AMENDMENT TO FORBEARANCE AGREEMENT
This Amendment to Forbearance Agreement (this "Amendment"), dated this 15th
day of February, 2000, is by and among ImageMax, Inc. ("Borrower"), a
Pennsylvania corporation, the undersigned subsidiaries of Borrower
(collectively, along with Borrower, the "Company Affiliates"), First Union
National Bank ("First Union"), successor by merger to CoreStates Bank, N.A., a
national bank, for itself and as agent pursuant to the Credit Agreement
described below (in such capacity, the "Agent"), and Commerce Bank, N.A.
("Commerce"), a national bank and one of the "Banks" under the Credit Agreement
described below.
BACKGROUND
A. Pursuant to the terms and subject to the conditions set forth in that
certain Credit Agreement, dated as of March 30, 1998, among Borrower, the
undersigned subsidiaries of Borrower, Agent, for itself and in such capacity,
Commerce Bank, N.A. and any other banks becoming a party thereto, as amended
pursuant to that certain Amendment No. 1 to Credit Agreement dated as of June 9,
1998 among Company Affiliates, First Union and Agent, and that certain Amendment
No. 2 to Credit Agreement dated as of November 16, 1998 among Company
Affiliates, First Union, Agent and Commerce (as amended, the "Credit
Agreement"), Banks established a revolving credit facility for Company
Affiliates pursuant to which Banks severally agreed, subject to and in reliance
on all of the provisions of the Credit Agreement and the other Loan Documents
referred to therein, to provide a revolving credit facility up to Thirty Million
($30,000,000.00) Dollars (which revolving credit facility has been decreased
pursuant to, inter alia, the Second Amendment (as decreased and amended, the
"Revolving Credit"), pursuant to which Banks made various loans, advances and
extensions of credit (including extensions of credit in the form of the issuance
for the account of Borrower and/or other Company Affiliates of various letters
of credit), which indebtedness is further evidenced by (i) a certain Revolving
Credit Note dated as of March 30, 1998 in the principal sum of Twenty-Five
Million ($25,000,000.00) Dollars (in respect of the Acquisition Facility)
executed and delivered by Borrower to Agent for the rateable benefit of each of
the Banks and (ii) a certain Revolving Credit Note dated as of March 30, 1998 in
the principal sum of Five Million ($5,000,000.00) Dollars (in respect of the
Working Capital Facility) executed and delivered by Borrower to Agent for the
rateable benefit of each of the Banks (collectively, the "Revolving Credit
Note").
B. As collateral security for the Obligations (as defined in the Credit
Agreement), pursuant to the terms and subject to the conditions set forth in (i)
that certain Security and Pledge Agreement, dated as of March 30, 1998, executed
and delivered by Company Affiliates to Agent, (ii) that certain Trademark
Collateral Agreement, dated as of March 30, 1998, executed and delivered by
Borrower to Agent and (iii) that certain Copyright Collateral Agreement, dated
as of March 30, 1998, executed and delivered by Borrower to Agent (collectively,
along with each of the instruments, agreements and documents referred to in such
documents and the Chesterton Mortgage described below, the "Loan Documents"),
Company Affiliates granted to Agent for the rateable benefit of Banks, and Agent
holds liens on and security interests in, to and under all of Company
Affiliates' respective existing and future goods, equipment, furniture,
inventory, machinery, money, accounts, contracts, contract rights, general
intangibles, fixtures, instruments,
documents and chattel paper, whether now owned or hereafter acquired or arising,
together with all replacements and substitutions therefor and additions thereto
and cash and noncash proceeds thereof (the "Collateral").
C. To induce Banks to enter into the Credit Agreement, establish the
Revolving Credit and make various loans, advances and extensions of credit to or
for the benefit of Company Affiliates, pursuant to the terms and subject to the
conditions of that certain Surety Agreement dated as of March 30, 1998, by each
Company Affiliate (other than Borrower) to Agent (the "Surety Agreement"), each
such Company Affiliate guaranteed, as a surety, the Obligations.
D. Prior to March 29, 1999, Borrower and the other Company Affiliates
defaulted in their financing arrangements with Agent and Banks. A list of the
defaults under the Credit Agreement and the other Loan Documents (collectively,
the "Existing Defaults") is attached to this Amendment as Exhibit "A" and hereby
made a part hereof. At the request of Company Affiliates, Agent and Banks
executed and exchanged with Company Affiliates that certain Forbearance
Agreement dated March 29, 1999 (the "First Forbearance Agreement"), pursuant to
which Agent and Banks agreed to forbear from exercising their rights and
remedies under the Loan Documents and applicable law. The First Forbearance
Agreement terminated, with the Obligations remaining outstanding, and Company
Affiliates again requested that Agent and Banks forbear from exercising their
rights and remedies under the Loan Documents and applicable law, pending the
refinancing by Company Affiliates of the Obligations and, solely as an
accommodation to Company Affiliates, Agent and Banks executed and exchanged with
Company Affiliates that certain Forbearance Agreement dated September 30, 1999
(the "Forbearance Agreement"), pursuant to which Agent and Banks agreed to
continue to forbear from exercising their rights and remedies under the Loan
Documents and applicable law in accordance with the terms of the Forbearance
Agreement.
E. Borrower and the other Company Affiliates have requested that Agent and
Banks (i) consent to Company Affiliates issuing one or more convertible
subordinated notes in the aggregate principal sum of Six Million ($6,000,000.00)
Dollars to TDH III, L.P., Dime Capital Partners and Xxxxxx X. Xxxxx
(collectively, the "TDH Investors") (such subordinated indebtedness being
hereinafter referred to as the "TDH Subordinated Indebtedness"), (ii) extend the
Forbearance Period through June 30, 2000 and (iii) modify certain covenants set
forth in the Forbearance Agreement. Agent and Banks agree to accommodate Company
Affiliates' requests under the terms and subject to the conditions set forth in
this Amendment.
NOW, THEREFORE, with the foregoing Background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound, hereby further covenant and agree as follows:
2
SECTION 1. DEFINITIONS.
1.1 Accounting Terms. All accounting terms not otherwise defined in this
Amendment or the Forbearance Agreement shall have the meanings ascribed to such
terms in accordance with GAAP.
1.2 Capitalized Terms. All capitalized terms not otherwise defined in shall
have the meanings ascribed to such terms in the Forbearance Agreement.
SECTION 2. AMENDMENT TO FORBEARANCE AGREEMENT.
Under the terms and subject to the conditions set forth in this Amendment,
the Forbearance Agreement is hereby amended as follows:
2.1 Forbearance Period; Terminating Events. The Forbearance Period is
hereby extended through the earlier of (i) June 30, 2000 or (ii) the date on
which any Terminating Event occurs, and the "Forbearance Termination Date" is
hereby amended to be such earlier date.
2.2 Amortization of Obligations. Interest on the outstanding principal
balance of the Obligations shall continue to be payable monthly, in arrears, on
the first day of each month. The principal of the Obligations shall be payable
in consecutive monthly installments as follows:
Payment Date Amount of Payment
------------ -----------------
February 15, 2000 $50,000
March 1, 2000 $125,000
April 1, 2000 $150,000
May 1, 2000 $250,000
June 1, 2000 $300,000
June 30, 2000 All principal, interest, fees and
reimbursable expenses in connection
with the Obligations shall be paid
and satisfied in full
In addition to the foregoing amortization, Banks shall receive a payment on
account of the principal of the Obligations in the amount of Five Million
($5,000,000.00) Dollars on the earlier of the date of funding of the TDH
Subordinated Indebtedness or February 15, 2000.
2.3 Accommodations with Respect to Covenants.
(A) Subsection 4.1(B) of the Forbearance Agreement is hereby deleted.
Company Affiliates shall not longer be required to submit a monthly,
written status report of activities undertaken by Xxxxx; provided, however,
that Agent and Banks hereby reserve the right, at their option, to require
such data and information (financial or otherwise) as Agent and Banks
3
may reasonably request including, without limitation, information as to the
activities of Xxxxx and others in connection with the sale of stock and/or
assets of Company Affiliates.
(B) Subsection 4.1(D)(2) is hereby deleted in its entirety and
replaced with the following:
Company Affiliates minimum stockholders equity, together with
the TDH Subordinated Indebtedness, shall at all times be not
less than Forty-Two Million ($42,000,000.00) Dollars, and
shall increase by the amount of net income of Company
Affiliates and investments in Company Affiliates, but shall
not be reduced by losses incurred by Company Affiliates.
(C) Subsection 4.1(D)(3) is hereby deleted in its entirety and
replaced with the following:
Capital Expenditures of Company Affiliates shall not exceed in
the aggregate the sum of Two Hundred Fifty Thousand
($250,000.00) Dollars for the calendar quarter ending March
31, 2000 and shall not exceed in the aggregate the sum of Five
Hundred Thousand ($500,000.00) Dollars for the calendar
quarter ending June 30, 2000, in each case determined on a
non-cumulative basis.
(D) Subsection 4.1(D)(6) is hereby deleted in its entirety and
replaced with the following:
Without the prior written consent of Banks, which consent may
be withheld by Banks in their sole and absolute discretion,
Company Affiliates shall not incur any additional indebtedness
including, without limitation, "off-balance sheet"
indebtedness in excess of the aggregate sum of Ten Thousand
($10,000.00) Dollars, except for (i) the TDH Subordinated
Indebtedness, which TDH Subordinated Indebtedness shall be in
the amount of Six Million ($6,000,000.00) Dollars, shall
accrue interest at not more than nine (9%) percent per annum,
with interest payable semi-annually, in arrears, commencing on
or after July 1, 2000 and, so long as any part of the
Obligations remain outstanding, no principal amortization
(whether by voluntary prepayment, acceleration or otherwise).
The TDH Subordinated Indebtedness shall otherwise be in form
and substance satisfactory to Agent, Banks and their counsel,
and (ii) a contingent indebtedness in the amount of up to Two
Hundred Fifty Thousand ($250,000.00) Dollars in favor of TDH
Investors in the event of the breakup of the TDH Subordinated
Indebtedness and otherwise under the terms and subject to the
conditions set forth in a certain Memorandum dated
4
November 9, 1999 from Xxx Xxxx and X.X. Xxxxxxx of TDH
Investors to Xxxx Xxxxx and Xxxx Xxxxxxxx of Company
Affiliates and acceptable to Agent, Banks and their counsel.
(E) Subsection 4.1(E) is hereby deleted in its entirety; provided, however,
that nothing herein contained shall be deemed to impair the right of Agent and
Banks after the occurrence of any Terminating Event to require the concentration
or disposition of remittances (or other proceeds) on account of accounts
receivable and other proceeds from the sale or other disposition of Collateral
in such manner as Agent and Banks may determine in their sole and absolute
discretion.
SECTION 3. ADDITIONAL COVENANTS.
3.1 In addition to all covenants set forth in the Loan Documents and the
Forbearance Agreement, Company Affiliates covenant and agree with Agent and
Banks that, so long as any of the Obligations remain unsatisfied and
outstanding, they will comply with the following covenants:
(A) On or before February 15, 2000, from the proceeds of the TDH
Subordinated Indebtedness, Banks shall receive on account of the principal
of the Obligations the sum of Five Million ($5,000,000.00) Dollars.
(B) On or before February 15, 2000, Company Affiliates shall obtain
and furnish to Agent and Banks a commitment for the refinancing of the
Obligations in an amount not less than Fifteen Million ($15,000,000.00)
Dollars (the "Refinancing Commitment"). The Refinancing Commitment shall be
subject only to such terms, covenants, conditions and contingencies as
Agent and Banks may accept in their sole and absolute discretion; provided,
however, that the Refinancing Commitment may be subject to the financial
institution issuing such commitment obtaining a participant to purchase and
fund a participation interest in not less than Six Million ($6,000,000.00)
Dollars of such Fifteen Million ($15,000,000.00) Dollar credit facility.
(C) On or before May 15, 2000, Company Affiliates shall obtain and
furnish to Bank a revised Refinancing Commitment for a Fifteen Million
($15,000,000.00) Dollar credit facility pursuant to which Company
Affiliates will be able to refinance the Obligations on or before June 30,
1999. The revised Refinancing Commitment shall be in form and substance
satisfactory to Agent, Banks and their counsel in their sole and absolute
discretion. Without limiting the generality of the foregoing, the
Refinancing Commitment may not be subject to the condition that the issuer
of such commitment obtain a participant in such financing arrangements.
SECTION 4. WARRANTIES AND REPRESENTATIONS.
4.1 Reaffirmation of Warranties and Representations. Except as qualified in
Schedule 4.1 attached hereto and hereby made a part hereof, Company Affiliates
hereby severally and collectively reaffirm and restate each of the warranties
and representations set forth in the Credit
5
Agreement and the other Loan Documents as if each such warranty and
representation were set forth at length herein.
4.2 Additional Warranties and Representations. To induce Agent and Banks to
enter into, in addition to the representations and warranties set forth in the
Loan Documents and the other instruments, agreements and documents otherwise
referred to herein, Company Affiliates severally and collectively represent and
warrant to Agent and Banks that:
(A) Each Company Affiliate has the corporate power, authority and
capacity to enter into and perform its liabilities and obligations under
and all related instruments, agreements and documents, and to incur the
indebtedness herein and therein provided for, and has taken all proper and
necessary corporate action to authorize the execution, delivery and
performance of and related instruments, agreements and documents;
(B) This Amendment is valid, binding and enforceable against Company
Affiliates in accordance with its terms; and
(C) No consent, approval or authorization of, or filing, registration
or qualification with, any person or entity (including, without limitation,
any shareholder or creditor of any Company Affiliates) is required to be
obtained by any Company Affiliate in connection with the execution and
delivery of or any related instrument, agreement or document, or
undertaking or performance of any obligation hereunder or thereunder.
SECTION 5. CONDITIONS PRECEDENT.
This Amendment is subject to the following conditions precedent (all
instruments, agreements and documents to be in form and substance satisfactory
to Banks and their counsel):
5.1 Documents Required for Closing. Borrower shall have duly executed
and/or delivered (or caused to be duly executed and/or delivered) to Banks the
following:
(A) A secretary's certificate (as of the date of this Amendment)
attaching a copy of resolutions of each Company Affiliate's Board of
Directors authorizing the execution, delivery and performance of this
Amendment and each other document to be executed and/or delivered pursuant
hereto and any other instrument, agreement or document referred to herein
and confirming that the articles or certificate of incorporation and
by-laws of each Company Affiliate have not changed since last delivered to
Agent;
(B) A certificate (dated the date of) of each Company Affiliate's
corporate secretary as to the incumbency and specimen signatures of the
officers of Borrower executing and each other document to be executed
and/or delivered pursuant hereto or thereto;
(C) TDH Investors and Agent on behalf of Banks shall execute and
exchange a subordination agreement in respect of the TDH Subordinated
Indebtedness in form and substance satisfactory to Agent, Banks and their
counsel;
6
(D) Copies of all instruments, agreements and documents evidencing the
TDH Subordinated Indebtedness;
(E) In consideration of the agreement of Banks to continue to forbear
pursuant to this Amendment, Company Affiliates shall pay to Agent for the
ratable benefit of Banks a forbearance extension fee in the amount of Fifty
Thousand ($50,000.00) Dollars (which fee shall be deemed part of the
Obligations secured by the Collateral) upon execution and exchange of this
Amendment; and
(F) Such other instruments, agreements and documents as may be
required by Banks and/or their counsel.
5.2 No Terminating Event. No Terminating Event shall have occurred and be
continuing.
SECTION 6. CONFIRMATION OF EXISTING INDEBTEDNESS AND RATIFICATION OF LOAN
DOCUMENTS.
6.1 Confirmation of Obligations. Company Affiliates hereby unconditionally
acknowledge and confirm that: the unpaid principal indebtedness of Company
Affiliates to Banks evidenced by the Loan Documents is as set forth on Exhibit
"B"; interest on such principal obligations has been paid through the date(s)
set forth on Exhibit B; and the foregoing indebtedness, together with
continually accruing interest and related costs, fees and expenses is, as of the
date hereof, owing without claim, counterclaim, right of recoupment, defense or
set-off of any kind or of any nature whatsoever.
6.2 Ratification of Financing Agreements. Company Affiliates hereby
unconditionally ratify and confirm and reaffirm in all respect and without
condition, all of the terms, covenants and conditions set forth in the Loan
Documents and agree that they remain unconditionally liable to Banks in
accordance with the respective terms, covenants and conditions of such
instruments, agreements and documents, and that all liens and security interests
and pledges encumbering the Collateral created pursuant to and/or referred to in
the Loan Documents continue unimpaired and in full force and effect, and secure
and shall continue to secure all of the Obligations, as the same may be modified
by the terms of . As part of the Collateral, each Obligor hereby reaffirms its
prior grant and grants to Agent a lien on and a security interest in and to all
of such Obligor's existing and future investment property.
SECTION 7. MISCELLANEOUS.
7.1 Integrated Agreement. This Amendment and all of the instruments,
agreements and documents executed and/or delivered in conjunction with shall be
effective upon the date of execution hereof and thereof by all parties hereto
and thereto, and shall be deemed incorporated into and made a part of the Loan
Documents. All such instruments, agreements and documents, and, shall be
construed as integrated and complementary of each other, and as augmenting and
7
not restricting Agent's and Banks' rights, remedies, benefits and security. If,
after applying the foregoing, an inconsistency still exists, the provisions of
shall constitute an amendment thereto and shall govern and control.
7.2 Release. In consideration of the accommodations being made available by
Banks to or for the benefit of Company Affiliates under, including, without
limitation, the continued forbearance on the part of Banks, Company Affiliates,
for themselves and their respective heirs, personal representatives, agents,
employees, successors and assigns, do hereby remise, release and forever
discharge Agent, Banks and their respective agents, employees, representatives,
officers, successors and assigns of and from any and all claims, counterclaims,
demands, actions and causes of action of any nature whatsoever, whether at law
or in equity, including, without limitation, any of the foregoing arising out of
or relating to the transactions described in, which against Agent, Banks or
their respective agents, employees, representatives, officers, successors or
assigns, or any of them, any Obligor has or hereafter can or may have for or by
reason of any cause, matter or thing whatsoever, from the beginning of the world
to the date of; provided, however, that this provision shall not release claims
resulting from acts of gross negligence or wilful misconduct of Banks.
7.3 No Coercion. Company Affiliates hereby represent and warrant that they
are fully aware of the terms set forth in and have voluntarily, and without
coercion or duress of any kind, entered into intending to be legally bound by
its terms.
7.4 Banks Reliance. Company Affiliates expressly understand and further
agree that Agent and Banks are relying on all terms, covenants, conditions,
warranties and representations set forth in including, without limitation,
Agent's and Banks' right to terminate the Forbearance Period at any time upon
the occurrence of a Terminating Event, as a material inducement to Agent and
Banks to enter into.
7.5 Debit Authorization. Each Company Affiliate hereby irrevocably
authorizes Agent and Banks to charge any deposit account of any Company
Affiliate maintained at any Bank for all or any part of any amount due under the
Loan Documents and including, without limitation, principal, interest, late
charges, fees and expenses reimbursable to Agent and Banks (including reasonable
legal fees) and the forbearance extension fee.
7.6 Expenses of Agent and Banks. Company Affiliates will pay all expenses,
including the reasonable fees and expenses of legal counsel for Agent and Banks,
incurred in connection with the preparation, negotiation, administration,
amendment, modification or enforcement of, the Credit Agreement, the other Loan
Documents, the collection or attempted collection of the Obligations and Agent's
and Banks' rights hereunder and under the instruments, agreements and documents
referred to herein, and in any proceedings (including, without limitation,
bankruptcy or other insolvency proceedings) brought or threatened to enforce
payment of any of the Obligations.
7.7 Applicable Law. This Amendment shall be governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of laws.
8
7.8 Jury Trial Waiver. COMPANY AFFILIATES HEREBY IRREVOCABLY WAIVE TRIAL BY
JURY AND ANY RIGHT THERETO, AND CONSENT TO THE JURISDICTION OF THE COURTS OF
PHILADELPHIA COUNTY, PENNSYLVANIA, AND AGREE NOT TO RAISE ANY OBJECTION TO SUCH
JURISDICTION, OR TO THE LAYING OF THE VENUE IN SUCH COMMONWEALTH, AND FURTHER
AGREE THAT SERVICE OF PROCESS MAY BE DULY EFFECTED UPON THEM BY SERVICE IN
ACCORDANCE WITH THE PROVISIONS OF THE UNIFORM INTERSTATE AND INTERNATIONAL
PROCEDURE ACT.
7.9 Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same writing.
IN WITNESS WHEREOF, the parties hereto have caused this Forbearance
Agreement to be duly executed and exchanged as of the day and year first above
written.
IMAGEMAX, INC.
IMAGEMAX OF INDIANA, INC.
IMAGEMAX OF SOUTH CAROLINA, INC.
IMAGEMAX OF TENNESSEE, INC.
IMAGEMAX OF ARIZONA, INC.
IMAGEMAX OF OHIO, INC.
IMAGEMAX OF VIRGINIA, INC.
AMMCORP ACQUISITION CORP.
Attest: IMAGEMAX OF DELAWARE, INC.
By: By: /s/ Xxxxxx X. Xxxxx
------------------------------ ---------------------------------
Name: Name: Xxxxxx X. Xxxxx
Title: Title: Acting CEO and Secretary
(Corporate Seal) Address: 0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: President
FIRST UNION NATIONAL BANK, successor
by merger to CORESTATES BANK, N.A. for
itself and as Agent
By: /s/ unintelligible
---------------------------------
Name:
Title:
Address: 000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
9
[Signature Lines Continued]
With a copy to: Klehr, Harrison, Xxxxxx,
Branzburg & Xxxxxx LLP
000 X. Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxx
COMMERCE BANK, N.A.
By: /s/ Xxxxxx Xxxxxxx, Xx.
---------------------------------
Name: Xxxxxx Xxxxxxx, Xx.
Title: Assistant Vice President
Address: 0000 Xxxxx 00 Xxxx
Xxxxxx Xxxx, XX 00000
10
EXHIBIT A
Existing Defaults
11
EXHIBIT B
Acquisition loan outstanding as of 2/15/00:
Bank Amount
------------------------- --------------
First Union National Bank $ 9,780,000.00
Commerce Bank, NA $ 4,890,000.00
--------------
Total Outstanding: $14,670,000.00
Working Capital loan outstanding as of 2/15/00:
Bank Amount
------------------------- --------------
First Union National Bank $ 2,477,333.32
Commerce Bank, NA $ 1,238,666.68
--------------
Total Outstanding: $ 3,716,000.00
12
