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): February 9, 1999
ASD GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-12873 14-1483460
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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
<PAGE>
Item 5. OTHER EVENTS
AGREEMENT WITH FOUNDERS
On February 9, 1999, ASD Group, Inc. (the "Company") entered into a
letter agreement with two of its original founders. Pursuant to an original
letter agreement dated January 4, 1993, the Company agreed to provide each of
the founders with a deferred compensation in the amount of $30,000 per year for
fifteen years. In addition, the Company agreed to continue to pay health
insurance premiums during this time for each of the founders. Finally, the
Company agreed that if the founders should die during this period, the pension
would be paid to such founder's wife or children. By letter agreement dated as
of February 9, 1999, the founders agreed to accept in lieu of any further
pension payments 75,000 restricted shares of the Company's Common Stock and
continuation of the medical, dental and prescription drug benefits currently
provided to the founders until the founders died or reached the age of 65.
AGREEMENT WITH GARY HORNE
The Company is currently indebted to Gary D. Horne, former Chief
Executive Officer and Chairman of the Board of the Company, in the aggregate
principal amount of $707,492.91, plus accrued and unpaid interest. By letter
agreement dated March 4, 1999, Gary Horne agreed to forgive such indebtedness in
exchange for: (i) 150,000 shares of the Company's Common Stock (the "Additional
Shares"); (ii) release of the 85,718 shares of the Company's Common Stock (the
"Escrow Shares") owned by Gary Horne currently being held in escrow, to secure
Mr. Horne's indemnifications under the Purchase Agreement (as defined below);
(iii) registration of the resale of the Additional Shares and Escrow Shares;
(iv) consent to the assignment by Mr. Horne of all insurance policies on the
life of Gary Horne from which the Company and/or Gary Horne borrowed the cash
value along with accumulated interest and an assumption of any liabilities with
respect to these insurance policies and the loans outstanding thereunder; (v)
the Company providing Gary D. Horne with life insurance for executives according
to the benefits of the Company's group insurance plan and providing Gary D.
Horne and his wife health and dental insurance according to the benefits of the
Company's group insurance plan continuously through September 1, 2001; and (vi)
the Company releasing Mr. Horne from certain liabilities arising from his acting
as an officer and/or director of the Company from June 26, 1998 through the date
hereof, and arising from the Securities Purchase Agreement dated June 26, 1998
(the "Purchase Agreement").
Consummation of this agreement is subject to a number of conditions
including the Company using its best efforts to obtain a general release from
each of the purchasers listed on Schedule A to the Purchase Agreement.
<PAGE>
BANKERS TRUST AGREEMENT
As of February 26, 1999, the Company was indebted to Bankers Trust
Company ("BTC") in the amount of $2,501,132.64, plus all accrued but unpaid
interest. Effective February 26, 1999, the Company and BTC entered into the
Second Restructuring Agreement (the "Second Restructuring Agreement") pursuant
to which the Company's obligations to BTC will be reduced from approximately
$2,500,000, plus all accrued but unpaid interest, to $800,000. Pursuant to the
Second Restructuring Agreement, upon receipt of a $250,000 payment, Bankers
Trust will reduce the Company's indebtedness to it to $550,000, which amount
will be payable in 24 months. It is anticipated that consummation of the Second
Restructuring Agreement will occur on March 19, 1999, however, it is subject to
certain conditions including payment by the Company of $250,000.
REVOLVING CREDIT FACILITY WITH PNC BANK
On March 10, 1999, the Company amended the terms of its revolving
credit facility with PNC Bank pursuant to which the Company's credit line was
increased from $4,500,000 to $5,700,000. The Company currently has an over
advance to PNC Bank under the credit facility in the amount of approximately
$1,575,000. Pursuant to the terms of the amendment, the Company agreed to begin
repaying this over advance upon the earliest to occur of (i) sale of the
Company's currently idle manufacturing facility, (ii) refinancing of certain of
the Company's real property or (iii) August 29, 1999.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibits.
1. Letter Agreement dated as of February 9, 1999 between
the Company and James J. Yessian.
2. Letter Agreement dated as of February 9, 1999 between
the Company and John D. Halik.
3. Letter Agreement dated as of March 4, 1999 between
the Company and Gary D. Horne.
4. Second Restructuring Agreement dated as of February
26, 1999 among Automatic Systems Developers, Inc.;
ASD Group, Inc.; High Technology Computers, Inc.;
Netcomp, Inc. and Bankers Trust Company.
5. First Amendment Agreement dated as of March 10, 1999,
among Automatic Systems Developers, Inc. and High
Technology Computers, Inc. as borrowers; ASD Group,
Inc. as guarantor; the financial institutions which
are now hereafter become a party to that certain
credit agreement dated as of December 18, 1997 and
PNC Bank National Association, as agent, amending the
restructuring agreement dated as of June 26, 1998.
2
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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/ PETER C. ZACHARIOU
---------------------------------
Peter C. Zachariou, President
Dated: March 11, 1999
3
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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1. Letter Agreement dated as of February 9, 1999 between the
Company and James J. Yessian.
2. Letter Agreement dated as of February 9, 1999 between the
Company and John D. Halik.
3. Letter Agreement dated as of March 4, 1999 between the Company
and Gary D. Horne.
4. Second Restructuring Agreement dated as of February 26, 1999
among Automatic Systems Developers, Inc.; ASD Group, Inc.;
High Technology Computers, Inc.; Netcomp, Inc. and Bankers
Trust Company.
5. First Amendment Agreement dated as of March 10, 1999, among
Automatic Systems Developers, Inc. and High Technology
Computers, Inc. as borrowers; ASD Group, Inc. as guarantor;
the financial institutions which are now hereafter become a
party to that certain credit agreement dated as of December
18, 1997 and PNC Bank National Association, as agent, amending
the restructuring agreement dated as of June 26, 1998.
EXHIBIT 1
ASD GROUP, INC.
One Industry Street
Poughkeepsie, NY 12603
(914) 452-3000
As of February 9, 1999
Mr. James J. Yessian
310 Allview Avenue
Brewster, NY 10509
Dear Mr. Yessian:
This letter will confirm our agreement with respect to the prior
agreement you had with ASD Group, Inc. (the "Company") pursuant to the letter
dated January 4, 1993 (the "Original Letter"). Pursuant to the Original Letter,
the Company agreed to provide you with a pension of $30,000.00 per year for 15
years. The Company also agreed to continue to pay your health insurance premiums
during this time. Finally, the Company agreed that should you die during this
period, the pension would paid to your wife or children.
As you know the Company has experienced serious financial difficulties
recently. As a result, in lieu of the pension payments, you have agreed to
accept 75,000 shares of Company's common stock. With respect to each of you and
your spouse, the Company will continue to provide each of you with medical,
dental and prescription benefits that are in the health package in effect now
until death or you reach the age of 65. At such time as either of you reaches
the age of 65 and becomes entitled to benefits from the federal government, the
Company will continue Part B coverage, including medical, dental and
prescription insurance as the secondary carrier until the death of either you or
your spouse. Upon receipt of the stock certificate representing 75,000 shares of
common stock, the Original Letter will be terminated and you waive all rights,
title and claims to any other payments or benefits from the Company except as
specifically provided herein.
Assuming this accurately reflects our agreement, please sign the
attached copy of this letter in the space indicated below and the General
Release attached and return same to me at your earliest convenience. Upon
receipt of the signed letter agreement and General Release, we will arrange to
have delivered to you a stock certificate representing 75,000 shares of the
Company's common stock. Should you have any questions or require any additional
information, please call me.
Sincerely yours,
/s/ Peter C. Zachariou
-----------------------------
Peter C. Zachariou, President
ACKNOWLEDGED AND ACCEPTED THIS
___ DAY OF FEBRUARY, 1999.
/S/ JAMES J. YESSIAN
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James J. Yessian
EXHIBIT 2
ASD GROUP, INC.
One Industry Street
Poughkeepsie, NY 12603
(914) 452-3000
As of February 9, 1999
Mr. John D. Halik
6 Maloney Road, RD No. 2
Poughkeepsie, NY 12603
Dear Mr. Halik:
This letter will confirm our agreement with respect to the prior
agreement you had with ASD Group, Inc. (the "Company") pursuant to the letter
dated January 4, 1993 (the "Original Letter"). Pursuant to the Original Letter,
the Company agreed to provide you with a pension of $30,000.00 per year for 15
years. The Company also agreed to continue to pay your health insurance premiums
during this time. Finally, the Company agreed that should you die during this
period, the pension would paid to your wife or children.
As you know the Company has experienced serious financial difficulties
recently. As a result, in lieu of the pension payments, you have agreed to
accept 75,000 shares of Company's common stock. With respect to each of you and
your spouse, the Company will continue to provide each of you with medical,
dental and prescription benefits that are in the health package in effect now
until death or you reach the age of 65. At such time as either of you reaches
the age of 65 and becomes entitled to benefits from the federal government, the
Company will continue Part B coverage, including medical, dental and
prescription insurance as the secondary carrier until the death of either you or
your spouse. Upon receipt of the stock certificate representing 75,000 shares of
common stock, the Original Letter will be terminated and you waive all rights,
title and claims to any other payments or benefits from the Company except as
specifically provided herein.
Assuming this accurately reflects our agreement, please sign the
attached copy of this letter in the space indicated below and the General
Release attached return these documents to me at your earliest convenience. Upon
receipt of the signed letter agreement and General Release, we will arrange to
have delivered to you a stock certificate representing 75,000 shares of the
Company's common stock. Should you have any questions or require any additional
information, please call me.
Sincerely yours,
/s/ Peter C. Zachariou
-----------------------------
Peter C. Zachariou, President
ACKNOWLEDGED AND ACCEPTED THIS
___ DAY OF FEBRUARY, 1999.
/s/ John D. Halik
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John D. Halik
EXHIBIT 3
ASD GROUP, INC.
ONE INDUSTRY STREET
POUGHKEEPSIE, NY 12603
(914) 452-3000
March 4, 1999
Mr. Gary D. Horne
220 South Riverside Road
Highland, NY 12528
Dear Gary:
This letter will confirm our agreement regarding the current amount
owed by ASD Group, Inc. (the "Company") to you. You agree to forgive the
Company's indebtedness to you in the aggregate principal amount of $707,492.91
plus all accrued and unpaid interest as evidenced by the Amended and Restated
Promissory Note between the Company and Gary D. Horne dated as of November 18,
1997 and the Promissory Note between the Company and Gary D. Horne dated as of
June 26, 1998 in exchange for the following:
(1) 150,000 shares of the Company's common stock (the "Shares"),
which Shares will NOT be subject to the redemption provision
described below;
(2) release of the 85,718 shares of the Company's common stock
(the "Escrow Shares") owned by Gary D. Horne and currently
being held in escrow pursuant to the Escrow Agreement among
the Company, Gary D. Horne and Broad and Cassel dated as of
June 26, 1998 (the "Escrow Agreement") and termination of the
Escrow Agreement;
(3) registration of the re-sale of the Shares and Escrow Shares on
the Company's Registration Statement on Form SB-2 filed with
the U.S. Securities Exchange Commission on February 1, 1999
(the "Registration Statement"); provided, however, Mr. Horne
will agree not to sell, transfer or otherwise dispose of the
Shares and Escrow Shares for a period of 180 days from the
effective date of the Registration Statement and the
certificate representing the Shares and Escrow Shares will be
affixed with a legend describing this restriction;
(4) Gary D. Horne will provide the Company with a general release
in a form annexed hereto as Appendix "A". This release will be
held in escrow by his counsel, Deily, Dautel & Mooney, LLP,
until all of the provisions of this agreement have been
satisfied;
(5) the Company, its officers and all the parties listed as
Purchasers on Schedule 1 of the Securities Purchase Agreement,
dated June 26, 1998, will execute and deliver a Release in
favor of Gary D. Horne in the form shown on Appendix "B". The
Company agrees to provide its executed and notarized Release,
and that of Peter Zachariou, at the time of the signing of
this agreement. Cameron Worldwide Ltd.
<PAGE>
will provide its executed and notarized release within two (2)
business days of the signing of this agreement. Thereupon, the
Company agrees to use its best efforts to obtain executed and
notarized releases from the rest of the Releasors.
Furthermore, the Company acknowledges and agrees that Gary D.
Horne will have no liability under Section 15 -
Indemnification Provision of the Securities Purchase
Agreement.
(6) concerning all insurance policies ("Policies") from which the
Company borrowed cash value along with accumulated interest
since the loan that formed the basis for Notes, the Company
agrees to first provide a release of assignment to be prepared
by Donald Holztshammer of Northeastern Mutual Life Insurance
Company and then the Company agrees to accept the transfer of
ownership of the Policies to the Company;
(7) the Company will provide continuously through September 1,
2001, Gary D. Horne with life insurance for executives
according to the benefits of the Company's group insurance
plan and also provide Gary D. Horne and his wife, health and
dental insurance according to the benefits of the Company's
group insurance plan;
(8) the Company will reimburse Gary D. Horne at the signing of
this Agreement for fifty (50) percent of his legal fees in
connection with the negotiation of this Agreement, but not to
exceed $1,500,000; and
(9) as a quid pro quo to Stanley F. Zuk, age 62, the Company
agrees to provide life insurance for executives to him
according to the benefits of the Company's group insurance
plan and also to provide Stanley F. Zuk and his wife, health
and dental insurance according to the benefits of the
Company's group insurance plan until Stanley reaches age 65.
Upon receipt of the signed letter agreement, the exchange of the
Release(s), and the completion of Sections 3 through 9 above, we will deliver to
you the certificate representing 85,718 shares and certificates representing
150,000 shares.
Sincerely yours,
/s/ Peter C. Zachariou
-------------------------
Peter C. Zachariou
President
ACKNOWELDGED AND ACCEPTED THIS
___ DAY OF MARCH, 1999.
/S/ GARY D. HORNE
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Gary D. Horne
EXHIBIT 4
"THE SECURITY FOR THIS INSTRUMENT IS SUBORDINATED TO THE LIEN IN FAVOR OF THE
SENIOR OBLIGATIONS (AS DEFINED IN THE INTERCREDITOR AND SUBORDINATION AGREEMENT
HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF DECEMBER 18, 1997, MADE BY
BANKERS TRUST COMPANY IN FAVOR OF THE SENIOR LENDER (AS DEFINED THEREIN), WITH
SUCH OTHER RESTRICTIONS APPLICABLE TO THIS INSTRUMENT AS STATED THEREIN."
SECOND RESTRUCTURING AGREEMENT
THIS SECOND RESTRUCTURING AGREEMENT (this "AGREEMENT") dated
as of February 26, 1999 among AUTOMATIC SYSTEMS DEVELOPERS, INC., a New York
corporation having its chief executive office and principal place of business at
1 Industry Street, Poughkeepsie, New York 12603 (the "COMPANY"), ASD GROUP,
INC., a Delaware corporation having its chief executive office and principal
place of business at 1 Industry Street, Poughkeepsie, New York 12603 ("ASD
GROUP", and together with the Company, the "BORROWERS"), High Technology
Computers, Inc., a New York corporation having its chief executive office and
principal place of business at 1 Industry Street, Poughkeepsie, New York 12603
("COMPUTERS"), Netcomp, Inc., formerly known as ASD Office Systems, Inc., a New
York corporation having its chief executive office and principal place of
business at 1 Industry Street, Poughkeepsie, New York 12603 ("NETCOMP", and
together with Computers, the "GUARANTORS"), and BANKERS TRUST COMPANY, a New
York banking corporation having an address at One Bankers Trust Plaza, 130
Liberty Street, New York, New York 10006 ("BTCO").
RECITALS
WHEREAS, the Borrowers, the Guarantors and BTCo are parties to
a Restructuring Agreement dated as of December 19, 1997 (the "FIRST
RESTRUCTURING AGREEMENT") under which the parties agreed to restructure the
Borrowers' obligations to BTCo under the Existing Loan Documents (as defined in
the First Restructuring Agreement);
WHEREAS, in connection with the First Restructuring Agreement,
the Borrowers, 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;
WHEREAS, the 1997 Note is secured by, among other things, (1)
certain property of the Company, Computers and 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 ASD Group's real property and improvements
thereon located in the Town of LaGrange, County of Dutchess, State of New York
(the "ASD GROUP PROPERTY"), as heretofore modified, extended, spread and
assumed, from ASD Group to Poughkeepsie Savings Bank ("PSB"), as predecessor in
interest to BTCo (the "ASD GROUP MORTGAGE"); (3) certain mortgages each
<PAGE>
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 BTCo (the "ASD MORTGAGE", and
together with the ASD Group Mortgage (as modified, extended, spread and
assumed), the "MORTGAGES");
WHEREAS, the indebtedness of the Borrowers to BTCo is
guarantied by the Guarantors pursuant to separate guaranties, each dated October
22, 1993 (the "GUARANTIES", and each a "GUARANTY"), in favor of PSB, and
assigned to BTCo and reaffirmed and ratified by the Guarantors in the First
Restructuring Agreement;
WHEREAS, in connection with the First Restructuring Agreement,
ASD Group delivered to BTCo a Warrant to Purchase 100,000 shares of common stock
of ASD Group at an exercise price of $4.50 dated December 28, 1997 (the
"ORIGINAL WARRANT");
WHEREAS, BTCo and the Borrowers are parties to an Option and
Forbearance Agreement dated as of June 26, 1998 (the "OPTION AGREEMENT", and
collectively with the First Restructuring Agreement, the Security Documents (as
defined below), the Guaranties and all related documents, agreements and
instruments executed in connection therewith, as any of the foregoing have been
amended, modified or otherwise supplemented, the "EXISTING LOAN DOCUMENTS");
WHEREAS, the Borrowers and the Guarantors acknowledge that as
of the date hereof, there is due and owing $ 2,501,132.64 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;
WHEREAS, the Borrowers and the Guarantors have requested that
BTCo agree to restructure the Borrowers' obligations to BTCo under the Existing
Loan Documents; and
WHEREAS, upon the terms and subject to the conditions set
forth herein, BTCo is willing to restructure the Borrowers' obligations to BTCo
under the Existing Loan Documents.
AGREEMENT
In consideration of the Recitals and of the mutual promises
and covenants contained herein, BTCo, the Company, ASD Group, Computers and
Netcomp agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings specified below (such meanings
to be equally applicable to both the
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<PAGE>
singular and plural forms of the terms defined):
"ASD ASSIGNMENT OF LEASES AND RENTS" shall mean the Assignment
of Leases and Rents on the ASD Property dated July 24, 1987 from the Company to
PSB, as predecessor in interest to BTCo.
"ASD GROUP ASSIGNMENT OF LEASES AND RENTS" shall mean the
Assignment of Leases and Rents on the ASD Group Property dated September 17,
1991 from ASD Group to PSB, as predecessor in interest to BTCo.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday,
or other day on which commercial banks in New York are authorized or required by
law to close.
"COLLATERAL" shall have the meaning given to such term in the
Security Agreement.
"INDEBTEDNESS" shall mean, at any time and with respect to any
Person, (i) all indebtedness of such Person for borrowed money, (ii) all
indebtedness of such Person for the deferred purchase price of property or
services, (iii) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments (other than performance, surety and
appeal bonds arising in the ordinary course of business), (iv) all indebtedness
of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (v)
all obligations of such Person under leases which have been or should be, in
accordance with generally accepted accounting principles, consistently applied
("GAAP"), recorded as capital leases, to the extent required to be so recorded,
(vi) all reimbursement, payment or similar obligations of such Person,
contingent or otherwise, under acceptance, letter of credit or similar
facilities, (vii) all Indebtedness referred to in clauses (i) through (vi) above
guaranteed directly or indirectly by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Indebtedness or to advance or supply funds for the payment or
purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss in respect of such Indebtedness, (C) to supply
funds to or in any other manner invest in the debtor (including any agreement to
pay for property or services irrespective of whether such property is received
or such services are rendered) or (D) otherwise to assure a creditor against
loss in respect of such Indebtedness, and (viii) all Indebtedness referred to in
clauses (i) through (vii) above
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<PAGE>
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness.
"INDEMNITY AGREEMENTS" shall mean (i) the Indemnity Agreement
dated October 22, 1993 from the Company, together with ASD Group, the Guarantors
and High Technology Solutions, Inc. ("SOLUTIONS"), in favor of PSB, as BTCo's
predecessor in interest, and (ii) the Indemnity Agreement dated October 23,
1993, from ASD Group, together with the Company, the Guarantors and Solutions,
in favor of PSB, as BTCo's predecessor in interest.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor and
Subordination Agreement dated as of December 18, 1997 (as the same may be
amended, supplemented or otherwise modified from time to time) between BTCo and
PNC Bank, National Association ("PNC").
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind whatsoever (including any conditional
sale or other title retention agreement or any lease in the nature thereof).
"LOAN PARTIES" shall mean the Borrowers and the Guarantors.
"NEW LOAN DOCUMENTS" shall mean this Agreement, the New Term
Note (as defined below), the Guaranties, the Security Documents, any ancillary
documentation which is required or otherwise executed to perfect the Liens
pledged, reaffirmed, ratified and granted to BTCo pursuant to the Security
Documents, and all other documents and instruments delivered in connection
herewith and therewith, all as amended, supplemented, or otherwise modified from
time to time.
"NEW WARRANT" shall mean the Warrant to Purchase 100,000
shares of common stock of ASD Group at an exercise price of $2.00 per share
dated even date herewith from ASD Group in favor of BTCo.
"PERSON" shall mean any natural person, corporation, division
of a corporation, partnership, trust, joint venture, association, company,
estate, unincorporated organization or government or any agency or political
subdivision thereof.
"PNC CREDIT AGREEMENT" shall mean the Revolving Credit, Term
Loan and Security Agreement, dated as of December 18, 1997, among the Company,
Computers and PNC as amended, modified or otherwise supplemented from time to
time.
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<PAGE>
"PNC LIENS" shall mean the liens and mortgages in favor of PNC
pursuant to the PNC Credit Agreement.
"SECURITY DOCUMENTS" shall mean the Mortgages, the Security
Agreement, the ASD Assignment of Leases and Rents and the ASD Group Assignment
of Leases and Rents (as any of the foregoing may be amended, modified, or
otherwise supplemented from time to time).
SECTION 2. EFFECTIVENESS. The provisions of this Agreement
shall not be effective unless the transactions contemplated by this Agreement
are closed on or prior to March 19, 1999 (the "CLOSING DATE"). In the event that
the transactions contemplated by this Agreement do not occur on or prior to the
Closing Date, then all claims and rights of the parties hereto are reserved and
this Agreement shall be terminated and of no force and effect and no mention or
other use of it may be made in any court proceeding or for any other purpose
whatsoever. The Closing Date may be extended by written agreement of all of the
parties to this Agreement.
SECTION 3. LOAN REDUCTION PAYMENT. On the Closing Date, the
Borrowers shall pay $250,000 to BTCo in immediately available funds to reduce
the Borrowers' obligations under the Existing Loan Documents (the "LOAN
REDUCTION PAYMENT").
SECTION 4. AMENDMENT AND RESTATEMENT OF THE NEW TERM NOTE. The
Borrowers shall execute and deliver to BTCo an amended and restated secured
consolidated note in the form of Exhibit A (the "NEW TERM Note"). The New Term
Note shall be executed and delivered in replacement of and substitution for, but
not payment of, the 1997 Note. The New Term Note shall be dated as of the date
of this Agreement and shall be in the principal amount of $550,000. No interest
shall accrue on the New Term Note (unless an Event of Default (as defined below)
shall have occurred. The principal and all other amounts due under the terms of
the New Term Note shall be payable on February 26, 2001.
SECTION 5. RIGHT OF SETOFF. BTCo is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other Indebtedness at any time owing by BTCo to
or for the credit or the account of any of the Loan Parties against any and all
of the Borrowers' and Guarantors' obligations under the New Loan Documents
(including all extensions, amendments, restatements, modifications, supplements
and renewals thereof, the "OBLIGATIONS"), irrespective of whether or not BTCo
shall have made any demand under the New Loan Documents and although such
Obligations may be unmatured. BTCo agrees promptly to notify the Loan Parties
after any such setoff and application made by BTCo, PROVIDED that the failure to
give such notice shall not affect the validity of such setoff and application.
The
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<PAGE>
rights of BTCo under this Section are in addition to other rights and remedies
which BTCo may have upon the occurrence and during the continuance of any Event
of Default.
SECTION 6. REIMBURSEMENT OF EXPENSES. The Borrowers shall
reimburse BTCo within five (5) days of its written demand, for the amount of all
reasonable costs and expenses incurred by BTCo at any time after the actual date
(as opposed to the effective date) of execution of this Agreement in connection
with (i) the negotiation, preparation, execution and delivery of any document
relating to the refinancing, restructuring or reorganization (including in a
bankruptcy proceeding) of any New Loan Document or obligation thereunder; and
(ii) the enforcement or collection or attempted enforcement or collection of any
New Loan Document or obligation thereunder and any matter related thereto
(including in a bankruptcy proceeding); including, without limitation, the fees
and out-of-pocket expenses of any legal counsel, accountants, appraisers and
experts retained or hired by BTCo in connection with clauses (i) and (ii) of
this Section. At BTCo's option, BTCo may apply any payments made pursuant to
Section 4 of this Agreement to any such costs and expenses, whether or not BTCo
has made demand therefor.
SECTION 7. COLLATERAL. Each of the Borrowers and the
Guarantors hereby reaffirms and ratifies all representations, warranties and
covenants contained in the Security Documents to which it is a party, and
confirms that the Security Documents secure the Obligations under the New Term
Note.
SECTION 8. AMENDMENTS OF SECURITY AGREEMENT AND MORTGAGE
MODIFICATION AGREEMENT.
(a) All references in the Security Agreement to
"Obligations" shall be deemed to be "Obligations" as defined in this Agreement.
(b) All references in the Mortgage Modification
Agreement (as defined in the First Restructuring Agreement) to the
"Consolidated Note" shall be deemed to be references to the "New Term Note"
as defined in this Agreement.
(c) The execution, delivery and effectiveness of this
Agreement shall not, except as expressly provided herein, amend, waive or
modify any of the terms and provisions of the New Loan Documents, and each such
New Loan Document shall remain in full force and effect and is hereby ratified
and confirmed.
SECTION 9. GUARANTIES.
(a) Each of the Guarantors hereby consents to the
terms and provisions of this Agreement, the New Term Note and all documents and
agreements to be executed or delivered in connection herewith or therewith, and
reaffirms, ratifies,
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confirms and acknowledges, that its liability, and BTCo's rights, under their
respective Guaranties shall be unaffected by the amendment and restatement of
the 1997 Note in the form of the New Term Note and shall remain in full force
and effect through the final and indefeasible payment of all sums owed to BTCo
under the New Loan Documents.
(b) Each of the Guarantors hereby covenants,
warrants and represents that it has been represented by counsel of its choice
in connection with the execution and delivery of this Agreement and the other
New Loan Documents to which it is a party and has executed and delivered this
Agreement and the other New Loan Documents to which it is a party freely,
voluntarily and without coercion or duress.
(c) Each of the Guarantors hereby (i) agrees that
its liability to BTCo as a guarantor of the New Term Note and all other
obligations of the Borrowers to BTCo is absolute and unconditional, irrespective
of the validity or enforceability of the Borrowers' obligations to BTCo or any
New Loan Document, including the Guaranties; and (ii) agrees that it will not
assert, and hereby unconditionally waives, any right of setoff or recoupment,
counterclaim or defense of any nature whatsoever (including, without limitation,
all defenses based on suretyship or impairment of collateral, and all defenses
which the Borrowers may assert on the underlying debt, including failure of
consideration, breach of warranty, fraud, payment, statute of frauds,
bankruptcy, lack of legal capacity, statute of limitations, lender liability,
accord and satisfaction, and usury) to payment of any obligations under its
Guaranty or this Agreement; and (iii) disclaims the existence of or reliance
upon any representations by BTCo, oral or written.
(d) Each of the Guarantors hereby agrees that if
either of the Borrowers is the subject of a proceeding under Title 11 of the
United States Code (the "BANKRUPTCY CODE"), it will not assert that the pendency
of such action or any order entered in such action is a defense to the timely
payment of its obligations to BTCo under its Guaranty.
(e) Each of the Guarantors hereby subordinates any
and all rights of payment in its favor with respect to any Indebtedness owing to
any Guarantor by either of the Borrowers, to the prior payment and satisfaction
in full of any and all Indebtedness owing by the Borrowers to BTCo under the
terms of the New Loan Documents. Each of the Guarantors further agrees not to
assert any rights of subrogation with respect to its Guaranty and hereby waives
all claims and rights of reimbursement, contribution and indemnity against the
Borrowers.
SECTION 10. REAFFIRMATION OF INDEMNITY AGREEMENTS. Each of the
Borrowers and the Guarantors hereby reaffirms, ratifies, confirms and
acknowledges, that its obligations, and
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BTCo's rights, under the Indemnity Agreements, shall be unaffected by this
Agreement and the other New Loan Documents and shall survive the payment in full
of the Term Note and the release of the Security Documents.
SECTION 11. TERMINATION OF OPTION. Effective as of the date
hereof, the Option (as such term is defined in the Option Agreement) is hereby
terminated and all references in the Option Agreement to the Option shall be of
no further force and effect; PROVIDED, HOWEVER, that the remaining provisions of
the Option Agreement shall be unaffected by this Agreement and shall survive the
payment in full of the New Term Note and the release of the Security Documents.
SECTION 12. REPRESENTATIONS AND WARRANTIES. Each of the
Borrowers and the Guarantors represents and warrants as follows:
(a) It is a New York corporation (except ASD Group,
which is a Delaware corporation), duly organized, validly existing and in good
standing under the laws of the State of New York (or, in the case of ASD Group,
the State of Delaware) and is in good standing under the laws of each other
state in which it does business, and has all the requisite power and authority
to execute and deliver, and to perform all of its obligations under, this
Agreement, the New Term Note and the other New Loan Documents as are necessary
to consummate the transactions herein contemplated.
(b) It maintains offices at the address set forth
above for it and maintains all of its business records at such address.
(c) The Company and ASD Group, respectively, are the
legal and beneficial owners of, and have good and marketable title to, the ASD
Property and the ASD Group Property, respectively, free and clear of any lien,
security interest, charge or encumbrance except for the Mortgages and the PNC
Liens. The Mortgages are valid second priority mortgage liens against the ASD
Property and the ASD Group Property. The ASD and ASD Group Assignments of Leases
and Rents are valid second priority assignments of the collateral set forth
therein, and except to the extent any rents assigned thereunder are determined
not to be property of either of the Borrowers, or such Borrower's estate in any
proceeding under the Bankruptcy Code in which such Borrower is a debtor or
alleged debtor, such rents shall constitute "Cash Collateral" as such term is
defined in section 363 of the Bankruptcy Code, notwithstanding any action or
inaction on the part of BTCo with respect to the Assignments of Leases and
Rents.
(d) Neither the execution or delivery of this
Agreement, the New Term Note or any of the other New Loan Documents, nor the
consummation of the transactions herein or
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therein contemplated, will result in a breach of any term of, or constitute a
default under, or constitute an event which with notice or lapse of time or both
will result in a breach of or constitute a default under, any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which any of the Loan Parties is a party, or conflict with any law,
order, rule or regulation applicable to any of the Loan Parties or of any court
or any federal or state government, regulatory body, or administrative agency or
any other governmental body having jurisdiction over its property.
(e) No authorization, approval or other action by,
or notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by any of the Loan
Parties of this Agreement or any of the other New Loan Documents.
(f) This Agreement and the other New Loan Documents
are and will be the legal, valid and binding obligation of each party thereto,
enforceable against such party in accordance with its respective terms.
(g) There is no pending or threatened action or
proceeding affecting any of the Loan Parties before any court, governmental
agency or arbitrator which may materially adversely affect the ability of any of
the Loan Parties to perform its obligations under this Agreement or any of the
other New Loan Documents or would purport to affect the legality, validity or
enforceability of this Agreement or any of the other New Loan Documents.
(h) The obligations of the Borrowers to repay all
amounts due under the New Term Note and the other New Loan Documents, together
with all costs and expenses thereunder, are absolute and unconditional, and the
Borrowers may not assert, and hereby unconditionally waive, any right of setoff
or recoupment, counterclaim or defense of any nature whatsoever to payment of
any obligations under any New Loan Document to BTCo.
(i) Upon the effectiveness of this Agreement, there
are no defaults or Events of Default which have occurred and are continuing
under any of the Existing Loan Documents.
(j) BTCo has no obligation to make advances or
extend any financial accommodations to any of the Loan Parties.
(k) The obligations of the Guarantors under the
Guaranties are absolute and unconditional, irrespective of the validity or
enforceability of the Guaranties or the Borrowers' obligations to BTCo, and the
Guarantors may not assert any right of setoff or recoupment, counterclaim or
defense of any nature whatsoever to payment of any of its obligations under its
respective Guaranty and this Agreement.
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SECTION 13. AFFIRMATIVE COVENANTS.
From the date hereof and for so long as any amount shall
remain outstanding under the New Term Note or unpaid under this Agreement, each
of the Borrowers agrees that it will:
(a) Deliver to BTCo promptly after becoming aware
thereof, notice of the commencement of any litigation or governmental
investigation affecting either of the Borrowers, which, if adversely determined,
is likely to have a material adverse effect on (i) the condition (financial or
otherwise), operations, properties, performance or prospects of either of the
Borrowers, (ii) the legality, validity or enforceability of this Agreement or
any other New Loan Document or (iii) the ability of either of the Borrowers to
carry out its obligations under this Agreement, the New Term Note or any of the
other New Loan Documents to which it is a party.
(b) Deliver to BTCo simultaneously with delivery of
same to PNC, copies of all documents relating to the condition (financial or
otherwise), operations, properties, performance or prospects of either of the
Borrowers, which are required to be delivered to PNC pursuant to the PNC Credit
Agreement.
(c) Deliver to BTCo within five (5) Business Days
after becoming aware of the occurrence of an Event of Default continuing on the
date of such statement, a statement of the Borrowers setting forth the details
of such Event of Default and the action taken or proposed to be taken by the
Borrowers with respect thereto.
(d) Deliver to BTCo promptly, from time to time, such
other information regarding the business affairs and financial condition of each
of the Borrowers as BTCo may reasonably request.
(e) Allow BTCo to send representatives, including
accountants and financial consultants, to its premises to examine its books,
records, operations and assets and give BTCo and its representatives reasonable
access to the personnel of such Borrower.
(f) Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its corporate existence,
material rights, licenses, permits and franchises.
(g) Comply in all material respects with all laws
and regulations applicable to it, except where the failure to so comply is not
likely to have a material adverse effect on (i) the condition (financial or
otherwise), operations, properties, performance or prospects of either of the
Borrowers, (ii) the
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legality, validity or enforceability of this Agreement or any other New Loan
Document or (iii) the ability of either of the Borrowers to carry out its
obligations under this Agreement or any other New Loan Document to which it is a
party.
(h) Maintain all its material properties and assets
in good working condition, reasonable wear and tear excepted.
(i) Pay all its obligations promptly and in
accordance with their terms and pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its properties before the same shall become
in default (except for taxes, assessments and governmental charges or levies
that are being contested in good faith and by proper proceedings and with
respect to which appropriate reserves are being maintained by it in accordance
with GAAP), as well as all lawful claims for labor, materials, and ssupplies or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof.
(j) (i) Keep all its insurable properties and
properties in which each Loan Party has an interest insured against the hazards
of fire, flood, sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to such Loan Party's including,
without limitation, business interruption insurance; (ii) Maintain insurance in
such amounts as is customary in the case of companies engaged in businesses
similar to such Loan Party insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds of
such Loan Party either directly or through authority to draw upon such funds or
to direct generally the disposition of such assets; (iii) Maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) Maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Loan Party is engaged in business; (v) Furnish BTCo
with (1) copies of all policies and evidence of the maintenance of such policies
by the renewal thereof at least thirty (30) days before any expiration date, and
(2) appropriate loss payable endorsements in form and substance satisfactory to
BTCo, naming BTCo as a co-insured and loss payee as its interest may appear with
respect to all insurance coverage referred to in clauses (i) and (iii) above,
and providing that all proceeds thereunder shall be payable to BTCo, no such
insurance shall be affected by any act or neglect of the insured or owner of the
property described in such policy, and that such policy and loss payable clauses
may not be canceled, amended or terminated unless at least thirty (30) days'
prior written notice is given to BTCo. In the event
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of any loss thereunder, the carriers named therein hereby are directed by BTCo
and the applicable Loan Party to make payment for such loss to BTCo and not to
such Loan Party and BTCo jointly. If any insurance losses are paid by check,
draft or other instrument payable to any Loan Party and BTCo jointly, BTCo may
endorse such Loan Party's name thereon and do such other things as BTCo may deem
advisable to reduce the same to cash. BTCo is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (i) and (ii)
above. All loss recoveries received by BTCo upon any such insurance may be
applied to the Obligations, in such order as BTCo, in its sole discretion, shall
determine. Any surplus shall be paid by BTCo to the Loan Parties or applied as
may be otherwise required by law. Any deficiency thereon shall be paid by the
Loan Parties to BTCo, on demand. Anything hereinabove to the contrary
notwithstanding, and subject to the fulfillment of the conditions set forth
below, BTCo shall remit to the Loan Parties insurance proceeds received by BTCo
during any calendar year under insurance policies procured and maintained by the
Loan Parties which insure the Loan Parties' insurable properties to the extent
such insurance proceeds do not exceed $50,000 in the aggregate during such
calendar year or $30,000 per occurrence. In the event the amount of insurance
proceeds received by BTCo for any occurrence exceeds $30,000, then BTCo shall
not be obligated to remit the insurance proceeds to the Loan Parties unless the
Loan Parties shall provide BTCo with evidence reasonably satisfactory to BTCo
that the insurance proceeds will be used by the Loan Parties to repair, replace
or restore the insured property which was the subject of the insurable loss. In
the event the Loan Parties have previously received (or, after giving effect to
any proposed remittance by BTCo to the Loan Parties, would receive) insurance
proceeds which equal or exceed $50,000 in the aggregate during any calendar
year, then BTCo may, in its sole discretion, either remit the insurance proceeds
to the Loan Parties upon the Loan Parties providing BTCo with evidence
reasonably satisfactory to BTCo that the insurance proceeds will be used by the
Loan Parties to repair, replace or restore the insured property which was the
subject to the insurable loss, or apply the proceeds to the Obligations, as
aforesaid. The agreement of BTCo to remit insurance proceeds in the manner above
provided shall be subject in each instance to satisfaction of each of the
following conditions: (x) No Event of Default shall then have occurred, and (y)
the Loan Parties shall use such insurance proceeds to repair, replace or restore
the insurable property which was the subject of the insurable loss and for no
other purpose. This subsection is subject to the provisions of the PNC Credit
Agreement.
SECTION 14. NEGATIVE COVENANTS. From the date hereof and for
so long as any amount shall remain outstanding under the New Term Note or unpaid
under this Agreement, each of the Borrowers agrees that it shall not, without
the prior written consent of BTCo:
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(a) Sell, assign or otherwise dispose of (i) its
assets (except as contemplated in Section 17) substantially as an entirety or
individually to another Person or (ii) any of its right, title or interest in or
to any of the Collateral (as defined in the Security Agreement) other than sales
of Collateral approved by BTCo provided that BTCo shall, subject to the terms of
the Intercreditor Agreement, receive either all sale proceeds (net of reasonable
sale commissions) thereof or substitute Collateral acceptable to BTCo on which
BTCo shall be granted a second priority security interest (junior only to the
PNC Liens) and which shall be insured and otherwise subject to all of the
provisions of the New Loan Documents applicable to Collateral.
(b) Make any transfer, including payments or grants
of security interests, to any insider, as such term is defined in section
101(31) of the Bankruptcy Code, with the exception of the payment of reasonable
salaries or reimbursement of reasonable out-of-pocket expenses incurred in the
ordinary course of its business to its directors and officers and other
employees.
(c) Incur any indebtedness, liability or other
obligation, other than in the ordinary course of business.
(d) Grant, suffer or permit to exist any Lien,
security interest or other encumbrance on any Loan Party's assets, whether
involuntarily, by operation of law or otherwise, except for (i) the PNC Liens;
and (ii) such Liens and security interests in favor of BTCo which currently
exist, are granted hereunder or which may be hereafter granted to BTCo by any of
the Loan Parties.
(e) Consolidate or merge into, or transfer its
properties or assets substantially as an entirety to, another Person.
(f) Make any material change in its existing capital
structure.
(g) Cancel any claim against any Person or any debt
owing to it, except for consideration and in the ordinary course of business.
(h) Declare, pay or make any dividend or distribution
on any shares of the common or preferred stock of any of the Loan Parties (other
than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of such Loan Party's funds,
property or assets to the purchase, redemption or other retirement of any common
or preferred stock, or of any options to purchase or acquire any such shares of
common or preferred stock of any of the Loan Parties.
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(i) Repay more than $300,000 in the aggregate of
principal due under the Becker Group Loans (as defined in the PNC Credit
Agreement).
SECTION 15. EVENTS OF DEFAULT; REMEDIES. Each of the
following shall constitute a default (an "EVENT OF DEFAULT") under this
Agreement:
(a) The Loan Parties shall fail to pay when due any
amount in respect of this Agreement, the New Term Note or any other New Loan
Document;
(b) Any of the Loan Parties shall fail to comply with
any covenant or agreement contained in this Agreement or any of the other New
Loan Documents, and such failure remains unremedied for a period of ten days
after notice from BTCo, except that no such notice shall be required in the
event that any of the Loan Parties fails to comply with any covenants contained
in Section 14 of this Agreement;
(c) Any representation or warranty of any of the
Loan Parties contained in this Agreement or any of the other New Loan Documents
shall be false, misleading, or incorrect in any material respect;
(d) Any action is taken in respect of the
dissolution, liquidation, winding up or cessation of any of the Loan Parties'
business, or any of the Loan Parties shall fail to pay its debts as they mature
or admits in writing its inability to pay its debts as they mature; or any of
the Loan Parties calls a meeting of its creditors for purposes of compromising
its debts;
(e) Any of the Loan Parties shall be the subject of
any bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any federal or state law and, in the event any such proceeding
is commenced against such Loan Party, such proceeding is not dismissed within
forty-five (45) days;
(f) Any of the Loan Parties shall (i) fail to pay
its debts as they mature or admit in writing its inability to pay its debts as
they mature or its inability to pay its debts generally or (ii) make a general
assignment for the benefit of its creditors;
(g) The appointment of a receiver or conservator for
any of the Loan Parties' property;
(h) A material adverse change in the condition
(financial or otherwise), operations, business, or properties of any of the Loan
Parties since the date hereof;
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(i) There shall exist an attachment or distraint of
any funds or other property in which any of the Loan Parties has rights which
may be in, or come into, the possession or control of BTCo or any other party
acting for or on behalf of BTCo or which comprises BTCo's security interest;
(j) BTCo's security interest in any funds or
property in which any of the Loan Parties has rights becomes subject at any
time to any mandatory order of any court or other legal process;
(k) Any judgment or order for the payment of money
against any of the Loan Parties shall be entered and remain undischarged or
unbonded for ten (10) days; or
(l) Any Event of Default (as defined in the PNC
Credit Agreement) shall have occurred under the PNC Credit Agreement;
then, and in any such event and at any time thereafter during the continuance of
such event, BTCo may, upon written notice to the Borrowers, (i) declare all of
the Obligations to be immediately due and payable, in which case all of the
Obligations shall automatically become immediately due and payable without any
requirement of notice to the Loan Parties), without presentment, demand, protest
or any other requirement or obligation of BTCo and (ii) exercise any and all
remedies available to BTCo under this Agreement and any other New Loan Document.
SECTION 16. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
This Agreement shall become effective when, and only when BTCo shall have
received, (a) counterparts of this Agreement duly executed by each of the Loan
Parties; (b) the Loan Reduction Payment in immediately available funds; (c) all
costs, fees and expenses, including without limitation, attorneys' fees,
incurred by BTCo in connection with the restructuring of the obligations of the
Borrowers to BTCo under the Existing Loan Documents (including, without
limitation, all of the transactions set forth herein); and (d) all of the
following documents, each document (unless otherwise indicated) being dated the
date of receipt thereof by BTCo (which date shall be the same for all such
documents) and being duly executed by the parties thereto:
(i) the New Term Note;
(ii) an opinion of Broad and Cassel, counsel to the Loan
Parties, in substantially the form annexed as Exhibit B;
(iii) the New Warrant in replacement of the Original Warrant;
(iv) an officer's certificate, in form and substance
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satisfactory to BTCo, certifying (A) that attached thereto are
true, complete and correct copies of the resolutions of the
boards of directors of each of the Loan Parties approving the
execution of this Agreement and the other New Loan Documents;
(B) that attached thereto are true, complete and correct
copies of the by-laws of each of the Loan Parties, as in
effect on the date of the certificate; and (C) that the
Certificates of Incorporation of each of the Loan Parties have
not been amended since the dates of the last amendments
thereto as indicated on the certificates furnished pursuant to
clause (vii) below;
(v) incumbency certificates, in form and substance
satisfactory to BTCo, certifying the names and signatures of
the persons authorized to execute this Agreement and the other
New Loan Documents on behalf of the Loan Parties;
(vi) copies of Certificates of Incorporation for each of the
Loan Parties, as amended;
(vii) certificates of the secretary of state or similar
governmental office for the jurisdiction in which such
corporation is incorporated, dated as of a recent date, as to
the good standing of and payment of taxes by each of the Loan
Parties; and
(viii) PNC's written consent to this Agreement, in the form
annexed as Exhibit C.
(ix) such other documents, instruments, opinions, evidence,
materials, and information as BTCo may reasonably request.
SECTION 17. RELEASE OF MORTGAGES AND ASSIGNMENTS OF LEASES AND RENTS.
Each of the parties acknowledges and agrees that the Company is currently in the
process of negotiating the sale of all or a part of the ASD Property and/or the
ASD Group Property or a refinancing of the entire Indebtedness secured by the
Mortgages. BTCo acknowledges and agrees that PNC Bank has a prior lien on the
ASD Property and ASD Group Property. BTCo acknowledges and agrees that any and
all proceeds from the sale of the ASD Property and/or ASD Group Property or
refinancing of the entire Indebtedness secured by the Mortgages will be paid to
PNC. In the event of a sale by the Company or ASD Group, as the case may be, of
the ASD Property or the ASD Group Property or the refinancing of the entire
Indebtedness secured by the Mortgages, BTCo and PNC shall release all necessary
liens, including the ASD Mortgage or the ASD Group Mortgage as the case may be.
SECTION 18. REINSTATEMENT OF EXISTING OBLIGATIONS. If at any
time, payment of all or any part of the Loan Reduction
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Payment is rescinded or must otherwise be returned by BTCo upon insolvency,
bankruptcy or reorganization of any Loan Party or otherwise, the Obligations (as
defined in the First Restructuring Agreement and as evidenced by the 1997 Note)
shall be reinstated.
SECTION 19. NOTICES. Notices, requests and other
communications under this Agreement and any other New Loan Document shall be in
writing and may be delivered to the parties hereto personally or sent by
facsimile transmission or first class mail, return receipt requested, addressed
as follows, and if sent by mail, shall be deemed to have been delivered on the
date such notice, request or other communication shall have been deposited in a
stamped, addressed envelope with any post office of the U.S. Postal Service:
If to the Borrowers or the Guarantors:
c/o ASD Group, Inc.
1 Industry Street
Poughkeepsie, New York 12603
Attention: Peter C. Zachary
(Telecopier No. 914-452-3071)
With a copy to:
Broad and Cassel
Miami Center
201 South Biscayne Boulevard
Suite 3000
Miami, Florida 33131
Attention: Linda C. Frazier, Esq.
Dale S. Bergman, P.A.
(Telecopier No. (305) 373-9443)
If to BTCo:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street, 25th Floor
New York, New York 10006
Attention: Mr. Thomas J. O'Brien
Principal
(Telecopier No. (212) 669-0743)
With a copy to:
Luskin, Stern & Eisler LLP
330 Madison Avenue, Suite 3400
New York, NY 10017
Attention: Richard Stern, Esq.
(Telecopier No. (212) 293-2705)
The parties hereto may change their addresses by giving
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notice thereof to the other parties hereto in conformity with this section.
SECTION 20. RELEASE AND INDEMNITY.
(a) Each of the Loan Parties 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 Existing Loan Documents, (all of the foregoing hereinafter
called the "RELEASED MATTERS"). Each of the Loan Parties 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 Loan Parties 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.
(b) Each of the Loan Parties hereby agrees to
indemnify and hold harmless BTCo and its directors, officers, employees and
agents, including all professionals (each an "INDEMNIFIED PARTY") from and
against any and all expenses, losses, claims, damages and liabilities
(including, without limitation, all fees and disbursements of attorneys and
other professionals) incurred by or asserted against any Indemnified Party in
connection with or arising out of, relating to, or by reason of any
investigation, litigation or proceeding arising out of, relating to or in
connection with any claims made by any Person in any way relating to the
transactions contemplated hereby, but excluding therefrom all expenses, losses,
claims, damages, and liabilities arising out of or resulting from the gross
negligence or willful misconduct of any Indemnified Party.
SECTION 21. MISCELLANEOUS.
(a) This Agreement or any New Loan Document, or any
provisions hereof or thereof, may be changed, waived, or terminated only by a
statement in writing signed by the party
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against which such change, waiver or termination is sought to be enforced and
such statement shall be limited as written. No delay in enforcing or failure to
enforce any right under this Agreement shall constitute a waiver of such right.
No waiver by BTCo of any Event of Default hereunder shall be effective unless in
writing, nor shall any waiver operate as a waiver of any other Event of Default
on a future occasion.
(b) All representations, warranties and covenants of
the parties contained herein shall survive the execution and delivery of this
Agreement and shall terminate only on full payment and performance of all their
obligations to BTCo, including, without limitation, those under this Agreement,
the New Term Note and the Security Documents.
(c) Each of the Loan Parties 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 reaffirmed, ratified and created by the Security
Documents.
(d) 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.
(e) THIS AGREEMENT, TOGETHER WITH THE OTHER NEW LOAN
DOCUMENTS, CONSTITUTES THE ENTIRE AGREEMENT AND UNDERSTANDING AMONG THE PARTIES
RELATING TO THE SUBJECT MATTER HEREOF, AND SUPERSEDES ALL PRIOR PROPOSALS,
NEGOTIATIONS, AGREEMENTS AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER. IN
ENTERING INTO THIS AGREEMENT, EACH OF THE LOAN PARTIES 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 BTCO, EXCEPT FOR THE AGREEMENTS OF
BTCO SET FORTH HEREIN. THIS AGREEMENT MAY BE REGARDED AS AN AGREEMENT FOR THE
LOAN OF MONEY. THE PARTIES STATE THAT THERE ARE NO OTHER AGREEMENTS, WHETHER
ORAL OR WRITTEN, WHICH ARE NOT CONTAINED IN THIS AGREEMENT, THE NEW TERM NOTE,
THE SECURITY DOCUMENTS, OR ANY OF OTHER NEW LOAN DOCUMENTS; AND NO SUCH
AGREEMENT SHALL BE BINDING UPON THE PARTIES WHICH IS NOT STATED IN THIS
AGREEMENT OR IN THE REFERENCED DOCUMENTS.
(f) The Loan Parties shall not assign this Agreement
or any rights or obligations hereunder, without the prior written consent of
BTCo.
(g) BTCo may freely assign to one or more banks or
other financial institutions all or a portion of its rights and obligations
under this Agreement without the prior written consent of the Loan Parties.
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<PAGE>
(h) 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.
(i) 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 waives 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 Loan Parties
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 Loan
Parties hereby agrees and consents that, without limiting other methods of
obtaining jurisdiction, personal jurisdiction over the Loan Parties 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 Loan Parties by registered mail to or by personal
service, unless otherwise designated in writing in accordance with the notice
requirements set forth below.
(j) EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY
DESIGNATES CT CORPORATION SYSTEM LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK,
AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH LOAN PARTY TO RECEIVE, FOR AND ON
BEHALF OF SUCH LOAN PARTY, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS
IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
NEW LOAN DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH
AGENT AT ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO SUCH LOAN PARTY, BUT
FAILURE OF SUCH LOAN PARTY TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE
SERVICE OF SUCH PROCESS.
(k) EACH OF THE LOAN PARTIES AND BTCo HEREBY WAIVES
ITS RIGHT TO TRIAL BY JURY IN ANY CONTROVERSY ARISING OUT
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<PAGE>
OF OR RELATING TO THIS AGREEMENT OR ANY OF THE NEW LOAN DOCUMENTS.
(l) BTCo SHALL HAVE NO LIABILITY TO THE LOAN PARTIES
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY
LOAN PARTY IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY
A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON BTCo, THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF BTCo. EACH OF THE LOAN PARTIES HEREBY WAIVES ALL FUTURE
CLAIMS AGAINST BTCo FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES
UNLESS RESULTING FROM THE GROSS NEGLIGENCE OF BTCo OR BTCo's KNOWING VIOLATION
OF THE LAW.
(m) No delay or omission by BTCo in exercising any
right or remedy hereunder shall impair any such right or operate as a waiver
thereof. No single or partial exercise by BTCo of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
(n) 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.
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<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
----------------------------------------------
Thomas J. O'Brien
Principal
AUTOMATIC SYSTEMS DEVELOPERS, INC.
By: /S/ PETER C. ZACHARIOU
------------------------------------------
Name: Peter C. Zachariou
Title: President
ASD GROUP, INC.,
formerly known as Dutchess Design
and Development, Inc.
By: /S/ PETER C. ZACHARIOU
-----------------------------------------
Name: Peter C. Zachariou
Title: President
HIGH TECHNOLOGY COMPUTERS, INC.
By:/S/ PETER C. ZACHARIOU
------------------------------------------
Name: Peter C. Zachariou
Title: President
NETCOMP, INC., formerly known as
ASD Office Systems, Inc.
By:/S/ GARY D. HORNE
------------------------------------------
Name: Gary D. Horne
Title: Chairman/Board of Directors
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<PAGE>
EXHIBIT C
CONSENT AND AFFIRMATION
PNC Bank, National Association ("PNC") and Bankers Trust
Company ("BTCO"), as parties to the Intercreditor and Subordination Agreement
(as amended from time to time, the "INTERCREDITOR AGREEMENT"), dated as of
December 18, 1997, do hereby agree as follows:
1. PNC consents to the payment of $250,000 by Automatic
Systems Developers, Inc. and ASD Group, Inc. (the
"BORROWERS"), pursuant to that certain Second
Restructuring Agreement (the "RESTRUCTURING
AGREEMENT") dated as of February 26, 1999 among BTCo,
the Borrowers, High Technology Computers, Inc. and
Netcomp, Inc., to be applied as stated in the
Restructuring Agreement, and PNC further waives any
provisions to the contrary in the Intercreditor
Agreement.
2. PNC and BTCo hereby affirm, ratify and acknowledge
all other terms and conditions of the Intercreditor
Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Consent
and Affirmation to be executed by their duly authorized officers as of February
26, 1999.
PNC BANK, NATIONAL ASSOCIATION
By:/S/ LASZLO HAJDU-NEMETH
----------------------------------
Name: Laszlo Hajdu-Nemeth
Title: Senior Vice President
BANKERS TRUST COMPANY
By:/S/ THOMAS J. O'BRIEN
----------------------------------
Thomas J. O'Brien
Principal
EXHIBIT 5
FIRST AMENDMENT AGREEMENT
AMONG
AUTOMATIC SYSTEMS DEVELOPERS, INC. AND
HIGH TECHNOLOGY COMPUTERS, INC.,
AS BORROWERS,
ASD GROUP, INC., AS GUARANTOR,
THE FINANCIAL INSTITUTIONS WHICH ARE NOW OR HEREAFTER BECOME
A PARTY TO THAT CERTAIN CREDIT AGREEMENT DATED AS OF DECEMBER 18, 1997 AND
PNC BANK, NATIONAL ASSOCIATION, AS AGENT
AMENDING THE RESTRUCTURING AGREEMENT DATED AS OF JUNE 26, 1998
Dated as of March 10, 1999
<PAGE>
THIS FIRST AMENDMENT AGREEMENT dated as of March 10, 1999 (this
"AMENDMENT") 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, as agent for the Lenders (in such
capacity, the "AGENT"). As of the date hereof, PNC Bank, National Association is
and always has been the only Lender under the Credit Agreement. In its capacity
as the sole Lender and the Agent under the Credit Agreement, PNC Bank, National
Association is hereinafter sometimes referred to as "PNC."
W I T N E S S E T H:
WHEREAS, the Borrowers and PNC have entered into a Revolving Credit,
Term Loan and Security Agreement dated as of December 18, 1997 (as the same may
be amended, modified, supplemented or restated from time to time, the "CREDIT
AGREEMENT"; the terms defined in the Credit Agreement are used in this Amendment
as in the Credit Agreement unless otherwise defined in this Amendment); and
WHEREAS, prior to the date hereof, certain Defaults and Events of
Default of the Borrowers had occurred under the Credit Agreement;
WHEREAS, the parties to the Credit Agreement reached an agreement in
connection with, among other things, such Defaults and Events of Default
pursuant to that certain Agreement dated as of June 26, 1998 (as the same may be
amended, modified, supplemented or restated from time to time, the
"RESTRUCTURING AGREEMENT");
WHEREAS, the parties thereto desire and are willing, on the terms and
conditions set forth below, to modify certain terms of the Restructuring
Agreement.
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto have agreed to amend the
Restructuring Agreement as hereinafter set forth:
SECTION 1A. AMENDMENTS TO RESTRUCTURING AGREEMENT. The Restructuring
Agreement is, subject to the satisfaction of the conditions to effectiveness set
forth in Section 2 hereof, hereby amended as follows:
(a) Paragraph D of the Recitals is amended to read in its entirety as
follows:
"The maximum credit facility provided by the Credit Agreement is a
revolving loan of up to $4,500,000, provided that such amount shall be
increased to $5,700,000 from the First Amendment Effective Date (as
defined in the First Amendment hereto)."
<PAGE>
(b) Clause (I) of the third sentence of Paragraph (b) of Section 8
(Future Modification of Credit Agreement) of the Restructuring Agreement is
hereby amended by adding the following to the end thereof:
";PROVIDED, HOWEVER, that from and after the First Amendment Effective
Date for so long as no Defaults exist other than Specified Defaults and
this Agreement is not in default, the Borrowers shall not be required
to maintain any Undrawn Availability."
(c) Section 9 (Over-Advance) of the Restructuring Agreement, effective
as of the First Amendment Effective Date, is hereby deleted in its entirety and
substituted in lieu thereof is the following:
"(1) The parties agree that two separate over-advances shall exist in
the aggregate principal amounts of $900,000 (the "TIER 1 OVER-ADVANCE")
and $675,000 (the "TIER 2 OVER-ADVANCE"), respectively. The Tier 1
Over-Advance shall be repaid in full on or before the earlier of the
date of acceleration of the amounts due under the Credit Agreement or
September 10, 1999 (the "TIER 1 TERMINATION DATE"). The Tier 2
Over-Advance shall be repaid in full on or before the earlier of the
date of acceleration of the amounts due under the Credit Agreement or
the date of the Refinancing Event (as defined below); PROVIDED,
HOWEVER, such date of the Refinancing Event shall be no later than
August 29, 1999 (the "TIER 2 TERMINATION DATE"). Notwithstanding
anything in this Section 9 to the contrary, (a) at such time as the
real property listed on SCHEDULE A hereto is sold (the "REAL PROPERTY
SALE"), then the proceeds of such sale (the "REAL PROPERTY PROCEEDS")
shall be applied automatically to the Tier 1 Over-Advance, PROVIDED,
however, in the event that the Real Property Proceeds are insufficient
to repay in full the Tier 1 Over-Advance, then the Borrowers shall be
permitted until the later of (i) the Tier 1 Termination Date or (ii) 30
days from the date of such Real Property Sale to pay such deficiency,
PROVIDED, FURTHER, HOWEVER, in any event the Tier 1 Over-Advance must
be repaid in full no later than the date of acceleration of the amounts
due under the Credit Agreement, and (b) at such time as the real
property listed on SCHEDULE B hereto is refinanced (the "REFINANCING
EVENT"), then the proceeds of such Refinancing Event shall be applied
automatically to the Tier 2 Over-Advance and shall thereafter
permanently reduce the Tier 2 Over-Advance, PROVIDED, HOWEVER, in any
event the Tier 2 Over-Advance must be repaid in full no later than the
Tier 2 Termination Date; PROVIDED, FURTHER, HOWEVER, to the extent the
Tier 2 Over-Advance remains outstanding as of the Tier 2 Termination
Date, then such amount, unless due and payable earlier by acceleration
or otherwise, shall be paid in equal monthly installments of $100,000
until such time as the Tier 2 Over-Advance is paid in full."
SECTION 1B. ACKNOWLEDGMENT REGARDING NON-AVAILABILITY OF EURODOLLAR
RATE. Each of the parties hereto acknowledges and agrees that, effective as of
the First Amendment Effective Date, the Borrower shall not be permitted to
borrow Eurodollar Rate Loans under the Credit Agreement and all borrowings must
thereafter be Domestic Rate Loans.
2
<PAGE>
SECTION 1C. WAIVER. PNC hereby waives any default arising under Section
8(b) of the Restructuring Agreement as in effect prior to the First Amendment
Effective Date.
SECTION 1D. CONFIRMATION. Each Borrower and Holdings hereby confirms
PNC's right to establish reserves against the Collateral at any time in its sole
and absolute discretion.
SECTION 1E. PROJECTIONS. The Borrowers and Holdings covenant and agree
to provide to PNC on a date no later than March 31, 1999 projections for the
fiscal period beginning June 26, 1999 and ending June 23, 2000 (the
"PROJECTIONS"). The Projections shall be in form and substance reasonably
satisfactory to PNC. In addition, the Borrowers and Holding covenant and agree
that the performance, financial or otherwise, of the Borrowers and Holdings
shall not be less than 85% of the value of the parameters, financial or
otherwise, set forth in the Projections, measured as of the end of each fiscal
quarter covered by such Projections.
SECTION 1F. INVESTMENTS. The Borrowers and Holdings covenant and agree
that on or before March 30, 1999, the Borrowers will receive additional capital,
in the form of equity or subordinated debt, pursuant to documentation in form
and substance satisfactory to PNC, in an amount not less than $1,200,000.
SECTION 1G. INSURANCE. The Borrowers hereby covenant and agree to have
a life insurance policy in the amount of $1,500,000 naming Peter Zachariou as
insured issued by an insurer reasonably satisfactory to PNC issued no later than
March 30, 1999. Simultaneously with the issuance of such life insurance policy,
the Borrowers shall collaterally assign to PNC all of its right, title and
interest in and to all rights of the Borrowers in such life insurance policy,
pursuant to documents to which each of the Borrowers, the insurer and PNC is a
party, in form and substance satisfactory to PNC.
SECTION 2A. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective only upon the satisfaction of all of the following conditions
precedent (the date of satisfaction of such conditions being referred to herein
as the "FIRST AMENDMENT EFFECTIVE DATE"):
(a) Each of the parties hereto shall have duly executed and delivered
this Amendment (whether the same or different copies) and PNC shall have
received a copy signed by each of the Borrowers and Holdings (collectively, the
"PRINCIPAL PARTIES");
(b) PNC shall have received the favorable opinions of Broad and Cassel
and other local counsel as PNC may reasonably request, in form and substance
satisfactory to PNC;
(c) PNC shall have received a certificate signed by each of the
Borrowers stating that each of the representations and warranties contained in
Section 3 hereof are true and correct on and as of the First Amendment Effective
Date as though made on and as of such date;
(d) PNC shall have received payment in full of all of the fees and
expenses due and payable pursuant to Section 5 hereof;
3
<PAGE>
(e) PNC shall have received a copy of any and all filings, SEC or
otherwise, documents or agreements, including, without limitation, the Proxy
Statement filed with the SEC on March 2, 1999, necessary to effect, as required
by law, the recapitalization of Holdings as contemplated by the Debt Conversion
Agreements (as defined below); and
(f) PNC shall have received such other documents, including, but not
limited to, amendments, modifications, supplements or restatements of any Other
Documents, opinions, approvals or appraisals as PNC may reasonably request.
SECTION 2B. CONDITIONS SUBSEQUENT. The Borrowers and Holdings covenant
and agree to provide the following agreements (collectively, the "DEBT
CONVERSION AGREEMENTS"), as executed, to PNC, in form and substance reasonably
satisfactory in PNC, on a date no later than March 1, 1999.
(i) A copy of the Second Restructuring Agreement by and among
the Borrowers, Holdings and Bankers Trust Company, dated as of March
__, 1999; and
(ii) A copy of (A) the Agreement by and among the Borrowers,
Holdings and John Halik and (B) the Agreement by and among the
Borrowers, Holdings and James Yessian, each dated as of February 9,
1999.
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce PNC to
enter into this Amendment, each of the Principal Parties hereby represents and
warrants to PNC that (i) it has the full capacity and legal right to execute,
deliver and perform its obligations under this Amendment and the Other Documents
to which it is a party, and each of the Principal Parties has taken all
appropriate action necessary to authorize the execution and delivery of, and the
performance of its obligations under, this Amendment and the Other Documents,
(ii) this Amendment, the Credit Agreement and the Restructuring Agreement (as
amended by this Amendment) and the Other Documents, constitute legal, valid and
binding obligations of each of the Principal Parties enforceable against it in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization or moratorium or similar laws affecting the rights of
creditors generally, (iii) the representations and warranties contained in the
Credit Agreement and the Restructuring Agreement and in each of the Other
Documents, to which it is a party are true and correct on and as of the First
Amendment Effective Date 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 and Restructuring Agreement or are being consented to by PNC in
this Amendment, (iv) no Default or Event of Default (other than those expressly
waived herein) has occurred and is continuing, or would result from the
execution, delivery and performance by each of the Principal Parties of this
Amendment, the Credit Agreement and Restructuring Agreement (as amended by this
Amendment) or any of the Other Documents, to which it is a party, (v) none of
the Principal Parties is in default in the payment or performance of any of its
obligations under any mortgage, indenture, security agreement, contract,
undertaking or other agreement or instrument to which it is a party or which
purports to be binding upon it or any of its properties or assets, which default
would have a material adverse effect on its properties, assets or financial
condition, (vi) each of the Principal Parties is in compliance with all
applicable statutes, laws, rules, regulations, orders and judgments, the
4
<PAGE>
contravention or violation of which would have a material adverse effect on its
properties, assets or condition (financial or otherwise), (vii) no material
adverse change in its properties, assets or in the condition (financial or
otherwise) has occurred, and (viii) no litigation or administrative proceeding
of or before any court or governmental body or agency is now pending, nor, to
the best knowledge of each of the Principal Parties upon reasonable inquiry, is
any such litigation or proceeding now threatened against each of the Principal
Parties or any of its properties, nor, to the best knowledge of each of the
Principal Parties 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 its properties, assets or condition
(financial or otherwise).
SECTION 4. REFERENCE TO AND EFFECT ON THE DOCUMENTS.
(a) Each reference in the Credit Agreement or the Restructuring
Agreement, as the case may be, to "this Agreement", "hereunder", "hereof",
"herein" or words of like import, and each reference to the Credit Agreement in
the Other Documents other than the Credit Agreement and Restructuring Agreement,
shall mean and be a reference to the Credit Agreement and Restructuring
Agreement, as the case may be, as amended hereby.
(b) Except as specifically provided herein, the Credit Agreement and
Restructuring 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 Principal Parties. The amendments and waivers 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
Credit Agreement and Restructuring Agreement or any document delivered pursuant
thereto or (ii) prejudice any right or rights which PNC may now or in the future
have in connection with the Credit Agreement and Restructuring Agreement or the
Other Documents.
(c) Except as specifically provided herein, the execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of PNC under the Credit Agreement and the Restructuring
Agreement or any of the Other Documents nor constitute a waiver or modification
of the Credit Agreement and the Restructuring Agreement and any provision of any
of the Other Documents nor a waiver of any now existing or hereafter arising
Defaults or Events of Default. A default under the Restructuring Agreement as
amended hereby shall be an Event of Default under the Credit Agreement.
SECTION 5. FEES AND EXPENSES. Each of the Principal Parties hereby
agrees to pay, on a joint and several basis, PNC on demand for all costs,
expenses, charges and taxes (other than any income taxes relating to income of
PNC), including, without limitation, all reasonable fees and disbursements of
counsel, incurred by PNC in connection with the negotiation, preparation,
reproduction, execution, delivery, administration and enforcement of this
Amendment and any Other Documents, to be delivered hereunder.
In addition, PNC shall receive from the Principal Parties the
following, which are deemed to be fully earned upon the execution of this
Amendment:
5
<PAGE>
(a) a fee of one hundred and fifty thousand dollars ($150,000),
payable on the earlier of (i) in full on the date of refinancing
or repayment of the amounts outstanding under the Credit Agreement
and the Restructuring Agreement, or (ii) in part, within 90 days
of the end of each Fiscal Year in an amount equal to 40% of the
pre-tax profit of the Borrowers for such Fiscal Year, until such
fee is paid in full.
(b) Warrants to PNC to purchase 100,000 shares of Holdings Common
Stock with a term of five years and an exercise price of $1.25 per
share (in the form attached hereto as EXHIBIT A). [In this regard,
Holdings agrees to register the re-sale of Common Stock issuable
upon exercise of such Warrants (the "Underlying Shares") in its
Registration Statement on Form SB-2 filed with the SEC on February
1, 1999; PROVIDED, HOWEVER, PNC will agree not to sell, transfer
or otherwise dispose of the Underlying Shares for a period of six
months from the effective date of the Registration Statement.]
SECTION 6. GOVERNING LAW. This Amendment 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 conflict of laws principles.
SECTION 7. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 8. SUCCESSORS. This Amendment shall be binding upon the
successors, assigns, heirs, executors and administrators of the parties hereto.
SECTION 9. COUNTERPARTS. This Amendment 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 Amendment by signing any such
counterpart.
6
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Amendment
or has caused this Amendment to be executed by its duly authorized officer, as
of the date first above written.
AUTOMATIC SYSTEMS DEVELOPERS, INC.
By: /s/ Peter C. Zachariou
-------------------------------
Name: PETER C. ZACHARIOU
Title: PRESIDENT
HIGH TECHNOLOGY COMPUTERS, INC.
By: /s/ Peter C. Zachariou
-------------------------------
Name: PETER C. ZACHARIOU
Title: PRESIDENT
ASD GROUP, INC.
By: /s/ Peter C. Zachariou
-------------------------------
Name: PETER C. ZACHARIOU
Title: PRESIDENT
PNC BANK, NATIONAL ASSOCIATION,
as sole Lender and as Agent
By: /s/ Laszlo Hajdu-Nemeth
-------------------------------
Name: Laszlo Hadju-Nemeth
Title: Senior Vice President
7
<PAGE>
SCHEDULE A
253 North Grand Avenue
Poughkeepsie, New York
Vacant Land
Titusville, New York
SCHEDULE B
1 Industry Street
Poughkeepsie, New York
8
