EX-10.2.4 FORBEARANCE AGREEMENT

 

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                                                                  EXHIBIT 10.2.4

 

 

 

 

                              FORBEARANCE AGREEMENT

 

         This Forbearance Agreement (herein, the "Agreement") made as of the 9th

day of January 2004, by and among Delphax Technologies Canada Limited, f/k/a

Check Technology Canada Ltd., an Ontario corporation ("Borrower"), Delphax

Technologies Inc., f/k/a Check Technology Corporation, a Minnesota corporation

("Parent"), as Parent and as a Guarantor (Parent, together with all Domestic

Subsidiaries in existence from time to time being hereinafter referred to

collectively as the "Guarantors" and each such entity individually as a

"Guarantor"), Harris Trust and Savings Bank ("HTSB"), as Administrative Agent

for Lenders (in such capacity, "Administrative Agent") and Bank of Montreal, as

sole Lender ("Lender").

 

                                    RECITALS:

 

         A. Borrower, Parent, Administrative Agent and Lender are parties to

that Credit Agreement dated as of December 20, 2001 by and among Borrower,

Parent, and HTSB as sole Lender and as Administrative Agent, as amended by that

certain First Amendment to Credit Agreement dated as of December 18, 2002, as

further amended by that certain Second Amendment to Credit Agreement dated as of

August 11, 2003, as further amended by that certain Third Amendment to Credit

Agreement dated as of August 31, 2003 (as so amended, the "Credit Agreement").

All capitalized terms used herein without definition shall have the same

meanings herein as such terms have in the Credit Agreement.

 

         B. On December 31, 2003, all principal, and interest and other amounts

owing under the Credit Agreement became due and payable. However, neither

Borrower nor Parent paid such amounts except for the interest amounts that were

due and payable. The nonpayment of the principal constituted an Event of Default

under the Credit Agreement (the "Existing Default").

 

         C. Lender is not willing to waive the Existing Default.

 

         D. Borrower and Parent have represented to Administrative Agent and

Lender that Borrower and Parent are negotiating a credit facility with LaSalle

Business Credit LLC (the "Planned Refinancing") which, when closed, will result

in all amounts owed to each of Administrative Agent and Lender to be paid in

full. Borrower and Parent have further informed the Administrative Agent and

Lender that the Planned Refinancing, originally expected to be closed in

December 2003, is now expected to be closed before the end of January 2004.

 

         E. Borrower has requested that during (but only during) the "Standstill

Period" (defined in paragraph 6 below), and subject to the terms and conditions

set forth in this Agreement, Administrative Agent and Lender forbear from

exercising their rights or remedies available solely by reason of the Existing

Default.

 

         NOW, THEREFORE, upon the execution hereof by Administrative Agent,

Lender, Borrower and Parent, it is agreed as follows:

 

         1. Amounts Owing. Borrower acknowledges and agrees that the unpaid

principal amount of Loans as of the date hereof is $11,900,000.00 ($2,500,000.00

in Term Loans and

 

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$9,400,000.00 in Revolving Loans) and such amount (together with interest

thereon and other amounts owed under the Loan Documents) is justly and truly

owing by Borrower without defense, offset or counterclaim. Borrower further

acknowledges and agrees that it has no further rights to request borrowings

under the Credit Agreement.

 

         2. Acknowledgment of Default. The Existing Default constitutes an Event

of Default under the Credit Agreement. Borrower acknowledges that under the

Credit Agreement, because of the Existing Default, Lender is permitted and

entitled to terminate the Commitments, to decline to provide further credit to

Borrower, and exercise any other rights or remedies that may be available under

the Loan Documents or under applicable law. Borrower represents to

Administrative Agent and Lender that there are no Defaults or Events of Default

other than the Existing Default.

 

         3. Forbearance. Unless and until Standstill Termination (as defined in

paragraph 6 below) occurs, Administrative Agent and Lender will not, solely by

reason of the occurrence of the Existing Default, enforce any of the liens

granted under the Collateral Documents or, except as provided herein, exercise

any other right or remedies available solely by reason of the Existing Default.

 

         4. Interest. Borrower acknowledges and agrees that from and after

January 1, 2004, interest on the unpaid amount of the Loans has been accruing

(and will continue to accrue) at the default rate specified in Section 1.10 of

the Credit Agreement. Borrower further agrees that no Loans may be converted to

Eurodollar Loans.

 

         5. Additional Agreements. Borrower shall keep Administrative Agent and

Lender fully apprised as to the status of the Planned Refinancing including by

notifying Administrative Agent and Lender (a) promptly after (but in any event

not later than the day after the date on which Borrower learns) the Planned

Refinancing has been approved (or not approved) by LaSalle Business Credit,

LLC's credit committee, (b) of the expected closing date of the Planned

Refinancing and (c) immediately if at any time Borrower believes that it is

likely that the Planned Refinancing will not close on or before January 31,

2004.

 

         6. Standstill Period; Standstill Termination.

 

                  (a) As used in this Agreement, "Standstill Period" means the

         period beginning on the date of this Agreement and ending on the date

         on which Standstill Termination occurs.

 

                  (b) As used in this Agreement, "Standstill Termination" shall

         mean the first to occur of the following:

 

                           (1) January 31, 2004;

 

                           (2) the date on which the Planned Refinancing closes;

 

                           (3) if LaSalle Business