QUADRANT 4 SYSTEM CORPORATION (OTCMKTS:QFOR) Files An 8-K Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
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. |
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
lenders loss payable endorsement for BMOs benefit and an
endorsement showing BMO as additional insured, as required by the
Credit Agreement.
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
lenders loss payable endorsement for BMOs 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. 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.
Agreement as of the date hereof is $17,847,315.91. 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 Companys 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.
default from BIP Lender, LLC, as collateral agent (Collateral
Agent) for the Companys 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. 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.
Subordinated Credit Agreement as of the date hereof is
$5,075,000. 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.
| Item 5.02. |
Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
On December 5, 2016, Nandu Thondavadi, the Companys President and
Chief Executive Officer, and Dhru Desai, the Companys Chief
Financial Officer and Chairman of the Board, each notified the
Board of Directors of the Company (the Board) of their respective
resignations from the Board, and from all officer and employee
positions within the Company and its subsidiaries, effective
immediately. Following the resignations of Mr. Thondavadi and Mr.
Desai, the Company is under the control of its three independent
directors, who are overseeing the operations of the Company
pending the appointment of new executive officers. The directors
are considering whether it is necessary and appropriate for the
Company to engage outside financial and/or restructuring
personnel.
Chief Executive Officer, and Dhru Desai, the Companys Chief
Financial Officer and Chairman of the Board, each notified the
Board of Directors of the Company (the Board) of their respective
resignations from the Board, and from all officer and employee
positions within the Company and its subsidiaries, effective
immediately. Following the resignations of Mr. Thondavadi and Mr.
Desai, the Company is under the control of its three independent
directors, who are overseeing the operations of the Company
pending the appointment of new executive officers. The directors
are considering whether it is necessary and appropriate for the
Company to engage outside financial and/or restructuring
personnel.
| Item 8.01. |
Other Events
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Criminal Complaint
On November 30, 2016, Nandu Thondavadi, the Companys Chief
Executive Officer, and Dhru Desai, the Companys Chief Financial
Officer and Chairman, were arrested and charged in a criminal
complaint filed by the U.S. Attorneys Office for the Northern
District of Illinois, with wire fraud, corporate officer
certification of financial reports that do not fairly present, in
all material respects, the financial condition of the Company
and, with respect Mr. Thondavadi only, the making of false
statements to the Securities and Exchange Commission (the SEC),
in a case titled United States of America vs. Nandu Thondavadi
and Dhru Desai, Case No. 16 CR 772 (N.D. Ill.). The Company is
reviewing the alleged conduct and taking appropriate steps to
protect the interests of the Company and its shareholders. The
alleged conduct by Mr. Thondavadi and Mr. Desai includes, without
limitation, engaging in a scheme to fraudulently misrepresent and
conceal the terms of certain acquisitions (Teledata Technology
Solutions, Inc. and Momentum Mobile) and the amount of a
significant liability related to a lawsuit filed by Downtown
Capital Partners, LLC. The complaint further alleges that Mr.
Thondavadi falsely testified before the SEC regarding his
purported lack of control of a customer of the Company, Core
Information Technology Services, Inc. The Company cannot predict
the outcome of these matters, but intends to cooperate fully with
the Government. The above summary is qualified in its entirety by
reference to the full text of the complaint, which is available
at
https://www.justice.gov/usao-ndil/press-release/file/914036/download.
Executive Officer, and Dhru Desai, the Companys Chief Financial
Officer and Chairman, were arrested and charged in a criminal
complaint filed by the U.S. Attorneys Office for the Northern
District of Illinois, with wire fraud, corporate officer
certification of financial reports that do not fairly present, in
all material respects, the financial condition of the Company
and, with respect Mr. Thondavadi only, the making of false
statements to the Securities and Exchange Commission (the SEC),
in a case titled United States of America vs. Nandu Thondavadi
and Dhru Desai, Case No. 16 CR 772 (N.D. Ill.). The Company is
reviewing the alleged conduct and taking appropriate steps to
protect the interests of the Company and its shareholders. The
alleged conduct by Mr. Thondavadi and Mr. Desai includes, without
limitation, engaging in a scheme to fraudulently misrepresent and
conceal the terms of certain acquisitions (Teledata Technology
Solutions, Inc. and Momentum Mobile) and the amount of a
significant liability related to a lawsuit filed by Downtown
Capital Partners, LLC. The complaint further alleges that Mr.
Thondavadi falsely testified before the SEC regarding his
purported lack of control of a customer of the Company, Core
Information Technology Services, Inc. The Company cannot predict
the outcome of these matters, but intends to cooperate fully with
the Government. The above summary is qualified in its entirety by
reference to the full text of the complaint, which is available
at
https://www.justice.gov/usao-ndil/press-release/file/914036/download.
Wells Notice
On November 30, 2016, the Company received a Wells Notice from
the SEC staff (the Staff) of the Division of Enforcement
stating that the Staff has made a preliminary determination to
recommend that the SEC file an enforcement action against the
Company alleging violations of the antifraud, reporting and
books and records provisions of the Securities Act of 1933 and
the Securities Exchange Act of 1934. A Wells Notice is not a
formal allegation or a finding of wrongdoing, but is a
preliminary determination by the Staff that it may recommend to
the Commissioners of the SEC that a civil enforcement action or
administrative proceeding be brought against the recipient. The
Company has an opportunity to respond to issues raised by the
Staff and offer its perspective prior to any SEC decision on
whether to authorize the commencement of an enforcement
proceeding. Under SEC procedures, a recipient of a Wells Notice
has an opportunity to respond in the form of a Wells submission
that seeks to persuade the SEC that such an action should not
be brought. The Company is presently unable to predict how long
the SEC process will last, the outcome of the SECs
investigation or any action that the SEC may decide to pursue,
or any other impact on the Company as a result of the proposed
or any actual enforcement action. The Company intends to
cooperate fully in connection with this matter.
the SEC staff (the Staff) of the Division of Enforcement
stating that the Staff has made a preliminary determination to
recommend that the SEC file an enforcement action against the
Company alleging violations of the antifraud, reporting and
books and records provisions of the Securities Act of 1933 and
the Securities Exchange Act of 1934. A Wells Notice is not a
formal allegation or a finding of wrongdoing, but is a
preliminary determination by the Staff that it may recommend to
the Commissioners of the SEC that a civil enforcement action or
administrative proceeding be brought against the recipient. The
Company has an opportunity to respond to issues raised by the
Staff and offer its perspective prior to any SEC decision on
whether to authorize the commencement of an enforcement
proceeding. Under SEC procedures, a recipient of a Wells Notice
has an opportunity to respond in the form of a Wells submission
that seeks to persuade the SEC that such an action should not
be brought. The Company is presently unable to predict how long
the SEC process will last, the outcome of the SECs
investigation or any action that the SEC may decide to pursue,
or any other impact on the Company as a result of the proposed
or any actual enforcement action. The Company intends to
cooperate fully in connection with this matter.
Going Dark Process
As previously reported, the Companys Board determined in
September 2016 that, for the Company, the costs associated
with being a public reporting company in the U.S. were not
justified by the benefits, and the Company undertook
preliminary steps to allow the Company to deregister its
Common Stock under Section 15(d) of the Exchange Act and to
suspend its reporting obligations under Section 13(a) of the
Exchange Act, after which process (the Going Dark Process)
the Company would no longer be subject to SEC reporting and
related requirements under the Exchange Act. In light of the
matters reported in this Current Report on Form 8-K, the
Board of Directors has suspended indefinitely work on the
Going Dark Process.
September 2016 that, for the Company, the costs associated
with being a public reporting company in the U.S. were not
justified by the benefits, and the Company undertook
preliminary steps to allow the Company to deregister its
Common Stock under Section 15(d) of the Exchange Act and to
suspend its reporting obligations under Section 13(a) of the
Exchange Act, after which process (the Going Dark Process)
the Company would no longer be subject to SEC reporting and
related requirements under the Exchange Act. In light of the
matters reported in this Current Report on Form 8-K, the
Board of Directors has suspended indefinitely work on the
Going Dark Process.
About QUADRANT 4 SYSTEM CORPORATION (OTCMKTS:QFOR)
Quadrant 4 System Corporation (Quadrant 4) is engaged in providing cloud-based platform-as-a-service (PaaS) and software-as-a-service (SaaS) products to the health insurance, media and education verticals. The Company operates through two business segments: Services and Platforms (PaaS/SaaS). The Company’s core platforms include QHIX/QBIX, a cloud-based health insurance exchange and benefits management platform; QBLITZ, a cloud-based digital media platform, and QEDX, a cloud-based education platform for K-12 students each of which incorporates the Company’s Social Media, Mobility, Analytics and Cloud (SMAC) technologies. Its services include consulting, application life cycle management, enterprise applications and data management, mobility applications and business analytics. It offers solutions to the healthcare, media and education industries. QHIX helps its clients engage consumers differently using SMAC operating through a Cloud environment. QUADRANT 4 SYSTEM CORPORATION (OTCMKTS:QFOR) Recent Trading Information
QUADRANT 4 SYSTEM CORPORATION (OTCMKTS:QFOR) closed its last trading session down -0.0003 at 0.0339 with 2,512,238 shares trading hands.