Item 2.04.
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Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement.
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BMO Credit Agreement Notice of Default
On December 1, 2016, Quadrant 4 System Corporation (the “Company”) received a formal notice of default from BMO Harris Bank N.A. (“BMO”) with respect to the Credit Agreement, dated as of July 1, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), between the Company, as borrower, and BMO, as lender. The notice of default cited (i) the pending charges described in Item 8.01 of this Current Report on Form 8-K, which is incorporated by reference into this Item 2.04, (ii) the failure of the Company to timely deliver evidence of having closed a deposit account with another lender, and (iii) the failure of the Company to deliver evidence that the policies of insurance of the Company and its subsidiaries contain a lender’s loss payable endorsement for BMO’s benefit and an endorsement showing BMO as additional insured, as required by the Credit Agreement.
The approximate amount of borrowings outstanding under the Credit Agreement as of the date hereof is $17,847,315.91. Pursuant to the Credit Agreement, BMO has elected (a) to impose the default rate of interest on the term loan and the reimbursement obligations as set forth in Section 2.9 of the Credit Agreement, effective as of December 1, 2016 and continuing thereafter until such time as the Company is so notified in writing by BMO, with payments commencing in respect of such accrued default interest on the first interest payment date to occur following December 1, 2016 in accordance with the terms of the Credit Agreement, and (b) that no borrowing of “Eurodollar Loans” as defined by the Credit Agreement, will be advanced, continued or created by conversion due to the existence of the subject events of default as set forth in Section 2.6(a) of the Credit Agreement.
BIP Subordinated Credit Agreement Notice of Default
On December 3, 2016, the Company received a formal notice of default from BIP Lender, LLC, as collateral agent (“Collateral Agent”) for the Company’s mezzanine lenders (collectively, the “Mezzanine Lenders”) with respect to the Senior Subordinated Credit Agreement, dated as of November 3, 2016 (the “Subordinated Credit Agreement”) by and among the Company, BIP Lender, LLC and BIP Quadrant 4 Debt Fund I, LLC (“BIP”). The notice of default cited (i) the pending charges described in Item 8.01 of this Current Report on Form 8-K which is incorporated by reference into this Item 2.04, (ii) the failure of the Company to timely deliver evidence of having closed a deposit account with another lender, (iii) the failure of the Company to deliver financial reports as required under the Subordinated Credit Agreement, and (iv) the failure of the Company to pay BIP a scheduled payment of interest on the term loan, which was due on December 1, 2016.
The approximate amount of borrowing outstanding under the Subordinated Credit Agreement as of the date hereof is $5,075,000. Pursuant to the Subordinated Credit Agreement, BIP has elected (a) to impose the default rate of interest on the term loan and the reimbursement obligations as set forth in Section 2.5 of the Subordinated Credit Agreement, effective as of December 3, 2016 and continuing thereafter until such time as the Company is so notified in writing from Collateral Agent, with payments commencing in respect of such accrued default interest on the first interest payment date to occur following December 3, 2016 in accordance with the terms of the Subordinated Credit Agreement, and (b) that certain of the Restricted Payments (as defined in Section 7.6 of the Subordinated Credit Agreement) may not be made during the existence of the subject events of default as set forth in Section 7.6 of the Subordinated Credit Agreement.