Exhibit 10.3
SUBORDINATED LOAN AND AMENDMENT AGREEMENT
AMONG
IMAGEMAX, INC.
TDH III, L.P.
LVIR INVESTOR GROUP, LP
AND
XXXXXX X. XXXXX
DATED DECEMBER 11, 2003
EXHIBIT A - FORM OF SUBORDINATED PROMISSORY NOTE
EXHIBIT B - FORM OF SECURITY AGREEMENT
EXHIBIT C - FORM OF MORTGAGE
EXHIBIT D - FORM OF WARRANT NOTE
EXHIBIT E - FORM OF PLEDGE AGREEMENT
EXHIBIT F - FINANCING STATEMENTS
SUBORDINATED LOAN AND AMENDMENT AGREEMENT
THIS SUBORDINATED LOAN AND AMENDMENT AGREEMENT ("Agreement")
is dated this 11th day of December, 2003, by and among IMAGEMAX, INC., a
corporation incorporated under the laws of the Commonwealth of Pennsylvania (the
"Company"), TDH III, L.P., a limited partnership organized under the laws of the
State of Delaware ("TDH"), LVIR INVESTOR GROUP, LP, a limited partnership
organized under the laws of the State of Delaware ("LVIR") and XXXXXX X. XXXXX,
an individual resident of Pennsylvania ("Xxxxx") (TDH and LVIR sometimes
individually an "Institutional Investor" and collectively the Institutional
Investors"; TDH, LVIR and Xxxxx sometimes individually an "Investor" and
collectively the "Investors").
BACKGROUND
The Company desires to obtain from the Investors secured
subordinated loans in an aggregate amount of Five Hundred Thousand ($500,000)
(the "Subordinated Loan") and the Investors are willing to provide the
Subordinated Loan to the Company on the terms and pursuant to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, the parties hereto, intending to be legally bound,
agree as follows:
1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
1.1 "Additional Warrants" shall mean the warrants to
purchase, in the aggregate, 8,400,000 shares of Common Stock issued to the
Investors on or about June 14, 2002, as amended, restated or otherwise modified
from time to time.
1.2 "Affiliate" shall mean, with respect to any
Person, (i) a director, officer or stockholder of such Person, (ii) a spouse,
parent, sibling or descendant of such Person (or spouse, parent, sibling or
descendant of any director or executive officer of such Person), and (iii) any
other Person that, directly or indirectly through one or more intermediaries,
Controls, or is Controlled by, or is under common Control with, such person.
1.3 "Articles of Incorporation" shall have the
meaning set forth in Section 5.2 of this Agreement.
1.4 "Board of Directors" shall mean the Board of
Directors of the Company.
1.5 "Closing" shall have the meaning set forth in
Section 4 of this Agreement.
1.6 "Closing Date" shall have the meaning set forth
in Section 4 of this Agreement.
1.7 "Collateral" shall have the meaning set forth in
the Security Agreement.
1.8 "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
1.9 "Common Stock" shall mean the common stock, no
par value, of the Company.
1.10 "Control" shall mean, with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
1.11 "Convertible Notes" shall mean the Amended and
Restated Convertible Promissory Notes issued by the Company and ImageMax of
Delaware, Inc. to the Investors in the aggregate principal amount of $6,270,000,
as amended by this Agreement and as hereafter amended, restated or otherwise
modified from time to time.
1.12 "Disclosure Schedule" shall have the meaning set
forth in Section 5.1 of this Agreement.
1.13 "Environmental Law" shall have the meaning set
forth in Section 5.15(a) of this Agreement.
1.14 "ERISA" shall have the meaning set forth in
Section 5.10(a) of this Agreement.
1.15 "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
1.16 "GAAP" shall mean generally accepted accounting
principles of the United States.
1.17 "Governmental Body" shall mean any United States
or state governmental body, any agency, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory or taxing authority
thereunder.
1.18 "Hazardous Substance" shall have the meaning set
forth in Section 5.15(a) of this Agreement.
1.19 "Indebtedness" shall mean, without duplication,
indebtedness of a Person for borrowed money or which is evidenced by a note,
bond, debenture or similar instrument.
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1.20 "Institutional Investor" and "Institutional
Investors" shall have the meaning set forth in the first paragraph of this
Agreement.
1.21 "Institutional Notes" shall mean the Notes
(individually an "Institutional Note") originally issued to the Institutional
Investors under this Agreement and any notes issued in exchange or substitution
for such Notes, as each may hereafter be amended, restated or otherwise modified
from time to time.
1.22 "Investor" and "Investors" shall have the
meaning set forth in the first paragraph of this Agreement.
1.23 "Knowledge of the Company" shall refer to
matters that are known or in the exercise of reasonable business judgment should
be known by one or more of the Company's or any Subsidiary's executive officers
or the individuals serving on the Company's Board of Directors.
1.24 "Loan and Warrant Purchase Agreement" shall mean
the Convertible Subordinated Loan and Warrant Purchase Agreement dated February
15, 2000 by and among the Company and the Investors, as amended by a First
Amendment to Convertible Subordinated Loan and Warrant Purchase Agreement dated
June 14, 2002, and as hereafter amended, restated or otherwise modified from
time to time.
1.25 "Material Adverse Effect" shall have the meaning
set forth in Section 5.1 of this Agreement.
1.26 "Material Contract" shall have the meaning set
forth in Section 5.16 of this Agreement.
1.27 "Mortgage" shall have the meaning set forth in
Section 2.3 of this Agreement.
1.28 "Notes" shall mean the Notes (individually a
"Note") described in Section 2.2 hereof and any notes issued in exchange or
substitution for such notes, as each may hereafter be amended and/or restated.
1.29 "Person" shall include an individual,
corporation, limited liability company, partnership, joint venture, association,
trust, or any other entity or organization.
1.30 "Plan" shall have the meaning set forth in
Section 5.10 of this Agreement.
1.31 "Pledge Agreement" shall have the meaning set
forth in Section 3 of this Agreement.
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1.32 "Required Interest of Institutional Investors"
shall mean the following:
(a) So long as the Institutional Investors both
hold Notes, a Required Interest of Institutional Investors shall mean the
holders of Institutional Notes representing at least sixty percent (60%) of the
outstanding principal balance of all Institutional Notes plus TDH; provided,
however, that the additional consent of TDH shall not be required if the
outstanding principal balance of the Institutional Notes held by TDH (including
partners of TDH to whom such Institutional Notes may have been assigned and
trusts established for their benefit) is less than Eighty Three Thousand Dollars
($83,000) other than by reason of payments made on a pro rata basis to all
holders of Notes;
(b) If TDH no longer holds a Note but LVIR still
holds a Note, a Required Interest of Institutional Investors shall mean LVIR;
and
(c) If LVIR no longer holds a Note but TDH still
holds a Note, a Required Interest of Institutional Investors shall mean TDH.
1.33 "Requirements of Law" means, as to any Person,
any law, statute, treaty, rule, regulation, right, privilege, qualification,
license or franchise or determination of an arbitrator or a court or other
Governmental Body or stock exchange, in each case applicable or binding upon
such Person or any of its property or to which such Person or any of its
property is subject or pertaining to any or all of the transactions contemplated
or referred to in this Agreement.
1.34 "SEC Reports" shall have the meaning set forth
in Section 5.7(a) of this Agreement.
1.35 "Securities Act" shall mean the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder.
1.36 "Security Agreement" shall have the meaning set
forth in Section 2.3 of this Agreement.
1.37 "Senior Loan Agreement" shall mean that certain
Amended and Restated Credit Agreement dated June 13, 2002, among the Company,
its Subsidiaries, Commerce Bank, NA and Firstrust Bank, as amended, restated or
otherwise modified from time to time.
1.38 "Stock Option Plan" shall mean the Company's
1997 Incentive Plan, as amended by Amendment No. 98-1.
1.39 "Subordinated Loan" shall have the meaning set
forth in the Background section of this Agreement.
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1.40 "Subordination Agreement" shall mean that
certain Amended and Restated Subordination Agreement dated June 13, 2002, among
the Company, its Subsidiaries, Commerce Bank, NA, for itself and as agent, and
Investors, as amended and supplemented by (i) that certain First Amendment to
Amended and Restated Subordination Agreement dated December 23, 2002, (ii) that
certain Second Amendment to Amended and Restated Subordination Agreement dated
April 11, 2003, and (iii) that certain Third Amendment to Amended and Restated
Subordination Agreement dated the date hereof.
1.41 The term "subsidiary" shall mean as to any
Person, any entity of which more than 50% (by number of votes) of the voting
securities shall be owned by such Person and/or one or more entities which are
themselves subsidiaries of such Person and the term "Subsidiary" shall mean any
subsidiary of the Company.
1.42 "Transactions" shall have the meaning set forth
in Section 5.4 of this Agreement.
1.43 "Transfer" as to any Warrant Stock, shall mean
to sell, or in any other way directly or indirectly, to transfer, assign,
distribute, encumber, pledge, hypothecate or otherwise dispose of, either
voluntarily or involuntarily (or a sale, or any other direct or indirect
transfer, assignment, distribution, encumbrance or other voluntary or
involuntary disposition), as the case may be.
1.44 "WARN" shall have the meaning set forth in
Section 5.10(f) of this Agreement.
1.45 "Warrant Note" shall have the meaning set forth
in Section 3 of this Agreement.
1.46 "Warrant Stock" shall mean the shares of Common
Stock issued upon exercise of the Additional Warrants.
2. The Subordinated Loan.
2.1 The Subordinated Loan. On the date hereof, the
Investors shall lend to the Company and its Subsidiaries and the Company and its
Subsidiaries shall borrow from the Investors, the aggregate principal amount of
Five Hundred Thousand Dollars ($500,000), upon the terms and subject to the
conditions of this Section 2.
2.2 Promissory Notes. The indebtedness of the Company
and its Subsidiaries to the Investors for the Subordinated Loan pursuant to this
Section 2 will be evidenced by secured subordinated promissory notes executed by
the Company and its Subsidiaries in favor of each Investor, in the principal
amount set forth opposite its name on Schedule 2.2, such notes to be in
substantially the form attached hereto as Exhibit A (each, as amended, restated
or otherwise modified from time to time, a "Note" and collectively the "Notes").
The Notes shall be secured and shall be subordinated to all bank and other
commercial lending obligations of the Company and its Subsidiaries outstanding
on the date hereof or incurred in accordance with the terms hereof from time to
time hereafter, but shall be senior to all other debt of the Company and its
Subsidiaries.
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2.3 Security. The obligations of the Company and its
Subsidiaries under this Agreement shall be secured in accordance with (i) a
security agreement of even date herewith in substantially the form attached
hereto as Exhibit B among the Company and its Subsidiaries and TDH, individually
and as Agent (as amended, restated or otherwise modified from time to time, the
"Security Agreement"); and (ii) a mortgage of even date herewith in
substantially the form attached hereto as Exhibit C on the Company's real
property in Chesterton, Indiana (as amended, restated or otherwise modified from
time to time, the "Mortgage"). The rights of TDH, individually and as Agent,
under the Security Agreement and the Mortgage, are subordinate to the rights of
Commerce Bank, NA and FirsTrust Bank as provided in the Subordination Agreement.
2.4. Use of Proceeds. The net proceeds received by
the Company and its Subsidiaries hereunder shall be used by the Company and its
Subsidiaries for working capital.
3. Exercise of Additional Warrants. On the date hereof, each
Investor shall have exercised the Additional Warrant held by such Investor and
shall have paid the exercise price provided for in such Additional Warrant by
the delivery of a promissory note substantially in the form attached hereto as
Exhibit D (each, as amended, restated or otherwise modified from time to time a
"Warrant Note" and collectively the "Warrant Notes"). Each Investor's obligation
under the Warrant Note delivered by such Investor shall be secured by a pledge
of the Warrant Stock issued upon exercise of the Additional Warrant, which
pledge agreement shall be substantially in the form attached hereto as Exhibit E
(each, as amended, restated or otherwise modified from time to time a "Pledge
Agreement" and collectively the "Pledge Agreements").
4. Closing. The closing of the purchase and sale of the Notes
(the "Closing") shall take place at the offices of Xxxxxx Xxxxxxxx LLP in
Berwyn, Pennsylvania on December 11, 2003, or at such other place and time as
the Company and the Investors may otherwise agree (the "Closing Date"). At the
Closing, the Company and its Subsidiaries will deliver to the Investors the
Notes against payment of the purchase price therefor by wire transfer to such
account as shall be designated by the Company.
5. Representations and Warranties of the Company. Except as
set forth in the Company's disclosure schedules which are attached to and
incorporated by reference into, this Agreement, the Company hereby represents
and warrants to the Investors as follows:
5.1 Organization and Qualification; Subsidiaries.
Each of the Company and each Subsidiary of the Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below). The Company and
each Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. When used in connection with the
Company or any Subsidiary, the term "Material Adverse Effect" means any effect
that is or is reasonably likely to be materially adverse to the business,
operations, condition or assets (including, without limitation, contingent
liabilities) of the Company and the Subsidiaries taken as a whole. A true and
complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital
stock of each Subsidiary owned by the Company and each other Subsidiary, is set
forth in Section 5.1 of the Disclosure Schedule, which has been delivered prior
to the date of this Agreement by the Company to the Investors and which is
attached hereto (the "Disclosure Schedule"). Except as disclosed in such
Schedule, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation, partnership, joint venture
or other business association or entity.
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5.2 Articles of Incorporation and Bylaws. The Company
has heretofore furnished to the Investors a complete and correct copy of the
Amended and Restated Articles of Incorporation, as amended ("Articles of
Incorporation") and the Bylaws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Articles of
Incorporation, Bylaws and equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any
provision of its Articles of Incorporation, Bylaws or equivalent organizational
documents.
5.3 [Reserved]
5.4 Authority Relative to this Agreement. The Company
has all necessary power and authority to execute and deliver this Agreement, the
Security Agreement and the Notes, to issue the Warrant Stock to the Investors
and to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby (the "Transactions"). The execution
and delivery of this Agreement, the Security Agreement and the Notes and the
issuance of the Warrant Stock to the Investors by the Company and the
consummation by the Company of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement, the
Security Agreement and the Notes, to issue the Warrant Stock to the Investors,
or to consummate the Transactions. This Agreement, the Security Agreement and
the Notes have been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the Investors of the
Agreement, constitute legal, valid and binding obligations of the Company.
5.5 No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 5.5(a) of the
Disclosure Schedule, the execution and delivery of this Agreement, the Security
Agreement and the Notes and the issuance of the Warrant Stock by the Company do
not, and the performance of this Agreement by the Company will not, (a) conflict
with or violate the Articles of Incorporation or Bylaws or equivalent
organizational documents of the Company or any Subsidiary, (b) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any Subsidiary or by which any property or asset of the Company or
any Subsidiary is bound or subject or (c) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance of any nature on any property or asset of the Company or any
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
subject, in each case except for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
have a Material Adverse Effect.
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(b) Except as set forth in Section 5.5(b) of the
Disclosure Schedule, the execution and delivery of this Agreement, the Security
Agreement and the Notes and the issuance of the Warrant Stock by the Company do
not, and the performance of this Agreement, the Notes and the Warrants by the
Company will not, require any consent, approval, authorization or permit of, or
filing with, or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for any filing required under applicable federal
or state securities laws, (ii) for consents, approvals, authorizations or
permits which have already been obtained, and (iii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the Company from performing its
obligations under this Agreement, the Notes and the Security Agreement, and
would not, individually or in the aggregate, have a Material Adverse Effect.
5.6 Compliance. Except for (i) the continuing
defaults with respect to the Senior Loan Agreement set forth in the Second
Amendment to Forbearance Agreement dated December 11, 2003 by and among the
Company, ImageMax of Delaware, Inc., Commerce Bank, NA and FirsTrust Bank, and
(ii) the continuing defaults of the Company with respect to the Convertible
Subordinated Loan and Warrant Purchase Agreement dated February 15, 2000 by and
among the Company and the Investors, as amended and supplemented from time to
time and the promissory notes and warrants made or issued by the Company to the
Investors, neither the Company nor any Subsidiary is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or subject or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or subject, except for any
such conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect. The outstanding principal balance of
the Revolving Credit Facility as of the date hereof does not exceed the Maximum
Available Revolving Credit (as those terms are defined in the Senior Loan
Agreement).
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5.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and
documents required to be filed by it with the SEC, and has heretofore delivered
or made available to the Investors, in the form filed with the SEC, (a) its
Annual Reports on Form 10-K for the fiscal year ended December 31, 2002, (b) its
Quarterly Reports on Form 10-Q for the periods ended March 31, June 30 and
September 30, 2003, (c) all proxy statements relating to the Company's meetings
of shareholders (whether annual or special) held in this period and (d) all
other forms, reports and other registration statements filed by the Company with
the SEC since January 1, 2003 (the forms, reports and other documents referred
to in clauses (a), (b), (c) and (d) above being referred to herein,
collectively, as the "SEC Reports"). The SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act, and
the Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder and (ii) did not, at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No
Subsidiary is required to file any form, report or other document with the SEC.
(b) Each of the consolidated financial
statements (including, in each case, any notes thereto) contained in the SEC
Reports was prepared in all material respects in accordance with GAAP throughout
the periods indicated (except as may be indicated in the notes thereto) and each
fairly presents in all material respects the consolidated financial position,
results of operations and changes in shareholders' equity and cash flows of the
Company and the consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein (subject, in the case of unaudited
statements, to the absence of notes and to normal and recurring year-end
adjustments none of which individually or in the aggregate would have a Material
Adverse Effect.
(c) Except as and to the extent set forth on the
consolidated balance sheet of the Company and the consolidated Subsidiaries as
at December 31, 2002 including the notes thereto (the "2002 Balance Sheet"),
neither the Company nor any Subsidiary has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP, except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice since December 31,
2002 and liabilities and obligations which do not individually or in the
aggregate have a Material Adverse Effect.
5.8 Absence of Certain Changes or Events. Since
September 30, 2003, except as contemplated by this Agreement or disclosed in any
SEC Report filed prior to the date of this Agreement, the Company and the
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since September 30, 2003, there has
not been (i) any change in the business, operations, properties, condition,
assets or liabilities of the Company or any Subsidiary having, individually or
in the aggregate, a Material Adverse Effect, (ii) any damage, destruction or
loss (whether or not covered by insurance) with respect to any property or asset
of the Company or any Subsidiary and having, individually or in the aggregate, a
Material Adverse Effect, (iii) any material change by the Company in its
accounting methods, principles or practices, (iv) any revaluation by the Company
of any asset (including, without limitation, any writing down of the value of
inventory or writing off of notes or accounts receivable), other than in the
ordinary course of business consistent with past practice, (v) any failure by
the Company to revalue any asset in accordance with GAAP consistent with past
practice, (vi) any entry by the Company or any Subsidiary into any commitment or
transaction material to the Company and the Subsidiaries taken as a whole, (vii)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities, (viii) other than pursuant to the
contracts referred to in Section 5.16, any increase in or establishment of any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company or any Subsidiary, except in the ordinary course of business
consistent with past practice, or (ix) any entering into, renewal, modification
or extension of, any contract, arrangement or agreement with any other party
having individually or in the aggregate, a Material Adverse Effect.
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5.9 Absence of Litigation. Except as set forth in
Section 5.9 of the Disclosure Schedule or as disclosed in the SEC Reports filed
prior to the date of this Agreement, there is no claim, action, proceeding or
investigation pending or, to the Knowledge of the Company, threatened against
the Company or any Subsidiary, or any property or asset of the Company or any
Subsidiary, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign. As of the date hereof,
neither the Company nor any Subsidiary nor any property or asset of the Company
or any Subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Material
Adverse Effect.
5.10 Employee Benefit Plans.
(a) The Company has made available to Investors
true and correct copies of (i) all employee benefit plans (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the Company or any
Subsidiary and (ii) each employee benefit plan for which the Company or any
Subsidiary could incur liability under Section 4069 of ERISA, in the event such
plan were terminated, or under Section 4212(c) of ERISA, or in respect of which
the Company or any Subsidiary remains secondarily liable under Section 4204 of
ERISA (collectively, the "Plans"). Except as set forth in Section 5.10 of the
Disclosure Schedule, no Plan is a "defined benefit plan" within the meaning of
Section 3(35) of ERISA and no Plan is subject to Part IV of ERISA. To the
Company's knowledge, neither the Company nor any Subsidiary has any obligation
(i) to create, incur liability with respect to or cause to exist any other
employee benefit plan, program or arrangement, (ii) to enter into any contract
or agreement to provide compensation or benefits to any individual or (iii) to
modify, change or terminate any Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
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(b) Except as publicly filed with the SEC or as
set forth in Section 5.10 of the Disclosure Schedule, none of the Plans (i)
provides for the payment of separation, severance or termination benefits to any
person, (ii) obligates the Company or any Subsidiary to pay separation,
severance, termination or other benefits as a result of any Transaction or (iii)
obligates the Company or any Subsidiary to make any payment or provide any
benefit that could be subject to a tax under Section 4999 of the Code. None of
the Plans provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the Company
or any Subsidiary.
(c) Each Plan which is intended to be qualified
under Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that such Plan is so qualified, and each trust
established in connection with any Plan which is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that such trust is so exempt. To the Knowledge
of the Company, no fact or event has occurred since the date of any such
determination letter from the IRS that could adversely affect the qualified
status of any such Plan or the exempt status of any such trust. Each trust
maintained or contributed to by the Company or any Subsidiary which is intended
to be qualified as a voluntary employees' beneficiary association exempt from
federal income taxation under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and, to the Knowledge of the Company, no fact or event has
occurred since the date of such determination by the IRS that could adversely
affect such qualified or exempt status.
(d) There has been no prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan which is not subject to a statutory exemption or which could
result in any material liability to the Company. Neither the Company nor any
Subsidiary is currently liable or has previously incurred any liability for any
tax or penalty arising under Section 4971, 4972, 4979, 4980 or 4980B of the Code
or Section 502(c) of ERISA, and to the Knowledge of the Company no fact or event
exists which could give rise to any such liability. Neither the Company nor any
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA, including, without limitation, any liability in connection
with (i) the termination or reorganization of any employee pension benefit plan
subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and no fact or event exists which could give rise to
any such liability.
(e) To the Knowledge of the Company, each Plan
is now and has been operated in all respects in accordance with the requirements
of all applicable laws, including, without limitation, ERISA and the Code, and
the Company and each Subsidiary have performed all obligations required to be
performed by them under, are not in any respect in default under or in violation
of, and have no Knowledge of any default or violation by any party to, any Plan.
All contributions, premiums or payments required to be made with respect to any
Plan have been timely made, are fully deductible for income tax purposes and no
such deduction previously claimed has been challenged by any government entity.
The 2002 Balance Sheet reflects an accrual of all amounts of employer
contributions and premiums accrued but unpaid with respect to the Plans.
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(f) The Company and the Subsidiaries have not
incurred any liability under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act and the regulations promulgated
thereunder ("WARN").
5.11 Labor Matters. There are no controversies
pending or, to the Knowledge of the Company, threatened between the Company or
any Subsidiary and any of their respective employees, which controversies have
had or could have a Material Adverse Effect. Neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or any Subsidiary,
nor, to the Knowledge of the Company, are there any activities or proceedings of
any labor union to organize any such employees. Neither the Company nor any
Subsidiary has breached or otherwise failed to comply with any provision of any
such agreement or contract and there are no grievances outstanding against the
Company or any Subsidiary under any such agreement or contract. There are no
unfair labor practice complaints pending against the Company or any Subsidiary
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any Subsidiary. There is no
strike, slowdown, work stoppage or lockout, or, to the Knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any
Subsidiary.
5.12 Tangible Property; Real Property and Leases.
(a) Except as set forth on Section 5.12(a) of
the Disclosure Schedule, the Company and the Subsidiaries have sufficient title
to or leasehold interests in all their tangible properties and assets to conduct
their respective businesses as currently conducted, with only such exceptions
as, individually or in the aggregate, would not have a Material Adverse Effect.
(b) No parcel of real property owned or leased
by the Company is subject to any governmental decree or order to be sold nor is
being condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the Knowledge of the Company,
has any such condemnation, expropriation or taking been proposed.
(c) All leases of real property leased for the
use or benefit of the Company or any Subsidiary to which the Company or any
Subsidiary is a party requiring annual rental payments in excess of U.S. $50,000
during the term of the lease are in full force and effect, and there exists no
material default under any such lease by the Company or any Subsidiary, nor to
the Knowledge of the Company any event which with notice or lapse of time or
both would constitute a default thereunder by the Company or any Subsidiary,
except as, individually or in the aggregate, would not have a Material Adverse
Effect.
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(d) Upon the execution by the Company, its
Subsidiaries and Agent of the Security Agreement and the filing of the financing
statements attached hereto as Exhibit F (the "Financing Statements") with the
Secretary of State of the Commonwealth of Pennsylvania and the Secretary of
State of the State of Delaware and the payment of all applicable filing fees and
expenses, Agent will have a valid and perfected security interest in all the
Collateral as to which a security interest can be perfected by the filing of the
Financing Statements. The Collateral is free and clear of any liens and
encumbrances except those in favor of the lenders under the Senior Loan
Agreement.
5.13 Trademarks, Patents and Copyrights. The Company
and the Subsidiaries own or possess adequate licenses or other valid rights to
use all patents, patent rights, trademarks, trademark rights, trade names, trade
dress, trade name rights, copyrights, servicemarks, trade secrets, applications
for trademarks and for servicemarks, mask works, know-how and other proprietary
rights and information used or held for use in connection with the business of
the Company and the Subsidiaries and the Company is unaware of any assertion or
claim challenging the validity of any of the foregoing which, individually or in
the aggregate, could have a Material Adverse Effect. Except as set forth in
Section 5.13 of the Disclosure Schedule, to the Knowledge of the Company, the
conduct of the business of the Company and the Subsidiaries as conducted since
September 30, 2003 does not conflict in any way with any patent, patent right,
license, trademark, trademark right, trade dress, trade name, trade name right,
service xxxx, mask work or copyright of any third party that, individually or in
the aggregate, could have a Material Adverse Effect. To the Knowledge of the
Company, there are no infringements of any propriety rights owned by or licensed
by or to the Company or any Subsidiary which, individually or in the aggregate,
could have a Material Adverse Effect.
5.14 Taxes. The Company and the Subsidiaries have
filed all federal, state, local and foreign tax returns and reports required to
be filed by them (taking into account applicable extensions) and have paid and
discharged all federal, state, local and foreign taxes as are due and have paid
all applicable ad valorem taxes as are due, other than (i) such payments as are
being contested in good faith by appropriate proceedings and (ii) such filings,
payments or other occurrences that, individually or in the aggregate, could not
result in a Material Adverse Effect. Neither the IRS nor any other taxing
authority or agency, domestic or foreign, is now asserting or, to the Knowledge
of the Company, threatening to assert against the Company or any Subsidiary any
deficiency or claim for additional taxes or interest thereon or penalties in
connection therewith. Neither the Company nor any Subsidiary has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, county, municipal or foreign
income tax which is currently in effect. The accruals and reserves for taxes
reflected in the 2002 Balance Sheet and the interim balance sheet for the period
ended September 30, 2003 are adequate to cover all taxes accruable through
closing date (including interest and penalties, if any, thereon) in accordance
with GAAP. Neither the Company nor any Subsidiary has made an election under
Section 341(f) of the Code.
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5.15 Environmental Matters.
(a) For purposes of this Agreement, the
following terms shall have the following meanings: (i) "Hazardous Substances"
means (A) any petroleum or petroleum product, including crude oil, and any
fractions thereof, natural gas, natural gas liquids, synthetic gas or
polychlorinated biphenyls; (B) any pollutant or contaminant; or (C) any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and (ii)
"Environmental Law", means any federal, state or local law relating to (A)
releases or threatened releases of Hazardous Substances; (B) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous
Substances; or (C) otherwise relating to pollution of the environment or the
protection of human health.
(b) The Company's and its Subsidiaries'
operations are not violating any applicable Environmental Law. The Company and
the Subsidiaries have all material permits and licenses required under any
applicable Environmental Law to conduct its business. The soils, surface and
ground waters at the properties owned or leased by the Company or any of its
Subsidiaries have not been contaminated with any Hazardous Substance by the
Company's or any Subsidiary's operations to any extent requiring removal or
remediation under any Environmental Law. Neither the Company nor any Subsidiary
has received any written notice of violation under any Environmental Law which
notice of violation remains unresolved. To the Knowledge of the Company, no
Hazardous Substances are present on or under any real property owned or occupied
by the Company or any of its Subsidiaries or have emanated from or been
transported from any such real property except in compliance with applicable
Environmental Law.
(c) Notwithstanding anything in this Agreement
to the contrary, this Section 5.15 is the exclusive representation and warranty
as to all matters related to or arising from Environmental Laws, Hazardous
Substances, pollution, contamination, exposure to or the presence of Hazardous
Substances and any conditions attributed to any of the foregoing.
5.16 Material Contracts. Each contract listed on
Schedule 5.16 which comprise the only contracts which are material to the
Company and the Subsidiaries taken as a whole (each a "Material Contract" and
together, the "Material Contracts") is in full force and effect and is
enforceable against the Company or Subsidiary, as the case may be, in accordance
with its terms and no condition or state of facts exists that, with notice or
the passage of time, or both, would constitute a material default by the Company
or any Subsidiary or, to the Knowledge of the Company, any third party under
such Material Contracts. The Company or the applicable Subsidiary has duly
complied in all material respects with the provision of each Material Contract
to which it is a party except where any failure would not have a Material
Adverse Effect.
5.17 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the
Company.
5.18 Offering Exemption. Assuming with respect to the
Investors the accuracy of the representations, warranties, acknowledgments and
agreements of the Investors set forth in Section 6 hereof, the issuance of the
Notes and the issuance of the Warrant Stock are exempt from registration under
the Securities Act and from registration or qualification under applicable state
securities or blue sky laws.
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6. Representations and Warranties of the Investors. Each
Investor, severally and not jointly, represents and warrants about itself to the
Company as follows:
6.1 Such Investor is acquiring the Note in the amount
set forth opposite its name on Schedule 2.2 and the Warrant Stock solely for its
own account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act.
6.2 Such Investor understands that the Note and the
Warrant Stock have not been registered or qualified under the Securities Act or
any state securities laws, by reason of their issuance and sale in transactions
exempt from the registration or qualification requirements of the Securities Act
and applicable state securities laws. Such Investor acknowledges that reliance
on said exemptions is predicated in part on the accuracy of its representations
and warranties herein. Such Investor acknowledges and agrees that the Note and
the Warrant Stock must be held indefinitely unless a subsequent disposition
thereof is registered or qualified under the Securities Act and applicable state
securities laws or is exempt from registration; and that, except as required in
the Loan and Warrant Purchase Agreement, the Company is not required so to
register or qualify any such securities or to take any action to make such an
exemption available except to the extent provided in the Loan and Warrant
Purchase Agreement.
6.3 Such Investor further understands that the
exemption from registration afforded by Rules 144 and 144A (the provisions of
which are known to it) issued under the Securities Act depends on the
satisfaction of various conditions and that, if applicable, Rules 144 and 144A
afford the basis for sales under certain circumstances only in limited amounts.
6.4 Such Investor represents and warrants to the
Company that it will not Transfer the Note or the Warrant Stock, except in
accordance with the terms of this Agreement and the Note, as the case may be,
and in compliance with the Securities Act and applicable state securities laws.
The parties acknowledge that each Institutional Investor may transfer the Note
and the Warrant Stock to one or more of its partners or a trust established for
their benefit, subject to compliance with the Securities Act and applicable
state securities laws.
6.5 Such Investor represents and warrants to the
Company that (i) it has such knowledge and experience in financial and business
matters as is necessary to enable it to evaluate the merits and risks of an
investment in the Company and is not utilizing any other person to be its
purchaser representative in connection with evaluating such merits and risks;
(ii) it has no present need for liquidity in its investment in the Company and
is able to bear the risk of that investment for an indefinite period and to
afford a complete loss thereof, and (iii) it was not formed for the specific
purpose of making an investment in the Company.
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6.6 Such Investor represents and warrants to the
Company that it is qualified as an "accredited investor" as defined in Rule 502
promulgated under the Securities Act of 1933.
6.7 Such Investor acknowledges that it has been
provided with and has been furnished with all information it has requested from
the Company and has had an opportunity to review all of the books and records of
the Company and to discuss with management of the Company all of the business
and financial affairs of the Company.
6.8 Such Investor represents and acknowledges that it
has received a copy of the documents and items on the data room diskette
delivered to such Investor, and it has had the opportunity to ask questions of
and to receive answers from the Company concerning, and to review all books and
records of the Company and to obtain additional information regarding, the
Company and such documents and items to such Investor's satisfaction, that such
Investor has in fact asked all such questions, received such answers and
obtained such information to such Investor's satisfaction.
7. Deliveries; Conditions.
7.1 At the Closing, the Company shall cause to be
delivered to the Investors the following:
(a) The Notes in accordance with Section 2.2
hereof to each Investor, in the principal amount set forth next to such
Investor's name on Schedule 2.2;
(b) The Warrant Stock in accordance with Section
3 hereof;
(c) The Security Agreement duly executed by the
Company and its Subsidiaries;
(d) A "Good Standing Certificate" of the Company
in the Commonwealth of Pennsylvania dated as of a recent date;
(e) A Certificate of the Secretary of the
Company attaching (A) the Articles of Incorporation of the Company in effect at
the Closing, (B) the Bylaws of the Company in effect at the Closing, (C) copies
of resolutions by the Board of Directors authorizing and approving this
Agreement, the issuance and delivery of the Notes and the Warrant Stock, and the
consummation of the transactions contemplated hereby; and (D) certifying as to
the incumbency of the officers executing this Agreement on behalf of the Company
and the documents contemplated by this Agreement to which the Company is a
party; and
(f) An opinion of Xxxxxx Xxxxxxxx, LLP
satisfactory in form and substance to each Investor.
7.2 At the Closing, each Investor shall cause to be
delivered to the Company
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(a) the purchase price for the Note being
acquired by such Investor;
(b) the Additional Warrant held by such
Investor;
(c) an executed Warrant Note for the exercise
price of the Additional Warrant held by such Investor; and
(d) an executed Pledge Agreement.
7.3 Chairman and Chief Executive Officer. As a
condition precedent to the obligations of the Investors to make the Loan, X. X.
Xxxxxxx shall have been elected Chairman of the Board of Directors and appointed
the Chief Executive Officer of the Company and each Subsidiary.
7.4 Amendment to Subordination Agreement and
Forbearance Agreement. As a condition precedent to the obligations of the
Investors to make the Loan, the lenders under the Senior Loan Agreement, the
Investors, the Company and the Subsidiary shall have executed an amendment to
the Subordination Agreement and the lenders under the Senior Loan Agreement, the
Company and the Subsidiary shall have executed an amendment to the Amended and
Restated Subordination Agreement dated June 13, 2002, as previously amended on
December 23, 2002 and April 11, 2003.
8. Covenants of the Company. The Company covenants and agrees
that, so long as either Institutional Note is outstanding (in which case
references to the Investors in this Section 8.1 shall refer to those Investor(s)
holding an Institutional Note), except to the extent the Company receives the
approval of a Required Interest of the Institutional Investors, the Company
shall comply and cause its Subsidiaries to comply with the covenants set forth
in Sections 8 and 9 of the Loan and Warrant Purchase Agreement, which covenants
are hereby incorporated herein by reference as though the same were set forth in
full herein.
9. Event of Default. The Company shall be in default of this
Agreement and the Notes if X. X. Xxxxxxx is removed from his position as Chief
Executive Officer of the Company or any Subsidiary or if his powers as Chief
Executive Officer are reduced from those typically enjoyed by a chief executive
officer.
10. Application of Payments. Any payment by the Company on
account of the Notes or the Convertible Notes shall be applied in the manner
that the Investors, in the exercise of their sole discretion, shall determine.
11. Amendment of Convertible Notes. Each Convertible Note is
hereby amended as follows:
(a) Directly under the heading of each
Convertible Note, the phrase "Due February 15, 2004" is hereby amended to read
"Due April 30, 2004."
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(b) The first paragraph of Section 1 of the
Note, beginning with the second sentence, and the second paragraph of Section 1
of the Note, are hereby amended to read in their entirety as follows:
Payments of all amounts outstanding hereunder
including principal and accrued interest
shall be payable in a single payment on the
earlier of (a) April 30, 2004 or (b) if the
Holder hereof so elects by written notice to
the Company, upon a Change of Control (the
"Termination Date"). Interest shall accrue
from January 1, 2002 on the unpaid principal
balance hereof at a rate equal to nine
percent (9%) per annum, compounded
semi-annually on June 30 and December 31.
Such interest shall be calculated on the
basis of actual days elapsed over a 365-day
year and shall be payable on the Termination
Date or on such earlier date as this Note is
prepaid in full pursuant to the terms set
forth below.
The Company and the Subsidiary jointly and
severally agree to pay interest (computed on
the same basis as set forth above) on overdue
principal and (to the extent legally
enforceable) on overdue interest, at the
stated rate plus four and one-half percent
(4.5%) per annum, compounded semi-annually on
June 30 and December 31 (or, in each case, at
the highest rate permitted by applicable law,
whichever is less) until paid. For this
purpose, principal and accrued interest are
not due until April 30, 2004, unless
accelerated earlier under the terms of the
Loan Agreement or this Note.
(c) Sections 2(a)(i) and (ii) of each
Convertible Note are hereby amended to read in their entirety as follows:
(i) Default shall occur in the payment
of interest on this Note or any of
the other Notes or any of the Notes
issued to the Investors on or about
December 11, 2003 (each a "Secured
Note" and collectively the "Secured
Notes") when the same shall have
become due; or
(ii) Default shall occur in the making of
any payment of the principal of this
Note or any of the other Notes or
any of the Secured Notes at the
expressed or any accelerated
maturity date; or
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(d) Section 2(a)(v) of each Convertible Note is
hereby amended to read in its entirety as follows:
Default shall occur in the
observance or performance of any
covenant or agreement contained in
the Loan Agreement or any Warrant
and such default is not remedied
within twenty (20) business days
after the earlier of (i) the date on
which the Company first obtains
knowledge of such Default and (ii)
the date on which written notice
thereof is given to the Company by
any Holder or an Event of Default
shall occur under the Subordinated
Loan and Amendment Agreement dated
December 11, 2003 among the Company
and the Investors; or
12. Agency Provisions.
12.1 Authorization and Action. Each Investor hereby
irrevocably appoints TDH as its agent under the Security Agreement and the
Mortgage (the "Agent") and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Security Agreement and the
Mortgage as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto. The duties of the Agent shall be
mechanical and administrative in nature and the Agent shall not by reason of
this Agreement, be a trustee or fiduciary for any Investor. The Agent shall have
no duties or responsibilities except those expressly set forth herein or in the
Security Agreement or the Mortgage. As to any matters not expressly provided for
by this Agreement or the Security Agreement or the Mortgage (including, without
limitation, enforcement of Agent's security interest in any Collateral securing
the obligations owing to any of the Investors), the Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or so
refraining from acting) upon the joint written instructions of Investors, and
such instructions shall be binding upon the Investors and all holders of Notes;
provided, however, that the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or applicable law.
12.2 Liability of Agent. Neither the Agent nor any of
its partners, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
or in the Security Agreement or the Mortgage in the absence of its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Agent (a) may treat the payee of any Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee, which notice must be in form satisfactory to the
Agent; (b) may consult with legal counsel (including counsel for the Company),
independent public accountants and other experts selected by it and shall not be
liable to any Investor for any action taken or omitted to be taken in good faith
by it in accordance with the advice of such counsel, accountants, or experts;
(c) makes no warranty or representation to any Investor and shall not be
responsible to any Investor for any statements, warranties, or representations
made in or in connection with this Agreement; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants, or conditions of this Agreement on the part of the Company or to
inspect the property (including the books and records) of the Company; (e) shall
not be responsible to any Investor for the due execution, legality, validity,
enforceability, genuineness, perfection, sufficiency, or value of this Agreement
or any other instrument or document furnished pursuant thereto; and (f) shall
incur no liability to any Investor under or in respect of this Agreement or the
Security Agreement or the Mortgage by acting upon any notice, consent,
certificate, monthly billing statement or other instrument or writing (which may
be sent by telegram, telex, or facsimile transmission) believed by it to be
genuine and signed or sent by the proper party or parties.
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12.3 Independent Credit and Collateral Decisions.
Each Investor acknowledges that it has, independently and without reliance upon
the Agent or any other Investor and based on such documents and information as
it has deemed appropriate, made its own credit and collateral analysis
(including an analysis of the nature and value of any Collateral, the
enforceability of the Agent's security interest therein and the perfection of
such documents and information as it shall deem appropriate at the time), and
will continue to make its own credit decision in taking or not taking action
under this Agreement. The Agent shall have no duty or responsibility to provide
any Investor with any credit or other information concerning the affairs,
financial condition or business of the Company which may come into the
possession of the agent or any of its affiliate. Agent makes no express or
implied warranty concerning the value of any Collateral or the perfection or
enforceability of it security interest therein. Agent shall have no duty to
protect any Collateral or the security interest granted therein.
12.4 Indemnification. Investors agree to indemnify
the Agent (to the extent not reimbursed by the Companies), ratably according to
the respective amounts of their portion of the face amount of the Notes, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement, the Security
Agreement or the Mortgage, or any action taken or omitted by the Agent under
this Agreement, the Security Agreement or the Mortgage, provided that neither
the Company nor any Investor shall be liable for any portion of the foregoing
resulting from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Investor agrees to reimburse the Agent (to the
extent not reimbursed by the Company) promptly upon demand for its ratable share
of any reasonable out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preparation administration, or
enforcement of, or legal advice in respect of rights or responsibilities under,
the Security Agreement and the Mortgage.
12.5 Successor Agent. The Agent may resign at any
time by giving at least 60 days' prior notice thereof to the Investors and the
Company. Upon any such resignation, the Investors shall have the right by
unanimous agreement to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Investors and shall have accepted such appointment
within 30 days after the resigning Agent's giving of notice of resignation, then
the resigning Agent may, on behalf of the Investors appoint a successor Agent.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the Agent, and the resigning Agent
shall be discharged from its duties and obligations under this Agreement. After
any resigning Agent's resignation hereunder as Agent, the provisions of this
Section 12 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
20
12.6 Sharing of Payments, Etc. If any Investor shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right or setoff, or otherwise) on account of any Note held by it in excess of
its ratable share of payments on account of the Notes obtained by all Investors
at any time when an Event of Default shall have occurred and remain continuing,
such Investor shall be deemed to have purchased from the other holder such
participation in the Notes held by them as shall be necessary to cause such
purchasing Investor to share the excess payment ratably with each of the other
Investors, provided, however, that if all or any portion of such excess payment
is thereafter recovered from such purchasing Investor, such purchase from each
Investor shall be rescinded and each Investor shall repay to the purchasing
Investor the purchase price to the extent of such recovery together with an
amount equal to such Investor's ratable share (according to the proportion of
(1) the amount of such Investor's required repayment to (2) the total amount so
received from the purchase Investor) of any interest or other amount paid or
payable by the purchasing Investor in respect of the total amount so recovered.
The Company agree that any Investor so purchasing a participation from another
holder pursuant to this Section 12.6 may, to the fullest extent permitted by
law, exercise all of its rights of payment (including the right of setoff) with
respect to such participation as fully as if such holder were the direct
creditor of the Company in the amount of such participation. Each Investor shall
give the Agent written notice within five (5) days of any payments or other
recoveries described above.
12.7 Enforcement by Agent. All rights of action under
the Security Agreement and the Mortgage may be instituted, maintained, pursued
and/or enforced by Agent. Any suit or proceeding instituted by Agent in
furtherance of such enforcement shall be brought in Agent's name without the
necessity of joining any of the other Investors. In any event, the recovery of
any judgment by Agent shall be for the ratable benefit of all of the Investors,
subject to the reimbursement of expenses and costs of Agent by the Investors.
Notwithstanding the foregoing, in no event shall Agent be entitled to take any
action to enforce the Investors' rights in respect of the Company (including,
without limitation, any actions or rights described in the Notes), release any
Collateral pledged or guarantee of similar support agreement provided to secure
the Company's obligations to the Investors and/or the Agent or waive, modify or
amend the Security Agreement or the Mortgage or any rights or obligations of any
party thereunder without the prior written consent of each Investor.
12.8 Pro Rata Treatment. Except as specifically
provided to the contrary herein, the rights and obligations of the Investors
shall be pro rata on the basis of their percentage interest in the aggregate
face amount of the Notes.
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13. Legend on Notes. The Notes shall bear the following legend
until such time as the Notes are no longer subject to the provisions hereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO
THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.
14. Survival of Representations and Warranties;
Indemnification; Fees and Expenses.
14.1 All representations and warranties contained
herein shall survive the Closing. All statements contained in a certificate or
other instrument delivered by the Company pursuant to this Agreement in
connection with the transactions contemplated by this Agreement shall constitute
representations and warranties by the Company under this Agreement.
14.2 The Company shall, with respect to the
representations, warranties and agreements made by the Company herein, and the
each Investor shall, with respect to the representations, warranties and
agreements made by such Investor herein, indemnify, defend and hold the other
harmless against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal and accounting
fees and expenses) arising from the untruth, inaccuracy or breach of any of the
representations, warranties or agreements of the Company or such Investor, as
the case may be.
14.3 The Company hereby agrees to reimburse Investors
for their out-of-pocket expenses, including reasonable attorney's fees and costs
and filing fees, incurred by the Investors in connection with its due diligence
and the development, preparation and execution of this Agreement and all other
documents and instruments relating thereto whether or not Closing occurs. Such
reimbursement shall be made simultaneously with Closing.
15. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or the Investors, the Investors or the Company (as the case may be) may proceed
to protect and enforce its rights either by suit in equity and/or by action at
law, including, but not limited to, an action for damages as a result of any
such breach and/or an action for specific performance or injunctive relief with
respect to any such covenant or agreement contained in this Agreement.
16. Notices. All notices or requests provided for or permitted
to be given pursuant to this Agreement must be in writing and may be given or
served by (i) depositing the same in the United States mail, addressed to the
party to be notified, postage paid, and registered or certified with return
receipt requested, or (ii) by delivering such notice in person to such party.
Notices so deposited in the mail shall be deemed to have been given or served on
the date on which the party actually received or refused such written notice, as
shown by the date or postmark of any return receipt indicating the date of
delivery or attempted delivery to such receiving party. The addresses of the
parties hereto for all purposes of this Agreement are:
22
Company:
ImageMax, Inc.
000 Xxxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxx
Telephone: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esquire
Telephone: 000-000-0000
The Investors:
TDH III, L.P.
000 X. Xxxxxx-Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: X. X. Xxxxxxx
Telephone: 000-000-0000
with a copy to:
XxXxxxxxxx, Keen & Xxxxxxx
Radnor Court, Suite 160
000 Xxxxx Xxxxxx-Xxxxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Xx., Esquire
Telephone: 000-000-0000
and
LVIR Investor Group, LP
000 Xxxxx 00, Xxxxxxxx X, 0xx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxx
Telephone: 000-000-0000
23
and
Xxxxxx Xxxxx
000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone: 000-000-0000 extension 102
By giving to the other parties at least five (5) days written
notice thereof, any party hereto shall have the right from time to time and at
any time during the term of this Agreement to change its respective address and
each party shall have the right to specify as its address any other address
within the United States of America.
17. Binding Agreement. This Agreement and each provision
herein shall be binding upon and applicable to, and shall inure to the benefit
of, the Investors, their permitted assigns and legal representatives.
18. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in force
and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the intention
of the parties hereto that they would have executed the remaining portion of
this Agreement without including therein any such part, parts or portion which
may for any reason be hereafter declared invalid or unenforceable.
19. Consents and Waivers. No consent or waiver, express or
implied, by any party hereto of the breach, default or violation by any other
party hereto of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach, default or violation of the same or
any other obligations of such party hereunder. Failure on the part of any party
hereto to complain of any act of any of the other parties or to declare any of
the other parties hereto in default, irrespective or how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder.
20. Applicable Law. This Agreement and all questions relating
to its validity, interpretation and performance shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to the conflict of laws principles of the Commonwealth of
Pennsylvania or any other jurisdiction.
21. Prior Agreements. This Agreement, together with all
exhibits hereto, and the other agreements contemplated hereby supersede any
prior or contemporaneous understanding or agreement among the parties respecting
the subject matter hereof. There are no arrangements, understandings or
agreements, oral or written, among the parties hereto relating to the subject
matter of this Agreement, except those fully expressed herein or in documents
executed contemporaneously herewith. No change or modification of this Agreement
shall be valid or binding upon the parties hereto unless such change or
modification or waiver shall be in writing and signed by the parties hereto.
24
22. Counting of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday or holiday.
23. Captions. The captions used in this Agreement are for
convenience only and shall not be construed in interpreting this Agreement.
Whenever the context so requires, the neuter shall include the feminine and
masculine, and the singular shall include the plural, and conversely.
24. Headings. All section headings herein have been inserted
for convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.
25. Gender. All pronouns used herein shall include all genders
and the singular and plural as the context requires.
26. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original for all purposes, but all of
which taken together shall constitute only one agreement. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
27. Publicity; Confidentiality. Except as may be required by
applicable Requirements of Law, (i) none of the parties to this Agreement shall
issue a publicity release or public announcement or otherwise make any
disclosure concerning this Agreement or the transactions contemplated hereby,
without prior approval by the other parties hereto (which approval shall not be
unreasonably withheld) and (ii) the Company and the Investors agree that all
information received from each other will be held strictly confidential and each
party will take reasonable steps to maintain the confidentiality of such
information; provided, however, that nothing in this Agreement shall restrict
the Company or the Investors from disclosing information: (a) that is already
publicly available; and (b) to their respective (i) shareholders, principals,
partners and employees and (ii) attorneys, accountants, consultants and other
advisors to the extent necessary to obtain their services in connection with the
transactions contemplated by this Agreement. If any announcement is required by
law to be made by any party hereto, prior to making such announcement such party
will deliver a draft of such announcement to the other parties and shall give
the other parties an opportunity to comment thereon. Notwithstanding any other
provision of this Agreement, at the earlier of the date of the public
announcement of the discussions of any transaction which is the subject matter
of this Agreement (each, a "Transaction"), the date of the public announcement
of a Transaction, or the date of the execution of this Agreement, each party to
such Transaction (and each employee, representative, or other agent of the
taxpayer) may disclose to any and all persons, without limitations of any kind,
the tax treatment and tax structure of such Transaction and all materials of any
kind (including opinions or other tax analyses) that are provided to the party
relating to such tax treatment and tax structure. In addition, no party is
subject to any restriction concerning its consulting with its tax advisor
regarding the tax treatment or tax structure of any Transaction at any time.
25
28. Waiver of Trial by Jury. THE PARTIES HERETO HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT OR ANY DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION WITH THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
IMAGEMAX, INC.
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: CFO
TDH III, L.P.
By: TDH III Partners, L.P.,
its general partner
By: /s/ X.X. Xxxxxxx
----------------
Name: X. X. Xxxxxxx
Title: General Partner
LVIR INVESTOR GROUP, LP
By: Prometheus Management Group, LLC,
its general partner
By: /s/ Xxxxxx X. Xxxx
------------------
Name: Xxxxxx X. Xxxx
Title: General Partner
/s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
26
Schedule 2.2
Name of Investor Amount of Investment
---------------- --------------------
TDH $133,333
LVIR $358,334
Xxxxx $ 8,333
27
