FIRST AMENDMENT TO
CONVERTIBLE SUBORDINATED LOAN
AND WARRANT PURCHASE AGREEMENT
This First Amendment to Convertible Subordinated Loan and Warrant Purchase
Agreement ("First Amendment") is made and entered into this 14th day of June,
2002 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"), DIME
CAPITAL PARTNERS, INC., a corporation organized under the laws of the State of
New Jersey ("Dime") and XXXXXX X. XXXXX, an individual resident of Pennsylvania
("Xxxxx") (TDH and Dime sometimes individually an "Institutional Investor" and
collectively the "Institutional Investors"; and TDH, Dime and Xxxxx sometimes
individually an "Investor" and collectively the "Investors").
WHEREAS, the Company and the Investors are parties to a Convertible
Subordinated Loan and Warrant Purchase Agreement dated February 15, 2000 (the
"Purchase Agreement"); and
WHEREAS, the parties hereto wish to amend the Purchase Agreement as set
forth herein;
NOW THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Section 1 of the Purchase Agreement is hereby amended by adding a new
Section 1.1A which shall read in its entirety as follows:
1.1A "Additional Warrants" shall mean the warrants described in
Section 2.4 hereof and any warrants issued in exchange or substitution
for such warrants, as each may hereafter be amended and/or restated.
2. Section 1 of the Purchase Agreement is hereby amended by adding a new
Section 1.2A which shall read in its entirety as follows:
1.2A "Amended Notes" shall mean the notes described in Section 2.2(b)
hereof and any notes issued in exchange or substitution for such
notes, as each may hereafter be amended and/or restated.
3. Section 1 of the Purchase Agreement is hereby amended by adding a new
Section 1.2B which shall read in its entirety as follows:
1.2B "Amended Warrants" shall mean the warrants described in Section
2.3(b) hereof and any warrants issued in exchange or substitution for
such warrants, as each may hereafter be amended and/or restated.
4. Section 1.16 of the Purchase Agreement is here amended and restated to
read in its entirety as follows:
1.16 [Intentionally Omitted]
5. Section 1.30 of the Purchase Agreement is hereby amended and restated
to read in its entirety as follows:
1.30 "Notes" shall mean the Original Notes and the Amended Notes and
each of the Original Notes and the Amended Notes is individually
referred to as a "Note."
6. Section 1 of the Purchase Agreement is hereby amended by adding a new
Section 1.30A which shall read in its entirety as follows:
1.30A "Original Notes" shall mean the notes described in Section
2.2(a) hereof.
7. Section 1 of the Purchase Agreement is hereby amended by adding a new
Section 1.30B which shall read in its entirety as follows:
1.30B "Original Warrants" shall mean the warrants described in Section
2.3(a) hereof.
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8. Section 1.47 of the Purchase Agreement is hereby amended and restated
to read in its entirety as follows:
1.47 "Warrants" shall mean the Original Warrants, the Amended Warrants
and the Additional Warrants and each of the Original Warrants, the
Amended Warrants and the Additional Warrants is individually referred
to as a "Warrant."
9. Section 2.2 of the Purchase Agreement is hereby amended and restated
to read in its entirety as follows:
2.2 "Promissory Notes"
(a) The indebtedness of the Company and its Subsidiaries to the
Investors for the Subordinated Loan pursuant to this Section 2 was
evidenced by convertible subordinated promissory notes executed by the
Company and its Subsidiaries in favor of each Investor, in the
principal amount set forth opposite the Investor's name on Schedule
2.2(a) (the "Original Notes").
(b) On June 13, 2002, the Investors shall deliver to the Company
the Original Notes, which shall be cancelled by the Company, and the
Company and its Subsidiary shall execute and deliver to the Investors
notes that amend and restate the Original Notes in the principal
amount set forth opposite the Investor's name on Schedule 2.2(b) (the
"Amended Notes"). The Amended Notes issued in accordance with this
Section 2.2(b) will be in substantially the form attached hereto as
Exhibit A. Up to an aggregate of $1,971,764.77 of the principal amount
of the Amended Notes is convertible into shares of Common Stock at an
initial conversion price of $0.40 per share. The Amended Notes shall
be subordinated to all bank and other commercial lending obligations
of the Company and its Subsidiary then outstanding or incurred in
accordance with the terms hereof from time to time thereafter, but
shall be senior to all other debt of the Company and its Subsidiary.
3
10. Section 2.3 of the Purchase Agreement is hereby amended and restated
to read in its entirety as follows:
2.3 Issuance of Original Warrants and Amended Warrants.
(a) Concurrently with the delivery by the Company of the Original
Notes, the Company issued to, and in the name of, each Investor stock
purchase warrants to acquire the number of shares of the Company's
Common Stock set forth opposite their name on Schedule 2.3 on or
before February 15, 2005 at an exercise price of Three Dollars and
Fifty Cents ($3.50) (the "Original Warrants").
(b) On June 13, 2002, the Investors shall deliver to the Company
the Original Warrants, which will be cancelled by the Company, and the
Company shall issue to, and in the name of, each Investor stock
purchase warrants in like amount that amend and restate the Original
Warrants (the "Amended Warrants"). The Amended Warrants issued in
accordance with this Section 2.3(b) will be in substantially the form
attached hereto as Exhibit B.
11. The Purchase Agreement is hereby amended and restated by adding a new
Section 2.4 which shall read in its entirety as follows:
2.4 Issuance of Additional Warrants. Concurrently with the delivery
by the Company of the Amended Notes and the Amended Warrants, the
Company shall issue to, and in the name of, each Investor stock
purchase warrants to acquire the number of shares of the Company's
Common Stock set forth opposite their name on Schedule 2.4 at an
exercise price and otherwise on the terms and conditions set forth
therein. The Additional Warrants issued in accordance with this
Section 2.4 will be in substantially the form attached hereto as
Exhibit C.
12. The first sentence of Section 4 of the Purchase Agreement is hereby
amended and restated to read in its entirety as follows:
The closing of the purchase and sale of the Original Notes and the
Original Warrants (the "Closing") took place at the offices of Xxxxxx
Xxxxxxxx LLP in Berwyn, Pennsylvania on February 15, 2000 (the
"Closing Date").
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13. The Original Notes and the Original Warrants were delivered in
accordance with Section 7.1(a) and Section 7.1(b) of the Purchase Agreement on
February 15, 2000.
14. Section 9.2 of the Purchase Agreement is hereby amended and restated
by deleting subpart (i) in its entirety and replacing it with the following:
(i) the Indebtedness provided under that certain Credit Agreement
between the Company, its Subsidiary, the Lenders (as defined therein)
and Commerce Bank, N.A., dated as of June 13, 2002
15. Section 9.3 of the Purchase Agreement is hereby amended and restated
by deleting subpart (i) and replacing it with the following:
(i) the existing Liens in favor of Commerce Bank, N.A.
16. Section 11.1 of the Purchase Agreement is hereby amended by adding at
the end therefor the following:
; provided, however, that nothing in this Section 11.1 will be
construed to prohibit or delay the issuance, exercise or conversion of
the Amended Notes, the Amended Warrants or the Additional Warrants.
17. Section 12 of the Purchase Agreement is hereby amended and restated to
read in its entirety as follows:
12. Effect of Change of Control.
12.1 Change of Control.
(a) Each of the following events shall constitute a "Change
of Control":
(i) The acquisition by a Person (other than an Investor
or an Affiliate of an Investor or one or more partners
of an Institutional Investor or a trust established for
their benefit) of more than fifty percent (50%) of the
beneficial ownership (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934,
as amended), of the Common Stock of the Company;
5
(ii) a sale, conveyance, exchange or transfer ("Sale")
to another Person of all or substantially all of the
assets of the Company or the Subsidiaries taken as a
whole;
(iii) the merger or consolidation of the Company or any
of its Subsidiaries with one or more other Persons
(excluding mergers of one Subsidiary into another or
the merger of any Subsidiary into the Company); or
(iv) the merger or consolidation of one or more
Persons into or with the Company or any of the
Subsidiaries (excluding mergers of one Subsidiary into
another or the merger of any Subsidiary into the
Company); or
if, in the case of (iii) or (iv), the shareholders of the
Company and/or Subsidiary involved (the "Involved Company")
prior to such merger or consolidation do not retain at least
a majority of the voting power of the Involved Company or
surviving Person, as the case may be.
(b) If, at any time, a Change of Control occurs, the
principal balance and all accrued interest under the Notes
shall, at the election of each Holder thereof, be due and
payable on the effective date of such Change of Control,
without penalty or premium.
(c), (d) and (e) [Intentionally Omitted]
12.2 [Intentionally Omitted]
12.3 [Intentionally Omitted]
12.4 [Intentionally Omitted]
12.5 [Intentionally Omitted]
12.6 [Intentionally Omitted]
18. Section 17 of the Purchase Agreement is hereby amended by deleting the
Company's address and replacing it with the following:
ImageMax, Inc.
000 Xxxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attn.: Xxxx X. Xxxxxxxx
6
Xxxxx X. Xxxxx
(000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Attn.: Xxxxxxx X. Xxxxxxxxx
(000) 000-0000
19. The Purchase Agreement is hereby amended by adding Exhibit A, Exhibit
B and Exhibit C attached hereto.
20. References in the Purchase Agreement to the "Agreement" shall be
understood to refer to the Purchase Agreement, as amended by this First
Amendment, and as the same may hereafter be amended, restated or otherwise
modified from time to time.
21. 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 that the representations and warranties of the
Company contained in Attachment I hereto, are true and correct on the date
hereof.
22. The closing of the purchase and sale of the Amended Notes, Amended
Warrants and Additional Warrants (the "Second Closing") shall take place at the
offices of Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx, LLP, 0000 Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, XX 00000 on June 13, 2002.
23. All representations and warranties contained in Attachment I hereto
shall survive the Second Closing. All statements contained in a certificate or
other instrument delivered by the Company pursuant to the Agreement in
connection with the transactions contemplated by this
7
Agreement shall constitute representations and warranties by the Company under
this Agreement.
24. The Company shall, with respect to the representations, warranties and
agreements made by the Company herein, indemnify, defend and hold the Investors
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.
25. At the Second Closing, the Investors shall cause to be delivered to
the Company the following:
(a) an executed copy of the Amended and Restated Subordination Agreement
dated as of June 13, 2002;
(b) the Original Notes and
(c) the Original Warrants.
26. At the Second Closing, the Company shall cause to be delivered to the
Investors the following:
(a) the Amended Notes in accordance with Section 2.2(b) of the Agreement;
(b) the Amended Warrants in accordance with Section 2.3(b) of the
Agreement; and
(c) the Additional Warrants in accordance with Section 2.4 of the
Agreement.
27. The Company hereby agrees to reimburse the Investors for all
out-of-pocket expenses, including reasonable attorneys' fees and costs, incurred
by the Investors in connection with the development, preparation and execution
of this First Amendment and the documents and instruments referred to herein.
Such reimbursement shall be made concurrently with the Company's execution and
delivery of this First Amendment.
8
28. This First Amendment 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 First Amendment shall become binding
when one or more counterparts hereof, individually or taken together, shall bear
the signature of all of the parties reflected hereon as the signatories.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of the day and year first above written.
IMAGEMAX, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
TDH III, L.P.
By: /s/ X.X. Xxxxxxx
---------------------------------
Name: X.X. Xxxxxxx
-------------------------------
Title: General Partner, TDH III Partners, L.P,
------------------------------------------
the General Partner of TDH III, L.P.
---------------------------------------------
DIME CAPITAL PARTNERS, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Name: Xxxxxxx X. Xxxx
-------------------------------
Title: President
------------------------------
/s/ Xxxxxx X. Xxxxx
------------------------------------
Xxxxxx Xxxxx
9
Schedule 2.2(a)
-------------------------------------------------------------------------------
Name Principal Amount of Original Note
-------------------------------------------------------------------------------
TDH III, L.P. $1,600,000.00
-------------------------------------------------------------------------------
DIME CAPITAL PARTNERS, INC. $4,300,000.00
-------------------------------------------------------------------------------
XXXXXX X. XXXXX $ 100,000.00
-------------------------------------------------------------------------------
Schedule 2.2(b)
-------------------------------------------------------------------------------
Name Principal Amount of Amended Note
-------------------------------------------------------------------------------
TDH III, L.P. $1,672,000.00
-------------------------------------------------------------------------------
DIME CAPITAL PARTNERS, INC. $4,493,500.00
-------------------------------------------------------------------------------
XXXXXX X. XXXXX $ 104,500.00
-------------------------------------------------------------------------------
ATTACHMENT I
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
1.1. Organization; Power; Qualification. Each of the Company and its
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization. The
jurisdictions in which the Company and its Subsidiary are organized and
qualified to do business as of the Closing Date are described in Schedule 1.1 of
the Disclosure Schedule.
1.2. 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 the Subsidiary. Such Articles of Incorporation, Bylaws and
equivalent organizational documents are in full force and effect. Neither the
Company nor the Subsidiary is in violation of any provision of its Articles of
Incorporation, Bylaws or equivalent organizational documents.
1.3. Capitalization.
(a) The authorized capital stock of the Company consists of 10,000,000
shares of preferred stock (none of which is issued and outstanding) and
40,000,000 shares of Common Stock. As of the date hereof,
(i) 6,793,323 shares of Common Stock are issued and outstanding, all
of which are validly issued, fully paid and nonassessable;
(ii) no shares of Common Stock are held by the Subsidiary; and
(iii) 1,600,000 shares of Common Stock are reserved for issuance
pursuant to stock options granted pursuant to the Company's Stock Option
Plan or otherwise of which options to purchase an aggregate of 1,343,000 of
Common Stock have been granted to date.
Except as set forth in this Section 1.3 or Schedule 1.3 of the Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or the Subsidiary or obligating the Company or the
Subsidiary to issue or sell any shares of capital stock of, or their equity
interest in, the Company or the Subsidiary. All shares of Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Section 1.2
of the Disclosure Schedule, there are no outstanding contractual obligations of
the Company or the Subsidiary to repurchase, redeem or otherwise acquire any
shares of Common Stock or any capital stock of the Subsidiary or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
12
otherwise) in, the Subsidiary or any other person. Each outstanding share of
capital stock of the Subsidiary is duly authorized, validly issued, fully paid
and nonassessable.
(b) 4,929,412 shares of Common Stock have been duly reserved for issuance
upon conversion of the Notes. The issuance, sale and delivery of such shares of
Common Stock have been duly authorized by all requisite corporate action of the
Company and when so issued, sold and delivered, such shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, not subject to
preemptive or any other similar rights of the shareholders of the Company or
others and free and clear of any and all liens and encumbrances except as
contemplated by the Agreement.
(c) 8,400,000 shares of Common Stock have been duly reserved for issuance
upon exercise of the Warrants. The issuance, sale and delivery of such shares of
Common Stock have been duly authorized by all requisite corporate action of the
Company and when so issued, sold and delivered, such shares of Common Stock will
be validly issued and outstanding, fully paid and nonassessable, not subject to
preemptive or any other similar rights of the shareholders of the Company or
others and free and clear of any and all liens and encumbrances except as
contemplated by the Agreement.
(d) ImageMAX of Delaware, Inc. is the Company's sole subsidiary. All of
the issued and outstanding stock of ImageMax of Delaware, Inc. is owned by the
Company.
1.4. Authority Relative to the Agreement. The Company has all necessary
power and authority to execute and deliver the Purchase Agreement (as amended),
the Notes and the Warrants, and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby
(the "Transactions"). The execution and delivery of the Purchase Agreement (as
amended), the Notes and the Warrants 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 the Purchase Agreement (as amended), the
Notes and the Warrants, or to consummate the Transactions. The Purchase
Agreement (as amended), the Notes and the Warrants have been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Investors of the Purchase Agreement (as amended),
constitute legal, valid and binding obligations of the Company.
1.5. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 1.5(a) of the Disclosure Schedule, the
execution and delivery of the Purchase Agreement (as amended), the Notes and the
Warrants by the Company do not, and the performance of this Purchase Agreement
(as amended) by the Company will not (i) conflict with or violate the Articles
of Incorporation or Bylaws or equivalent organizational documents of the Company
or its Subsidiary, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Company or the Subsidiary or by
which any property or asset of the Company or the Subsidiary is bound or subject
or (iii) result in a 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
13
encumbrance of any nature on any property or asset of the Company or the
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or the Subsidiary is a party or by which the Company or the
Subsidiary or any property or asset of the Company or the 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.
(b) Except as set forth in Schedule 1.5(b) of the Disclosure Schedule, the
execution and delivery of the Purchase Agreement (as amended), the Notes and the
Warrants by the Company do not, and the performance of the Purchase Agreement
(as amended), 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 the Purchase
Agreement (as amended), the Notes and the Warrants, and would not, individually
or in the aggregate, have a Material Adverse Effect.
1.6. Compliance. Neither the Company nor its Subsidiary is in conflict
with, or in default or violation of, (i) any law, rule, regulation, order,
judgment or decree to the Company or the Subsidiary or by which any property or
asset of the Company or the 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 the
Subsidiary is a party or by which the Company or the Subsidiary or any property
or asset of the Company or the 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.
1.7. Tax Returns and Payments. Each of the Company and its Subsidiary has
duly filed or caused to be filed all federal, state, local and other tax returns
required by Applicable Law to be filed, and has paid, or made adequate provision
for the payment of, all federal, state, local and other taxes, assessments and
governmental charges or levies upon it and its property, income, profits and
assets which are due and payable. No Governmental Authority has asserted any
Lien or other claim against the Company or Subsidiary thereof with respect to
unpaid taxes which has not been discharged or resolved. The charges, accruals
and reserves on the books of the Company and its Subsidiary in respect of
federal, state, local and other taxes for all Fiscal Years and portions thereof
since the organization of the Company and its Subsidiary are in the judgment of
the Company adequate, and the Company does not anticipate any additional taxes
or assessments for any of such years.
1.8. Intellectual Property Matters. Each of the Company and its Subsidiary
owns or possesses rights to use all franchises, licenses, copyrights, copyright
applications, patents, patent rights or licenses, patent applications,
trademarks, trademark rights, trade names, trade name rights, copyrights and
rights with respect to the foregoing which are required to conduct its business.
No event has occurred which permits, or after notice or lapse of time or both
would permit, the revocation or termination of any such rights, and neither the
Company nor the
14
Subsidiary thereof is liable to any Person for infringement under Applicable Law
with respect to any such rights as a result of its business operations.
1.9. Environmental Matters.
1.9.1. The properties owned, leased or operated by the Company and
its Subsidiary now, or in the past, do not contain, and to their knowledge have
not previously contained, any Hazardous Materials in amounts or concentrations
which (i) constitute or constituted a violation of applicable Environmental Laws
or (ii) could give rise to liability under applicable Environmental Laws;
1.9.2. The Company, the Subsidiary and such properties and all
operations conducted in connection therewith are in compliance, and have been in
compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about such properties or such operations which could
interfere with the continued operation of such properties or impair the fair
saleable value thereof;
1.9.3. Neither the Company nor the Subsidiary thereof has received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters, Hazardous Materials, or
compliance with Environmental Laws, nor does the Company or the Subsidiary
thereof have knowledge or reason to believe that any such notice will be
received or is being threatened;
1.9.4. Hazardous Materials have not been transported or disposed of
to or from the properties owned, leased or operated by the Company and its
Subsidiary in violation of, or in a manner or to a location which could give
rise to liability under, Environmental Laws, nor have any Hazardous Materials
been generated, treated, stored or disposed of at, on or under any of such
properties in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Laws;
1.9.5. No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of the Company threatened, under any
Environmental Law to which the Company or the Subsidiary thereof is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
Company, the Subsidiary or such properties or operations; and
1.9.6. There has been no release, or to the best of the Company's
knowledge, threat of release, of Hazardous Materials at or from properties
owned, leased or operated by the Company or the Subsidiary, now or in the past,
in violation of or in amounts or in a manner that could give rise to liability
under Environmental Laws.
1.10. ERISA.
1.10.1. As of the date of the Agreement, neither the Company nor any
ERISA Affiliate maintains or contributes to, or has any obligation under, any
Employee Benefit Plans other than those identified in Schedule 1.10 of the
Disclosure Schedule;
15
1.10.2. The Company and each ERISA Affiliate is in compliance with
all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by the Company or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;
1.10.3. No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has the Company or any ERISA Affiliate
failed to make any contributions or to pay any amounts due and owing as required
by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension
Plan prior to the due dates of such contributions under Section 412 of the Code
or Section 302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension
Plan;
1.10.4. Neither the Company nor any ERISA Affiliate has: (ii) engaged
in a nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code; (ii) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid; (iii) failed to make a required contribution or
payment to a Multiemployer Plan, or (iv) failed to make a required installment
or other required payment under Section 412 of the Code;
1.10.5. No Termination Event has occurred or is reasonably expected
to occur; and
1.10.6. No proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of the Company after due inquiry, threatened
concerning or involving any (i) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Company or
any ERISA Affiliate, (ii) Pension Plan, or (iii) Multiemployer Plan.
1.11. Material Contracts. Schedule 1.11 of the Disclosure Schedule sets
forth a complete and accurate list of all Material Contracts of the Company and
its Subsidiary in effect as of the date hereof not listed pursuant to any other
section of the Disclosure Schedule hereto; other than as set forth in Schedule
1.11 of the Disclosure Schedule, each such Material Contract is, and after
giving effect to the consummation of the Transactions contemplated by the
Agreement will be, in full force and effect in accordance with the terms
thereof. Copies of each Material Contract have either been furnished to the
Investors directly by the Company or are attached as an Exhibit to the Company's
SEC Reports.
1.12. Employee Relations. Each of the Company and the Subsidiary has a
stable work force in place and is not, as of the date hereof, party to any
collective bargaining agreement nor
16
has any labor union been recognized as the representative of its employees,
except as set forth on Schedule 1.12 of the Disclosure Schedule. The Company
knows of no pending, threatened or contemplated strikes, work stoppage or other
collective labor disputes involving its employees or those of its Subsidiary.
1.13. Financial Statements. The (i) Consolidated balance sheets of the
Company and its Subsidiary as of December 31, 2001, and the related statements
of income and retained earnings and cash flows for the Fiscal Years then ended
and (ii) unaudited Consolidated balance sheet of the Company and its Subsidiary
as of March 31, 2002, and related unaudited interim statements of revenue and
retained earnings, copies of which have been furnished to the Investors, are
complete and correct and fairly present the assets, liabilities and financial
position of the Company and its Subsidiary as at such dates, and the results of
the operations and changes of financial position for the periods then ended. All
such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP. The Company and its Subsidiary have
no Debt, obligation or other unusual forward or long-term commitment which is
not fairly reflected in the foregoing financial statements or in the notes
thereto.
1.14. No Material Adverse Change. Since December 31, 2001, there has been
no material adverse change in the properties, business, operations, prospects,
or condition (financial or otherwise) of the Company and its Subsidiary and no
event has occurred or condition arisen that could reasonably be expected to have
a Material Adverse Effect.
1.15. Titles to Properties. Each of the Company and its Subsidiary has such
title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Company and its Subsidiary delivered pursuant to Paragraph
1.13, except those which have been disposed of by the Company or its Subsidiary
subsequent to such date which dispositions have been in the ordinary course of
business or as otherwise expressly permitted hereunder.
1.16. Litigation. Except as set forth on Schedule 1.16 of the Disclosure
Schedule, there are no actions, suits or proceedings pending nor, to the
knowledge of the Company threatened against or in any other way relating
adversely to or affecting the Company or its Subsidiary thereof or any of their
respective properties in any court or before any arbitrator of any kind or
before or by any Governmental Authority.
1.17. 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.
1.18. 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 of the Purchase Agreement (as amended), the
issuance of the Notes, the offering for sale of the Warrants and the issuance of
the Common Stock upon conversion of the Notes and exercise of the Warrants 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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