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EXHIBIT 4.12
[NATIONSBANK LETTERHEAD]
March 2, 1999
Danka Holding Company
00000 Xxxxx Xxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx
Re: Credit Agreement dated as of December 5, 1998 among Danka Business Systems
PLC, a limited liability company incorporated in England and Wales (Registered
Number 1101386) ("Danka PLC"), Dankalux Sarl & Co. SCA, a Luxembourg company
("Dankalux"), and Danka Holding Company, a Delaware corporation ("Danka
Holding") (Danka PLC, Dankalux and Danka Holding are herein collectively the
"Companies"), NationsBank, National Association, a national banking association
formerly known as NationsBank, National Association (Carolina), each other Bank
signatory hereto (each individually, a "Bank" and collectively, the "Bank"), and
NationsBank National Association in its capacity as agent for the Banks (in such
capacity, the "Agent"), as amended (the "Credit Agreement"). Capitalized terms
contained herein and not otherwise defined shall have the meaning set forth in
the Credit Agreement.
Ladies and Gentlemen:
NationsBank, N.A., as Agent under the Credit Agreement has received the
agreement of the Majority Banks to the waiver of the enforcement of the
financial convenants contained in Section 8.3 of the Credit Agreement and the
waiver of any adverse effect resulting therefrom for the Waiver Period, as
such term is defined in the letter (the "Request Letter") dated February 18,
1999 from the Companies, a copy of which is attached hereto, subject to the
terms and conditions set forth in the Request Letter.
NATIONSBANK, N.A., as Agent
By: /s/ Xxxxxx X. Xxxx III
-------------------------
Xxxxxx X. Xxxx III
Senior Vice President
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February 18, 1999
NationsBank, N.A., as Agent
000 Xxxxx Xxxxx Xxxxxx, XX0-000-0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Re: Credit Agreement dated as of December 5, 1996 among Danka Business
Systems PLC, a limited liability company incorporated in England and
Wales (Registered Number 1101386) ("Danka PLC"), Dankalux Sarl & Co.
SCA, a Luxembourg company ("Dankalux"), and Danka Holding Company, a
Delaware corporation ("Danka Holding") (Danka PLC, Dankalux and Danka
Holding are herein each a "Company" and collectively the
"Companies"), NationsBank, National Association, a national banking
association formerly known as NationsBank, National Association
(Carolinas), each other Bank signatory thereto (each individually , a
"Bank" and collectively, the "Banks"), and NationsBank, National
Association, in its capacity as agent for the Banks (in such
capacity, the "Agent"), as amended (the "Credit Agreement")
Ladies and Gentlemen:
The Companies hereby request that NationsBank, as Agent, seek to obtain
from the Banks a waiver of the enforcement of the financial covenants contained
in Section 8.3 of the Credit Agreement and a waiver of any adverse effect
resulting therefrom, such waiver to be effective as of March 1, 1999 and for a
period from March 1, 1999 through the later of (i) August 27, 1999 and (ii) the
Extension Date (as defined below) (the "Waiver Period"), subject to the
provisions of Section 1 below. The Companies jointly and severally acknowledge
and agree that the consent of the Banks and of the
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Agent to such waiver shall be subject to the following terms and conditions (to
which the Banks and the Agent and the Companies agree by such consent):
1. As used herein, the term "Extension Date" means the earlier of (i) the
date (the "Company Estimated Closing Date") (which may not be later than
December 27, 1999 unless a later date is approved by the Majority Banks) that
is specified in a certificate (a "Company Extension Request") sent by the Chief
Executive Officer of Danka PLC to the Banks (care of the Agent) and containing
the information described below and (ii) the date (the "Consummation Date") on
which each of (1) the closing of all Affected Transactions (as defined below)
shall have occurred, (2) all sales proceeds of such Affected Transactions shall
have been received by the Companies (or their affiliates) and (3) the
appropriate portion thereof shall have been paid to the Agent as provided in
Section 9 below. There shall be no Extension Date, and the Waiver Period shall
accordingly end on August 27, 1999, unless on or before August 17, 1999, a
Company Extension Request is received by the Agent which certifies: (i) that a
Regulatory Review Condition (as defined below) has occurred and that, as a
result thereof, the Companies request an extension of the termination of the
Waiver Period, (ii) that a definitive sales contract has been executed and
delivered by all parties thereto with respect to each transaction that the
Company desires to treat as an Affected Transaction, (iii) in reasonable
detail, the conditions constituting each Regulatory Review Condition, the
Companies' plans to resolve such conditions and the time by which the Companies
reasonably believe such conditions will be so resolved, (iv) in reasonable
detail, the Companies' plans with respect to obtaining all required shareholder
approval of each Affected Transaction and causing the Consummation Date to
occur in respect thereof and the time by which the Companies reasonably believe
each material step in such process will be completed and (v) that the Company
Estimated Closing Date which has been specified is reasonably related to the
matters set forth pursuant to clauses (iii) and (iv) above. The Companies may
from time to time obtain an extension of the Company Estimated Closing Date if
the facts then in existence demonstrate the need for such
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extension and an additional Company Extension Request specifying the matters
set forth in clauses (i) through (v) above has been delivered to the Banks
(care of the Agent). "Affected Transactions" are transactions for the sale of
the assets or equity of any or all of the Omnifax division of Danka Office
Imaging Company ("Omnifax") or the divisions or business unit(s) of the
Companies commonly referred to as "DSI" (hereinafter "DSI") or "International"
(hereinafter "International") as to which there shall have occurred either (i)
Securities and Exchange Commission review of a proxy statement with respect to
shareholder approval of such transaction or (ii) any delay in receiving
shareholder approval of such transaction due to applicable London Stock
Exchange or similar United Kingdom requirements (either of the circumstances
described in the foregoing clauses (i) and (ii) being hereinafter referred to
as a "Regulatory Review Condition"). Notwithstanding anything to the contrary
contained in this letter (this "Request Letter"), the Waiver Period shall
terminate on any day (1) which is three (3) days after Agent has delivered to
the Companies a written notice stating that the Companies have ceased using all
reasonable efforts to resolve any Regulatory Review Condition with respect to
any Affected Transaction, to obtain all required shareholder approval with
respect to such Affected Transaction or to cause the Consummation Date to occur
in respect thereof, in each case as promptly as practicable, unless the same
has been remedied in Agent's sole judgment within such three (3) day period,
(2) on which the Chief Executive Officer of Danka PLC shall have failed to
certify to the Banks, within five (5) days of any written request therefor sent
by the Agent, that the Companies have continuously used, and are continuing to
use, all reasonable efforts to, as promptly as practicable, resolve all
Regulatory Review Conditions, obtain all required shareholder approvals and
cause the Consummation Date to occur with respect to all Affected Transactions,
or (3) which is three (3) days after Agent has delivered to the Companies a
written notice stating that the Companies have failed to use their best efforts
to cause the closing to occur as quickly as possible with respect to the sale
of the assets or equity of each of Omnifax, DSI and International, unless the
same has been remedied in Agent's sole judgment within such three (3) day
period.
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2. During the Waiver Period the Applicable Margin on (i) outstanding
Offshore Rate Loans (other than any New Loans, as defined below) shall be
2.00%, (ii) outstanding Offshore Rate Loans that are New Loans shall be 3.50%
and (iii) outstanding Base Rate Loans that are New Loans shall be 1.50% per
annum higher than the Applicable Margin thereon otherwise in effect.
3. The Companies acknowledge and agree that the Agent has caused its
counsel to retain PricewaterhouseCoopers LLP as independent business consultant
(the "Consultant") to assess on behalf of the Agent, its counsel and the Banks
the operations, finances, and business affairs of Danka PLC and its
Subsidiaries and to furnish reports of its findings and recommendations solely
to the Agent, its counsel and the Banks. The Companies jointly and severally
agree to pay all reasonable fees, costs, and expenses of the Consultant
incurred in connection with the performance by the Consultant of its duties
described in this paragraph. The Companies shall, and shall cause all
Subsidiaries, to cooperate fully and in a timely manner with the Consultant,
including its agents and employees.
4. The Companies acknowledge and agree that the Agent (or appropriate
sub-agent) for the benefit of the Banks has been granted, in connection with
the waiver request letter dated October 16, 1998 from Danka PLC and its
Subsidiaries to the Agent (the "Prior Request Letter"), first priority Liens
(subject to certain encumbrances and subject to certain exceptions, exclusions,
prior interests or subordinations provided for in the Loan Documents or any
amendments thereof entered into after the date of execution thereof (including,
without limitation, the Third Amendment and the proposed Fourth Amendment (in
such form as may be entered into hereafter) to the Credit Agreement)) on all of
the assets of Danka Holding and its Subsidiaries, including but not limited to
inventory, accounts receivable, property, plant and equipment, cash, depositary
accounts, contract rights and general intangibles, located within the United
States (the "Bank Liens") securing the timely payment of certain Loans made
pursuant to the Credit Agreement, provided, however, the Banks shall have no
security interest, claim or other Lien on any property of, or any equity of,
any Restricted Subsidiary or any
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property of any of the Companies or the Subsidiaries which is the subject of a
negative pledge agreement pursuant to any agreement or in connection with any
transaction described in Section 16 hereof (but solely with respect to the
building and other real and personal property financed by the facility
referenced in said Section and in any event not more restrictive than the
negative pledge agreement currently included in such facility) or in Section 3
of the Third Amendment to Credit Agreement, as supplemented by any subsequent
amendment to the Credit Agreement. Danka Holding and its Subsidiaries hereby
agree that upon the agreement by the Majority Banks to the waiver requested
pursuant to this Request Letter, (i) the Bank Liens will secure the timely
payment of any and all Obligations (including, without limitation, all
obligations incurred or Loans made at any time prior to, on or after the date
hereof pursuant to, or in connection with, the Credit Agreement, the Prior
Request Letter or this Request Letter), and (ii) Danka Holdings shall take, and
shall cause all of its Subsidiaries to take, as soon as practicable and at
their sole cost and expense, all steps that the Agent shall determine to be
reasonably necessary or advisable, pursuant to documentation in form and
substance satisfactory to the Agent, to cause the Bank Liens to secure the
timely payment of any and all Obligations (including, without limitation, all
Loans) as provided in clause (i) above.
5. The Companies shall furnish to the Agent and the Banks as soon as
practicable but in any event within thirty (30) days of the end of each
calendar month the monthly consolidated balance sheet and consolidated
statements of earnings and cash flow of Danka PLC and its Subsidiaries,
certified in writing by any representative authorized to provide the
certification required by Section 7.1(c) of the Credit Agreement to have been
prepared in accordance with United States GAAP in a manner consistent with past
practices of Danka PLC, and to the best knowledge of such signatory to be true,
correct, and complete in all material respects, subject to necessary audit
adjustments. On or before each Wednesday, the Companies shall deliver to the
Banks cash flow projections on a weekly basis for a 13-week period and actual
results for the prior week, in form consistent with the projections and results
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heretofore delivered to the Banks or such other form as may be reasonably
acceptable to the Companies and the Agent.
6. Nothing contained in this Request Letter or otherwise shall affect the
obligation of the Companies to make the repayments of the Term Loans required
pursuant to Section 2.9(c) of the Credit Agreement on each and every date
referred to on Schedule V to the Credit Agreement which occurs during the
Waiver Period.
7. (a) Notwithstanding anything to the contrary contained in the Credit
Agreement, the Prior Request Letter or otherwise, but subject to the provisions
of clause (a)(ii) below, during the Waiver Period the Companies shall not be
entitled to receive any Loans (other than the New Loans (as defined in clause
(b) below)) under the Credit Agreement or any International Swing Line Loans
under the International Swing Line Facility. For purposes of the foregoing
limitation, it is hereby understood and agreed that (i) the aggregate
outstanding principal amount of all Revolving Loan Outstandings (other than in
respect of New Loans) shall not exceed an amount equal to the sum of (1) the
Revolving Loan Outstandings as of October 20, 1998 and (2) $90,000,000 and the
aggregate outstanding amount of all International Swing Line Loans shall not
exceed $65,121,721 and (ii) neither any borrowing of Revolving Loans or Swing
Line Loans or International Swing Line Loans (as the case may be) up to the
limitations described in this clause (a)(i) hereof, nor any continuations or
conversions of Loans pursuant to Section 2.4(a) of the Credit Agreement, shall
constitute Loans or International Swing Line Loans that violate the first
sentence of this clause (a), or New Loans.
(b) On or after April 1, 1999, the Companies may borrow, and the Banks
shall make, new Revolving Loans during the Waiver Period in an aggregate
principal outstanding amount not to exceed the limitations provided for in
clause (c) and clause (d) below (the "New Loans"). As a precondition to any New
Loan, the Chief Executive Officer or Chief Financial Officer of Danka PLC
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shall have, on or before the date of proposed borrowing of the New Loans,
delivered a certificate to the Banks (care of the Agent) certifying in
reasonable detail that the then current financial condition (including, without
limitation, the then current cash balances and cash flow projections) of the
Companies requires the Companies to borrow such New Loans in order for the
Companies to be able to operate their businesses in the ordinary course of
business (a "Need Certificate").
(c) The New Loans shall be in an aggregate outstanding amount of not more
than $30,000,000 at any one time on or after April 1, 1999 and prior to the
date which is one business day following the date on which the proceeds of the
sale of the assets or equity of Omnifax (the "Omnifax Proceeds") or DSI (the
"DSI Proceeds") shall have been received by the Companies (or their
affiliates). Within one business day of such receipt of the Omnifax Proceeds or
the DSI Proceeds, the aggregate outstanding principal amount of all New Loans
shall be reduced (including, without limitation, as a result of the payment to
the Agent of a portion of such sales proceeds pursuant to Section 9 below, such
payment to qualify as a reduction in the New Loans notwithstanding the fact
that such proceeds shall have also reduced Term Loan Outstandings as provided
in said Section 9) to an aggregate amount not in excess of $15,000,000.
(d) The New Loans shall be in an aggregate outstanding amount of not more
than $15,000,000 at any one time on or after one business day following the
date of receipt of the Omnifax Proceeds or the DSI Proceeds (as described in
clause (c) above) and prior to the date which is one business day following the
date on which the proceeds of the sale of the assets or equity of Omnifax or
DSI (whichever is the entity not sold first as described in clause (c) above)
or International (the "Additional Proceeds") shall have been received by the
Companies (or their affiliates). For purposes of calculating the $15,000,000
maximum amount of New Loans described in this clause (d), any payment to the
Agent of a portion of the Omnifax Proceeds or DSI Proceeds (as described in
clause (c) above) shall
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not be deemed to have reduced the aggregate outstanding amount of New Loans
except to the extent that immediately prior to such payment such aggregate
outstanding amount exceeded $15,000,000. Within one business day of such
receipt of the Additional Proceeds, all New Loans shall be paid in full
(including, without limitation, as a result of the payment to the Agent of a
portion of such sales proceeds pursuant to Section 9 below, such payment to
qualify as a reduction in the New Loans notwithstanding the fact that such
proceeds shall have also reduced Term Loan Outstandings as provided in said
Section 9).
8. During the Waiver Period (i) Danka PLC shall not pay any dividends or
make any distributions, (ii) neither the Companies nor any of their
Subsidiaries shall make any Acquisitions, and (iii) neither the Companies nor
any of their Subsidiaries will make any Investments (except, if the proposed
Fourth Amendment to the Credit Agreement becomes effective, as permitted
thereby).
9. During and after the Waiver Period, notwithstanding the provisions set
forth in Section 2.9(f)(i) of the Credit Agreement, 60% of the first
$200,000,000 of Net Proceeds, 80% of the next $200,000,000 of Net Proceeds and
90% of any additional Net Proceeds shall be paid to the Agent on behalf of the
Banks within one business day after receipt of such Net Proceeds by the
Companies (or their affiliates) in order to prepay or otherwise permanently
reduce Term Loans Outstandings, or if there are no Term Loan Outstandings,
Revolving Loan Outstandings (with a simultaneous reduction in Revolving
Commitments). As used in this Section 9 and in the Credit Agreement, the term
"Net Proceeds" shall mean, with respect to the sale, lease, transfer or other
disposition of assets of Danka PLC or any Subsidiary or affiliate thereof
(including sales of equity interests in a Subsidiary or other affiliate of
Danka PLC or any Subsidiary to a person other than Danka PLC or its
Subsidiaries), the cash proceeds from such sale plus the fair market value of
all non-cash proceeds, if any, from such sale, less the reasonable expenses of
such sale, and taxes actually paid or payable as a result of such sale and any
secured Indebtedness required to be repaid in connection with such sale.
Notwithstanding anything to
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the contrary contained herein or in the Credit Agreement, there shall not be
any deduction in calculating Net Proceeds for, and the Companies shall satisfy
out of their portion of Net Proceeds as provided above in this Section 9, any
and all payments to Xxxxxxx Kodak Company for the purpose of reducing existing
accounts payable or otherwise.
10. The Companies shall pay to the Agent for the benefit of each of the
Banks which shall have consented to the waiver requested by this Request Letter
a waiver fee equal to 1/8% of such Banks' Commitment.
11. The Companies shall, at their expense, permit and fully cooperate with
the Agent and its representatives in a review and evaluation of all assets of
the Companies and their Subsidiaries located in the United States.
12. The Companies and their Subsidiaries shall use their best efforts at
all times during the Waiver Period to maintain existing committed and/or
discretionary lines of credit outside the United States of at least
$30,000,000; and the Companies shall promptly notify the Agent in writing of
any termination of lines of credit outside the United States.
13. The Companies will be liable for prompt payment of (i) all reasonable
legal and other out-of-pocket expenses incurred by any member of the Bank
Steering Committee to the extent such expenses relate to the activities of such
member on the Bank Steering Committee and (ii) all reasonable fees and expenses
of Wachtell, Lipton, Xxxxx & Xxxx, Xxxxx Xxxxx Mulliss & Xxxxx, L.L.P. and
PricewaterhouseCoopers, as advisors to the Agent.
14. Neither the Companies nor their Subsidiaries shall incur additional
Indebtedness except as permitted by Section 7 hereof or to the extent necessary
to comply with Section 12 above.
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15. The Companies and the Guarantors acknowledge that they have no
existing defense, counterclaim, offset, cross-complaint, claim or demand of any
kind or nature whatsoever that can be asserted to reduce or eliminate all or
any part of their respective liability to pay the full indebtedness outstanding
under the terms of the Credit Agreement and any other documents which evidence,
guaranty or secure the Obligations (including, without limitation, the Prior
Request Letter and this Request Letter). The Companies and the Guarantors
hereby release and forever discharge the Agent, the Banks and all of their
officers, directors, employees, attorneys, consultants and agents from any and
all actions, causes of action, debts, dues, claims, demands, liabilities and
obligations of every kind and nature, both in law and in equity, known or
unknown, whether matured or unmatured, absolute or contingent.
16. The Companies shall have received a waiver of violations of the
financial covenants incorporated in the tax retention operating lease documents
and shall have provided a copy of such waiver to the Agent.
17. During and after the Waiver Period, in the event that Danka PLC or any
of its Subsidiaries shall receive any foreign or United States federal or state
tax refunds in an amount (for each individual tax refund or series of related
tax refunds) of at least $100,000, an amount equal to 100% of the amount of
such tax refunds shall be paid to the Agent on behalf of the Banks to repay or
otherwise permanently reduce Term Loan Outstandings, or if there are no Term
Loan Outstandings, Revolving Loan Outstandings (with a simultaneous reduction
in Revolving Commitments).
18. Promptly upon their execution, the Companies shall deliver to each
Bank true and correct copies of all executed sales contracts with respect to
Omnifax, DSI and International, and all proxy statements and other filings in
connection with such sales that are filed with the Securities and Exchange
Commission, the London Stock Exchange or any other United Kingdom or other
foreign
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regulatory authority (to the extent not prohibited by applicable law,
rules or regulations). The Companies shall promptly upon obtaining knowledge
thereof deliver a notice to the Banks (care of the Agent) specifying the first
date on which the Companies (or their affiliates) are entitled to receive any
sales proceeds with respect to the sale of Omnifax, DSI or International, and
further specifying the reasons for any delay in such date of receipt that may
be agreed to by the Companies.
19. On or before April 30, 1999, the Companies will deliver to the members
of the Bank Steering Committee the proposed business plan for the Companies for
the five year period following the Waiver Period, and the proposed
restructuring proposal of the Companies for the restructuring after the Waiver
Period of all outstanding Loans and other Obligations under the Credit
Agreement.
20. The provisions of this Request Letter supersede any provisions of the
Credit Agreement, the other Loan Documents, the International Swing Line
Agreements and the Prior Request Letter to the extent they are inconsistent
herewith.
The Companies further acknowledge and agree that any breach during the
Waiver Period in the timely performance, observance, or fulfillment of any of
the terms or conditions stated above shall constitute an Event of Default under
the Credit Agreement and, unless the Majority Banks shall otherwise agree in
writing, shall terminate the effectiveness of any waiver obtained by the Agent
from the Banks pursuant to this Request Letter. The Companies further
acknowledge and agree that, except to the extent expressly modified by the
provisions of this Request Letter, nothing contained herein is intended to or
shall limit any of the provisions of the Loan Documents as currently in effect,
except that, should the Agent obtain the waiver of Section 8.3 of the Credit
Agreement requested hereby, the enforcement of such provisions shall be waived
during the Waiver Period as well as any adverse effect resulting therefrom,
subject to the Companies' full and timely compliance with the terms and
conditions
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of such waiver stated above; provided, however, that an Event of Default shall
be deemed to have occurred as of the last day of the Waiver Period if Danka PLC
and its Subsidiaries are not in compliance with any of the financial covenants
set forth in Section 8.3 of the Credit Agreement as of such day, using, in the
case of clauses (i) or (iii) of said Section, the relevant financial
information for Danka PLC and its Subsidiaries for the twelve-month period most
recently ended before such day of measurement (rather than the four fiscal
quarter period otherwise required by such covenants). Capitalized terms used
herein without definition shall have the meanings ascribed thereto in the
Credit Agreement.
Very truly yours,
DANKA BUSINESS SYSTEMS PLC
By: _________________________
Name: _______________________
Title: ______________________
DANKA HOLDING COMPANY
By: _________________________
Name: _______________________
Title: ______________________
DANKALUX SARL & CO. SCA
By: DANKALUX SARL, COMMANDITE
By: _________________________
Name: _______________________
Title: ______________________
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The Guarantors hereby consent to the foregoing:
AMERICAN BUSINESS CREDIT CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
AMERITREND CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
CORPORATE CONSULTING GROUP, INC.
By: _________________________
Name: _______________________
Title: ______________________
DI INVESTMENT MANAGEMENT, INC.
By: _________________________
Name: _______________________
Title: ______________________
DANKA IMAGING XXXXXXXXXXXX.XXX.
By: _________________________
Name: _______________________
Title: ______________________
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DANKA MANAGEMENT COMPANY, INC.
By: _________________________
Name: _______________________
Title: ______________________
DANKA OFFICE IMAGING COMPANY
By: _________________________
Name: _______________________
Title: ______________________
DYNAMIC BUSINESS SYSTEMS, INC.
By: _________________________
Name: _______________________
Title: ______________________
XXXXXX ENTERPRISES, INC.
By: _________________________
Name: _______________________
Title: ______________________
KIS IMAGING SERVICES, INC.
By: _________________________
Name: _______________________
Title: ______________________
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