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
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)."
(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.
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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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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;
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(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 ▇▇▇▇ ▇▇▇▇▇ and (B) the Agreement by and among the
Borrowers, Holdings and ▇▇▇▇▇ ▇▇▇▇▇▇▇, 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
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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:
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(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.
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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/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT
HIGH TECHNOLOGY COMPUTERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT
ASD GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT
PNC BANK, NATIONAL ASSOCIATION,
as sole Lender and as Agent
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇
Title: Senior Vice President
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SCHEDULE A
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
Vacant Land
Titusville, New York
SCHEDULE B
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
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