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Forbearance Agreement - DELPHAX TECHNOLOGIES INC - 1-13-2004

VIEWS: 16 PAGES: 12

									                                                 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
$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 Credit, LLC's credit committee does not approve the Planned Refinancing, the date on
which Borrower first learns of such nonapproval;

                                                          2
(4) if at any time Borrower believes that it is reasonably likely that the Planned Refinancing will not close on or
before January 31, 2004, the date on which Borrower first makes that determination;

(5) the occurrence of any one or more of the following events: (a) any Default or Event of Default under the
Credit Agreement, in each case other than the Existing Default; (b) any failure by Borrower for any reason to
comply with any term, condition or provision contained in this Agreement; (c) any representation made by
Borrower in this Agreement or pursuant to it proves to be incorrect or misleading in any material respect when
made; or (d) any change shall occur after the date hereof, in the condition or prospects, financial or otherwise, of
Parent and its Subsidiaries, taken as a whole, which Lender in good faith deems materially adverse.

(c) The occurrence of any Standstill Termination shall be deemed an Event of Default under the Credit
Agreement. Upon the occurrence of a Standstill Termination, the Standstill Period is automatically terminated and
Administrative Agent and Lender shall be permitted and entitled, without further notice of default or demand for
payment to Borrower, Parent or any other Guarantor, to exercise all rights and remedies that may be available
under the Loan Documents or applicable law.

7. No Waiver and Reservation of Rights. Borrower acknowledges that Administrative Agent and Lender are not
waiving the Existing Default, but is simply agreeing to forbear from exercising their rights and remedies solely with
respect to the Existing Default to the extent expressly set forth in this Agreement. Without limiting the generality of
the foregoing, Borrower acknowledges and agrees that immediately upon expiration of the Standstill Period,
Administrative Agent and Lender have all of their rights and remedies with respect to the Existing Default to the
same extent, and with the same force and effect, as if the forbearance had not occurred. Borrower will not assert
and hereby forever waives any right to assert that Administrative Agent or Lender are obligated in any way to
continue beyond the Standstill Period to forbear from enforcing their rights or remedies or that Administrative
Agent and Lender are not entitled to act on the Existing Default after the occurrence of a Standstill Termination as
if such default had just occurred and the Standstill Period had never existed. Borrower acknowledges that
Administrative Agent and Lender have made no representations as to what actions, if any, either of them will take
after the Standstill Period or upon the occurrence of any Standstill Termination, a Default or Event of Default, and
Lender and Administrative Agent must and do hereby specifically reserve any and all rights and remedies they
have (after giving effect hereto) with respect to the Existing Default and each other Default or Event of Default
that may occur.

8. RELEASE. FOR VALUE RECEIVED, INCLUDING WITHOUT LIMITATION, THE AGREEMENTS
OF LENDERS IN THIS AGREEMENT, BORROWER AND, BY SIGNING THE
ACKNOWLEDGEMENT AND CONSENT BELOW, PARENT HEREBY RELEASE ADMINISTRATIVE
AGENT AND LENDER, THEIR RESPECTIVE CURRENT AND FORMER SHAREHOLDERS,
DIRECTORS, OFFICERS, AGENTS, EMPLOYEES, ATTORNEYS, CONSULTANTS, AND
PROFESSIONAL ADVISORS (COLLECTIVELY, THE "RELEASED PARTIES") OF AND FROM ANY
AND ALL DEMANDS, ACTIONS,

                                                          3
CAUSES OF ACTION, SUITS, CONTROVERSIES, ACTS AND OMISSIONS, LIABILITIES, AND
OTHER CLAIMS OF EVERY KIND OR NATURE WHATSOEVER, BOTH IN LAW AND IN EQUITY,
KNOWN OR UNKNOWN, WHICH BORROWER OR PARENT HAS OR EVER HAD AGAINST THE
RELEASED PARTIES FROM THE BEGINNING OF THE WORLD TO THIS DATE, INCLUDING,
WITHOUT LIMITATION, THOSE ARISING OUT OF THE EXISTING FINANCING
ARRANGEMENTS AMONG BORROWER, PARENT AND LENDER, AND BORROWER AND
PARENT FURTHER ACKNOWLEDGE THAT, AS OF THE DATE HEREOF, THEY DO NOT HAVE
ANY COUNTERCLAIM, SET-OFF OR DEFENSE AGAINST THE RELEASED PARTIES, EACH OF
WHICH BORROWER AND PARENT HEREBY EXPRESSLY WAIVE.

9. Loan Documents Remain Effective. Except as expressly set forth in this Agreement, the Loan Documents and
all of Borrower's and Parent's obligations thereunder (including, without limitation, Parent's obligations as a
Guarantor), the rights and benefits of Administrative Agent and Lender thereunder, and the liens and security
interests created thereby remain in full force and effect. Without limiting the foregoing, Borrower and Parent agree
to comply with all of the terms, conditions and provisions of the Loan Documents except to the extent such
compliance is inconsistent with the express provisions of this Agreement. This Agreement and the Loan
Documents are intended by the parties as a final expression of their agreement and are intended as a complete
and exclusive statement of the terms and conditions of that agreement.

10. Fees and Expenses. Borrower shall pay to Lender a forbearance fee of $50,000, which shall be earned on
and as of the date hereof and shall be due and payable on or before the date hereof. Borrower shall also pay on
demand all fees and expenses (including attorneys' fees and consultant's fees and expenses) incurred by
Administrative Agent and Lender and their counsel in connection with this Agreement and the obligations of
Borrower hereunder and the other instruments and documents being executed and delivered in connection
herewith and all fees and expenses of counsel to Administrative Agent due and not yet paid with respect to the
credit facilities subject to the Credit Agreement.

11. Conditions Precedent. The effectiveness of this Agreement is subject to the satisfaction of the following
condition precedent: (a) Borrower, Parent, Administrative Agent and Lender shall have executed and delivered
this Agreement on or before the close of business on the date hereof and (b) Lender shall have received in
immediately available funds the forbearance fee described in paragraph 10 above.

12. Miscellaneous. By its acceptance hereof, Borrower and Parent hereby represent that they have the necessary
power and authority to execute, deliver and perform the undertakings contained herein and that the same do bind
Borrower and Parent. This Agreement may be executed in counterparts and by different parties on separate
counterpart signature pages, each of which to constitute an original and all of which taken together to constitute
one and the same instrument. This Agreement shall be governed by Illinois law and shall be governed and
interpreted on the same basis as the Credit Agreement.

13. Parent' Acknowledgement and Consent. Parent has heretofore executed and delivered to Administrative
Agent and Lender the Credit Agreement, including a guaranty, and

                                                         4
certain Collateral Documents pursuant to the Credit Agreement. Parent hereby consents to the Agreement and
agrees to the terms thereof, including, without limitation, Section 11 thereof, and confirms that its guaranty and the
Collateral Documents executed by it, and all of the obligations of Parent thereunder, remain in full force and
effect. Parent further agrees that the consent of Parent to any further amendments to the Credit Agreement or the
Agreement shall not be required as a result of this consent having been obtained. Parent acknowledges that
Administrative Agent and Lender are relying on this acknowledgement and consent in entering into the Agreement
with Borrower.

                                    [SIGNATURE PAGES TO FOLLOW]

                                                          5
This Forbearance Agreement is entered into as of the date and year first above written.

                              DELPHAX TECHNOLOGIES CANADA LTD.
                                  (f/k/a Check Technology Canada Ltd.)

                                  By /s/ Robert M. Barniskis
                                     ----------------------------------
                                     Name Robert M. Barniskis
                                          -------------------
                                     Title Chief Financial Officer
                                           -----------------------




                                 DELPHAX TECHNOLOGIES INC. (f/k/a
                                    Check Technology Corporation)

                                  By /s/ Robert M. Barniskis
                                     ----------------------------------
                                     Name Robert M. Barniskis
                                          -------------------
                                     Title Chief Financial Officer
                                           -----------------------




Accepted and agreed to.

                              HARRIS TRUST AND SAVINGS BANK, in its
                                   individual capacity as Administrative
                                                  Agent

                                  By /s/ Richard A. Garcia
                                     ----------------------------------
                                     Name Richard A. Garcia
                                          -----------------
                                     Title Director
                                           --------




                                    BANK OF MONTREAL, as Lender

                                  By /s/ Richard A. Garcia
                                     ----------------------------------
                                     Name Richard A. Garcia
                                          -----------------
                                     Title Director
                                           --------




                                                        6
                                                  Exhibit 21

                                              SUBSIDIARIES

DELPHAX TECHNOLOGIES INC. AND SUBSIDIARIES

The Company's subsidiaries, all of which are wholly owned, are as follows:

                                    Delphax Technologies Canada Ltd.

                                       Delphax Technologies Limited

                                        Delphax Technologies S.A.S.

                                       Check Technology Pty Limited

                                                GTI Holdings

                                                GTI Ventures
                                               Exhibit 23.1

                             CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Nos. 333-69733 and 333-75504)
on Form S-8 of our report dated November 14, 2003 with respect to the consolidated financial statements and
schedule of Delphax Technologies Inc. included in the Annual Report (Form 10-K) for the year ended
September 30, 2003.

                                                                      /s/ Ernst & Young LLP
                                                                      -----------------------
                                                                            Ernst & Young LLP




           Minneapolis, Minnesota
           January 8, 2004
                                                     Exhibit 31.1

                                                 CERTIFICATION

I, Jay A. Herman, Chairman and Chief Executive Officer of Delphax Technologies Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Delphax Technologies Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant
as of, and for, the periods presented in this annual report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-159e)) for the Registrant and
have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;

b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period
covered by this report based on such evaluation; and

c) Disclosed in this report and change in the Registrant's internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonable likely to materially affect, the Registrant's internal control over
financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and
report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant's internal controls over financial reporting.

           Dated:       January 12, 2004                      By: /s/ Jay A. Herman
                        ----------------                          ----------------------------------
                                                                           Jay A. Herman
                                                                Chairman and Chief Executive Officer
                                                     Exhibit 31.2

                                                 CERTIFICATION

I, Robert M. Barniskis, Vice President and Chief Financial Officer of Delphax Technologies Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Delphax Technologies Inc.

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant
as of, and for, the periods presented in this annual report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-159e)) for the Registrant and
have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;

b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period
covered by this report based on such evaluation; and

c) Disclosed in this report and change in the Registrant's internal control over financial reporting that occurred
during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonable likely to materially affect, the Registrant's internal control over
financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of
directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and
report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant's internal controls over financial reporting.

          Dated:        January 12, 2004                   By: /s/ Robert M. Barniskis
                        ----------------                       -------------------------------------
                                                                       Robert M. Barniskis
                                                               Vice President and Chief Financial
                                                               Officer
                                                     Exhibit 32.1

                                                 CERTIFICATION

I, Jay A. Herman, Chairman and Chief Executive Officer of Delphax Technologies Inc. (the Company), do
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:

o the Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2003, as filed with
the Securities and Exchange Commission (the Report), fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

o the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.

          Dated:        January 12, 2004                     By:         /s/ Jay A. Herman
                        ----------------                        ------------------------------------
                                                                           Jay A. Herman
                                                                Chairman and Chief Executive Officer
                                                     Exhibit 32.2

                                                 CERTIFICATION

I, Robert M. Barniskis, Vice President and Chief Financial Officer of Delphax Technologies Inc. (the Company),
do hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

o the Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2003, as filed with
the Securities and Exchange Commission (the Report), fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

o the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.

          Dated:        January 12, 2004                      By:    /s/ Robert M. Barniskis
                        ----------------                         -----------------------------------
                                                                          Robert M. Barniskis
                                                                 Vice President and Chief Financial
                                                                 Officer

								
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