Exhibit 4.1
WORKOUT AND COLLATERAL RELEASE AGREEMENT
THIS WORKOUT AND COLLATERAL RELEASE AGREEMENT, dated as of May 15, 2002
(the "Agreement") is made by and among NETPLEX SYSTEMS, INC., a Delaware
corporation ("Systems"), THE NETPLEX GROUP, INC., a New York corporation
("Group") and WATERSIDE CAPITAL CORPORATION, a Virginia corporation
("Waterside").
RECITALS
A. WHEREAS, Waterside has provided equity investment and loan financing
to Group and Systems (or either of them as the case may be) and a limited loan
guaranty to American Commercial Finance Corporation ("ACFC") on behalf of
Systems pursuant to certain Investment Documents, as defined in the Master
Agreement by and among Group, Systems and Waterside dated September 28, 2001
(the "Master Agreement"), except that the term "Investment Documents" shall be
amended to include all of the Notes as such term is defined below;
B. WHEREAS, in exchange for Waterside's investment and other
undertakings set forth in the Investment Documents, Group and Systems pledged
all of their assets to Waterside as security for their obligations to Waterside
under the Investments Documents;
C. WHEREAS, Group executed three secured commercial notes payable to
Waterside in the original principal amounts of $900,000, $154,697.45 and $50,000
(collectively the "Notes")
D. WHEREAS, Group and Systems are in default under the Investment
Documents (which include, without limitation, the Notes);
E. WHEREAS, in order to improve its cash position and reduce its debt
load, Systems desires to sell one of its two operating divisions, i.e., the
Retail Practice Division headquartered in Xxxxxx, Oklahoma, pursuant to a
certain Asset Purchase Agreement (the "Asset Purchase Agreement") by and between
Systems and CGI Information Systems and Management Consultants, Inc., a Delaware
corporation ("CGI");
F. WHEREAS, Systems is required under the Asset Purchase Agreement to
provide, among other things, free and clear title to the assets being sold under
the Asset Purchase Agreement and Systems therefore desires Waterside to release
its security interest in Systems' assets to the extent necessary to permit the
completion of said sale;
G. WHEREAS, Systems is a wholly owned subsidiary of Group;
H. WHEREAS, to induce Waterside to take the actions contemplated by
this Agreement, Group and Systems are willing to take the actions set forth
below.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Waterside's Undertakings
1.1 Waterside's Consent and Release. Waterside hereby consents to the
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sale by Systems of its Retail Practices Division to CGI and agrees to release
its security interest in the assets of Systems passing to CGI pursuant to the
Asset Purchase Agreement. In connection with such release, Waterside agrees,
subject to its reasonable review and approval, to execute and file, at Systems'
sole cost and expense, such instruments and documents, including amended UCC
financing statements, as may be necessary to release its security interest in
said assets.
1.2 Limited Release. Systems and Group expressly acknowledge and agree
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that Waterside's release set forth herein is a limited release extending only to
those assets being conveyed to CGI by Systems under the Asset Purchase Agreement
and to no other assets owned by Systems or Group.
1.3 Interest and Dividend Rate Adjustment. Waterside agrees to a
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reduction in the base interest rate set forth in the Notes and in the base
dividend rate payable under the terms of the preferred stock of Systems and/or
Group owned by Waterside to nine percent (9%) per annum.
2. Confirmation of Pledge and Grant
Systems and Group hereby expressly agree and confirm that, except as
specifically set forth herein, the security interests granted to Waterside under
the Investment Documents continue in full force and effect as security for all
of Group and Systems respective obligations set forth in the Investment
Documents.
3. Undertakings of Systems and Group
3.1 Systems Undertakings. In exchange for Waterside's release as
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provided in Section 1, Systems agrees:
3.1.1 to obtain from ACFC a complete and unconditional release
of Waterside from the Limited Guaranty Agreement (As to Amount) dated
May 2, 2001 and made by Waterside in favor of ACFC simultaneously with
the closing under the Asset Purchase Agreement;
3.1.2 to exchange 500 of the 1,000 shares of its Class A
Preferred Stock currently held by Waterside for $500,000 which shall be
evidenced by a Secured Commercial Note payable to Waterside which will
carry an annual interest rate of nine percent (9%) and which will
provide for principal payments beginning one year from the date of said
note; and
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3.1.3 to apply $341,423 of the sales proceeds from the sale of
its Retail Practices Division as follows:
(i) first, to pay off the Secured Commercial Note in
the original principal amount of $50,000, dated September 28,
2001made by Systems payable to Waterside. As of May 15, 2002,
the outstanding principal and interest on the note was
$51,250.00;
(ii) second, to pay off the Secured Commercial Note in
the original principal amount of $154,697.45 dated September
28, 2001 and made by Group payable to Waterside. As of May 15,
2002, the outstanding principal and interest on the note was
$90,252.25;
(iii) third, to apply the remaining amount of such funds
(expected to be approximately $163,670.75) towards the Secured
Commercial Note in the original principal amount of $900,000,
dated September 28, 2001 and made by Group payable to
Waterside. As of May 15, 2002, the outstanding principal and
interest on the note was $923,750 and after applying the above
described payment the remaining principal balance of the note
(all interest currently due and owing being paid in full) is
expected to be approximately $736,329.25; and
(iv) fourth, $12,500.00 to apply to all past due
dividends.
3.2 Group Undertakings. In order to induce Waterside to provide
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the release and interest rate and dividend rate concessions set forth in Section
1, Group agrees to:
3.2.1 exchange, on a one for one basis, 500 shares of its
Preferred Stock (the specific class to be determined) for 500 shares of
Systems Class A Preferred Stock currently held by Waterside, such Group
Preferred Stock to have substantially the same rights and privileges
with respect to Group as exist for the Systems Class A Preferred Stock
being exchanged by Waterside. Waterside agrees to give serious
consideration to providing Group with an opportunity to redeem the
Group Preferred Stock at a discounted rate; however, Waterside is not
hereby making a legally enforceable obligation in this regard; and
3.2.2 cause its wholly owned subsidiary, Contractors
Resources, Inc., a New Jersey corporation ("Resources"), to grant a
first priority security interest in all of its assets securing all of
Group's and Systems' obligations to Waterside pursuant to a Security
Agreement to be executed between Waterside and Resources.
4. Representations and Warranties
4.1 Prior Representations and Warranties. Systems and Group each
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represent and warrant to Waterside that all of their respective representations
and warranties contained in the Investment Documents are true and complete as of
the date on which this Agreement has been executed and expressly reaffirm same
as if set forth herein.
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4.2 Asset Purchase Agreement. Systems and Group each represent and
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warrant that the copy of the Asset Purchase Agreement attached hereto is a true
and correct copy of the final form of same and that no modifications,
alterations or changes have been made which are not reflected in the attached
copy.
5. Further Agreements
Group and Systems agree and acknowledge that Waterside has acted in
good faith and with all due speed to achieve the workout solution set forth in
this Agreement to enable Systems to close its sale under the Asset Purchase
Agreement with CGI. Group and Systems further agree that time is of the essence
to this Agreement and that they will fully and faithfully execute the covenants
and undertake the obligations required under this Agreement with due diligence,
and further agree to execute, or cause to be executed, at their sole cost and
expense, such additional instruments, agreements and documents as Waterside may
require or desire to give effect to, ratify and confirm or otherwise memorialize
such covenants and obligations including, without limitation: a secured
commercial note, a release for Waterside from its Limited Guaranty Agreement
given to ACFC, an investors rights agreement, and a stock certificate for
Waterside's 500 shares of Group's Preferred Stock.
6. Breach
In the event that any of Group, Systems or Resources fails to fulfill
its obligations hereunder or otherwise breaches this Agreement, any Investment
Document or any other agreement with Waterside, then, in such event, Waterside
shall have the immediate right to declare all or any of Group, Systems and
Resources to be in default under the Investment Documents and any other
agreements entered into between Waterside and Group, Systems or Resources. This
cross-default provision shall supercede any language contained in any other
prior agreement which is designed to nullify or invalidate any cross-default
language, including without limitation, Section 8.1 of the Master Agreement.
7. Miscellaneous
7.1 Successors and Assigns Included in Parties. Whenever in this
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Agreement one of the parties is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such party shall
be included, and all covenants and agreements contained in this Agreement by or
on behalf of Systems or Group or by or on behalf of Waterside shall bind and
inure to the benefit of its respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
7.2 Costs and Expenses. Group and Systems shall pay all reasonable
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costs and expenses incurred by Waterside in connection with the execution of
this Agreement, including but not limited to filing fees, recording taxes and
reasonable attorneys' fees.
7.3 Severability. If any provision(s) of this Agreement or the
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application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this
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Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
7.4 Article and Section Headings; Defined Terms. Numbered and titled
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article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
7.5 Notices. Any and all notices, elections or demands permitted or
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required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
or sent by certified mail or overnight via nationally recognized courier service
(such as Federal Express), to the other party at the address set forth below, or
at such other address as may be supplied in writing and of which receipt has
been acknowledged in writing. The date of personal delivery or 3 business days
after the date of mailing (or the next business day after delivery to such
courier service), as the case may be, shall be the date of such notice, election
or demand. For the purposes of this Agreement:
The address of Waterside is: Waterside Capital Corporation
000 X. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: 000-000-0000
with a copy to: Xxxxxxx X. Best, III, P.C.
000 X. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Best, III, Esquire
Telecopy No.: 757-624-1900
The address of Group is: The Netplex Group, Inc.
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telecopy No.: 000-000-0000
The address of Systems is: Netplex Systems, Inc.
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Xxxx Xxxxx
Telecopy No.: 000-000-0000
with a copy to: Arent Fox Xxxxxxx Xxxxxxx & Xxxx, PLLC
0000 Xxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esquire
Telecopy No.: 000-000-0000
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7.6 Governing Law and Amendments. This Agreement shall be construed
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and enforced under the laws of the Commonwealth of Virginia applicable to
contracts to be wholly performed in the Commonwealth, without regard to
conflicts of law principles. No amendment or modification hereof shall be
effective except in a writing executed by Waterside Group and Systems.
7.7 Survival of Representations and Warranties. All representations
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and warranties contained herein made by or furnished on behalf of Group or
Systems in connection herewith shall survive the execution and delivery of this
Agreement.
7.8 Counterparts. This Agreement may be executed in any number of
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counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.9 Construction and Interpretation. Should any provision of this
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Agreement require judicial interpretation, the court interpreting or construing
the provision shall not apply a presumption that the terms hereof shall be more
strictly construed against one party by reason of the rule of construction that
a document is to be more strictly construed against the party that itself or
through its agent prepared it, it being agreed that Group and Systems and
Waterside, and their respective counsels, have participated in its preparation.
7.10 General Indemnification. Group and Systems shall, jointly and
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severally, indemnify Waterside, its officers, directors, employees and agents
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties") and shall hold each of Indemnified Party harmless from and against any
and all losses, liabilities, damages, costs, expenses and claims of any and
every kind whatsoever (except those arising solely by reason of the gross
negligence or willful misconduct of an Indemnified Party) which may be imposed
on, incurred by, or asserted against the Indemnified Parties or any of them
arising by reason of any action or inaction or omission to any act legally
required of either Group or Systems (including without limitation as required
pursuant hereto or pursuant to any other agreement contemplated herein or any
Investment Document) to which Group or Systems is a party.
7.11 Standard of Care; Limitation of Damages. Waterside shall be liable
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to Group or to Systems only for matters arising from this Agreement resulting
from Waterside's gross negligence or willful misconduct and any and all other
liability of Waterside either to Group or to Systems is waived. Waterside shall
not in any event be liable to either Group or Systems for special or
consequential damages arising from this Agreement or otherwise.
7.12 Consent to Jurisdiction; Exclusive Venue. Each of Group and
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Systems irrevocably consents to the jurisdiction of the United States District
Court for the Eastern District of Virginia, Norfolk Division, and of all
Virginia state courts sitting in Norfolk, Virginia, for the purpose of any
litigation to which Waterside may be a party and which concerns this Agreement
or the matters contemplated herein. Each of Group and Systems accepts that venue
for any such action shall lie exclusively with courts sitting in Norfolk,
Virginia, unless Waterside agrees to the contrary in writing.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the
date set forth above.
WATERSIDE CAPITAL CORPORATION
By:___________________________________
Xxxxxx Xxxxxxx, Vice President
NETPLEX SYSTEMS, INC.
By:___________________________________
Xxxx X. Xxxxx, Chief Executive Officer
THE NETPLEX GROUP, INC.
By:___________________________________
Xxxx X. Xxxxx, President
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