein.
(e) COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS. The
Purchaser understands that the Securities being offered and sold hereunder have
not been registered under the Securities Act. The Purchaser understands that the
Securities being offered and sold hereunder must be held indefinitely unless the
sale or other transfer thereof is subsequently registered under the Securities
Act or an exemption from such registration is available. Moreover, the Purchaser
understands that its right to transfer the Securities being purchased hereunder
will be subject to certain restrictions, which include restrictions against
transfer under the Securities Act and applicable state securities laws. In
addition to such restrictions, the Purchaser realizes that it may not be able to
sell or dispose of the Securities being purchased hereunder, as there may be no
public or other market for them. The Purchaser understands that certificates
evidencing the Securities being purchased hereunder shall bear a legend
substantially as follows:
The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, or any applicable state law. They may not be
offered for sale, sold, transferred or pledged
without (1) registration under the Securities Act of
1933, as amended, and any applicable state law, or
(2) an opinion (reasonably satisfactory to the
Company) of counsel that registration is not
required.
(f) AUTHORITY; ENFORCEABILITY. The Purchaser has the full
right, power, and authority (corporate or otherwise) to execute and deliver this
Agreement and perform its obligations hereunder.
(g) NONCONTRAVENTION. This Agreement constitutes a valid and
legally binding obligation of the Purchaser and neither the execution of this
Agreement, nor the consummation of the transactions contemplated hereby, will
constitute a violation of or default
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under, or conflict with, any judgment, decree, statute or regulation of any
governmental authority applicable to the Purchaser or any contract, commitment,
agreement or restriction of any kind to which the Purchaser is a party or by
which its assets are bound. The execution and delivery of this Agreement does
not, and the consummation of the transactions described herein will not, violate
applicable law, or any mortgage, lien, agreement, indenture, lease or
understanding (whether oral or written) of any kind outstanding relative to the
Purchaser.
(h) APPROVALS. No approval, authorization, consent, order or
other action of, or filing with, any person, firm or corporation or any court,
administrative agency or other governmental authority is required in connection
with the execution and delivery of this Agreement by the Purchaser or the
consummation of the transactions described herein.
(i) CONSULTANT'S COMPENSATION. The Purchaser acknowledges that
Catalyst will receive, as compensation for its having acted as financial advisor
to the Purchasers, (i) a fee of $110,500; (ii) $5,782.26 for reimbursement of
expenses; (iii) $5,000 for financial consulting services for one month; and (iv)
the Catalyst Warrants to purchase 141,360 shares of the Company's Common Stock,
at a price of $.27 per share.
(j) CONCURRENT ISSUANCES OF SECURITIES. The Purchaser
acknowledges that, with the purchase of the Shares contemplated hereby, the
Company will also be issuing the Series C Preferred Stock, the Catalyst
Warrants, the Becker Warrants, the BlueStone Warrants, the Meyers Warrants, the
PNC Warrant, the Cameron Warrant and the Zachariou Warrant in connection with
the Restructuring (collectively, the "Restructuring Securities"). Moreover, the
Company may from time to time raise additional capital, which may include, but
not be limited to, subsequent offers and sales by the Company ("Subsequent
Sales") of additional shares of Preferred Stock with the same or different
terms. Nothing herein shall prohibit the Company from effecting the Subsequent
Sales; provided, however, that such shares shall rank junior to the Series A
Preferred Stock and the Series B Preferred Stock with respect to payment of
dividends and liquidation rights, unless otherwise consented to by the holders
of such shares of Preferred Stock as provided in the Certificates of
Designation. Until the Series A Preferred Stock and the Series B Preferred Stock
become convertible, the Company agrees to afford the Purchasers a right of first
refusal with respect to any future sales of Common Stock or Preferred Stock by
the Company (other than pursuant to outstanding options and warrants or under
the Company's employee benefit plans).
(k) RESTRICTIONS ON CONVERSION. The Purchaser acknowledges
that the Series A Preferred Stock and the Series B Preferred Stock will not be
convertible into Common Stock until such time as the Company obtains stockholder
approval of (a) the Restructuring in accordance with Rule 4310(c)(H) of the
Rules of The National Association of Securities Dealers, Inc., and (b) an
amendment to the Company's Certificate of Incorporation increasing the
authorized number of shares of Common Stock (the "Capital Amendment"), at which
time the Series A Preferred Stock and the Series B Preferred Stock will
automatically convert into shares of Common Stock.
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6. REPRESENTATIONS OF THE COMPANY. The Company acknowledges, represents
and warrants that except as set forth in the SEC Documents or as disclosed on
the Schedules hereto:
(a) CORPORATE ORGANIZATION. Each of the Company, HTC and ASD
is duly organized, validly existing and in good standing under the laws of the
state of its incorporation, and has full corporate power, authority and legal
right to own its properties and to conduct the businesses in which it is now
engaged. The Company is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction where the
ownership or lease of its assets or the operation of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, operations, property or financial or
other condition of the Company (a "Material Adverse Effect"). The Company owns
100% of the issued and outstanding capital stock of each of HTC and ASD.
(b) AUTHORITY. The Company has full corporate power and
authority to execute and deliver this Agreement, all agreements and documents
referred to herein or contemplated hereby, including, without limitation, the
Restructuring Documents (the "Ancillary Documents") and to perform all of its
covenants and agreements hereunder. The execution and delivery of this Agreement
and the Ancillary Documents by the Company, the performance by the Company of
its covenants and agreements hereunder and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action.
(c) ENFORCEABILITY. This Agreement has been duly executed and
delivered and constitutes the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally or by the
principles governing the availability of specific performance, injunctive relief
and other equitable remedies (regardless of whether such enforceability is
considered in equity or at law), including requirements of reasonableness and
good faith in the exercise of rights and remedies thereunder; (ii) applicable
laws and court decisions which may limit or render unenforceable certain terms
and provisions contained therein, but which in our opinion do not substantially
interfere with the practical realization of the benefits thereof, except for the
economic consequences of any procedural delay which may be imposed by, relate to
or result from such laws and court decisions; and (iii) the limitations on the
enforceability of the securities indemnification provisions set forth herein by
reason of matters of public policy.
(d) NONCONTRAVENTION. Neither the execution and delivery of
this Agreement by the Company, nor the consummation of the transactions
contemplated hereby, nor the performance by the Company of its covenants and
agreements hereunder (i) violates any provision of the Certificate of
Incorporation or Bylaws of the Company; (ii) violates any existing law, statute,
ordinance, regulation, or any order, judgment or decree of any court or
governmental agency to which the Company is a party or by which the Company or
any of its
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assets is bound; or (iii) conflicts with or will result in any breach of any of
the terms of or constitute a default under or result in the termination of or
the creation of any lien pursuant to the terms of any indenture, mortgage, real
property lease, securities purchase agreement, credit or loan agreement or other
material agreement to which the Company is a party or by which the Company or
any of its assets is bound, to the extent such violation thereof, conflict
therewith, breach thereof, default thereunder or termination thereof has been
waived in writing or would have a Material Adverse Effect.
(e) CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 1,000,000 shares of Preferred Stock, $.01 par value,
none of which are issued and outstanding, and (ii) 10,000,000 shares of Common
Stock, $.01 par value, of which 1,577,917 shares are issued and outstanding.
Such outstanding shares do not give effect to the issuance of the Shares
hereunder or the Restructuring Securities. Attached as SCHEDULE 5(E) is a list
of all outstanding options and warrants. The holders of outstanding capital
stock of the Company have no preemptive rights. The Certificate of Designation
has been approved by the Board of Directors of the Company.
(f) THE SHARES. The Shares being offered and sold pursuant to
this Agreement have been duly and validly authorized and, when issued for the
consideration herein provided, will be duly and validly issued, fully paid and
nonassessable.
(g) CONVERSION SHARES. The Conversion Shares have been duly
authorized and reserved for issuance and, when issued upon conversion of the
Series A Preferred Stock and the Series B Preferred Stock in accordance with the
terms thereof, will be duly and validly authorized and issued, fully paid and
nonassessable. Notwithstanding the foregoing, the Company does not currently
have sufficient shares of authorized but unissued Common Stock to issue all of
the shares of Common Stock required to be delivered upon conversion of the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock and exercise of all outstanding options and warrants and the other
Restructuring Securities.
(h) APPROVALS. Except as may be required under federal and
state securities laws (which have been or, in the case of compliance required on
a post-sale basis, will be complied with) and except for stockholder approval of
the Restructuring and the Capital Amendment as contemplated hereby, the
execution, delivery and performance of this Agreement by the Company does not
require the consent, waiver, approval, license or authorization of or any filing
with any person or any governmental authority. The issuance of the Shares
pursuant to this Agreement is not subject to the registration or prospectus
delivery requirements of Section 5 of the Securities Act.
(i) LEGAL PROCEEDINGS. Except as described on SCHEDULE 5(I),
there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or, to the best knowledge of
the Company, threatened against or affecting the Company, whether at law or in
equity, or before or by any governmental authority; nor (ii) judgments, decrees,
injunctions or orders of any governmental authority or arbitrator against the
Company, which, in either case, could have a Material Adverse Effect.
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(j) ASSETS. To the best of its knowledge, after due diligence,
except as described on SCHEDULE 5(J), the Company has good and marketable title
to its assets, free and clear of any mortgage, pledge, security interest,
encumbrance, charge, or other lien.
(k) SEC FILINGS, ETC. The Company has heretofore delivered to
each Purchaser correct and complete copies of the SEC Documents. The SEC
Documents were true and correct in all material respects at the time filed with
respect to the periods covered thereby; and such reports, as amended,
supplemented, or updated by subsequent filings, are true and correct as of the
date so amended, supplemented or updated in all material respects, do not
contain any misstatement of a material fact and do not omit to state a material
fact or any fact required to be stated therein or necessary to make the
statements contained therein not materially misleading with respect to the
periods covered thereby; and all amendments or supplements thereto required to
be filed under the federal securities laws have been so filed. The consolidated
financial statements of the Company included in the SEC Documents complied, when
filed, with the then-applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may have been indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form 10-QSB
promulgated by the SEC) and fairly presented (subject in the case of the
unaudited statements, to normal audit adjustments) the financial position of the
Company at the dates thereof and the consolidated results of the operations and
statement of changes in financial position for the periods then ended. The
Company has filed all documents and agreements that were required to be filed as
exhibits to the SEC Documents and all such documents and agreements when filed
were correct and complete in all material respects. Notwithstanding the
foregoing, the Company's financial situation has changed since the Company filed
the SEC Documents.
(l) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
the financial statements (the "Financial Statements") included in the SEC
Documents, or on SCHEDULE 5(L), or as incurred in the ordinary course of
business subsequent to March 31, 1998, as of the date hereof (i) the Company has
no liability of any nature (matured or unmatured, fixed or contingent) that was
not provided for or disclosed in the Financial Statements, and (ii) to the best
knowledge of the Company after due diligence, all liability reserves established
by the Company and set forth in the Financial Statements were adequate in all
material respects for the purposes indicated therein.
(m) ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts
receivable and accounts payable of the Company as of June 18, 1998, attached
hereto as EXHIBIT 5(M) are (a) bona fide; (b) in accordance with the books and
records of the Company, (c) fairly, completely and accurately present the
accounts receivable and accounts payable of the Company as of such date and (d)
prepared in conformity with generally accepted accounting principals
consistently applied as of the period covered thereby.
(n) INVENTORY. The Company has previously provided or made
available to the Purchasers a list of the Company's inventory, including raw
materials and work in
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progress. The Company's inventory is valued at $3,400,000.00 as of June 19,
1998. The inventories of the Company are in usable and saleable condition and
each item of such inventory is saleable at least at the value at which it is
carried on the books. To the best of the Company's knowledge, once completed and
converted to inventory, the Company's work in progress will be in useable and
saleable condition.
(o) MATERIAL CHANGES. Except as disclosed in or contemplated
by the SEC Documents or described on SCHEDULE 5(O) attached hereto, since March
31, 1998, there has not been any adverse material change in the assets,
liabilities, operations or financial condition of the Company.
(p) CUSTOMERS AND CONTRACTS. Except as disclosed in the SEC
Documents or described on SCHEDULE 5(P) attached hereto, to its knowledge, since
March 31, 1998, the Company has not lost any material customers and no material
contracts have been cancelled.
(q) TAXES. The Company has accurately prepared and timely
filed or has had accurately prepared and timely filed on its behalf all tax
returns which, to the knowledge of the Company, are required to be filed by it,
and has paid all taxes shown to be due and payable on said returns including but
not limited to all employment and payroll taxes or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (other than those the amount or validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with generally accepted accounting principles have
been provided on the books of the Company) including but not limited to all
employment and payroll taxes; and no tax liens have been filed and, to the
knowledge of the Company, no claims are being asserted with respect to any such
taxes, fees or other charges.
(r) O.S.H.A. AND ENVIRONMENTAL COMPLIANCE. The Company has
duly complied with, and its facilities, business, assets, property, leaseholds
and equipment are in compliance in all material respects with, the provisions of
the Federal Occupational Safety and Health Act, the Environmental Protection
Act, and all other environmental laws; there have been not outstanding
citations, notices or orders of non-compliance issued to the Company or relating
to its business, assets, property, leaseholders or equipment under such laws,
rules or regulations.
The Company has been issued all required federal,
state and local licenses, certificates or permits relating to all applicable
environmental laws. There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively, referred to as "Releases") of hazardous
substances at, upon, under or within the real property owned by the Company.
There are no underground storage tanks or polychlorinated biphenyl on the real
property. To the best of the Company's knowledge, the real property has never
been used as a treatment, storage or disposal facility of hazardous waste. To
the Company's knowledge, no hazardous substances are present on the real
property or any premises leased by the Company,
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excepting such quantities as are handled in accordance with all applicable
manufacturer's instructions and governmental regulations and in proper storage
containers and as are necessary for the operation of the commercial business of
the Company.
(s) RELATED PARTY TRANSACTIONS. Except to the extent described
in the SEC Documents or as described on SCHEDULE 5(S), no current principal
stockholder or current or former director, officer or employee of the Company
nor any "affiliate" (as defined in the rules and regulations promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), of any
such person, is currently, or since March 31, 1998 has been, directly or
indirectly through his affiliation with any other person or entity, a party to
any transaction (other than as an employee, consultant or stockholder) with the
Company providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring cash payments from or to any such
person.
(t) GUARANTEES. Except with respect to the obligations of its
subsidiaries to PNC and BT, the Company is not a guarantor of any liability or
obligation (including indebtedness) of any other person.
(u) DISCLOSURE. The representations and warranties made by the
Company in this Agreement or, except to the extent modified or amended by
subsequent written disclosure to each of the Purchasers through the date hereof,
in any other document or certificate furnished in connection herewith did not
contain at the time made or, if set forth herein, does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under which
they are made, not misleading in any material respect. There is no fact known to
the Company that materially adversely affects or, other than general economic
conditions in the industry in which the Company operates, that the Company
reasonably believes will in the future materially adversely affect the business,
operations, affairs or condition, financial or otherwise, of the Company, which
has not been set forth in this Agreement, the Schedules thereto or in the SEC
Documents.
7. COVENANTS OF THE COMPANY. So long as the Purchasers hold Securities
that in the aggregate represent at least 20% of the outstanding capital stock of
the Company, the Company shall:
(a) REPORTS AND INFORMATION. Furnish to the Purchasers and
James B. Zane, promptly after mailing to stockholders, copies of each Annual or
Quarterly Report to the Company's stockholders and proxy or information
statement relating to a meeting of the Company's stockholders.
(b) CORPORATE EXISTENCE. Preserve and keep in full force and
effect its corporate existence, its qualification to do business and its good
standing in every state where it is or is required to be qualified to do
business, except where the failure to be so qualified would not have a Material
Adverse Effect; provided that nothing herein shall prevent the Company or any
subsidiary of the Company from changing their state of incorporation.
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(c) LICENSES, PERMITS AND FRANCHISES. Maintain, preserve and
protect at all times all of its corporate and operational licenses, permits and
franchises, and comply with each and all of the terms, conditions and
requirements of such licenses, permits and franchises, except to the extent
management of the Company determines it is not in the best interest of the
Company to do so.
(d) PROPERTIES. Preserve all of its assets and properties that
are used in the conduct of its business and maintain and keep these assets and
properties in good repair, working order and condition, and from time to time
make or cause to be made all needed and proper repairs, renewals, replacements,
betterments and improvements to these assets and properties to preserve and
maintain their value (including, but not limited to, by further encumbrance of
the assets or properties), normal wear and tear excepted, so that the business
carried on in connection with these assets and properties may be properly
conducted at all times, except to the extent management of the Company
determines it is not in the best interest of the Company to do so.
(e) BOOKS AND RECORDS. Keep at all times complete books of
record and accounts, in conformity with generally accepted accounting principles
as revised from time to time, with full, true and correct entries of all
dealings and transactions in relation to the Company's business and affairs, and
reasonably protect such books and accounts against loss or damage.
(f) STATUTORY COMPLIANCE. At all times, conduct its business
in accordance with, and comply in all material respects with, all applicable
statutes, regulations, judgments, decrees, resolutions and orders of, and all
applicable restrictions imposed by, any and all governmental entities and/or
authorities, federal, state, local and non-U.S., judicial or administrative,
applicable to the conduct of the Company's businesses and activities (including
environmental and other regulatory requirements) or the ownership or operation
of its properties, licenses, permits and/or franchises, particularly those
pertaining to the business it currently operates.
(g) CONDUCT OF BUSINESS. Carry on its business and activities
diligently and consistent with prudent business practice for a company of the
size and character of the Company and will use its best efforts to preserve its
present relationship with suppliers, customers and others having business
relationships with it, except to the extent that management of the Company
determines it is not in the best interest of the Company to do so.
(h) BOARD REPRESENTATION. Simultaneously with the Closing
Date, Stanley F. Zuk and Gregory Horne will resign from their positions as
members of the Board of Directors. The remaining members of the Board of
Directors shall cause three individuals designated by the Purchasers to be
nominated for election to the Board of Directors of the Company, and shall use
their best efforts to cause the election to the Board of Directors of such
nominees, to serve until the conclusion of the next annual general meeting of
stockholders of the Company in accordance with the Bylaws of the Company. The
members of the Board of Directors shall also adopt a corporate resolution fixing
the size of the Board at six members
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and agreeing not to increase the size until after the annual meeting of
stockholders. The Company shall pay the reasonable amount of out-of-pocket
expenses of the Purchasers' designees in attending such board or committee
meetings in accordance with its ordinary and usual policies for the
reimbursement of the expenses of non-employee directors. Notwithstanding
anything to the contrary contained in this section, a director designated by the
Purchasers shall be subject to the approval of the Company's management, which
shall not unreasonably be withheld. Promptly after first proposing a candidate,
the Purchasers shall furnish to the Company such information as may be requested
by the Company about such designee (i) that is required to be included in a
Registration Statement under the Securities Act or a Proxy Statement under the
Exchange Act and (ii) that would be required to be included in a Schedule 13D
under the Exchange Act by Item 2 thereof if filed by the candidate with respect
to ownership of the Company's securities.
(i) STOCKHOLDER APPROVAL. The Company agrees to prepare and
file, within 45 days of the date of this Agreement, a proxy statement with
respect to a meeting of stockholders to approve the terms of the Restructuring,
including, without limitation, this Agreement and the transactions contemplated
hereby and the Capital Amendment, that require stockholder approval, including
but not limited to the conversion of the Preferred Stock. The Board of Directors
will take all reasonable steps necessary to hold this meeting within 120 days of
the date of this Agreement. The Board of Directors of the Company has determined
by unanimous vote that this transaction is advisable and in the best interests
of the Company's stockholders and, to the extent consistent with their fiduciary
obligations, will recommend to the Company's stockholders the approval of this
Agreement and the transactions contemplated hereby and cause the Company to use
its best efforts to solicit from its stockholders proxies in favor of approving
this Agreement.
(j) ACCOUNTS PAYABLE. For a period of six months from the date
of this Agreement, the Company will submit to Peter Zachariou a schedule for the
payment of accounts payable. The schedule of payments of accounts payable must
be approved by Peter Zachariou, provided, however, if Peter Zachariou does not
respond to such schedule within five (5) business days of the date of receipt,
the Company can pay such accounts payable according to the schedule. In
addition, the Company shall not be required to submit for approval payments for
salaries processed through ADP and payments of less than $25,000 in the
aggregate per month.
8. PUT OPTION. Notwithstanding anything contained herein to the
contrary, in the event stockholder approval of the matters set forth in Section
6(i) is not obtained within one year of the date of this Agreement, Purchasers
shall have the option, for a period of 90 days thereafter, to require the
Company to re-purchase their shares of Series A Preferred Stock and/or Series B
Preferred Stock purchased by them at a price equivalent to the Purchase Price
plus 12% per annum (prorated over the period such shares are outstanding) by
tendering a written request thereafter to the Company accompanied by the
certificates evidencing such shares duly endorsed for transfer with medallion
signature guarantees affixed thereon.
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9. REGISTRATION RIGHTS.
(a) REGISTRATION STATEMENT. The Company shall file with the
U.S. Securities and Exchange Commission (the "Commission") a registration
statement registering the re-sale of the Securities within 30 days of the date
of the Company's special or annual meeting of stockholders and use its best
efforts to cause such registration statement to become effective as soon as
practicable. In the event the Company has not filed such registration statement
by March 31, 1999, the Purchasers may, by written notice to the Company, demand
the registration of the resale of such Securities. Upon the written request of
the Purchasers, the Company shall use its best efforts to effect the
registration under the Securities Act of the Securities which is has been so
requested to register.
(b) PIGGY-BACK REGISTRATION RIGHTS. In addition, if at any
time during the two years from the date of this Agreement the Company shall
prepare and file one or more registration statements under the Securities Act
(other than a registration statement in Form S-4 (or with regard to any
transaction contemplated by Rule 145 promulgated under the Securities Act) or
Form S-8 or any successor form of limited purpose and other than a
post-effective amendment to any such registration statement), with respect to a
public offering of equity or debt securities of the Company, or of any such
securities of the Company held by its security holders, the Company will include
in any such registration statement such information as is required, and such
number of shares of Common Stock purchased hereunder and Conversion Shares
(collectively, the "Registrable Securities") held by the Purchasers thereof or
their respective designees or transferees as may be requested by them (the
"Holders"), to permit a public offering of the Registrable Securities so
requested; PROVIDED, HOWEVER, that if, in the written opinion of the Company's
managing underwriter, if any, for such offering, the inclusion of the
Registrable Securities requested to be registered, when added to the securities
being registered by the Company or the selling security holder(s), would exceed
the maximum amount of the Company's securities that can be marketed without
otherwise materially and adversely affecting the entire offering, then the
Company may exclude from such offering all or that portion of the Registrable
Securities requested to be so registered, so that the total number of securities
to be registered is within the maximum number of shares that, in the opinion of
the managing underwriter, may be marketed without otherwise materially and
adversely affecting the offering, provided that at least a pro rata amount of
the securities that otherwise were requested to be registered for other
stockholders is also excluded. In the event of such a requested registration,
the Company shall furnish the then Purchasers of the Registrable Securities with
not less than 20 days' written notice prior to the proposed date of filing of
such registration statement. Further notice shall be given by the Company to
Holders, with respect to subsequent registration statements or post-effective
amendments filed by the Company, at such time as all of the Registrable
Securities have been registered or may be sold without registration under the
Securities Act or applicable state securities laws and regulations pursuant to
Rule 144 of the Securities Act. The holders of the Registrable Securities shall
exercise the rights provided for in this Section 8 by giving written notice to
the Company, within ten days of receipt of the Company's notice of its intention
to file a registration statement. Notwithstanding anything contained herein to
the contrary, the Company may delay the effectiveness of such registration
statement or withdraw such registration statement;
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PROVIDED, HOWEVER, the Company will provide the Holders with notice of such
delay or withdrawal.
(c) RULE 144. Notwithstanding anything contained herein to the
contrary, the Holders shall not be permitted to exercise the registration rights
provided for herein with respect to all such portion of the Registrable
Securities as may be sold without registration under the Securities Act or
applicable state securities laws and regulations under Rule 144 of the
Securities Act.
(d) EXPENSES. The Company shall bear all expenses, incurred in
the preparation and filing of such registration statements or post-effective
amendment (and related state registrations, to the extent permitted by
applicable law) and the furnishing of copies of the preliminary and final
prospectus thereof to the Holders, other than expenses of the Holders' counsel,
and other than sales commissions or transfer taxes incurred by the then holders
with respect to the sale of such securities.
(e) DELAY OF REGISTRATION STATEMENT. Notwithstanding the
provisions of this Section 8, if at any time during which the Company is
obligated to maintain the effectiveness of a registration statement pursuant to
such Section, counsel to the Company (which counsel shall be experienced in
securities matters) has determined in good faith that the filing of such
registration statement or the compliance by the Company with its disclosure
obligations thereunder would require the disclosure of material information
which the Company has a bona fide business purpose for preserving as
confidential, then the Company may delay the filing or the effectiveness of such
registration statement (if not then filed or effective, as appropriate) and
shall not be required to maintain the effectiveness thereof (if previously
declared effective) for a period expiring upon the earlier to occur of (i) the
date on which such information is disclosed to the public or ceases to be
material or the Company is so able to comply with its disclosure obligations, or
(i) 30 days after counsel to the Company makes such good faith determination.
There shall not be more than one such delay period with respect to any
registration statement after it has been declared effective pursuant to Section
8. Notice of any such delay period and of the termination thereof will be
promptly delivered by the Company to each Purchaser and shall be maintained in
confidence by each such Purchaser. The Purchasers shall not sell any Conversion
Shares during such period as any such registration statement is not current, as
advised by the Company, unless the sale is exempt from registration. The
Purchasers shall furnish to the Company such information regarding such
Purchaser and a written description of the contribution proposed by such
Purchaser as the Company may reasonably request.
(f) UNDERWRITERS' LOCKUP. Each Holder whose Registrable
Securities are included in a registration statement pursuant to an underwritten
public offering shall, if requested by the managing underwriter of the public
offering, enter into an agreement with the underwriter pursuant to which the
Holder will agree not to sell, transfer or otherwise dispose of the Registrable
Securities for such period after consummation of the public offering as may
reasonably be requested by the underwriter; up to a maximum of 120 days, without
the consent of the underwriter.
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10. NOTICES. All notices, reports and other communications to the
Purchasers of the Company hereunder shall be in writing, shall refer
specifically to this Agreement and shall be hand delivered or sent by facsimile
transmission or by registered mail or certified mail, return receipt requested,
postage prepaid, in each case to the respective persons and addresses specified
below (or to such other persons or addresses as may be specified in writing to
the other party):
If to the Purchaser, to: The respective address as set forth on
SCHEDULE 1 hereto
With a copy to: Zane and Rudofsky
152 West 57th Street
New York, New York 10019
Attn: James B. Zane, Esquire
Fax No.: (212) 541-5555
If to the Company, to: ASD Group, Inc.
1 Industrial Street
Poughkeepsie, New York 12603
Attn: Gary Horne, Chief Executive Officer
Fax No.: (914) 691-6070
With a copy to: Broad and Cassel
201 South Biscayne Boulevard, Suite 3000
Miami, Florida 33131
Attn: Dale S. Bergman, P.A.
Fax No.: (305) 373-9443
Any notice or communication given in conformity with this
Section shall be deemed to be effective when received by the addressee if
delivered by hand or overnight courier and three days after mailing, if mailed.
11. MEDIATION AND ARBITRATION OF DISPUTES.
(a) MEDIATION. If a dispute arises under this Agreement and if
the dispute cannot be settled through direct discussions, the parties agree to
endeavor first to settle the dispute in an amicable manner by nonbinding
mediation administered by the American Arbitration Association under its
Commercial Mediation Rules.
(b) ARBITRATION. Any dispute, unresolved through the mediation
process in Section 11(a), arising under this Agreement shall be submitted by the
parties to binding arbitration, with any such arbitration proceeding being
conducted in accordance with the rules of the American Arbitration Association.
Any arbitration panel presiding over any arbitration proceeding hereunder is
hereby empowered to render a decision in respect of such dispute, to award costs
and expenses (including reasonable attorney fees) as it shall deem equitable and
to
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enter its award in any court of competent jurisdiction. Each of the parties
submits to the jurisdiction of any state or federal court sitting in New York,
New York for purposes of enforcement of any arbitration award hereunder. Each
party also agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court. Each of the parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of
any other party with respect thereto.
12. NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of
the Purchasers or the Company to exercise and no delay in exercising any right,
power, remedy or privilege under this Agreement or provided by statute or at law
or in equity or otherwise, including, without limitation, the right or power to
terminate this Agreement, shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a waiver of any breach
of this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
13. AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent to any departure
therefrom, shall in any event be effective unless the same shall be in writing
specifically identifying this Agreement and the provision(s) intended to be
amended, modified, waived, terminated or discharged and signed by the Purchasers
and the Company, and each amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Purchasers and the Company.
14. POWER OF ATTORNEY. Each of the Purchasers set forth on Schedule 1
constitutes and appoints Peter Zachariou as his, her or its true and lawful
attorney in fact and agent with full power of substitution for him, her or it,
and as his, her or its name, place and stead in any capacities to execute in the
name of each such person any and all documents relating to the purchase of the
Shares and grants Peter Zachariou full power and authority to do and perform
each and every act and thing required or necessary to be done as such Purchaser
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
15. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY AND HORNE. Subject to the
limitations contained in Section 13(d), the Company and Horne, jointly and
severally, hereby agree to indemnify and hold each Purchaser and their
respective affiliates, directors, officers, employees and agents (collectively,
the "Purchaser Indemnitees") harmless from, and to reimburse each of the
Purchaser Indemnitees for, on an after-tax basis, any loss, damage, deficiency,
claim, liability, obligation, suit, action, fee, cost or expense of any nature
whatsoever (including, but not limited to, reasonable attorney's fees and costs)
(COLLECTIVELY,
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"LOSSES") arising out of, based upon or resulting from any inaccuracy in or any
breach of any representation or warranty of the Company contained in this
Agreement to the extent such Loss exceeds the Basket (as defined below),
certificate or other written instrument or document delivered by the Company
pursuant hereto.
(b) INDEMNIFICATION BY THE PURCHASER. Each Purchaser,
severally and not jointly, hereby agrees to indemnify and hold the Company and
its subsidiaries, affiliates, directors, officers, employees and agents
(collectively, the "Company Indemnitees") harmless from, and to reimburse each
of the Company Indemnitees for, on an after-tax basis, any Loss from (i) any
inaccuracy in or any breach of any representation or warranty of the Purchaser
contained in this Agreement, certificate or other written instrument or document
delivered by the Purchaser pursuant hereto or (ii) any breach of any of the
covenants, agreements or undertakings of the Purchaser contained in or made
pursuant to this Agreement.
(c) PROCEDURE FOR INDEMNIFICATION. Promptly following the
discovery of any breach of a representation or warranty of the Company or the
Purchasers contained in this Agreement, of any third party claim or of any other
matter which could entitle Purchasers or the Company to indemnification under
this Agreement, the indemnified party shall give notice to the indemnitor. The
indemnitor shall have ten days from receipt of such notice to pay the amount of
damages so specified or challenge the claim. If the indemnitor disputes such
claim for indemnification, the indemnitor shall be given 10 days in which to
meet with the Company's accountants, review the basis for such claim and dispute
the findings, if appropriate.
If any claim for indemnification hereunder results
from any claim or Loss by a person who is not a party to this Agreement ("Third
Party Claim"), such notice shall also specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The Indemnitee shall
give the other party prompt notice of any such claim and the Indemnitor shall
undertake the defense thereof by representatives of its own choosing, reasonably
satisfactory to the Indemnitee, at the expense of the Indemnitor. The Indemnitee
shall have the right to participate in any such defense of a Third Party Claim
with advisory counsel of its own choosing, at its own expense. If Indemnitor,
within 20 days after notice of any such Third Party Claim, fails to defend, the
Indemnitee shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim on behalf, and for the account of,
Indemnitor, at the expense and risk of Indemnitor.
(d) LIMITS ON INDEMNIFICATION. The Purchasers shall not be
entitled to indemnification pursuant to this Section 13 unless and until the
aggregate amount of the Company Indemnified Losses (generally, the Indemnified
Losses) with respect to losses for specific representations and warranties
exceeds the amounts set forth on SCHEDULE 13(D) with respect to those losses (in
each case, a "Basket"). In no event shall the Company or Horne be liable or
responsible after closing for any Indemnified Losses under this Agreement in
excess of an aggregate amount equal to $1,900,000. Moreover, Horne shall be
liable only to the extent of the principal amount then outstanding under the
Promissory Notes payable by the
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Company to Horne (the "Horne Notes"), and the 85,718 shares of the Company's
Common Stock owned by Horne (the "Horne Shares").
(e) SET-OFF AND ESCROW. Without limiting any other rights of
the Purchasers pursuant to this Agreement or otherwise, the Purchasers may, upon
written notice to Horne and subject to the provisions of Section 13(c), offset
against the amounts due Horne under the Horne Notes any and all Indemnified
Loses incurred or sustained by it and subject to indemnification under Section
13. To the extent of any offset, the principal amount outstanding under the
Horne Notes shall be reduced, and interest as stated therein shall accrue from
the date of such offset only on the principal balance as so reduced. In
addition, Horne shall enter into an agreement with the Company's transfer agent
in form and substance reasonable acceptable to the Purchasers pursuant to which
Horne shall place into escrow, for a period of one year commencing from the date
of this Agreement, the Horne Shares. Notwithstanding anything contained herein
to the contrary, Purchasers must first exercise their rights to set-off first
with respect to the Horne Notes.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTS. Each of the
representations and warranties made by the Company shall survive for a period of
one year after the date of this Agreement. No claim for the recovery of
Indemnified Losses may be asserted after such representations and warranties
shall thus expire; PROVIDED, however, that claims for Indemnified Losses first
asserted within such period shall not thereafter be barred.
17. INTEGRATION. This Agreement, including the Schedules hereto and the
agreements referred to herein, represents the entire understanding and agreement
of the parties with respect to the subject matter hereof. No other
representations, statements or warranties have been made, other than what is
written herein.
18. ATTORNEYS' FEES. Except as otherwise set forth herein, all costs
and expenses, including reasonable attorneys' fees, incurred in the enforcement
of this Agreement, shall be paid to the prevailing party by the non-prevailing
party, upon demand.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which may be considered one and the same agreement and each
of which shall be deemed an original.
20. GOVERNING LAW. This Agreement shall be enforced, governed and
construed in all respects in accordance with the internal laws, and not the laws
pertaining to conflicts or choice of laws, of the State of Delaware. The parties
agree to be subject to the personal jurisdiction of the federal and state courts
in the State of New York, and that any disputes arising from or in relation to
this Agreement may be commenced in Federal or State Court of competent
jurisdiction within the State of New York. The parties consent to service of
process by Certified Mail, Return Receipt Requested, at the addresses set forth
hereinabove.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto, through their duly authorized
officers, have executed this Agreement as of the date first written above.
THE COMPANY:
ASD GROUP, INC.
By: /S/ GARY D. HORNE
--------------------------------------
Gary Horne, Chairman of the Board
and Chief Executive Officer
PURCHASERS:
/S/ JONATHON LAURIE
------------------------------------------
JONATHON LAURIE
/S/ JACOB BENJAMIN
------------------------------------------
JACOB BENJAMIN
/S/ HENRY ORLINSKY
------------------------------------------
HENRY ORLINSKY
/S/ MARN RABINONCY
------------------------------------------
MARN RABINONCY
/S/ MARLENE MORDOWITZ
------------------------------------------
MARLENE MORDOWITZ
CONRAD CONSULTING
By: /S/ ILLEGIBLE
---------------------------------------
Name: Illegible
Title: Signatory
20
<PAGE>
/S/ REGINA MILLER
------------------------------------------
REGINA MILER
/S/ PETER ZACHARIOU
------------------------------------------
PETER ZACHARIOU
CAMERON WORLDWIDE LTD.
By: /S/ JAY H. SOLOMONT
---------------------------------------
Name: Jay H. Solomont
Title: Director
With respect to Section 5 only:
HIGH TECHNOLOGY COMPUTERS,
INC.
By: /S/ GARY D. HORNE
---------------------------------------
Gary D. Horne, Chief Executive Officer
AUTOMATED SYSTEMS
DEVELOPERS, INC.
By: /S/ GARY D. HORNE
---------------------------------------
Gary D. Horne
With respect to the Section 12 only:
/S/ GARY D. HORNE
------------------------------------------
GARY D. HORNE
21
<PAGE>
EXHIBITS
--------
Exhibit A Certificates of Designations, Preferences,
Rights and Limitations for Series A and
Series B Preferred Stock
Exhibit 5(m) Accounts Receivable and Accounts Payable
SCHEDULES
---------
Schedule 1 Purchasers
Schedule 3 Use of Proceeds
Schedule 5(e) List of Outstanding Options and Warrants
Schedule 5(i) Legal Proceedings
Schedule 5(j) Litigation, Outstanding Orders, Judgments, Etc.
Schedule 5(l) Undisclosed Liabilities
Schedule 5(o) Material Changes
Schedule 5(p) Customers and Contracts
Schedule 5(s) Related Party Transactions
Schedule 12(c) Indemnification Limits
EXHIBIT 2
AGREEMENT
This Agreement is made and entered into as of the 24th day of June,
1998, by and among Automatic Systems Developers, Inc., a New York corporation
("ASD"); High Technology Computers, Inc., a New York corporation ("HTC") (ASD
and HTC are each a "Borrower" and collectively, the "Borrowers"), ASD Group,
Inc., a Delaware corporation ("Holdings"); the financial institutions which are
now or hereafter become a party to the Credit Agreement (as defined below)(the
"Lenders") and PNC Bank, National Association (the "Agent"), as agent for the
Lenders.
RECITALS
A. The Borrowers, Lenders, and PNC are parties to a Revolving
Credit, Term Loan and Security Agreement dated December 18,
1997 (the "Credit Agreement") pursuant to which the Lenders
have made certain Advances to the Borrowers in the form of
Revolving Advances and a Term Loan.
B. Holdings is the parent of the Borrowers and has guaranteed the
obligations of the Borrowers under such Credit Agreement.
C. Certain Events of Default have occurred under the Credit
Agreement, namely the failure of Borrower and Holdings to meet
certain financial and non-financial covenants and failure to
make certain payments of principal and interest to
subordinated creditors of the Borrowers.
D. The maximum credit facility provided by the Credit Agreement
is a revolving loan of up to $4,500,000.00.
E. The parties wish to come to some agreement with respect to the
Advances, defaults and the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the undersigned agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. ACKNOWLEDGEMENTS. The Borrowers and Guarantors hereby
acknowledge and ratify that there currently are existing the
following Defaults under the Credit Agreement, namely Defaults
arising due to breaches of Sections 6.5 and 6.6 of the Credit
Agreement and Defaults arising under Section 6.9 due to
failure to pay amounts due under the Subordination Note
(collectively, the "Specified Defaults").
1
<PAGE>
3. CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective only upon the satisfaction or waiver of all of the
following conditions precedent:
(a) The Borrowers, the Guarantors and the Lenders shall
have duly executed and delivered this Agreement
(whether the same or different copies) and the Agent
shall have received a copy signed by each of the
Borrowers and the Guarantors;
(b) The Agent shall have received the fees and expense
reimbursements referred to in Section 16 hereof, a
fee in the amount of $7,500 to Agent and warrants
with a term of three years to purchase 100,000 shares
of Holdings Common Stock at a purchase price of $1.50
per share (in the form attached hereto as Exhibit A);
(c) The Agent shall have received resolutions executed by
the Board of Directors of the Borrowers approving
this Agreement;
(d) The Borrowers shall have received $1,500,000.00 in
immediately available funds as proceeds from the
investment by a group of investors led by Cameron
Worldwide Corp. (the "Cameron Transaction"), of which
not less than $865,000 shall be available to tbe
Borrowers as working capital;
(e) The Agent shall have received ratification of the
existing intercreditor and subordination agreement;
(f) Agent shall have received a pro forma balance sheet
and a statement of sources and uses of funds; and
(g) The Bank shall have received such other documents,
opinions, approvals or appraisals as the Bank may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders
to enter into this Agreement, each of the Borrowers and the
Guarantors hereby, jointly and severally, represent and
warrant to the Lenders that (i) each has the full power,
capacity, right and legal authority to execute, deliver and
perform its respective obligations under this Agreement, and
the other documents to which it is a party, and each of the
Borrowers have taken all appropriate action necessary to
authorize the execution and delivery of, this Agreement and
the documents to which it is a party, (ii) this Agreement, the
Credit Agreement and the other documents constitute legal,
valid and binding obligations of each of the Borrowers and the
Guarantors enforceable against such Borrower or Guarantor in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws effecting the rights of creditors generally,
(iii) the representations and warranties contained in the
Credit Agreement and in each of the other documents to which
it is a party are true and correct on and as of the date
hereof as though made on and as of such date, except for
changes which have occurred and which were not prohibited by
the terms of the Credit Agreement or as stated in this
Agreement, (iv) no Default or Event of Default would result
from the execution, delivery and
2
<PAGE>
performance by any Borrower and any Guarantor of this
Agreement, or any of the other documents to which it is a
party, (v) except as described above or except with respect to
the Subordinated Loan and the Becker Group Loan, none of the
Borrowers or the Guarantors are in default in the payment of
any of their respective obligations under any mortgage,
indenture, security agreement, contract, undertaking or other
agreement or instrument to which they are a party or which
purports to be binding upon them or any of their respective
properties or assets, which default would have a material
adverse effect on the management, business, operations,
properties, assets or condition (financial or otherwise) of
any Guarantor, (vi) each of the Borrowers and the Guarantors
is in compliance with all applicable statutes, laws, rules,
regulations, orders and judgments, the contravention or
violation of which would have a material adverse effect on the
management, business, operations, properties, assets or
condition (financial or otherwise) of any Borrower or on the
properties, assets or condition (financial or otherwise) of
any Guarantor, and (vii) no litigation or administrative
proceeding of or before any court or governmental body or
agency is now pending nor, to the best knowledge of any
Borrower or any Guarantor upon reasonable inquiry, is any such
litigation or proceeding now threatened against any Borrower
or any Guarantor upon reasonable inquiry, is there a valid
basis for the initiation of any such litigation or proceeding,
which if adversely determined (after giving effect to all
applicable insurance coverage then in existence) would have a
material adverse effect on the business, assets or condition
(financial or otherwise) of any Borrower or on the properties,
asset or condition (financial or otherwise) of any Guarantor.
5. WAIVER. Effective as of the date hereof, subject to the
condition that this Agreement not be in default, Lenders agree
to waive any and all rights they may have by virtue of the
occurrence of any Event of Default arising due to the
Specified Defaults whether such Event of Default is now
existing or arising in the future, including but not limited
to the right to declare the Obligations immediately due and
payable.
6. INTEREST AND FEES. The Lenders acknowledge that Borrowers and
Holdings have not to date been charged the Default Rate of
interest due to the Specified Defaults. Moreover, Lenders
agree not to charge the Borrowers and Holdings any Default
Rate of interest to which it may be entitled by virtue of
Specified Defaults (whether now existing or subsequently
occurring) from the original date of the Credit Agreement
through June 23, 2000 (or June 23, 2001 if extended pursuant
to Section 8) subject to the condition that this Agreement not
be in default.
7. FORBEARANCE. Effective as of the date hereof through August
24, 1998 (the "Forbearance Period"), and subject to the
satisfaction of the conditions set forth in Section 3 hereof,
the Lenders shall not seek to exercise any of their rights or
remedies under the Credit Agreement based on any Specified
Defaults including
3
<PAGE>
but not limited to statutory common law rights to offset.
Lenders will continue to provide financing to Borrowers
pursuant to the terms of this Agreement on the terms described
herein notwithstanding any Specified Default during the
Forbearance Period subject to the condition that this
Agreement not be in default.
8. FUTURE MODIFICATION OF CREDIT AGREEMENT.
(a) The Lenders will, upon review of projections
submitted from time to time by the Borrowers and
reasonably satisfactory to the Lenders, increase the
maximum credit limit from $4,500,000 to up to
$8,750,000, provided that such projections evidence
the reasonable use of such increase and the
Borrowers' reasonable ability to repay the same.
(b) During the Forbearance Period, the parties agree that
Lenders will continue to advance sums pursuant to the
Credit Agreement and not to exercise any of their
rights to declare a Default or terminate the Credit
Agreement so long as (I) Borrowers maintain Undrawn
Availability (as defined in the Credit Agreement)
equal to not less than $250,000, (II) there exist no
Defaults except the Specified Defaults, and (III)
there are no defaults under this Agreement. During
the Forbearance Period, the parties will negotiate in
good faith the restructure of the Credit Agreement to
reflect the recapitalization of the Company in light
of the Cameron Transaction and Agreements to the
covenants contained therein. If after the expiration
of the Forbearance Period, no agreement is reached as
to the restructure of the Credit Agreement, the
parties agree that the Credit Agreement will remain
in place until June 23, 2000 (provided that if no
Default or Event of Default has occurred under the
Credit Agreement or this Agreement, the Borrowers may
by written notice given between April 15, 2000 and
June 1, 2000 extend such date to June 23, 2001), and
Lenders agree not to exercise any of their rights to
declare a Default due to a Specified Default whether
now existing or arising in the future or terminate
the Credit Agreement so long as (I) Borrowers
maintain an Undrawn Availability equal to not less
than $250,000 through October 31, 1998 and $400,000
thereafter (which amount will reduce to $300,000 at
such time as the Company has two profitable
quarters), (II) there exist no Defaults except for
Specified Defaults, and (III) this Agreement is not
in default. If and when the Credit Agreement expires
on June 23, 2000 and the parties were unable to reach
agreement as to the restructure of the Credit
Agreement during the Forbearance Period, Borrowers
shall not be obligated to pay Agent the early
termination fee described in Section 13.1 of the
Credit Agreement. If the Credit Agreement is
terminated prior to such date, Section 13.1 shall
apply and a termination fee will be due and payable.
4
<PAGE>
9. OVER-ADVANCE. For purposes of this Agreement, the parties
agree that the over-advance shall be $900,000. The parties
agree that said over-advance will be added to the Formula
Amount during the Forbearance Period. Following the
Forbearance Period, if no amendment to the Credit Agreement
has been negotiated and executed by the parties thereto, this
over-advance amount shall remain in place for six months
following the Forbearance Period. Thereafter, $600,000 of the
over-advance will be reduced to zero on a straight line
amortized basis in 12 equal monthly installments, with the
remaining balance, if any, on the over-advance payable on June
23, 2000.
10. OFFSET AND NEW CAPITAL.
(a) The parties hereto agree that unless there exists an
Event of Default (other than a Specified Default),
the Lenders will not exercise their contractual,
statutory or common law rights of offset against the
proceeds of the Cameron Transaction.
(b) On or before July 23, 1998, the Borrowers shall
receive not less than $385,000 from equity
investments, as working capital for the Borrowers. If
such $385,000 is not received on or before August 2,
1998, the Lenders may declare an Event of Default to
exist, provided that an Event of Default shall not be
deemed to exist for failure to receive such amount
prior to August 2, 1998.
11. PAYMENT OF INDEBTEDNESS. Notwithstanding the language
contained in Sections 6.9, 7.16 and 7.17 of the Credit
Agreement, the Lenders agree to the payment by Holdings of
$220,000 in satisfaction of the Becker Group Loans ($110,000
of which will be paid on the date hereof and $110,000 of which
will be paid one year from the date of this Agreement).
Moreover, notwithstanding anything contained in the
Intercreditor and Subordination Agreement dated December 18,
1997 between Bankers Trust Company and the Agent (the
"Intercreditor Agreement"), the Lenders agree and consent to
the payment on the date hereof by Borrowers of $250,000 to
Bankers Trust Company. Following the date hereof, the
remaining indebtedness to Bankers Trust Company will be
subject to the Intercreditor and Subordination Agreement;
provided, however, if no default other than Specified Defaults
are than existing or would be caused thereby, Agent agrees and
consents to the repayment of the indebtedness to Bankers Trust
Company as provided for in the Option and Forebearance
Agreement among the Company, Bankers Trust Company and
Automatic System Developers, Inc. dated the date hereof and
attached as EXHIBIT A.
12. INDEBTEDNESS TO AFFILIATE. Lenders acknowledge that Holdings
has received a loan from Gary D. Horne, Chairman and Executive
Officer of Holdings.
5
<PAGE>
Notwithstanding the provisions contained in Section 7.8 of the
Credit Agreement, the Lenders consent to such indebtedness and
to the repayment of such indebtedness, if no Defaults other
than Specified Defaults are then existing or would be caused
thereby; provided, however, Mr. Horne's payments will be
limited to $10,000 per month until the month after Holdings
has three consecutive quarters in which it reports income
before income taxes (as opposed to a loss before income
taxes). Thereafter, the balance of Mr. Horne's indebtedness
will be repaid in equal monthly installments over a three year
period, if no Defaults other than Specified Defaults are then
existing or would be caused thereby.
13. CHANGE OF CONTROL. Lenders acknowledge that the Cameron
Transaction will result in a Change of Control. Lenders agree
that such Change of Control will not result in an Event of
Default or accelerate repayment of the Obligations; provided
that any further Change in Control shall constitute an Event
of Default.
14. AGREEMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. The
undersigned hereby consents to the proposal by the Board of
Directors to amend the Company's Certificate of Incorporation
and Bylaws to provide for (i) the issuance of shares of
Preferred Stock of Holdings to the Investors and (ii) the
increase in the authorized capital. Copies of the Amendment
are attached.
15. REFERENCE TO AND EFFECT ON THE DOCUMENTS.
(a) Except as specifically agreed herein, the Credit
Agreement and all other Documents, and all other
documents, agreements, instruments or writings
entered into in connection therewith, shall remain in
full force and effect and are hereby ratified,
confirmed and acknowledged by each of the Borrowers
and Guarantors. The agreements set forth above are
limited precisely as written and shall not be deemed
to (i) be a consent to any waiver or modification of
any other term or condition of the Agreement or any
documents delivered pursuant thereto or (ii)
prejudice any right or rights which the Agent or
Lender may now or in future have in connection with
the Agreement or the other Documents.
(b) The execution, delivery and effectiveness of this
Agreement shall not operate as a waiver of any right,
power or remedy of the Bank under any of the
Documents, nor constitute a waiver or modification of
any provision of any of the Documents, not a waiver
of any now existing or hereafter arising Defaults or
Events of Default, except as expressly stated in
Sections 5, 8 and 9.
6
<PAGE>
16. FEES AND EXPENSES.
(a) Each of the Borrowers hereby agrees, jointly and
severally, pay, or cause to be paid to, the Agent on
demand all legal fees incurred by the Agent in
connection with the negotiation, preparation,
reproduction, execution and delivery of this
Agreement and other Documents to be delivered
hereunder such amounts not to exceed $20,000.00, and
hereby instructs the Bank to pay by wire such legal
fees upon the execution and delivery hereof.
(b) Each of the Borrowers hereby agrees to, jointly and
severally, pay the Agent on demand for all costs,
expenses, charges and taxes (other than any income
taxes relating to income of the Bank), including,
without limitation, all reasonable fees and
disbursements of counsel, incurred by the Bank in
connection with the administration and enforcement of
this Agreement and the other Documents to be
delivered hereunder.
17. THIRD PARTY RELIANCE. No party to the Cameron Transaction or
any other person other than a direct party thereto, shall be a
third-party beneficiary of this Agreement, or shall be
entitled to rely thereon.
18. OTHER AGREEMENTS. Attached hereto are true and complete copies
of all agreements and understandings entered into in
connection with this Cameron Transaction, including without
limitation between or among any of any Borrower, Holdings, the
investors in the Cameron Transaction, Cameron, BT, the Becker
Group, BlueStone and H.J. Meyers & Co., Inc.
19. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed
and interpreted in accordance with the substantive laws of the
State of New York, without regard for its conflicts of laws
principles.
20. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not
constitute a part of Agreement for any other purpose.
21. SUCCESSORS. This Agreement shall be binding upon the
successors, assigns, heirs, executors and administrators of
the parties hereto.
7
<PAGE>
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this
Agreement by signing any such counterpart.
[SIGNATURES ON FOLLOWING PAGE]
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
AUTOMATIC SYSTEMS DEVELOPERS,
INC.
By: /S/ STANLEY F. ZUK
------------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
HIGH TECHNOLOGY COMPUTERS, INC.
By: /S/ STANLEY F. ZUK
------------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
ASD GROUP, INC.
By: /S/ STANLEY F. ZUK
------------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
PNC BANK, NATIONAL
ASSOCIATION, as Sole lender and agent
By: /S/ LASZLO HADJU-NEMETH
------------------------------------
Name: Laszlo Hadju-Nemeth
Title: Sr. Vice President
EXHIBIT 3
EXECUTION COPY
OPTION AND FORBEARANCE AGREEMENT
THIS OPTION AND FORBEARANCE AGREEMENT (this "Agreement") is made and
entered into as of the 17th day of June, 1998, by and among Bankers Trust
Company ("BTCo"), Automatic Systems Developers, Inc. (the "Company") and ASD
Group, Inc., formerly known as Dutchess Design and Development, Inc. ("DDD").
RECITALS
A. The Company and BTCo are parties to a Restructuring Agreement dated
as of December 19, 1997 (the "Restructuring Agreement") under which the parties
agreed to restructure the Company's and DDD's obligations to BTCo under the
Existing Credit Agreements, the Notes (as such terms are defined in the
Restructuring Agreement) and the documents executed and delivered in connection
therewith. In connection with the Restructuring Agreement, the Company and DDD,
jointly and severally, executed an Amended and Restated Secured Consolidated
Term Note, dated December 19, 1997 (as amended, supplemented or otherwise
modified from time to time, the "1997 Note"), in favor of BTCo in the original
principal amount of $2,801,133.
B. The Note is secured by, among other things, (1) certain property of
the Company, High Technology Computers, Inc. ("Computers"), and Netcomp, Inc.,
formerly known as ASD Office Systems, Inc. ("Netcomp") referenced in an Amended
and Restated Security Agreement dated as of December 19, 1997 (the "Security
Agreement") among the Company, Computers, Netcomp and BTCo; (2) a certain
mortgage dated September 17, 1991 on DDD's real property and improvements
thereon located in the Town of LaGrange, County of Dutchess, State of New York
(the "DDD Property"), as heretofore modified, extended, spread and assumed, from
DDD to Poughkeepsie Savings Bank ("PSB"), as predecessor in interest to the
Lender (the "DDD Mortgage"); (3) certain mortgages each dated July 24, 1987 on
the Company's real property and improvements thereon located in the Town of
Poughkeepsie, County of Dutchess, State of New York (the "ASD Property"), as
heretofore modified, extended, spread and assumed, from the Company to PSB, as
predecessor in interest to the Lender (the "ASD Mortgage"). The DDD Mortgage and
the ASD Mortgage, as modified, extended, spread and assumed, are hereinafter
referred to as the "Mortgages"). The Security Agreement and the Mortgages as
they may be amended, modified, or supplemented from time to time are hereinafter
referred to as the "Security Documents."
C. The indebtedness of the Company and DDD to BTCo is guarantied by
Computers and Netcomp (together, the "Guarantors") pursuant to separate
guaranties, each dated October 22, 1993 (the "Guaranties"), in favor of PSB, and
assigned to BTCo and reaffirmed and ratified by the Guarantors in the
Restructuring Agreement. All of the foregoing documents described in paragraphs
A through C hereof and all documents executed and delivered in connection
therewith are referred to as the "Loan Documents."
D. There is due and owing to BTCo as of the date hereof $2,751,133
under the 1997 Note, plus accrued interest (including interest at the default
rate provided in the 1997 Note), fees and expenses, all without defense, offset,
claim or counterclaim of any kind. The total amount
<PAGE>
owed from time to time to BTCo under the Loan Documents, including all
principal, interest, fees and expenses is referred to as the "Obligations."
E. The Security Documents evidence valid, enforceable liens, security
interests and mortgages, as the case may be.
F. The Company and DDD acknowledge and agree that Events of Default
have occurred under the Loan Documents by reason of, among other things, the
Company's and DDD's failure to make full payment of principal and interest
installments due on March 1, 1998, April 1, 1998, May 1, 1998 and June 1, 1998
(the "Existing Defaults").
G. The Company and DDD have requested that BTCo forbear temporarily
from exercising its rights and remedies under the Loan Documents by reason of
the existing defaults and grant the Company and DDD the option to pay off the
Obligations on the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the Recitals and of the mutual promises and
covenants contained herein, BTCo, the Company and DDD agree as follows:
SECTION 1. OPTION. BTCo, in consideration of the payment of the Option
Price (as defined in subsection (a) below) and the Additional Option Price (as
defined in subsection (b) below), as the case may be, hereby gives the Company
and DDD an option (the "Option") during the Option Period or the Additional
Option Period (as defined in subsection (b) below) to obtain a full release and
discharge of all of the Obligations upon payment of the amount set forth in
subsection (c) below on the following terms and conditions and on the other
terms and conditions set forth in this Agreement:
(a) OPTION PRICE. The Option Price shall be $250,000, which is payable
to BTCo upon the execution of this Agreement.
(b) OPTION PERIOD. The Option Period shall commence on the date all of
the conditions in section 3 have been fulfilled and shall terminate on the
earlier of (x) the occurrence of a Termination Event (as defined in section 5)
and (y) March 17, 1999. On or before the expiration of the Option Period, at the
written request of the Company and DDD and upon payment by the Company and DDD
to BTCo of an additional amount of $100,000 (the "Additional Option Price") on
or before the expiration of the Option Period, the Option Period shall be
extended to the earlier of (xx) the occurrence of a Termination Event and (yy)
September 17, 1999 (the "Additional Option Period").
(c) EXERCISE OF OPTION. The Option may be exercised on any business day
by written notice to BTCo delivered in accordance with section 9(h) by payment
in immediately available funds of $1,500,000 (in addition to the Option Price)
during the Option Period, or by payment in immediately available funds of
$1,550,000 (in addition to the Option Price and the Additional Option Price)
during the Additional Option Period (it being understood that the Company and
DDD shall not be entitled to reduce the amounts payable under this section by
any amounts, including, without limitation, the conditional reduction of
$460,000 provided for in the 1997 Note).
<PAGE>
(d) APPLICATION OF OPTION PRICE. Regardless of whether the Company and
DDD exercise the Option during the Option Period or the Additional Option
Period, as the case may be, the Option Price and the Additional Option Price (if
any) paid to BTCo shall be applied by BTCo to reduce the principal amount of the
1997 Note. If the Company and DDD do not exercise the Option during the Option
Period or the Additional Option Period, as the case may be, the Option Price and
the Additional Option Price (if any) shall be retained by BTCo and applied as
set forth in the preceding sentence, and the Company, DDD and all other persons
and entities shall have no further rights or claims with respect to the Option,
the Option Price or the Additional Option Price.
(e) DELIVERY OF DOCUMENTS AFTER EXERCISE OF OPTION. If the Company and
DDD exercise the Option in accordance with the terms of this Agreement, the
Company, DDD and the Guarantors shall on the ninety-first day following BTCo's
receipt of all payments due under this Agreement, deliver to BTCo a release, in
the form annexed as Exhibit A, and BTCo shall, on the ninety-first day following
its receipt of all payments due under this Agreement, dispose of the Warrant (as
defined in the Restructuring Agreement) in a manner reasonably acceptable to
BTCo and DDD, and, at the Company's and DDD's option: (i) return to the Company
and DDD (or to the Company's and DDD's designee) the other Loan Documents and
execute and deliver to the Company and DDD UCC termination statements,
satisfactions of the Mortgages and a release, in the form annexed as Exhibit B;
or (ii) assign the other Loan Documents to the Company and DDD (or to the
Company's and DDD's designee) without representation or warranty, express or
implied, and without recourse to BTCo.
SECTION 2. FORBEARANCE. Effective as of the date hereof through the
earlier of (a) the expiration of the Option Period or the Additional Option
Period, if in effect, or (b) the date that any Termination Event occurs (the
"Forbearance Period"), and subject to the satisfaction of the conditions
precedent set forth in section 3, BTCo shall not seek to exercise any of its
rights or remedies under the Loan Documents based on (i) the Existing Defaults
or (ii) the Company's and DDD's failure to make any regularly scheduled payment
of principal or interest due pursuant to the Loan Documents after the date of
this Agreement through the expiration of the Option Period or the Additional
Option Period, if in effect (the "Subsequent Payments").
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT. This
Agreement shall not be effective until it has been executed and delivered by
each of the undersigned, the consent at the end of this Agreement has been
executed by each of the Guarantors (the "Consent"), the Company and DDD have
paid the Option Price and BTCo has received PNC Bank's written consent to this
Agreement, in form annexed as Exhibit C.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the Company and DDD
hereby represents and warrants to BTCo as follows:
(a) RECITALS. The Recitals in this Agreement are true and correct in
all respects.
(b) DUE EXECUTION OF AGREEMENT. This Agreement has been duly executed
and delivered by the Company and DDD.
(c) ENFORCEABILITY. This Agreement is the legal, valid and binding
obligation of the Company and DDD, enforceable against the Company and DDD in
accordance with its terms.
<PAGE>
(d) NO VIOLATION. The execution, delivery and performance of this
Agreement by the Company and DDD do not and will not (i) violate any law, rule,
regulation or court order to which the Company or DDD is subject; or (ii) result
in the creation or imposition of any lien, security interest or encumbrance on
any property of the Company or DDD, whether now owned or hereafter acquired.
(e) OBLIGATIONS ABSOLUTE. The obligation of the Company and DDD to
repay the Obligations, together with all interest accrued thereon, is absolute
and unconditional, and there exists no right of setoff or recoupment,
counterclaim or defense of any nature whatsoever to payment of the Obligations.
(f) LOAN DOCUMENTS. Except as specifically modified hereby, all of the
terms and conditions of the Loan Documents shall remain in full force and
effect.
SECTION 5. TERMINATION EVENT. Each of the following shall constitute a
"Termination Event" hereunder:
(a) the Company and DDD shall fail to pay any amounts due
under the terms of this Agreement; or
(b) the existence of any default as a result of the occurrence
of any of the following: (i) any of the Company, DDD or any of the Guarantors
shall be adjudicated insolvent or bankrupt, or shall generally fail to pay or
admit in writing their respective inability to pay their respective debts as
they become due, (ii) any of the Company, DDD or any of the Guarantors shall
seek dissolution or reorganization or the appointment of a receiver, trustee,
custodian or liquidator or a substantial portion of their respective property,
assets or business or to effect a plan or other arrangement with their
respective creditors, (iii) any of the Company, DDD or any of the Guarantors
shall make a general assignment for the benefit of their respective creditors,
or consent to or acquiesce in the appointment of a receiver, trustee, custodian
or liquidator for a substantial portion of their respective property, assets or
business, (iv) any of the Company, DDD or any of the Guarantors shall file a
voluntary petition under any bankruptcy, insolvency or similar law, or (v) any
of the Company, DDD or any of the Guarantors or a substantial portion of their
respective property, assets or business shall become the subject of an
involuntary proceeding or petition for dissolution, reorganization, or the
appointment of a receiver, trustee, custodian or liquidator or shall become
subject to any writ, judgment, warrant of attachment, execution or similar
process which is not dismissed within 60 days; or
(c) Except as otherwise set forth in subsections (a), (b) and
(c) above, the Company or DDD shall fail to keep or perform any of the covenants
or agreements contained herein within fifteen days after having been served by
registered mail with notice of such failure; or
(d) any material representation or warranty of the Company or
DDD shall be false, misleading or incorrect in any material respect.
SECTION 6. EFFECT AND CONSTRUCTION OF AGREEMENT. Except as expressly
provided herein, the Loan Documents shall remain in full force and effect in
accordance with their respective terms, and this Agreement shall not be
construed to impair the validity, perfection or
<PAGE>
priority of any lien or security interest securing the Obligations or waive or
impair any rights, powers or remedies of BTCo under the Loan Documents. In the
event of any inconsistency between the terms of this Agreement and any of the
Loan Documents, this Agreement shall govern. Each of the Company and DDD
acknowledges that it has consulted with counsel and with such other experts and
advisors as it has deemed necessary in connection with the negotiation,
execution and delivery of this Agreement. This Agreement shall be construed
without regard to any presumption or rule requiring that it be construed against
the party causing this Agreement or any part hereof to be drafted.
SECTION 7. EXPENSES. Each of the Company and DDD agrees to pay all
reasonable costs, fees and expenses of BTCo (including the fees of BTCo's
counsel) incurred by BTCo in connection with the negotiation, preparation and
enforcement of this Agreement and the Loan Documents. Such fees and expenses
shall constitute part of the Obligations.
SECTION 8. RELEASE. In consideration of the foregoing, each of the
Company and DDD (and by their execution of the Consent, each of the Guarantors)
hereby releases, remises, acquits and forever discharges BTCo and BTCo's
employees, agents, representatives, consultants, attorneys, fiduciaries,
servants, officers, directors, partners, predecessors (including, without
limitation, PSB), successors and assigns, subsidiary corporations, parent
corporations and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities, obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect, at law or in equity, of whatsoever kind or nature, whether heretofore
or hereafter arising, for or because of any matter or things done, omitted or
suffered to be done by any of the Released Parties prior to and including the
date of execution hereof, and in any way directly or indirectly arising out of
or in any way connected to this Agreement or the Loan Documents, (all of the
foregoing hereinafter called the "Released Matters"). Each of the Company and
DDD (and by their execution of the Consent, each of the Guarantors) acknowledges
that the agreements in this paragraph are intended to be in full satisfaction of
all or any alleged injuries or damages arising in connection with the Released
Matters. Each of the Company and DDD (and by their execution of the Consent,
each of the Guarantors) represents and warrants to BTCo that it has not
purported to transfer, assign, pledge or otherwise convey any of its right,
title or interest in any Released Matter to any other person or entity and that
the foregoing constitutes a full and complete release of all Released Matters.
SECTION 9. MISCELLANEOUS.
(a) FURTHER ASSURANCE. Each of the Company and DDD agrees to execute
such other and further documents and instruments as BTCo may reasonably request
to implement the provisions of this Agreement and to perfect and protect the
liens and security interests created by the Loan Documents.
(b) BENEFIT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto, their
respective successors and assigns. No other person or entity shall be entitled
to claim any right or benefit hereunder, including, without limitation, the
status of a third-party beneficiary of this Agreement.
(c) INTEGRATION. This Agreement, together with the Loan Documents,
constitutes the entire agreement and understanding among the parties relating to
the subject matter hereof, and
<PAGE>
supersedes all prior proposals, negotiations, agreements and understandings
relating to such subject matter. In entering into this Agreement, each of the
Company and DDD acknowledges that it is relying on no statement, representation,
warranty, covenant or agreement of any kind made by BTCo or any employee or
agent of either of BTCo, except for the agreements of BTCo set forth herein.
(d) SEVERABILITY. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
enforceability without in any manner affecting the validity or enforceability of
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
(e) GOVERNING LAW; SERVICE OF PROCESS. This Agreement shall be governed
by and construed in accordance with the internal substantive laws of the State
of New York, without regard to its choice of law principles (other than Section
5-1401 of the New York General Obligations Law). Any legal action or proceeding
with respect to this Agreement and any document delivered in connection herewith
may be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery of
this Agreement, the parties hereby accept the jurisdiction of the aforesaid
courts. The parties hereto each irrevocably waive any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of FORUM NON CONVENIENS, which they may now or hereafter have to the bringing of
any such action or proceeding in such jurisdiction. Each of the Company and DDD
agrees to submit to personal jurisdiction in the State of New York in any action
or proceeding arising out of this Agreement and any documents delivered in
connection herewith and, in furtherance of such agreement, each of the Company
and DDD hereby agrees and consents that without limiting other methods of
obtaining jurisdiction, personal jurisdiction over the Company or DDD in any
such action or proceeding may be obtained within or without the jurisdiction of
any court located in New York and that any process or notice of motion or other
application to any such court in connection with any such action or proceeding
may be served upon the Company or DDD by registered mail to or by personal
service, unless otherwise designated in writing in accordance with the notice
requirements set forth below.
(f) JURY TRIAL WAIVER. THE COMPANY, DDD AND BTCO EACH HEREBY WAIVE
THEIR RIGHT TO TRIAL BY JURY IN ANY CONTROVERSY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE FINANCING DOCUMENTS.
(g) COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be executed
in any number of counterparts and by different parties to this Agreement on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
(h) NOTICES. Any notices with respect to this Agreement shall be given
by first class mail, return receipt requested, overnight mail or telecopier as
follows:
If to the Company or DDD:
<PAGE>
Automatic Systems Developers, Inc.
1 Industry Street
Poughkeepsie, New York 12603
Attn: Stanley F. Zuk
Telecopier No.: 914-452-3071
with a copy to:
Broad and Cassel
Miami Center
201 South Biscayne Boulevard
Suite 3000
Miami, Florida 33131
Attn: Linda Frazier, Esq.
Telecopier No.: 305-373-9443
If to BTCo:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attn: Mr. Thomas J. O'Brien
Telecopier No.: 212-669-0743
with a copy to:
Luskin, Stern & Eisler LLP
330 Madison Avenue
34th Floor
New York, New York 10017
Attn: Richard Stern, Esq.
Telecopier No.: 212-293-2705
(i) SURVIVAL. All representations, warranties, waivers and releases of
the Company and DDD (and the Guarantors) contained herein shall survive the
termination of the Agreement and the indefeasible payment in full in cash of the
Obligations under the Loan Documents.
(j) AMENDMENT. No amendment, modification, rescission, waiver or
release of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BANKERS TRUST COMPANY
By: /S/ THOMAS J. O'BRIEN
-------------------------------
Name: Thomas J. O'Brien
Title: Principal
AUTOMATIC SYSTEMS DEVELOPERS, INC.
By: /S/ STANLEY F. ZUK
-------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
ASD GROUP, INC.,
formerly known as Dutchess Design
and Development, Inc.
By: /S/ STANLEY F. ZUK
-------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
<PAGE>
CONSENT OF GUARANTORS
The undersigned are the guarantors under the Guaranties referred to in
the preceding Agreement. Each of the undersigned hereby consents to the terms of
the Agreement and hereby ratifies and confirms its respective guaranty in all
respects. Each of the undersigned further acknowledges, represents, warrants and
confirms that there are no defenses, offsets or claims of any nature whatsoever
to the undersigned's obligations and liabilities under its respective guaranty.
Dated: As of June 17, 1998
HIGH TECHNOLOGY COMPUTERS, INC.
By: /S/ STANLEY F. ZUK
-------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
Dated: As of June 17, 1998
NETCOMP, INC.
By: /S/ STANLEY F. ZUK
-------------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
EXHIBIT 4
As of June 24, 1998
ASD Group, Inc.
1 Industry Street
Poughkeepsie, New York 12603
Re: ASD Group, Inc. (the "Company")
Warrants to Purchase Shares of Common Stock
Gentlemen:
The undersigned (collectively, the "Lenders") are the holders of (i)
10% Senior Promissory Notes due June 19, 1998 (collectively, the "Original
Notes") and (ii) Warrants to Purchase Common Stock (collectively, the "Original
Warrants"), both in the amounts set forth on Schedule A attached. The
undersigned has been advised by the Company that the Company is currently in the
process of effecting a restructuring of some of its debt and a financing to
raise additional capital for the Company (the "Restructuring"). The investor
financing the Restructuring is unwilling to proceed with the Restructuring
unless and until the undersigned agree to the modifications set forth below. In
connection with such Restructuring, the undersigned agree as follows:
1. The Lenders are currently owed $1,100,000 in principal plus a
portion of unpaid interest due under the Original Notes (the
"Indebtedness"). In satisfaction for such Indebtedness, the
Lenders agree to accept $220,000 in cash ($110,000 of which
will be paid within five business days of the date of this
Agreement (the "Initial Cash Payment") and $110,000 of which
will be paid one year from the date of this Agreement). The
remaining $880,000 in principal amount of Indebtedness will be
converted into shares of Series C Convertible Preferred Stock
of the Company ("Series C Preferred Stock"), which are
convertible into shares of the Company's common stock, $.01
par value per share (the "Common Stock"), at the following
rates: (i) 50% of the Indebtedness at $1.15 per share of
Common Stock, and (ii) 50% of the Indebtedness at $1.25 per
share of Common Stock. Thus, the Lenders will receive shares
of Series C Preferred Stock convertible into an aggregate of
734,607 shares of Common Stock, subject to certain adjustments
if the Company issues or sells shares of Common Stock at a
price of less than $1.00 per share. Set forth on Schedule A
and opposite the name of each Lender is the amount of the cash
payment allocable to them and the number of shares of Common
Stock into which the shares of Series A Preferred Stock are
convertible. Attached as EXHIBIT A is
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 2
the Statement of Designations, Preferences, Rights and
Limitations with respect to the Series C Preferred Stock.
Attached as EXHIBIT B is the form of promissory note to be
given to the Lenders with respect to the $110,000 to be paid
one year from the date of this Agreement (the "New Notes").
2. The Lenders agree to forego any rights to interest currently
due on the Original Notes or that may accrue with respect to
the New Notes from the date hereof through the date the final
payment is made.
3. In addition, with respect to the Original Warrants, the
Lenders agree that immediately and automatically upon approval
of the Restructuring by the Company's stockholders, the
Original Warrants will be cancelled and replaced with Warrants
to Purchase Shares of Common Stock equivalent to 418,711
shares of the Company's Common Stock which represents 3% of
the issued and outstanding Common Stock of the Company on a
fully diluted basis as of the date hereof (the "New
Warrants"), subject to certain adjustments if the Company
sells shares of Common Stock at a price of less than $1.00 per
share. The New Warrants will be in the form attached as
EXHIBIT C and will entitle the holder to purchase shares of
the Company's Common Stock at a price of $1.50 per share and
will be exercisable for a period of three years from the date
of issuance.
4. Upon receipt of the initial cash payment and the New Notes,
the Indebtedness will be deemed satisfied in full without
further action on the part of either the Company or the
Lenders and the Original Notes and Original Warrants will
automatically be cancelled and null and void for all business
purposes. You agree to return the Original Notes and Original
Warrants to the Company within two business days of the date
of receipt of the initial cash payment and New Notes.
5. Notwithstanding anything contained herein to the contrary, the
Lenders agree that, for a period commencing the date hereof
until the later of (i) nine months from the date the
Restructuring is approved by the Company's stockholders, and
(ii) the date the option described in the Option and
Forebearance Agreement among Bankers Trust Company, the
Company and Automatic Systems Developers, Inc. dated the date
hereof, is exercised or expires, Cameron Worldwide Ltd.
("Cameron") has the right to require the Lenders, jointly and
not severally, to sell 50% of the shares of Series C Preferred
Stock and/or the underlying Common Stock to Cameron at the
stated value of the Series C Preferred Stock. Notice of any
such purchase of the Series C Preferred Stock or underlying
shares of Common Stock, specifying the date fixed for the
purchase and the place of purchase shall be given by first
class mail to each holder of record of the shares to be
purchased at his address of record. Lenders acknowledge and
agree that the certificates representing the Series C
Preferred Stock and/or the underlying shares of Common Stock
will be held in escrow by the Company's attorneys until this
period for mandatory sale has expired.
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 3
Moreover, certificates representing the shares will be affixed
with a legend describing this restriction, and the Company's
transfer agent will be given stop transfer instructions.
6. Each Lender recognizes that the acquisition of his, her or its
Series C Preferred Stock, New Warrants and shares of Common
Stock into which the Series C Convertible Preferred Stock are
convertible and New Warrants are exercisable (collectively,
the "Securities"), if any, is speculative and involves a high
degree of risk. Each Lender represents and warrants that he,
she or it is an "accredited investor" as defined under Rule
501(a) of the Securities Act of 1933, as amended (the
"Securities Act").
7. Each Lender hereby acknowledges that (a) the Lender has been
furnished by the Company with a copy of the Company's Form
10-KSB for the year ended June 30, 1997 and copies of the
Company's Form 10-QSB's for the quarters ended September 30,
1997, December 31, 1997 and March 31, 1998, as amended (the
"SEC Documents"), as well all other information regarding the
Company which has been reasonably requested; (b) all documents
which could be reasonably provided have been made available
for the Lender's inspection and review; (c) the Lender has
been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives
of the Company. Moreover, over the course of the several weeks
leading up to the consummation of this transaction, the
Lenders have received additional information regarding the
Company's financial situation and, particularly the existing
defaults on lines of credit, lack of cash flow to meet current
obligations without infusion of capital which may result in
the Company being characterized as insolvent and the terms of
the Restructuring.
8. Each Lender hereby acknowledges that his, her or its Series C
Preferred Stock and New Warrants, are being acquired for the
Lender's own account for investment and not for distribution
or resale to the public. Each Lender further acknowledges and
understands that the Securities are being or will be issued
without registration under the Securities Act pursuant to the
exemption from registration afforded by Section 4(2) of the
Securities Act and the rules and regulations promulgated
thereunder. Each Lender further acknowledges that the
Securities may only be sold, transferred or otherwise disposed
of unless registered under the Securities Act unless an
exemption from such registration is available and that
appropriate restrictive legends will be placed upon the
certificates evidencing the Securities. Each Lender further
acknowledges and understands that the shares of Series C
Preferred Stock may not be converted into shares of Common
Stock until such time as the Company's stockholders approve
(a) the Restructuring in accordance with Rule 4310(c)(H) of
the Rules of The National Association of Securities Dealers,
Inc., and (b) an amendment to the Company's Certificate of
Incorporation increasing the authorized
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 4
number of shares of Common Stock (the "Capital Amendment"). If
the Series C Preferred Stock cannot be converted, other than
by reasons, solely within the control of the holder, by March
31, 1999, the Company is required to purchase the Series A
Preferred Shares at a price equivalent to the stated value.
9. Each Lender agrees that effective upon the issuance of the
Series C Preferred Stock and Warrants to the Lenders, without
any further action on the part of either Company or the
Lenders, the Lenders, their officers and directors (in the
case of corporate Lenders) and their respective heirs,
executors, administrators, legal representatives and
successors and assigns, hereby release and absolutely forever
discharge the Company, its subsidiaries, officers, directors,
employees and agents, and their respective heirs, executors,
administrators, legal representatives and successors and
assigns (collectively, the "Company") from any and all claims,
demands, damages, liabilities, accounts, reckonings,
obligations, costs, expenses, liens, actions, and causes of
action of any kind and nature whatsoever, which each Lender
has, owns or holds or at any time ever had, owned or held
against the Company arising from or related to the
Indebtedness.
10. This Agreement (a) constitutes the entire agreement between
the parties with respect to the subject matter hereof; (b) may
be amended only in writing; (c) shall be governed by the laws
of the State of New York; and (d) shall be binding upon the
parties hereto and their respective legal representatives,
executors, successors and assigns.
11. This Agreement may be executed in one or more counterparts,
all of which may be considered one and the same agreement and
each of which shall be deemed an original.
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 5
12. The undersigned acknowledges that this Agreement constitutes
an accord and satisfaction and not an executory accord.
Sincerely yours,
/S/ WILLIAM BECKER
-------------------------------------
William Becker, Individually
/S/ WILLIAM BECKER
-------------------------------------
William Becker, IRA
/S/ MARJORIE BECKER
-------------------------------------
Marjorie Becker, Individually
/S/ SANFORD I. FELD
-------------------------------------
Sanford I. Feld
/S/ FREDERICK K. BECKER
-------------------------------------
Frederick K. Becker
/S/ RICHARD BECKER
-------------------------------------
Richard Becker
/S/ ARNOLD G. RIFKIN
-------------------------------------
Arnold G. Rifkin
/S/ ALAN JACOBS
-------------------------------------
Alan Jacobs
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 6
LEAFLAND ASSOCIATES, INC.
By: /S/ SANFORD I. FELD
----------------------------------
Name: Sanford I. Feld
Title: President
/S/ JULES L. MARX
-------------------------------------
Jules L. Marx
/S/ WILLIAM P. DIOGUARDIA
-------------------------------------
William P. Dioguardia
NEW OSHKIM LIMITED PARTNERS
By: /S/ KEVIN KIMBERLIN
----------------------------------
Name: Kevin Kimberlin
Title: General Partner
/S/ LAURA MCNAMARA
-------------------------------------
Laura McNamara
SPENCER TRASK HOLDINGS, INC.
By: /S/ WILLIAM P. DIOGUARDI
----------------------------------
Name: William P. Dioguardi
Title: Secretary
<PAGE>
ASD Group, Inc.
June 24, 1998
Page 7
Acknowledged and Agreed to this
26th day of June, 1998.
ASD GROUP, INC.
By: /S/ GARY D. HORNE
--------------------------------
Name: GARY D. HORNE
Title: CHIEF EXECUTIVE OFFICER
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
NOTES - ORIGINAL AMOUNT PAID AMOUNT PAID SERIES C
NAME AND ADDRESS BALANCE DUE WARRANTS (1ST PAYMENT) (2ND PAYMENT) PREFERRED STOCK(1) NEW WARRANTS
---------------- ----------- -------- ------------ ----------- ----------------- ------------
1
<S> <C> <C> <C> <C> <C> <C>
1. Feld, Sanford I. 0 175,000 0 0 0 137,017
Box 670, #12
Quimby Lane
Bernardsville, NJ 07924
2. Becker, Frederic K. $110,000 51,738 $11,000 $11,000 73,461 40,509
90 Woodbridge Center Dr.
Suite 900, Box 10
Woodbridge, NJ 07095-0958
3. Becker, Richard $44,000 20,696 $4,400 $4,400 29,384 16,204
287 York Street
Jersey City, NJ 07302
4. Rifkin, Arnold G. $66,000 31,044 $6,600 $6,600 44,076 24,306
9 Dearburn Court
Florham Park, NJ 07932
5. Jacobs, Alan $66,000 31,044 $6,600 $6,600 44,076 24,306
4 Hadwell Road
Short Hills, NJ 07078
6. Marx, Jules L. $44,000 30,435 $4,400 $4,400 29,384 23,829
429 Harding Drive
South Orange, NJ 07079
- ----------
1 Number set forth below represents the number of shares of Common Stock into which the shares of Series A Convertible Preferred
Stock are convertible.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NOTES - ORIGINAL AMOUNT PAID AMOUNT PAID SERIES C
NAME AND ADDRESS BALANCE DUE WARRANTS (1ST PAYMENT) (2ND PAYMENT) PREFERRED STOCK(1) NEW WARRANTS
---------------- ----------- -------- ------------ ----------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
7. Leafland Associates, Inc. $385,000 6,086 $38,500 $38,500 257,113 4,765
Employee Pension Plan and
Trust
c/o Sanford Feld
Box 670, #12 Quimby Lane
Bernardsville, NJ 07924
8. Marjorie Becker IRA $115,000 8,000 $11,500 $11,500 76,800 6,264
c/o William J. Becker
P.O. Box 170
Convent Station, NJ 07961
9. William J. Becker IRA $270,000 17,000 $27,000 $27,000 180,313 13,310
P.O. Box 170
Convent Station, NJ 07961
10. William P. Dioguardi 1,740 0 0 0 1,362
Spencer Trask Securities, Inc.
535 Madison Avenue
New York, NY 10022
11. Laura McNamara 696 0 0 0 546
Spencer Trask Securities, Inc.
535 Madison Avenue
New York, NY 10022
12. New Oshkim Limited Partners 1,044 0 0 0 817
Spencer Trask Securities, Inc.
535 Madison Avenue
New York, NY 10022
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
13. Spencer Trask Holdings 4,174 0 0 0 3,268
Incorporated
c/o Spencer Trask Securities,
Inc.
535 Madison Avenue
New York, NY 10022
14. William J. Becker 0 150,000 0 0 0 122,208
P. O. Box 170 6.086
Convent Station, NJ 07961
---------- -------- -------- -------- -------- --------
GRAND TOTAL $1,100,000 534,783 $110,000 $110,000 734,607 418,711
</TABLE>
A-3
EXHIBIT 5
June ____, 1998
ASD Group, Inc.
1 Industry Street
Poughkeepsie, New York 12603
RE: ASD GROUP, INC. (THE COMPANY) WARRANTS TO PURCHASE SHARES OF
COMMON STOCK
To Whom It May Concern:
The undersigned are the holders of warrants to purchase in the
aggregate 123,750 shares of the Company's common stock, $.01 par value per share
(the "Common Stock"), at a price of $2.69 per share, which warrants are
evidenced by a series of Warrant Certificates issued on or about August 29, 1996
(the "Certificates"). The undersigned has been advised by the Company that the
Company is currently in the process of effecting a Restructuring of some of its
debt and a financing to raise additional capital for the Company (the
"Restructuring"), which transactions involve the granting of additional warrants
and the sale of additional shares of Common Stock. The Company hereby represents
to the undersigned that (i) the Restructuring would increase the number of
shares subject to the warrants from 123,750 to approximately 477,000 and would
reduce the exercise price thereof to approximately $.77 per share; and (ii) the
investor financing the Restructuring is unwilling to proceed with the
Restructuring and financing unless the undersigned agree to the modifications
set forth below. In connection with such Restructuring, the undersigned agree as
follows:
1. The undersigned agree that immediately upon approval of the
Restructuring by the Company's stockholders, the Certificates
will be cancelled and replaced with warrants to purchase in
the aggregate 400,000 shares of the Company's common stock at
an exercise price of $1.50 per share. Upon approve of the
Restructuring, the Certificates will be automatically
cancelled and null and void for all business purposes, without
any further action by either party. Notwithstanding the
foregoing, within ten days of the date the undersigned
receives notice of the approval, the undersigned will return
these Certificates to the Company for cancellation provided
the Company provides the undersigned with the replacement
Warrants to Purchase Common Stock in the form attached hereto
as Exhibit A (the "New Warrant").
2. The Company agrees to register the re-sale of the shares of
Common Stock (the "Warrant Shares") on the terms described in
the New Warrant. Notwithstanding the registration of the
re-sale of the Warrant Shares, the undersigned acknowledge and
agree that 50% of the Warrant Shares registered for re-sale
will be subject to a
<PAGE>
six-month lock-up from the date such registration statement is
declared effective. In addition, the New Warrant and Warrant
Shares will continue to be subject to lock-up imposed by The
Nasdaq Stock Market, Inc. and may not be sold until November
13, 1998. The undersigned acknowledge that the certificates
representing the Warrant Shares will be affixed with a legend
describing this restriction. Moreover, the Company's transfer
agent will be given stop transfer instructions.
3. The undersigned and each of its, his or her affiliates,
subsidiaries, partners, officers, directors, employees, and
other entities that the undersigned controls or as to which
the undersigned has the power to grant a release, hereby
release and discharge the Company and its respective officers,
directors, employees and principal stockholders (collectively,
the "Company") from any and all manner of claims, demands,
contracts, damages, accounts, sums of money, debts,
liabilities, promises, obligations, costs and expenses
(including but not limited to attorneys' fees or awards of
attorneys' fees and/or costs), causes of action or suits, at
law or in equity, of whatsoever kind or nature, whether now
known or unknown, suspected or unsuspected (collectively,
"Claims"), that the undersigned has or may have had or may
have or hereafter shall or may have against the Company, by
reason of the Certificates, from the beginning of time to the
date of this Agreement. Without in any way limiting the
generality of the foregoing release, such release specifically
includes but is not limited to, any Claims arising out of or
in any way connected with any act or omission committed or
omitted by the Company with respect to the Certificates prior
to the date of this Agreement.
4. This Agreement may be executed in one or more counterparts,
all of which may be considered one and the same agreement and
each of which shall be deemed an original.
The undersigned acknowledges that this Agreement constitutes an accord
and satisfaction and not an executory accord.
Sincerely yours,
/S/ IRWIN PARNES
----------------------------------
Irwin Parnes
/S/ ILLEGIBLE
----------------------------------
SUC-TUW Doris Tenenbaum,
FBO Lori Halberg
2
<PAGE>
ATLANTA ALLERGY & ASTHMA
CLINIC
/S/ DENNIS L. SPANGLER
-------------------------------------------
Name: Dennis L. Spangler
Title: Trustee AA & AC Pension Fund
FBO M.S. Carroll
/S/ ALAN PARNES
-------------------------------------------
Alan Parnes
/S/ LEE SILVERSTEIN
-------------------------------------------
Lee Silverstein
/S/ RICHARD MEREL
-------------------------------------------
Richard Merel
/S/ DR. PAUL WOLFSON
-------------------------------------------
Dr. Paul Wolfson
/S/ MICHAEL ABRAMOWITZ
-------------------------------------------
Michael Abramowitz
/S/ DENNIS SPANGLER
-------------------------------------------
Dennis Spangler
/S/ DR. ARNOLD CURNYN
-------------------------------------------
Dr. Arnold Curnyn
/S/ URS FRICKER
-------------------------------------------
Urs Fricker
/S/ MICHAEL EKELUND /S/ OLE STENERSEN
-------------------------------------------
Michael Ekelund
Ole Stenersen
(Swedebank Luxembourg)
3
<PAGE>
-------------------------------------------
Ronald Urman
/S/ ALLEN FISH
-------------------------------------------
Allen Fish
/S/ MITCHELL COHEN
-------------------------------------------
Mitchell Cohen
UNITED INTERNATIONAL SERVICES
EST
By: /S/ KAMAL MUSTAFA
----------------------------------------
Name: Kamal Mustafa
Title:
Acknowledged and Agreed to
this _____ day of June, 1998.
ASD GROUP, INC.
By: /S/ STANLEY F. ZUK
--------------------------
Name: Stanley F. Zuk
Title: Chief Operating Officer
4
