EXHIBIT 2
AGREEMENT
This Agreement is made and entered into as of the 24th day of June,
1998, by and among Automatic Systems Developers, Inc., a New York corporation
("ASD"); High Technology Computers, Inc., a New York corporation ("HTC") (ASD
and HTC are each a "Borrower" and collectively, the "Borrowers"), ASD Group,
Inc., a Delaware corporation ("Holdings"); the financial institutions which are
now or hereafter become a party to the Credit Agreement (as defined below)(the
"Lenders") and PNC Bank, National Association (the "Agent"), as agent for the
Lenders.
RECITALS
A. The Borrowers, Lenders, and PNC are parties to a Revolving
Credit, Term Loan and Security Agreement dated December 18,
1997 (the "Credit Agreement") pursuant to which the Lenders
have made certain Advances to the Borrowers in the form of
Revolving Advances and a Term Loan.
B. Holdings is the parent of the Borrowers and has guaranteed the
obligations of the Borrowers under such Credit Agreement.
C. Certain Events of Default have occurred under the Credit
Agreement, namely the failure of Borrower and Holdings to meet
certain financial and non-financial covenants and failure to
make certain payments of principal and interest to
subordinated creditors of the Borrowers.
D. The maximum credit facility provided by the Credit Agreement
is a revolving loan of up to $4,500,000.00.
E. The parties wish to come to some agreement with respect to the
Advances, defaults and the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the undersigned agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. ACKNOWLEDGEMENTS. The Borrowers and Guarantors hereby
acknowledge and ratify that there currently are existing the
following Defaults under the Credit Agreement, namely Defaults
arising due to breaches of Sections 6.5 and 6.6 of the Credit
Agreement and Defaults arising under Section 6.9 due to
failure to pay amounts due under the Subordination Note
(collectively, the "Specified Defaults").
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3. CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective only upon the satisfaction or waiver of all of the
following conditions precedent:
(a) The Borrowers, the Guarantors and the Lenders shall
have duly executed and delivered this Agreement
(whether the same or different copies) and the Agent
shall have received a copy signed by each of the
Borrowers and the Guarantors;
(b) The Agent shall have received the fees and expense
reimbursements referred to in Section 16 hereof, a
fee in the amount of $7,500 to Agent and warrants
with a term of three years to purchase 100,000 shares
of Holdings Common Stock at a purchase price of $1.50
per share (in the form attached hereto as Exhibit A);
(c) The Agent shall have received resolutions executed by
the Board of Directors of the Borrowers approving
this Agreement;
(d) The Borrowers shall have received $1,500,000.00 in
immediately available funds as proceeds from the
investment by a group of investors led by Cameron
Worldwide Corp. (the "Cameron Transaction"), of which
not less than $865,000 shall be available to tbe
Borrowers as working capital;
(e) The Agent shall have received ratification of the
existing intercreditor and subordination agreement;
(f) Agent shall have received a pro forma balance sheet
and a statement of sources and uses of funds; and
(g) The Bank shall have received such other documents,
opinions, approvals or appraisals as the Bank may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Lenders
to enter into this Agreement, each of the Borrowers and the
Guarantors hereby, jointly and severally, represent and
warrant to the Lenders that (i) each has the full power,
capacity, right and legal authority to execute, deliver and
perform its respective obligations under this Agreement, and
the other documents to which it is a party, and each of the
Borrowers have taken all appropriate action necessary to
authorize the execution and delivery of, this Agreement and
the documents to which it is a party, (ii) this Agreement, the
Credit Agreement and the other documents constitute legal,
valid and binding obligations of each of the Borrowers and the
Guarantors enforceable against such Borrower or Guarantor in
accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws effecting the rights of creditors generally,
(iii) the representations and warranties contained in the
Credit Agreement and in each of the other documents to which
it is a party are true and correct on and as of the date
hereof as though made on and as of such date, except for
changes which have occurred and which were not prohibited by
the terms of the Credit Agreement or as stated in this
Agreement, (iv) no Default or Event of Default would result
from the execution, delivery and
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performance by any Borrower and any Guarantor of this
Agreement, or any of the other documents to which it is a
party, (v) except as described above or except with respect to
the Subordinated Loan and the Xxxxxx Group Loan, none of the
Borrowers or the Guarantors are in default in the payment of
any of their respective obligations under any mortgage,
indenture, security agreement, contract, undertaking or other
agreement or instrument to which they are a party or which
purports to be binding upon them or any of their respective
properties or assets, which default would have a material
adverse effect on the management, business, operations,
properties, assets or condition (financial or otherwise) of
any Guarantor, (vi) each of the Borrowers and the Guarantors
is in compliance with all applicable statutes, laws, rules,
regulations, orders and judgments, the contravention or
violation of which would have a material adverse effect on the
management, business, operations, properties, assets or
condition (financial or otherwise) of any Borrower or on the
properties, assets or condition (financial or otherwise) of
any Guarantor, and (vii) no litigation or administrative
proceeding of or before any court or governmental body or
agency is now pending nor, to the best knowledge of any
Borrower or any Guarantor upon reasonable inquiry, is any such
litigation or proceeding now threatened against any Borrower
or any Guarantor upon reasonable inquiry, is there a valid
basis for the initiation of any such litigation or proceeding,
which if adversely determined (after giving effect to all
applicable insurance coverage then in existence) would have a
material adverse effect on the business, assets or condition
(financial or otherwise) of any Borrower or on the properties,
asset or condition (financial or otherwise) of any Guarantor.
5. WAIVER. Effective as of the date hereof, subject to the
condition that this Agreement not be in default, Lenders agree
to waive any and all rights they may have by virtue of the
occurrence of any Event of Default arising due to the
Specified Defaults whether such Event of Default is now
existing or arising in the future, including but not limited
to the right to declare the Obligations immediately due and
payable.
6. INTEREST AND FEES. The Lenders acknowledge that Borrowers and
Holdings have not to date been charged the Default Rate of
interest due to the Specified Defaults. Moreover, Lenders
agree not to charge the Borrowers and Holdings any Default
Rate of interest to which it may be entitled by virtue of
Specified Defaults (whether now existing or subsequently
occurring) from the original date of the Credit Agreement
through June 23, 2000 (or June 23, 2001 if extended pursuant
to Section 8) subject to the condition that this Agreement not
be in default.
7. FORBEARANCE. Effective as of the date hereof through August
24, 1998 (the "Forbearance Period"), and subject to the
satisfaction of the conditions set forth in Section 3 hereof,
the Lenders shall not seek to exercise any of their rights or
remedies under the Credit Agreement based on any Specified
Defaults including
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but not limited to statutory common law rights to offset.
Lenders will continue to provide financing to Borrowers
pursuant to the terms of this Agreement on the terms described
herein notwithstanding any Specified Default during the
Forbearance Period subject to the condition that this
Agreement not be in default.
8. FUTURE MODIFICATION OF CREDIT AGREEMENT.
(a) The Lenders will, upon review of projections
submitted from time to time by the Borrowers and
reasonably satisfactory to the Lenders, increase the
maximum credit limit from $4,500,000 to up to
$8,750,000, provided that such projections evidence
the reasonable use of such increase and the
Borrowers' reasonable ability to repay the same.
(b) During the Forbearance Period, the parties agree that
Lenders will continue to advance sums pursuant to the
Credit Agreement and not to exercise any of their
rights to declare a Default or terminate the Credit
Agreement so long as (I) Borrowers maintain Undrawn
Availability (as defined in the Credit Agreement)
equal to not less than $250,000, (II) there exist no
Defaults except the Specified Defaults, and (III)
there are no defaults under this Agreement. During
the Forbearance Period, the parties will negotiate in
good faith the restructure of the Credit Agreement to
reflect the recapitalization of the Company in light
of the Cameron Transaction and Agreements to the
covenants contained therein. If after the expiration
of the Forbearance Period, no agreement is reached as
to the restructure of the Credit Agreement, the
parties agree that the Credit Agreement will remain
in place until June 23, 2000 (provided that if no
Default or Event of Default has occurred under the
Credit Agreement or this Agreement, the Borrowers may
by written notice given between April 15, 2000 and
June 1, 2000 extend such date to June 23, 2001), and
Lenders agree not to exercise any of their rights to
declare a Default due to a Specified Default whether
now existing or arising in the future or terminate
the Credit Agreement so long as (I) Borrowers
maintain an Undrawn Availability equal to not less
than $250,000 through October 31, 1998 and $400,000
thereafter (which amount will reduce to $300,000 at
such time as the Company has two profitable
quarters), (II) there exist no Defaults except for
Specified Defaults, and (III) this Agreement is not
in default. If and when the Credit Agreement expires
on June 23, 2000 and the parties were unable to reach
agreement as to the restructure of the Credit
Agreement during the Forbearance Period, Borrowers
shall not be obligated to pay Agent the early
termination fee described in Section 13.1 of the
Credit Agreement. If the Credit Agreement is
terminated prior to such date, Section 13.1 shall
apply and a termination fee will be due and payable.
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9. OVER-ADVANCE. For purposes of this Agreement, the parties
agree that the over-advance shall be $900,000. The parties
agree that said over-advance will be added to the Formula
Amount during the Forbearance Period. Following the
Forbearance Period, if no amendment to the Credit Agreement
has been negotiated and executed by the parties thereto, this
over-advance amount shall remain in place for six months
following the Forbearance Period. Thereafter, $600,000 of the
over-advance will be reduced to zero on a straight line
amortized basis in 12 equal monthly installments, with the
remaining balance, if any, on the over-advance payable on June
23, 2000.
10. OFFSET AND NEW CAPITAL.
(a) The parties hereto agree that unless there exists an
Event of Default (other than a Specified Default),
the Lenders will not exercise their contractual,
statutory or common law rights of offset against the
proceeds of the Cameron Transaction.
(b) On or before July 23, 1998, the Borrowers shall
receive not less than $385,000 from equity
investments, as working capital for the Borrowers. If
such $385,000 is not received on or before August 2,
1998, the Lenders may declare an Event of Default to
exist, provided that an Event of Default shall not be
deemed to exist for failure to receive such amount
prior to August 2, 1998.
11. PAYMENT OF INDEBTEDNESS. Notwithstanding the language
contained in Sections 6.9, 7.16 and 7.17 of the Credit
Agreement, the Lenders agree to the payment by Holdings of
$220,000 in satisfaction of the Xxxxxx Group Loans ($110,000
of which will be paid on the date hereof and $110,000 of which
will be paid one year from the date of this Agreement).
Moreover, notwithstanding anything contained in the
Intercreditor and Subordination Agreement dated December 18,
1997 between Bankers Trust Company and the Agent (the
"Intercreditor Agreement"), the Lenders agree and consent to
the payment on the date hereof by Borrowers of $250,000 to
Bankers Trust Company. Following the date hereof, the
remaining indebtedness to Bankers Trust Company will be
subject to the Intercreditor and Subordination Agreement;
provided, however, if no default other than Specified Defaults
are than existing or would be caused thereby, Agent agrees and
consents to the repayment of the indebtedness to Bankers Trust
Company as provided for in the Option and Forebearance
Agreement among the Company, Bankers Trust Company and
Automatic System Developers, Inc. dated the date hereof and
attached as EXHIBIT A.
12. INDEBTEDNESS TO AFFILIATE. Lenders acknowledge that Holdings
has received a loan from Xxxx X. Xxxxx, Chairman and Executive
Officer of Holdings.
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Notwithstanding the provisions contained in Section 7.8 of the
Credit Agreement, the Lenders consent to such indebtedness and
to the repayment of such indebtedness, if no Defaults other
than Specified Defaults are then existing or would be caused
thereby; provided, however, Xx. Xxxxx'x payments will be
limited to $10,000 per month until the month after Holdings
has three consecutive quarters in which it reports income
before income taxes (as opposed to a loss before income
taxes). Thereafter, the balance of Xx. Xxxxx'x indebtedness
will be repaid in equal monthly installments over a three year
period, if no Defaults other than Specified Defaults are then
existing or would be caused thereby.
13. CHANGE OF CONTROL. Lenders acknowledge that the Cameron
Transaction will result in a Change of Control. Lenders agree
that such Change of Control will not result in an Event of
Default or accelerate repayment of the Obligations; provided
that any further Change in Control shall constitute an Event
of Default.
14. AGREEMENT TO CERTIFICATE OF INCORPORATION AND BYLAWS. The
undersigned hereby consents to the proposal by the Board of
Directors to amend the Company's Certificate of Incorporation
and Bylaws to provide for (i) the issuance of shares of
Preferred Stock of Holdings to the Investors and (ii) the
increase in the authorized capital. Copies of the Amendment
are attached.
15. REFERENCE TO AND EFFECT ON THE DOCUMENTS.
(a) Except as specifically agreed herein, the Credit
Agreement and all other Documents, and all other
documents, agreements, instruments or writings
entered into in connection therewith, shall remain in
full force and effect and are hereby ratified,
confirmed and acknowledged by each of the Borrowers
and Guarantors. The agreements set forth above are
limited precisely as written and shall not be deemed
to (i) be a consent to any waiver or modification of
any other term or condition of the Agreement or any
documents delivered pursuant thereto or (ii)
prejudice any right or rights which the Agent or
Lender may now or in future have in connection with
the Agreement or the other Documents.
(b) The execution, delivery and effectiveness of this
Agreement shall not operate as a waiver of any right,
power or remedy of the Bank under any of the
Documents, nor constitute a waiver or modification of
any provision of any of the Documents, not a waiver
of any now existing or hereafter arising Defaults or
Events of Default, except as expressly stated in
Sections 5, 8 and 9.
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16. FEES AND EXPENSES.
(a) Each of the Borrowers hereby agrees, jointly and
severally, pay, or cause to be paid to, the Agent on
demand all legal fees incurred by the Agent in
connection with the negotiation, preparation,
reproduction, execution and delivery of this
Agreement and other Documents to be delivered
hereunder such amounts not to exceed $20,000.00, and
hereby instructs the Bank to pay by wire such legal
fees upon the execution and delivery hereof.
(b) Each of the Borrowers hereby agrees to, jointly and
severally, pay the Agent on demand for all costs,
expenses, charges and taxes (other than any income
taxes relating to income of the Bank), including,
without limitation, all reasonable fees and
disbursements of counsel, incurred by the Bank in
connection with the administration and enforcement of
this Agreement and the other Documents to be
delivered hereunder.
17. THIRD PARTY RELIANCE. No party to the Cameron Transaction or
any other person other than a direct party thereto, shall be a
third-party beneficiary of this Agreement, or shall be
entitled to rely thereon.
18. OTHER AGREEMENTS. Attached hereto are true and complete copies
of all agreements and understandings entered into in
connection with this Cameron Transaction, including without
limitation between or among any of any Borrower, Holdings, the
investors in the Cameron Transaction, Cameron, BT, the Xxxxxx
Group, BlueStone and X.X. Xxxxxx & Co., Inc.
19. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by and construed
and interpreted in accordance with the substantive laws of the
State of New York, without regard for its conflicts of laws
principles.
20. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not
constitute a part of Agreement for any other purpose.
21. SUCCESSORS. This Agreement shall be binding upon the
successors, assigns, heirs, executors and administrators of
the parties hereto.
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22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this
Agreement by signing any such counterpart.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
AUTOMATIC SYSTEMS DEVELOPERS,
INC.
By: /S/ XXXXXXX X. XXX
------------------------------------
Name: Xxxxxxx X. Xxx
Title: Chief Operating Officer
HIGH TECHNOLOGY COMPUTERS, INC.
By: /S/ XXXXXXX X. XXX
------------------------------------
Name: Xxxxxxx X. Xxx
Title: Chief Operating Officer
ASD GROUP, INC.
By: /S/ XXXXXXX X. XXX
------------------------------------
Name: Xxxxxxx X. Xxx
Title: Chief Operating Officer
PNC BANK, NATIONAL
ASSOCIATION, as Sole lender and agent
By: /S/ XXXXXX XXXXX-XXXXXX
------------------------------------
Name: Xxxxxx Xxxxx-Xxxxxx
Title: Sr. Vice President
