Exhibit 10.1
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "Forbearance Agreement") is made as of
August 21, 2003, by and among IMAGEMAX, INC., a Pennsylvania corporation, and
IMAGEMAX OF DELAWARE, INC., a Delaware corporation (together, the "Borrowers");
the Lenders, as defined in, and who are or may become a party to the Credit
Agreement (as defined below); and COMMERCE BANK, N.A., as Agent for the Lenders.
Background
The Borrowers, Lenders and Agent are parties to that certain Amended
and Restated Credit Agreement, dated as of June 13, 2002, as amended by the
First Amendment to Credit Agreement dated as of December 23, 2002, and as
further amended by the Second Amendment to Credit Agreement dated as of April
11, 2003 (the "Credit Agreement"), pursuant to which the Lenders agreed to
extend certain credit facilities to the Borrowers on the terms and conditions
set forth therein and in the other Loan Documents (as defined in the Credit
Agreement). Each initially capitalized term used herein without definition shall
have the meaning ascribed thereto in the Credit Agreement.
Certain Events of Default have occurred and will continue to occur (as
set forth in clauses (i) - (ii) below, the "Forbearance Defaults") under the
Credit Agreement and the other Loan Documents; namely, Borrowers have violated:
(i) Section 9.1 of the Credit Agreement, pursuant to which Borrowers
agreed that Borrowers and their respective Subsidiaries would not permit the
EBITDA of Borrowers on a Consolidated basis to be less than or equal to Seven
Hundred Forty-Six Thousand ($746,000) Dollars for the Second Quarter ended June
30, 2003. As of June 30, 2003, the EBITDA of Borrowers on a Consolidated basis
was Two Hundred Thirty Thousand ($230,000) Dollars; and
(ii) Paragraph 2.1.4 of the Credit Agreement, pursuant to which
Borrowers agreed to immediately repay, without notice or demand, any principal
balance of the Revolving Credit Facility in excess of the Maximum Available
Revolving Credit. As of June 30, 2003, the amount of the Indebtedness under the
Revolving Credit Facility exceeded the Maximum Available Revolving Credit by
Eight Hundred Eighty-Six Thousand Seventy ($886,070) Dollars (as the same has
and may increase and decrease in accordance with the amended and restated
definition of the Maximum Available Revolving Credit as set forth in Section 7.3
hereof, the "Overadvance").
Lenders and Agent are willing to forbear the exercise of their rights
under the Credit Agreement and the other Loan Documents in consideration of the
acknowledgements of Borrowers and the terms, conditions and provision
hereinafter set forth.
Except as expressly provided herein, each term, condition and provision
set forth in the Credit Agreement and in each other Loan Document are intended
to be ratified and confirmed herein in full.
NOW, THEREFORE, in consideration of the mutual covenants and premises
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Confirmation of Background. Each Borrower hereby ratifies, confirms and
acknowledges that the statements contained in the foregoing Background
are true and complete and that the Credit Agreement and each other Loan
Document are valid, binding and in full force and effect as of the date
hereof and fully enforceable against such Borrower in accordance with
the respective terms thereof. Each Borrower further acknowledges and
agrees that nothing contained in this Forbearance Agreement shall be
deemed to impair, reduce or release in any manner whatsoever any of the
obligations of either Borrower under any Loan Document.
2. General Acknowledgements. Each Borrower hereby acknowledges and agrees
as follows:
2.1. The Forbearance Defaults described in the Background have
occurred, and, as a consequence thereof, Events of Default
have occurred under the Credit Agreement and the Loan
Documents. With respect thereto, each Borrower hereby waives
any requirements for any further notice or demand from Agent
or Lenders in connection therewith;
2.2. As a result of the Forbearance Defaults, Agent, on behalf of
Lenders, has the right to: (i) declare that the entire
principal of and interest on the Loans, the Notes, and all
other amounts owed to the Lenders and to the Agent under the
Credit Agreement or any other Loan Document (other than any
Hedging Agreement) (such amounts, the "Indebtedness") and all
Obligations under the Credit Agreement and the Loan Documents
are immediately due and payable; and (ii) exercise all of
rights and remedies available to Agent and Lenders under the
Credit Agreement and the other Loan Documents;
2.3. Neither this Forbearance Agreement nor any other agreement
entered into in connection herewith or pursuant to the terms
hereof (collectively, the "Forbearance Documents") shall be
deemed or construed to be a compromise, satisfaction,
reinstatement, accord and satisfaction, novation or release of
the Credit Agreement or any other Loan Document, any rights or
obligations thereunder, or a waiver by Agent or any Lender of
any of their respective rights under the Credit Agreement or
any other Loan Document, or at law or in equity;
2.4. Neither this Forbearance Agreement nor any other Forbearance
Document, nor any action taken pursuant to this Forbearance
Agreement or under any Forbearance Document shall be deemed
to: (i) cure any Default or any other Event of Default which
may exist under the Credit Agreement or any Loan Document; or
(ii) be a waiver by Agent or Lenders of the Forbearance
Defaults or any other Event of Default under the Credit
Agreement or any Loan Document or of any rights or remedies in
connection therewith or with respect thereto. Each party
hereto intends that the obligations of Borrowers with respect
to the Credit Agreement and each Loan Document are, and shall
remain, in full force and effect; and
2.5. Except as expressly set forth herein, Borrowers hereby ratify,
confirm and reaffirm in all respects, without condition, all
terms, covenants and conditions set forth in the Loan
Documents, and hereby agree that the Borrowers remain jointly,
severally and unconditionally liable to the Agent and the
Lenders in accordance with the terms thereof, as amended by
this Forbearance Agreement. Each of the Borrowers further
herby ratifies, confirms and reaffirms that all of the
Collateral, liens, security interests and pledges created
pursuant to the Loan Documents, and/or referenced therein,
shall continue unimpaired, in full force and effect, and
secure and shall continue to secure each of the Borrower's
Obligations to the Agent and the Lenders. Without limiting the
foregoing, Borrowers each hereby ratify, confirm and reaffirm
any and all warrants of attorney contained in any of the Loan
Documents to confess judgment against any or all of the
Borrowers remain in full force and effect and that such
warrants of attorney were knowingly and voluntarily granted by
each of the Borrowers..
3. Challenge to Enforcement. Each Borrower acknowledges and agrees that
such Borrower does not have any defense, set-off, counterclaim or
challenge against the payment of any sums owing under the Credit
Agreement or any other Loan Document, or the enforcement of any of the
terms or conditions thereof, hereof or under any other Forbearance
Document.
4. Confirmation of Existing Indebtedness. Each Borrower acknowledges and
agrees that as the date hereof, the principal outstanding Indebtedness
due under the Revolving Credit Facility is Five Million Five Hundred
Fifty-Three Thousand Eight Hundred Eight Dollars and Sixty Cents
($5,553,808.60), together with accrued interest thereon in the amount
of Fifteen Thousand Eight Hundred Eighty-five Dollars and Seventy-Nine
Cents ($15,885.79). There is no Indebtedness outstanding under the Term
Loan Facility.
5. Forbearance. Agent and Lenders hereby agree to forbear from exercising
the rights and remedies available to them as a result of the
Forbearance Defaults, during the forbearance term (the "Forbearance
Term") which shall expire on the earlier of: (i) the occurrence of an
Event of Default (other than the Forbearance Defaults) under any Loan
Document; (ii) the occurrence of a Default hereunder; or (iii)
September 30, 2003 (the "Forbearance Period"). The occurrence of any of
the foregoing shall immediately operate to terminate the agreement of
Agent and Lenders to forbear hereunder. Upon such termination, Agent
and Lenders shall have no further obligations to forbear hereunder,
under any other Forbearance Document, under the Credit Agreement, or
under any other Loan Document, and Agent and Lenders may with notice to
the Borrower immediately exercise any and all rights and remedies
available to them under the Credit Agreement, any other Loan Document,
hereunder, under any other Forbearance Document, at law or in equity.
6. Forbearance Agreements and Undertakings. In consideration of, and as a
condition precedent to, the agreement of Agent and Lenders to forbear
the exercise of their rights as set forth in Section 5 hereof, and in
express reliance thereon, Borrowers covenant and agree to:
6.1. Overadvance Payments. Notwithstanding the provisions of the
penultimate sentence the amended and restated definition of
"Maximum Available Revolving Credit" as set forth in Section
7.3 hereof, on each Monday until the entire Overadvance has
been paid in full Borrowers shall make payments of Thirty
Thousand ($30,000) Dollars (or such lesser amount if the
amount of the Overadvance is then less than Thirty Thousand
($30,000) Dollars) in immediately available funds to Agent for
the ratable benefit of the Lenders, provided, however, that
notwithstanding the foregoing, any amount of the Overadvance
which remains outstanding on September 30, 2003 shall be paid
in full in immediately available funds to the Agent for the
ratable benefit of the Lenders; and
6.2. Status Reports of Sale of Business. Periodically (but no more
frequently than bi-weekly), at the request of the Agent,
Borrowers shall deliver to Agent a written report in a form
satisfactory to the Agent, information with respect to the
status of the Borrowers' efforts to sell the business of the
Borrowers. Such reports shall include the following
information as of the date of delivery thereof (and from the
date of the previous report) (i) the identification of all
names in respect of each potential buyer, and when offering
materials were delivered to such potential buyer, (ii)
Borrowers reasonable estimation of the level of interest of
each potential buyer, (iii) copies of the then current term
sheets and/or letters of intent and any correspondence
containing offers or counteroffers to purchase the business,
(iv) if so requested, all financial and other information
delivered by, or on behalf of, the Borrowers to any
prospective buyer or intermediary of the Borrowers or any
prospective buyer, (v) copies of all purchase agreements and
other transactional documents in respect of the sale of
Borrowers' business, and (vi) any other documentation or
information which the Agent may reasonably request in respect
of a prospective sale of the Borrowers' business. Borrowers
covenant and agree, at Borrower sole joint and several
expense, to cause any broker or other intermediary acting on
behalf of the Borrowers in respect of such prospective sale,
provided that such broker shall not be subject to liability to
the Agent or the Lenders as a result of its response to such
questions to answer any and all questions of the Agent, or its
representatives, in respect of the sale, absent such broker's,
gross negligence, fraud or willful misconduct;
6.3. Credit Insurance. On or before August 22, 2003, effective with
respect to accounts receivable generated by the Borrower on or
after July, 1, 2003 and so long as any portion of the
Indebtedness remains unpaid or any of the Obligations
unperformed, purchase and maintain credit insurance with
respect to Borrowers' accounts receivable (in excess of
Twenty-Five Thousand ($25,000) Dollars and which otherwise
comport with the underwriting guidelines of the credit
insurance carrier), from an insurance carrier acceptable to
the Agent, pursuant to a policy acceptable to Agent, in such
amounts and with such deductibles and exclusions as are
acceptable to the Agent. In connection with such coverage,
upon receipt of documentation from such insurance carrier,
deliver to Agent a true, correct and complete copy thereof,
certified by the Borrowers to the Agent as such. As soon as
reasonably practicable following the issuance of such
insurance, Borrowers shall cause such carrier to collaterally
assign Borrowers' rights in, to and under, such policy so as
to perfect Agent's first and only priority security interest
therein and the proceeds thereof, all in form and substance
acceptable to the Agent and its counsel;
6.4. Forbearance Fee. Pay to Agent for the ratable benefit of the
Lenders, a Forbearance Fee in the amount of Thirty Thousand
($30,000) Dollars, one-half of which shall be paid on or
before August 31, 2003 and the remaining one-half of which
shall be paid on or before September 30, 2003;
6.5. Subordinated Creditors. Deliver such consents and waivers as
Agent and the Lenders deem necessary or appropriate from the
holders of the Subordinated Debt to the undertakings of the
Borrowers as set forth in this Forbearance Agreement.
6.6. Indiana Property.
6.6.1. As soon as reasonably practicable, but in all events
on or before August 22, 2003, with respect to that
certain parcel of real property owned by the
Borrowers in Chesterton, Indiana (the "Indiana
Property"), deliver to the Agent a true, correct and
complete copy of each of the existing title insurance
policy, survey, appraisal, and environmental audit
issued to the Borrowers or their lenders, or their
respective predecessors-in-interest, in respect of
the Indiana Property, to the extent in the possession
of the Borrowers, Borrowers present or former
counsel, or Borrowers' existing mortgage lender.
6.6.2. Upon the request of Agent, deliver promptly, but in
all events within thirty (30) days of such request,
either (i) an environmental survey from an
engineering firm acceptable to the Agent establishing
to the satisfaction of the Agent that there are no
Hazardous Materials or other environmental
contaminants situate thereon present in or on the
Indiana Property (other than those that are
reasonably necessary for the operation of the Indiana
Property or the conduct of the business or businesses
that are conducted or intended to be conducted
thereon and that are appropriately stored in proper
containers, in compliance with all applicable
Environmental Laws), or (ii) an environmental
insurance policy to be issued, by a reputable
environmental insurance company acceptable to the
Agent insuring the cost of remediation of the Indiana
Property arising out of Hazardous Materials and other
environmental contaminants situate thereon, in such
amounts and with such coverage as is acceptable to
the Lender in the exercise of its reasonable credit
judgment.
6.6.3. As soon as reasonably practicable, but in all events
on or before September 15, 2003, obtain the consent
of Bank of America, the first mortgagee, and grant to
Agent for the ratable benefit of the Lenders, a
second mortgage lien pursuant to a recorded mortgage
in form and substance acceptable to the Agent on the
Indiana Property, the lien of which shall be insured
by a reputable title insurance company acceptable to
the Agent, subject only to (i) the lien of Bank of
America securing an indebtedness not in excess of
Nine Hundred Thousand ($900,000) Dollars, and (ii)
such other exceptions of title as are acceptable to
the Agent, and in connection therewith cause such
title insurance company to issue a Closing Protection
Letter in respect of its agent addressed to the Agent
in such form and substance as is reasonably
acceptable to the Agent.
6.6.4. On or before September 15, 2003, deliver to Agent for
the ratable benefit of the Lenders, an Environmental
Indemnity Agreement in form and substance acceptable
to the Agent;
6.7 Lenders' Costs. Upon demand of Agent, pay all Lenders' Costs
in connection with this Forbearance Agreement and as otherwise
incurred in connection with the Credit Agreement, including
but not limited to: (i) reasonable counsel fees incurred by
Agent and Lenders in connection with the negotiation and
documentation of this Forbearance Agreement and all
agreements, documents, and instruments executed and delivered
in connection herewith;
6.8 Engagement of Consultant. On or before August 22, 2003,
interview in good faith no less than three (3) consultants
acceptable to the Agent, with a good faith view towards
engaging a consultant acceptable to the Agent and Borrowers;
and on or before August 29, 2003, at Borrowers sole joint and
several expense, engage the services of a consultant
acceptable to the Agent and Lenders (the "Consultant") upon
such terms and conditions as are acceptable to the Agent and
Lenders. Borrowers covenant and agree, at Borrower sole joint
and several expense, to cause the Consultant to answer any and
all questions of the Agent, or its representatives, in respect
of the business of the Borrowers and to deliver to the Agent,
or its representatives, all such written analysis, advice and
recommendations in respect of the business of the Borrowers,
as may be requested by the Agent;
6.9 Borrowing Base Projection. In addition to any other
obligations of the Borrowers under the Credit Agreement or any
of the other Loan Documents, Borrowers shall prepare and
deliver to the Agent, in form and substance acceptable to the
Agent, a projected Borrowing Base Certificates, no later than
the third Friday of each month, reflecting what the Borrowers
reasonably believe will be the information on the Borrowing
Base Certificate to be delivered as of the fifth Business Day
of the next month; and
6.10 Delivery of Other Information. Deliver or cause to be
delivered to Agent and Lenders, all such other data and
information in respect of the condition, operation and affairs
of Borrowers as Agent and Lenders may request.
7. Amendment to Credit Agreement.
7.1 Eligible Applicable Margin. Effective as of July 1, 2003, the
definition of "Eligible Applicable Margin" in the Credit
Agreement is hereby amended and restated in its entirety as
follows:
"Applicable Margin" means for the purposes of calculating the
interest rate per annum in excess of Wall Street Prime Rate in effect
from time-to-time, and chargeable with respect to each of the Revolving
Credit Facility and the Term Loan Facility, the corresponding amount of
basis points per annum as set forth below for the applicable Cash Flow
Leverage Ratio achieved by the Borrowers from time-to-time:
------------- ------------------------------ ------------------------
Tier Cash Flow Leverage Ratio Applicable Margin
------------- ------------------------------ ------------------------
I > 1.75 250
-
------------- ------------------------------ ------------------------
II > 1.5 but < 1.75 225
-
------------- ------------------------------ ------------------------
III >1.25 but < 1.50 200
-
------------- ------------------------------ ------------------------
IV < 1.25 175
------------- ------------------------------ ------------------------
The Applicable Margin shall become effective on the date which is three
(3) Business Days following the delivery to the Agent the demonstration
of the calculation of the Borrowers' Cash Flow Leverage Ratio as
required under clause (ii) of each of Paragraphs 7.1.2 and 7.1.3
hereof.
7.2 Insured Eligible Accounts Receivable. The definition of
"Insured Eligible Accounts Receivable" is hereby added to, and
incorporated in, the Credit Agreement as follows:
"Insured Eligible Accounts Receivable" means an Eligible Account Receivable for
which Borrowers have obtained credit insurance, pursuant to a policy acceptable
to Agent in accordance with Section 6.3 of the Forbearance Agreement.
7.3 Maximum Available Credit. Paragraph 2.1.4 of the Credit
Agreement is hereby amended and restated in its entirety as
follows:
2.1.4 Maximum Available Credit. The outstanding principal
balance of the Revolving Credit Facility shall not exceed, at any time,
the lesser of: (i) Five Million Five Hundred Fifty-Three Thousand Eight
Hundred Eight Dollars and Sixty Cents ($5,553,808.60) Dollars, less the
aggregate face amount of Letters of Credit issued by the Agent for the
benefit of the Borrowers on account of the Lenders; or (ii) the sum of
(a) Ninety (90%) Percent of Borrowers' Insured Eligible Accounts
Receivable; (b) Eighty (80%) Percent of Borrowers' Eligible Accounts
Receivable, exclusive of Insured Eligible Accounts Receivable (or such
lesser percentage as the Agent in its sole and absolute discretion
(exercised in good faith in its reasonable judgment), may determine)
less an amount equal to the aggregate amount of trade payables of any
of the Borrowers due to Minolta Corporation and Canon USA, Inc., and
any of their respective Affiliates, and (c) Fifty (50%) Percent of
Borrower's uninsured accounts receivable, but in the aggregate not in
excess of Five Hundred Thousand ($500,000) Dollars, which are in excess
of ninety (90) days from the date of the billing thereof, but in all
other respects comport to the definition of Eligible Accounts
Receivables of the Borrower, all determined in accordance with the last
prevailing Borrowing Base Certificate delivered to Agent Bank in the
form of Schedule 2.1.4 of the Amended and Restated Credit Agreement
(the "Maximum Available Revolving Credit"). Borrowers jointly and
severally agree to immediately repay, without notice or demand, any
principal balance of the Revolving Credit Facility in excess of the
Maximum Available Revolving Credit. Unless Agent or the Lenders shall
request more frequently, Borrowers shall submit to the Agent no less
frequently than once a month, a Borrowing Base Certificate.
8. Cross Default. Notwithstanding anything to the contrary contained
herein or in any other Forbearance Document, the failure of Borrowers
to fully perform hereunder or under any other Forbearance Document, or
a breach of a representation and warranty hereunder or under any other
Forbearance Document shall constitute an Event of Default under the
Credit Agreement and each other Loan Document, and, following the
occurrence of any such Event of Default, Agent and Lenders may, at
their option and without further notice to Borrowers, exercise any and
all rights available to Agent and Lenders hereunder, under any other
Forbearance Document, under the Credit Agreement, under any other Loan
Document, at law, in equity or otherwise.
9. Additional Documents and Future Actions. Borrowers will, at their sole
cost, take such actions and provide Agent from time to time with such
agreements, instruments, documents or information as Agent may, in
Agent's discretion, deem necessary or advisable to perfect, protect,
maintain or enforce the security interests in the Collateral or to
carry out the terms of the Credit Agreement, the other Loan Documents,
the Forbearance Agreement and the other Forbearance Documents.
Borrowers hereby authorize and appoint Agents as Borrowers'
attorney-in-fact, with full power of substitution, to take such actions
as Agent may deem advisable to maintain and protect a continuously
perfected security interest of Lenders in the Collateral, and to
execute on Borrowers' behalf such other documents and notices as Agent
may deem advisable to protect the Collateral and the interests therein
and the rights thereunder of Agent and Lenders. Such power being
coupled with an interest is irrevocable.
10. Representations and Warranties. In consideration of the forbearance
extended herein by Agent and Lenders, each Borrower hereby represents
and warrants, which representations and warranties shall survive until
all Obligations of the Borrowers to Agent and Lenders are paid,
performed and satisfied in full, as follows:
10.1 Except as disclosed on Schedule 10.1 hereof, all
representations and warranties of each Borrower set forth in
the Credit Agreement and each other Loan Document are true and
complete as of the date hereof, except as such representations
and warranties may have been affected by the Forbearance
Defaults;
10.2 Except as disclosed on Schedule 10.1 hereof with respect to
the representations and warranties of the Borrowers, no
condition or event exists or has occurred which would
constitute an Event of Default under the Loan Documents (or
would, upon the giving of notice or the passage of time, or
both constitute an event of default) other than the
Forbearance Defaults;
10.3 The execution and delivery of this Forbearance Agreement and
each of the other Forbearance Documents by each Borrower and
all documents and agreements to be executed and delivered in
connection herewith or therewith: (i) have been duly
authorized by all requisite corporate action by such Borrower;
(ii) will not conflict with or result in the breach of or
constitute a default (upon the passage of time, delivery of
notice or both) under such Borrower's certificate or articles
of incorporation, by-laws, any applicable statute, law, rule,
regulation or ordinance or any indenture, mortgage, loan or
other document or agreement to which such Borrower is a party
or by which it or its property is bound or affected; and (iii)
will not result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
property or assets of such Borrower, except liens in favor of
Agent for the ratable benefit of Lenders; and
10.4 Upon the execution and delivery of this Forbearance Agreement
and the other Forbearance Documents, this Forbearance
Agreement and each other Forbearance Document shall be the
legally binding obligations of such Borrower enforceable
against such Borrower in accordance with the respective
provisions hereof and thereof, except to the extent
enforceability is limited by bankruptcy and other similar laws
affecting creditor's rights generally.
11. Certain Fees, Costs and Expenses. In addition to the payment of the
Forbearance Fee, Borrowers will pay all of expenses of Agent and
Lenders in connection with the preparation, negotiation, documentation
and closing of this Forbearance Agreement and each other Forbearance
Document, and the consummation of the transactions contemplated
hereunder, including, without limitation, fees, disbursements,
expenses, appraisal costs and fees and expenses of counsel retained by
Bank and all fees related to filings, recording of documents and
searches, whether or not the transactions contemplated hereunder are
consummated. Nothing contained herein shall limit in any manner
whatsoever the right of Agent and Lenders to reimbursement under any of
the Forbearance Documents.
12. Defaults. Occurrence of any one or more of the following shall
constitute a default hereunder and under each of the Forbearance
Documents:
12.1 The occurrence of an Event of Default or Default (as defined
in the Credit Agreement) (other than the Forbearance Defaults)
under the Credit Agreement or any other Loan Document,
hereunder or under any other Forbearance Document, or any
event which, with the giving of notice or passage of time or
both, would constitute a Default hereunder, or an Event of
Default thereunder;
12.2 The failure of Borrowers to comply with the terms hereof or
under any of the other Forbearance Documents; or
12.3 Subject to the modifications thereof as set forth in Schedule
10.1 hereof, any representation or warranty of either Borrower
in the Credit Agreement, any other Loan Documents, herein, or
any other Forbearance Document, is untrue in any material
respect or any statement, certificate or data furnished by any
Borrower pursuant hereto is untrue in any material respect as
of the date as on which such representation, warranty,
statement, certificate or data is stated or certified.
13. Remedies. At the option of Agent, upon the expiration or earlier
termination of the Forbearance Term, and without further notice or
demand, which notice and demand is expressly waived by each Borrower:
(i) the entire outstanding Obligations shall be immediately due and
payable; and/or (ii) Agent and Lenders may (a) terminate any obligation
to forbear hereunder; and (b) exercise each and every right and remedy
hereunder, under any other Forbearance Document, under any Loan
Document, at law, in equity or otherwise.
14. Indemnification. Each Borrower expressly jointly and severally agrees
defend, indemnify and hold harmless the Agent and the Lenders, and
their respective parents, Subsidiaries, Affiliates, employees, agents,
officers and directors, from and against any losses, penalties, fines,
liabilities, settlements, damages, costs and expenses, suffered by any
such Person in connection with any claim, investigation, litigation or
other proceeding (whether or not the Agent or any Lender is a party
thereto) and the prosecution and defense thereof, including without
limitation reasonable attorney's and consultant's fees, except to the
extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification
therefor, arising out of or in any way connected with: (i) the Credit
Agreement or any of the other Loan Documents, this Forbearance
Agreement or any of the other Forbearance Documents, or the Loans;
(iii) the enforcement, protection or preservation of the rights of
Agent or either Lender under the Loan Documents, the Forbearance
Documents, or any other document or agreement executed in connection
with the Obligations, or any of them; (iii) the validity, perfection or
enforceability of the Loan Documents or the Forbearance Documents; and
(iv) any action or inaction by Agent or any Lender in connection with
any of the foregoing.
15. Waivers. In connection with any proceedings hereunder, under any other
Forbearance Document, the Credit Agreement or any other Loan Document,
or otherwise in connection with any of the Indebtedness or Obligations,
including, without limitation, any action by Agent and Lenders in
replevin, foreclosure or other court process or in connection with any
other action related to the Collateral, each Borrower waives: (i) all
errors, defects and imperfections in such proceedings; (ii) all
benefits under any present or future laws exempting any property, real
or personal, or any part of any proceeds thereof from attachment, levy
or sale under execution, or providing for any stay of execution to be
issued on any judgment recovered in connection with the Obligations or
in any replevin or foreclosure proceeding, or otherwise providing for
any valuation, appraisal or exemption; (iii) all rights to inquisition
on any real estate, which real estate may be levied upon pursuant to a
judgment obtained in connection with any of the Obligations and sold
upon any writ of execution issued thereon in whole or in part, in any
order desired by Agent; (iv) presentment for payment, demand, notice of
demand, notice of nonpayment, protest and notice of protest of any of
the Obligations; (v) any requirement for bonds, security or sureties
required by statute, court rule or otherwise; (vi) any demand for
possession of any Collateral prior to commencement of any suit; (vii)
any right to require or participate in the marshaling of such
Borrower's assets; (viii) any notice or demand from Agent or Lenders
with respect to such Borrower's obligations under the Loan Documents;
(ix) all benefits under present and future laws permitting termination
of such Borrower's Obligations by delivery of notice or otherwise,
other than by performance of all such Borrower's obligations hereunder
and under the Loan Documents and the other Forbearance Documents; and
(x) all rights to claim or recover attorney's fees and costs in the
event that such Borrower is successful in any action to remove, suspend
or prevent the enforcement of a judgment entered by confession.
16. Notices. Any notice or other communication by one party hereto to the
other shall be given in the manner set forth in Section 13.1 of the
Credit Agreement.
17. CONFESSION OF JUDGMENT.
17.1 THE FOLLOWING SETS FORTH A WARRANT OF ATTORNEY TO CONFESS
JUDGMENT AGAINST EACH BORROWER. IN GRANTING THIS WARRANT OF
ATTORNEY TO CONFESS JUDGMENT AGAINST EACH BORROWER, SUCH
BORROWER, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO
CONSULT WITH) SEPARATE COUNSEL FOR SUCH BORROWER, AND WITH
KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY WAIVES ANY AND
ALL RIGHTS SUCH BORROWER HAS, OR MAY HAVE TO PRIOR NOTICE AND
AN OPPORTUNITY TO BE HEARD UNDER THE CONSTITUTIONS AND LAWS OF
THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. EACH
BORROWER SPECIFICALLY ACKNOWLEDGES THAT AGENT AND LENDERS HAVE
RELIED ON THIS WARRANT OF ATTORNEY IN GRANTING THE FINANCIAL
ACCOMMODATIONS DESCRIBED HEREIN AND IN CONTINUING TO MAKE
AVAILABLE THE FINANCIAL ACCOMMODATIONS DESCRIBED IN THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
17.2 EACH BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY
OF ANY COURT OF RECORD TO APPEAR FOR SUCH BORROWER IN ANY AND
ALL ACTIONS, AND UPON THE OCCURRENCE OF A DEFAULT OR AN EVENT
OF DEFAULT TO: (i) ENTER JUDGMENT AGAINST SUCH BORROWER FOR
THE PRINCIPAL SUM DUE HEREUNDER, UNDER THE OTHER FORBEARANCE
DOCUMENTS, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS;
OR (ii) SIGN FOR SUCH BORROWER AN AGREEMENT FOR ENTERING IN
ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS TO CONFESS
JUDGMENT AGAINST SUCH BORROWER FOR ALL OR ANY PART OF THE
INDEBTEDNESS; AND IN EITHER CASE FOR INTEREST AND COSTS
TOGETHER WITH A REASONABLE COLLECTION FEE IN AN AMOUNT NOT IN
EXCESS OF TEN (10%) PERCENT OF THE INDEBTEDNESS OUTSTANDING.
EACH BORROWER FURTHER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY
ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND ENTER
JUDGMENT AGAINST SUCH BORROWER AND IN FAVOR OF AGENT AND
LENDERS OR ANY HOLDER OF ANY OF THE NOTES WITH RESPECT TO AN
AMICABLE ACTION OF REPLEVIN OR ANY OTHER ACTION WITH RESPECT
TO THE COLLATERAL GRANTED TO AGENT FOR THE RATABLE BENEFIT OF
THE LENDERS PURSUANT TO THE LOAN DOCUMENTS AND THE FORBEARANCE
DOCUMENTS. EACH BORROWER WAIVES ALL RELIEF FROM ANY AND ALL
APPRAISEMENT OR EXEMPTION LAWS NOW IN FORCE OR HEREAFTER
ENACTED. IF A COPY OF THIS FORBEARANCE AGREEMENT, VERIFIED BY
AFFIDAVIT OF AN OFFICER OF THE AGENT, ANY LENDER OR ANY OTHER
HOLDER OF ANY OF THE NOTES, SHALL BE FILED IN ANY PROCEEDING
OR ACTION WHEREIN JUDGMENT IS TO BE CONFESSED, IT SHALL NOT BE
NECESSARY TO FILE THE ORIGINAL HEREOF AND SUCH VERIFIED COPY
SHALL BE SUFFICIENT WARRANT FOR ANY ATTORNEY OF ANY COURT OF
RECORD TO APPEAR FOR AND CONFESS JUDGMENT AGAINST SUCH
BORROWER AS PROVIDED HEREIN. JUDGMENT MAY BE CONFESSED FROM
TIME TO TIME UNDER THE AFORESAID POWERS WHICH SHALL NOT BE
EXHAUSTED BY ONE EXERCISE THEREOF.
18. WAIVER OF RIGHT TO TRIAL BY JURY. EACH BORROWER, AGENT AND LENDERS
WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (i) ARISING UNDER THIS AGREEMENT, THE FORBEARANCE DOCUMENTS,
OR ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO HEREIN OR DELIVERED IN
CONNECTION HEREWITH, OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF ANY BORROWER WITH RESPECT TO THIS
AGREEMENT, THE FORBEARANCE DOCUMENTS OR ANY OTHER DOCUMENT OR
INSTRUMENT REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH, OR
THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH BORROWER, AGENT AND
LENDERS AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH
BORROWER, AGENT AND LENDERS TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY. EACH BORROWER ACKNOWLEDGES THAT SUCH BORROWER: (a) HAS
HAD AN OPPORTUNITY TO CONSULT WITH COUNSEL REGARDING THIS SECTION; (b)
FULLY UNDERSTAND THE TERMS, CONTENT AND EFFECT HEREOF; AND (c)
VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS SECTION.
19. Miscellaneous.
19.1 The provisions of Article 13 of the Credit Agreement are
hereby incorporated herein and made a part hereof as if set
forth herein in full. To the extent of any inconsistency
between the terms and conditions of this Forbearance Agreement
and the terms and conditions of the Loan Documents or the
Forbearance Documents, the terms and conditions of the
Forbearance Documents shall prevail.
19.2 This Forbearance Agreement may be executed in counterpart,
each of which shall constitute an original and collectively
one and the same agreement.
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IN WITNESS WHEREOF, intending to be legally bound hereby, Borrowers,
Agent and Lenders have executed this Forbearance Agreement as an instrument
under seal as of the day and year first above written.
IMAGEMAX, INC.
IMAGEMAX OF DELAWARE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CEO of each Borrower
COMMERCE BANK, N.A.
as Agent and Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
FIRSTRUST BANK, as Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President
Schedule 10.1
Exceptions to the Representations and Warranties
Set Forth in the Credit Agreement
1. With respect to Section and Schedule 6.1.2 of the Credit Agreement
(Subsidiaries and Capitalization), there are 7,719,073 shares of common stock
outstanding at June 30, 2003; 925,750 shares of restricted stock were granted as
of June 30, 2003. In addition, 669,500 stock options were granted as of June 30,
2003.
2. With respect to Section and Schedule 6.1.12 of the Credit Agreement
(Material Contracts): (i) the ▇▇▇▇▇▇▇▇▇▇▇ lease was renewed until December 9,
2003; (ii) the Pugnale lease expired on December 9, 2002 and was not renewed;
(iii) the Semasko lease expired on December 9, 2002 and was not renewed; (iv)
the ▇▇▇▇▇▇▇▇▇▇ lease terminated on February 28, 2003 and the facility was moved
to Canton, MA; the new lease with Canton Realty Associates expires on February
28, 2006; and (v) the Schedule is revised to include all contracts identified as
Exhibits to the Borrower's 2002 Annual Report on Form 10-K filed April 15, 2003.
3. With respect to Section and Schedule 6.1.20 (Debt and Guarantee
Obligations), Borrower has capital lease obligations totaling approximately
$311,000 as of June 30, 2003.
4. With respect to Section and Schedule 6.1.21 (Litigation), there is
no longer any pending litigation; both matters listed on Schedule 6.1.21 have
been settled.
5. Section 6.1.16 (No Material Adverse Change), as it refers to
December 31, 2001, is no longer applicable.