EXHIBIT 99.2
CONSENT, WAIVER, AND THIRD AMENDMENT TO
CREDIT AGREEMENT AND LOAN DOCUMENTS
THIS CONSENT, WAIVER, AND THIRD AMENDMENT TO CREDIT AGREEMENT AND LOAN
DOCUMENTS ("Amendment"), dated as of November 13, 2002 (the "Amendment Date"),
is among Daisytek International Corporation, a Delaware corporation, each of its
Subsidiaries party hereto, Bank of America, National Association (in its
capacity as administrative agent for the Lenders), and each of the lending
institutions party hereto.
RECITALS:
A. The Obligated Parties, the Lenders, and the Agent have entered into
that certain Credit Agreement, dated as of April 24, 2002 (as amended, the
"Credit Agreement"), pursuant to which the Lenders have provided certain credit
facilities to the Borrowers.
B. Daisytek Australia Pty Limited and Daisytek Australia (QLD) Pty
Limited (collectively, "Daisytek Australia") each wholly-owned Subsidiaries of
Daisytek have obtained financing for the operations of Daisytek Australia
pursuant to an agreement (the "Australian Facility Agreement") with GE Capital
Finance PTY Limited ("GE Capital"). As a condition to entering into the
Australian Facility Agreement, GE Capital requires that Daisytek subordinate
certain intercompany indebtedness owing to Daisytek from Daisytek Australia to
the loans and obligations of Daisytek Australia owing to GE Capital (the
"Subordination") pursuant to a subordination agreement. The Obligated Parties
have requested that the Lenders consent to the subordination of the intercompany
indebtedness described in the preceding sentence.
C. The Obligated Parties have requested that the Lenders amend certain
provisions of the Credit Agreement and certain other Loan Documents and waive
the Events of Default as provided hereinbelow.
D. Subject to satisfaction of the conditions set forth herein, the
Majority Lenders hereby provide their consent to the Subordination, provide the
requested waivers of Events of Default, and amend the Credit Agreement as
specifically provided hereinbelow.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to the extent
not otherwise defined herein, shall have the same meanings as in the Credit
Agreement, as amended hereby.
1
ARTICLE 2
Consent to Subordination
Section 2.1 Consent to Subordination. Notwithstanding anything in the
Credit Agreement to the contrary (including Section 7.15 of the Credit
Agreement) and subject to Section 11.1 of the Credit Agreement and satisfaction
of the conditions precedent set forth in Article 6 of this Amendment, each of
the undersigned Lenders hereby consents to the Subordination and agrees that
Daisytek entering into the Subordination will not result in a Default or an
Event of Default under the Credit Agreement; provided that the terms of any
agreement, document, or certificate entered into by Daisytek in connection with
the Subordination is acceptable to the Agent, such acceptance to be evidenced in
writing, in its sole discretion (including the maturity and terms of any such
agreement, document, or instrument) and may not be amended, renewed, restated,
or otherwise modified without the Agent's prior written approval.
ARTICLE 3
Waiver of Events of Default
Section 3.1 Waivers.
-------
(a) Pursuant to Section 7.23 of the Credit Agreement, the Obligated Parties
were required to cause the Parent and its Subsidiaries to maintain a Fixed
Charge Coverage Ratio of not less than 1.00 to 1.00 for the four (4) Fiscal
Quarters ended September 30, 2002 (the "Measurement Date"). As of the
Measurement Date, the Fixed Charge Coverage Ratio of the Parent and its
Subsidiaries for the preceding four (4) Fiscal Quarters was less than the
required ratio. The Obligated Parties' failure to cause the Parent and its
Subsidiaries to maintain the Fixed Charge Coverage Ratio as required by the
Credit Agreement constitutes an Event of Default under Section 9.1(c) of the
Credit Agreement (the "Parent Fixed Charge Event of Default"). Effective as of
the Amendment Date and subject to satisfaction of the conditions precedent set
forth in Article 6 of this Amendment, the Majority Lenders hereby waive the
Parent Fixed Charge Event of Default.
(b) Pursuant to Section 7.24 of the Credit Agreement, the Obligated Parties
were required to cause the Borrowers to maintain a Fixed Charge Coverage Ratio
of not less than 1.00 to 1.00 for the six (6) months ended on the Measurement
Date. As of the Measurement Date, the Fixed Charge Coverage Ratio of the
Borrowers for the preceding six (6) months was less than the required ratio. The
Obligated Parties' failure to cause the Borrowers to maintain the Fixed Charge
Coverage Ratio as required by the Credit Agreement constitutes an Event of
Default under Section 9.1(c) of the Credit Agreement (the "Borrower Fixed Charge
Event of Default"). Effective as of the Amendment Date and subject to
satisfaction of the conditions precedent set forth in Article 6 of this
Amendment, the Majority Lenders hereby waive the Borrower Fixed Charge Event of
Default.
2
(c) Pursuant to Section 7.25 of the Credit Agreement, the Obligated Parties
were required to cause the Parent and its Subsidiaries to maintain an Adjusted
Tangible Net Worth of not less than $125,000,000 as of the Measurement Date. As
of the Measurement Date, the Adjusted Tangible Net Worth of the Parent and its
Subsidiaries was less than the required amount. The Obligated Parties' failure
to cause the Parent and its Subsidiaries to maintain the Adjusted Tangible Net
Worth as required by the Credit Agreement constitutes an Event of Default under
Section 9.1(c) of the Credit Agreement (the "Net Worth Event of Default"; the
Parent Fixed Charge Event of Default, the Borrower Fixed Charge Event of
Default, and the Net Worth Event of Default are referred to collectively herein
as the "Specified Defaults"). Effective as of the Amendment Date and subject to
satisfaction of the conditions precedent set forth in Article 6 of this
Amendment, the Majority Lenders hereby waive the Net Worth Event of Default.
ARTICLE 4
Amendments
Section 4.1 Amendment to Section 5.2(d) of the Credit Agreement. Effective
as of the Amendment Date, clause (i) of Section 5.2(d) of the Credit Agreement
is hereby amended and restated to read in its entirety as follows:
(i) setting forth in reasonable detail the calculations required to
establish the Obligated Parties' compliance with the covenants set
forth in Section 7.22 through Section 7.25 and Section 7.32 during the
period covered by such Financial Statements and as at the end thereof
and
Section 4.2 Amendment to Section 7.15 of the Credit Agreement. Effective as
of the Amendment Date, Section 7.15 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
Section 7.15 Transactions with Affiliates. Except as set forth
below, no Obligated Party shall sell, transfer, distribute, or pay any
money or property, including, but not limited to, any fees or expenses
of any nature (including, but not limited to, any fees or expenses for
management services), to any Affiliate, or lend or advance money or
property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any Capital Stock or indebtedness,
or any property, of any Affiliate, or become liable on any Guaranty of
the indebtedness, dividends, or other obligations of any Affiliate.
Notwithstanding the foregoing, if no Default or Event of Default is in
existence or would result therefrom an Obligated Party may engage in
transactions with an Affiliate in the ordinary course of such Obligated
Party's business consistent with past practices and upon terms no less
favorable to such Obligated Party than would be obtained in a
comparable arm's-length transaction with a third party who is not an
Affiliate, provided that such transaction does not constitute or result
in a Restricted Investment and after giving effect to such transaction
3
the Intercompany Accounts Total is less than or equal to the
Intercompany Accounts Limit.
Section 4.3 Amendment to Section 7.23 of the Credit Agreement. Effective as
of the Amendment Date, Section 7.23 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
Section 7.23 Parent's Fixed Charge Coverage Ratio. The
Obligated Parties will not permit the Fixed Charge Coverage Ratio,
determined for the Parent and its Subsidiaries on a consolidated basis
for the preceding four (4) Fiscal Quarters ended as of such date
(provided that for each of the Fiscal Quarters ending on December 31,
2002, March 31, 2003, and June 30, 2003 such calculation shall be for
the number of Fiscal Quarters ended on such date since October 1,
2002), to be less than 1.00 to 1.00.
Section 4.4 Amendment to Section 7.24 of the Credit Agreement. Effective as
of the Amendment Date, Section 7.24 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
Section 7.24 Borrowers' Fixed Charge Coverage Ratio. The
Obligated Parties will not permit the Fixed Charge Coverage Ratio,
determined for the Borrowers on a consolidated basis for the six (6)
calendar months ended as of such date (provided that for each of the
calendar months ending on October 31, 2002 through February 28, 2003
such calculation shall be for the number of calendar months ended on
such date since October 1, 2002), to be less than the ratio
corresponding to the applicable calendar months specified in the table
below, respectively:
Calendar Month End Fixed Charge Coverage
Ratio
October 31, 2002 and November 30, 2002 0.30 to 1.00
December 31, 2002 0.55 to 1.00
January 31, 2003 0.65 to 1.00
February 28, 2003 0.70 to 1.00
March 31, 2003 0.85 to 1.00
April 30, 2003 0.90 to 1.00
May 31, 2003 0.95 to 1.00
June 30, 2003 and each calendar month ending 1.00 to 1.00
thereafter
Section 4.5 Amendment to Article 7 of the Credit Agreement. Effective as of
the Amendment Date, Article 7 of the Credit Agreement is hereby amended to add a
new Section 7.32 and a new Section 7.33 thereto each of which shall read in its
respective entirety as follows:
4
Section 7.32 Borrower's Adjusted Tangible Net Worth. The
Obligated Parties will not permit the Adjusted Tangible Net Worth,
determined for the Borrowers on a consolidated basis, as of the last
day of each calendar month beginning with the calendar month ending
September 30, 2002 and continuing on each calendar month ending
thereafter, to be less than the Borrower's Adjusted Tangible Net Worth
Requirement.
Section 7.33 Additional Capital. The Obligated Parties will
obtain not less than $20,000,000 cash proceeds (net of any costs
incurred in connection therewith) from public or private offerings of
Capital Stock of the Parent and issuance of Permitted Subordinated
Debt, in any combination, each of which shall be on terms and
conditions acceptable to the Agent and the Majority Lenders as follows:
(a) on a best efforts basis, during the period from
November 13, 2002 through March 31, 2003 and in any event on
or before September 30, 2003; and
(b) if average Availability for any thirty (30) day
period (the first measurement date being February 14, 2003 and
continuing each day thereafter) is less than $15,000,000, then
within ninety (90) days of such occurrence or in the event the
Agent determines in its sole discretion that any Obligated
Party is not paying, discharging, or otherwise satisfying its
payables consistent with past payment practices, then within
ninety (90) days after the Agent's written notice to such
Obligated Party of such determination.
Section 4.6 Amendment to Section 8.2 of the Credit Agreement. Effective as
of the Amendment Date, Section 8.2 of the Credit Agreement is hereby amended by
(a) deleting the word "and" at the end of clause (c), (b) replacing the period
at the end of clause (d) with a semi-colon and the word "and", and (c) adding a
new clause (e) which shall read in its entirety as follows:
(e) Until the Agent, at the Obligated Parties' expense,
obtains an inventory appraisal or an update to an inventory appraisal
(a "desk-top appraisal"), as determined by the Agent in its sole
discretion, prepared on a basis satisfactory to the Agent, including,
without limitation, information required by Requirements of Law, after
giving effect to any requested Borrowing, Availability shall not be
less than (i) for the period from November 13, 2002 through and
including November 30, 2002, $1,500,000, (ii) for the period from
December 1, 2002 through and including December 9, 2002, $3,000,000,
and (iii) for the period from December 10, 2002 and thereafter,
$5,000,000, provided, however, that the foregoing condition precedent
is not a condition to each Lender participating in or reimbursing the
Bank or the Agent for such Lender's Pro Rata Share of any Non-Ratable
Loan or Agent Advance made in accordance with the provisions of Section
1.2(i) or Section 1.2(j).
5
Section 4.7 Amendment to Section 9.1 of the Credit Agreement. Effective as
of the Amendment Date, clause (i) of Section 9.1(c) of the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
(i) observance or performance of any of the covenants and agreements
contained in Section 7.2 (insofar as it requires the preservation of
the existence of the Obligated Parties), or Section 7.9 through Section
7.33, or Section 2.3 and Section 2.11 of the Parent Security Agreement
and Section 2.3 and Section 2.10 of the Subsidiary Security Agreement,
Section 4.8 Amendments to Annex A of the Credit Agreement. Effective as of the
Amendment Date, Annex A of the Credit Agreement is hereby amended as follows.
(a) Each of the following definitions is hereby added to Annex A of the
Credit Agreement in alphabetical order and shall read in its entirety as
follows.
"Additional Capital Event" means the
Obligated Parties' satisfaction of the requirement in
Section 7.33 that the Obligated Parties shall have
obtained after November 13, 2002 cash proceeds (net
of any costs incurred in connection therewith) from
offerings of Capital Stock of the Parent and issuance
of Permitted Subordinated Debt, in an aggregate
amount of not less than $20,000,000.
"Adjusted Net Earnings from Operations"
means, as applied to any Person (the "subject
Person") for any fiscal period, the net income of the
subject Person after giving effect to the deduction
of or provision for income taxes for such fiscal
period, as determined in accordance with GAAP,
excluding any and all of the following included in
such net income: (a) gain or loss arising from the
sale of any capital assets; (b) gain arising from any
write-up in the book value of any asset; (c) earnings
of any Person, substantially all the assets of which
have been acquired by the subject Person in any
manner, to the extent realized by such other Person
prior to the date of acquisition; (d) earnings of any
Person in which the subject Person has an ownership
interest unless (and only to the extent) such
earnings shall actually have been received by the
subject Person in the form of cash distributions; (e)
earnings of any Person to which assets of the subject
Person shall have been sold, transferred, or disposed
of, or into which the subject Person shall have been
merged, or which has been a party with the subject
Person to any consolidation or other form of
reorganization, prior to the date of such
transaction; (f) gain arising from the acquisition of
debt or equity securities of the subject Person or
from cancellation or forgiveness of Debt; (g) gain or
loss arising from extraordinary items, as determined
in accordance with GAAP, or
6
from any other non-recurring transaction; and (h)
income arising or recognized in connection with the
reversal of any portion of the September 30, 2002
Reserves.
"Borrower's Adjusted Tangible Net Worth
Requirement" means, as of the end of each calendar
month beginning with the calendar month ending
September 30, 2002, an amount equal to the amount
corresponding to the applicable calendar month end in
the following table:
Calendar Month End Borrower's Adjusted Tangible Net Worth
Requirement
September 30, 2002 through and including $22,750,000
February 28, 2003
March 31, 2003 $23,000,000
April 30, 2003 and each calendar month $23,000,000,
ending thereafter plus the
cumulative amount
of all
Adjusted Tangible Net Worth
Requirement Increases
"Intangible Assets" means, as applied to any
Person, (a) deferred assets other than prepaid
expenses, prepaid taxes, and deferred taxes, (b)
General Intangibles, (c) unamortized debt discount
and expense (excluding the amendment fee paid
pursuant to Section 8.6 of that certain Consent,
Waiver, and Third Amendment to Credit Agreement and
Loan Documents dated as of November 13, 2002, among
the Obligated Parties, the Agent, and the Lenders
party thereto), (d) assets of such Person
constituting Intercompany Accounts, and (e) Equipment
and Real Estate to the extent of any write-up in the
book value thereof resulting from a revaluation
effective after the Closing Date.
"Intercompany Accounts Total" means, as
applied to the Borrowers, at any time, an amount
equal to the sum of (a) all assets and liabilities,
however arising, which are due to a Borrower from any
Affiliate of the Parent or a Subsidiary of the
Parent, minus (b) all assets and liabilities, however
arising, which are due from a Borrower to any
Affiliate of the Parent or a Subsidiary of the
Parent.
"Intercompany Accounts Limit" means, as
applied to the Borrowers, at any time, an amount
equal to (a) $103,447,000, plus (b) $2,000,000 prior
to the occurrence of the Additional Capital Event or
$5,000,000 after occurrence of the Additional Capital
Event.
7
"September 30, 2002 Reserves" means any part
of one or more of the reserves established by the
Parent and its Subsidiaries in connection with the
preparation of the Financial Statements of the Parent
and its Subsidiaries dated September 30, 2002, and as
disclosed in Schedule A-4.
(b) Each of the following definitions set forth in Annex A of the Credit
Agreement is hereby amended and restated in its entirety to read as follows.
"Adjusted Tangible Net Worth" means, as
applied to any Person, without duplication, at any
date and determined in accordance with GAAP, (a)
total assets, minus (b) Intangible Assets, minus (c)
total liabilities, plus (d) with respect to an
Obligated Party, Permitted Subordinated Debt.
"Adjusted Tangible Net Worth Requirement"
means, as of the end of each Fiscal Quarter beginning
with the Fiscal Quarter ending December 31, 2002, an
amount equal to the amount corresponding to the
applicable Fiscal Quarter end in the following table:
Fiscal Quarter End Adjusted Tangible Net Worth
Requirement
December 31, 2002 $89,000,000
March 31, 2003 $91,000,000
June 30, 2003 and each Fiscal Quarter $91,000,000, plus
ending thereafter the cumulative
amount of all Adjusted
Tangible Net
Worth Requirement Increases
"Adjusted Tangible Net Worth Requirement
Increase" means an amount, as of the end of any
applicable fiscal period, commencing with the fiscal
period ending June 30, 2003, equal to the sum of (a)
fifty percent (50.0%) of the amount (not less than
zero) of Net Income for each Fiscal Quarter ending
after December 31, 2002, plus (b) fifty percent
(50.0%) of the net amount of all equity proceeds
received by the Parent after the Fiscal Quarter
ending December 31, 2002, plus (c) seventy five
percent (75%) of the net proceeds of Permitted
Subordinated Debt and offerings of equity securities
of the Parent received by the Obligated Parties under
Section 7.33.
"Applicable Margin" means, as of October 1, 2002,
EXHIBIT C TO COMPLIANCE CERTFICATE
8
(a) with respect to Base Rate
Revolving Loans and all other Obligations
(other than LIBOR Rate Revolving Loans),
1.00%; and
(b) with respect to LIBOR Rate
Revolving Loans, 3.00%;
in each case subject to adjustment from time to time
thereafter to the applicable percentage specified
corresponding to the Fixed Charge Coverage Ratio of
the Obligated Parties on a consolidated basis, as set
forth below, respectively:
Fixed Charge Coverage Ratio Base Rate LIBOR Rate
Revolving Loans Revolving Loans
Less than or equal to 1.10 to 1.00 0.75% 2.75%
Greater than 1.10 to 1.00 but less than or 0.50% 2.50%
equal to 1.30 to 1.00
Greater than 1.30 to 1.00 but less than or 0.25% 2.25%
equal to 1.50 to 1.00
Greater than 1.50 to 1.00 0.00% 2.00%
For the purpose of determining any such adjustments
to the Applicable Margin, the Fixed Charge Coverage
Ratio of the Obligated Parties shall be determined
for the immediately preceding four (4) Fiscal
Quarters based upon the Financial Statements of the
Obligated Parties, beginning with the Fiscal Quarter
ending September 30, 2003, delivered to the Agent and
the Lenders as required by Section 5.2(a) (with
respect to the Financial Statements for the end of
each Fiscal Year of the Parent) or Section 5.2(b)
(with respect to the Financial Statements for each
Fiscal Quarter end other than the Parent's Fiscal
Year end), and any such adjustment, if any, shall
become effective prospectively on and after the first
day of the calendar month following the calendar
month which begins at least five (5) days after the
date of delivery of such Financial Statements to the
Agent and the Lenders. Concurrently with the delivery
of such Financial Statements, the Borrowers shall
deliver to the Agent and the Lenders a certificate,
signed by a Responsible Officer of the Borrowers,
setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable
Margin. In the event the Obligated Parties fail to
timely deliver any such Financial Statements, in
addition to any other remedy provided for in this
Agreement, the Applicable Margin shall be deemed to
be equal to the highest level set forth in the
preceding table, until the first day of the first
calendar month following the delivery of such
Financial
9
Statements at which time the Applicable
Margin shall be determined, prospectively, in
accordance with the terms hereof. If a Default or
Event of Default exists at the time any reduction in
the Applicable Margin is to be implemented, such
reduction shall not occur until the first day of the
first calendar month following the date on which such
Default or Event of Default is waived or cured.
"EBITDA" means, with respect to any fiscal
period, Adjusted Net Earnings from Operations, plus,
without duplication and to the extent deducted in the
determination of Adjusted Net Earnings from
Operations for the fiscal period in question, (a)
Interest Expense, (b) the provision for (or minus any
benefit from) federal, state, local, and foreign
income taxes, and (c) depreciation and amortization.
"Fixed Charges" means, with respect to any
fiscal period, without duplication, the sum of (a)
Interest Expense, (b) federal, state, local, and
foreign income taxes paid in cash net of cash refunds
and cash reimbursements, (c) Capital Expenditures
(excluding Capital Expenditures funded with Debt
other than Revolving Loans, but including, without
duplication, principal payments with respect to such
Debt), (d) scheduled principal payments of Debt, and
(e) any Distributions other than Distributions made
in Capital Stock of the Person making such
Distribution.
"Maximum Inventory Loan Amount" means (a)
$85,000,000 or (b) after receipt by the Agent, at the
Obligated Parties' expense, of an inventory appraisal
or an update to an inventory appraisal ("desk-top
appraisal"), as determined by the Agent in its sole
discretion, prepared on a basis satisfactory to the
Agent, including, without limitation, information
required by Requirements of Law, and occurrence of
the Additional Capital Event, $105,000,000.
"Permitted Acquisition" means any
acquisition of a Person or substantially all of the
assets of a Person which is funded wholly from the
proceeds of Permitted Subordinated Debt or offerings
of equity securities of the Parent received by the
Parent after November 13, 2002, in each case, in a
transaction that satisfies each of the following
requirements: (a) the proceeds of Permitted
Subordinated Debt or offerings of equity securities
used to fund the acquisition must be in addition to
the proceeds of Permitted Subordinated Debt and
offerings of equity securities of the Parent required
to be obtained under Section 7.33 and (b) evidence
certified by the chief executive or chief financial
officer of the
10
Parent that (i) the Obligated Parties
will be in compliance with the covenant contained in
Section 7.23 on a pro forma basis for the four (4)
Fiscal Quarter period then most recently ended
(assuming (1) the consummation of the acquisition in
question, (2) that the incurrence or assumption of
any Debt in connection therewith occurred on the
first day of such period, and (3) to the extent any
such Debt bears interest at a floating interest rate,
the interest rate in effect for the entire period of
calculation was the interest rate in effect at the
time of calculation) and (ii) if a Borrower is a
party to the acquisition, the Obligated Parties will
be in compliance with the covenant contained in
Section 7.24 on a pro forma basis for the applicable
period specified in such Section then most recently
ended (assuming (1) consummation of the acquisition
in question, (2) incurrence or assumption of any Debt
in connection therewith occurred on the first day of
such period, and (3) to the extent any such Debt
bears interest at a floating interest rate, the
interest rate in effect for the entire period of
calculation was the interest rate in effect at the
time of calculation).
"Permitted Other Investments" means
investments by the Obligated Parties in Subsidiaries
(other than Subsidiaries organized under the laws of
the Commonwealth of Australia) which are not
Obligated Parties (the "subject Persons"), in an
aggregate amount during the term of this Agreement
not in excess of $2,000,000, or if the Additional
Capital Event has occurred, not in excess of
$5,000,000, consisting of (a) payments by an
Obligated Party under Letters of Credit issued under
this Agreement in support of obligations of the
subject Persons, (b) loans, advances, and equity
contributions, and (c) amounts paid under Guaranties
of Debt and other obligations of the subject Persons.
"Restricted Investment" means, with respect
to any Obligated Party, any acquisition of property
by such Obligated Party in exchange for cash or other
property, whether in the form of an acquisition of
Capital Stock, debt, or other indebtedness or
obligation, or the purchase or acquisition of any
other assets or property, or a loan, advance, capital
contribution, or subscription (each of the foregoing
an "Investment"), except the following if made at a
time when no Default or Event of Default exists or
would result therefrom: (a) acquisitions of Equipment
to be used in the business of such Obligated Party so
long as the acquisition costs thereof constitute
Capital Expenditures permitted hereunder; (b)
acquisitions of Inventory in the ordinary course of
business of such Obligated Party; (c) acquisitions of
other current assets acquired in the ordinary course
of business of such Obligated
11
Party; (d) Investments
in direct obligations of the U.S., or any agency
thereof, or obligations guaranteed by the U.S.,
provided that such obligations mature within one year
from the date of acquisition thereof; (e) Investments
in certificates of deposit maturing within one year
from the date of investment, bankers' acceptances,
Eurodollar bank deposits, or overnight bank deposits,
in each case issued by, created by, or with a bank or
trust company organized under the laws of the U.S. or
any state thereof having capital and surplus
aggregating at least $100,000,000; (f) Investments in
commercial paper given a rating of "A2" or better by
Standard & Poor's Corporation or "P2" or better by
Xxxxx'x Investors Service, Inc. and maturing not more
than ninety (90) days from the date of creation
thereof; and (g) Investments in Hedge Agreements
entered into for the purpose of limiting the amount
of interest payable under this Agreement; (h)
Investments in mutual funds substantially all of the
assets of which are comprised of securities of the
types described in clauses (d), (e), and (f)
preceding; (i) Investments consisting of intercompany
loans between any Borrower and another Borrower,
provided that such intercompany loans meet the
requirements prescribed by Section 7.15; (j)
Investments not in excess of (pound)9,000,000 in the
aggregate, consisting of intercompany loans by the
Obligated Parties to Daisytek UK Limited and ISA
International plc, collectively, which intercompany
loans shall be used to (i) fund intercompany loans to
ISA International plc (such intercompany loans not to
exceed (pound)3,000,000) and (ii) by Daisytek UK
Limited as payment of the cash consideration required
to be paid in connection with the ISA Acquisition
(such cash consideration not to exceed
(pound)6,000,000); (k) loans to executive officers
and non-employee directors of the Obligated Parties;
provided that (i) at the time of such loan no Default
or Event of Default shall exist or result therefrom,
and (ii) the aggregate amount of such loans made by
the Obligated Parties and outstanding at any one time
shall not exceed $5,000,000, calculated net of any
bad debt reserves; (l) existing Investments listed on
Schedule A-3); (m) Investments consisting of payments
made by the Parent under its Guarantees allowed under
Section 7.12(c); (n) Permitted Other Investments; and
(o) Permitted Acquisitions; (p) Investments not in
excess of $10,658,000 in the aggregate, consisting of
investments by the Obligated Parties in Daisytek
Australia Pty Limited and Daisytek Australia (QLD)
Pty Limited, collectively, in the amount of
$1,982,000 and intercompany loans by the Obligated
Parties to Daisytek Australia Pty Limited and
Daisytek Australia (QLD) Pty Limited, collectively,
in the amount of $8,676,000, collectively, which
intercompany loans may not be reborrowed; and (q)
other Investments not included in clauses (a) through
(p) preceding in an aggregate amount at any time not
in excess of the net amount of proceeds from
offerings of Capital Stock of the Parent and
Permitted Subordinated Debt funded after the Closing
Date, to the extent such net proceeds exceed an
amount equal to the sum of intercompany loans and
other Investments made by the Obligated Parties
pursuant to clause (j) and clause (p) preceding and
to the extent such net proceeds are in
12
addition to the proceeds of Permitted Subordinated
Debt and offerings of Capital Stock of the Parent
required to be obtained under Section 7.33.
(c) Clause (f) of the Interpretative Provisions set forth in Annex A of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
(f) For purposes of Section 9.1, a breach of a
financial covenant contained in Section 7.22 through Section
7.25 or Section 7.32 shall be deemed to have occurred as of
any date of determination thereof by the Agent or as of the
last day of any specified measuring period, regardless of when
the Financial Statements reflecting such breach are delivered
to the Agent and the Lenders.
Section 4.9 Addition to Schedules of the Credit Agreement. Effective as of
the Amendment Date, a new Schedule A-4 shall be added to the Credit Agreement
which shall read in its entirety as set forth on Schedule A-4 hereto.
Section 4.10 Amendment to Exhibit C to the Credit Agreement. Effective as
of the Amendment Date, Exhibit C to the Credit Agreement is hereby amended and
restated to read in its entirety as set forth on Exhibit C hereto.
ARTICLE 5
Amendment to Other Loan Documents
Section 5.1 Amendment to Parent Security Agreement. Effective as of the
Amendment Date, Section 2.7 of the Parent Security Agreement is amended in its
entirety to read as follows:
Section 2.7 Appraisals. The Agent may, at the Grantor's
expense, obtain an appraisal (prepared on a basis satisfactory to the
Agent and including, without limitation, information required by
Requirements of Law and by the internal policies of the Agent) of any
or all of the Collateral from a credentialed appraiser acceptable to
the Agent (a) whenever any Default or Event of Default exists and (b)
at such other times as the Agent may request, but not more frequently
than twice each calendar year. Additionally, the Agent may, at the
Grantor's expense, with respect to any appraisal obtained pursuant to
clause (b) preceding, obtain two updates thereto ("desk-top appraisal")
at such time as the Agent may determine in its discretion.
Section 5.2 Amendment to Subsidiary Security Agreement. Effective as of the
Amendment Date, Section 2.7 of the Subsidiary Security Agreement is amended in
its entirety to read as follows:
Section 2.7 Appraisals. The Agent may, at the Grantors'
expense, obtain an appraisal (prepared on a basis satisfactory to the
Agent and including, without limitation, information required by
Requirements of Law and by the internal policies of the Agent) of any
or all of the Collateral from a credentialed appraiser acceptable to
the Agent (a) whenever any Default or Event of Default exists and (b)
at such other times as the Agent may request, but not more frequently
than twice each calendar year. Additionally, the Agent may, at the
Grantors' expense, with respect to any appraisal obtained pursuant to
clause (b) preceding, obtain two updates thereto ("desk-top appraisal")
at such time as the Agent may determine in its discretion.
ARTICLE 6
Conditions
Section 6.1 Conditions Precedent. The effectiveness of this Amendment is
subject to the satisfaction of each of the following conditions precedent:
(a) The Agent shall have received all of the following, each dated the date
of this Amendment (unless otherwise indicated), in form and substance
satisfactory to the Agent:
(i) Amendment Documents. This Amendment and any other
instrument, document, or certificate reasonably required by
the Agent to be executed or delivered by the Obligated Parties
in connection with this Amendment, in each case duly executed
(the "Amendment Documents");
(ii) Closing Certificate. A certificate of each
Obligated Party signed by a Responsible Officer: (a) stating
that after giving effect hereto, no Default or Event of
Default exists; (b) describing how the Intercompany Account
arose between Daisytek and Daisytek Australia Pty Ltd. and
Daisytek Australia (QLD) Pty Limited; (c) stating the amount
of the Intercompany Account between Daisytek Australia to
Daisytek as of March 31, 2002 and September 30, 2002; and (d)
certifying as to such other factual matters as may be
reasonably requested by the Agent;
(iii) Receipt of Amendment Fee. The amendment fee in
accordance with Section 8.6 hereto;
13
(iv) Receipt of Arrangement and Structuring Fee. The
arrangement and structuring fee in accordance with Section 8.7
hereto;
(v) Additional Information. The Agent shall have
received such additional documents, instruments, and
information as the Agent may reasonably request to effect the
transactions contemplated hereby; and
(vi) Expenses. The Borrowers shall have paid to the
Agent all fees, costs, and expenses owed to and/or incurred by
the Agent in connection with the Credit Agreement or this
Amendment.
(b) The representations and warranties contained herein, in the Credit
Agreement, and in all other Loan Documents, as amended hereby, shall be true and
correct in all material respects as of the date hereof as if made on the date
hereof except for such representations and warranties limited by their terms to
a specific date.
(c) All corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all other agreements, documents, and
instruments executed and/or delivered pursuant hereto, and all legal matters
incident thereto, shall be satisfactory to Agent; and
(d) No Default or Event of Default shall be in existence after giving
effect to this Amendment.
ARTICLE 7
Other Agreements
Section 7.1 Adjusted Tangible Net Worth Requirement for September 30, 2002.
In consideration of this Amendment, the Obligated Parties represent and agree
that the Adjusted Tangible Net Worth, determined for the Parent and its
Subsidiaries on a consolidated basis pursuant to the Financial Statements
included in the 10Q filed by the Parent for the Fiscal Quarter ending September
30, 2002, as of the last day of the Fiscal Quarter ending September 30, 2002,
will be greater than or equal to $87,000,000.
ARTICLE 8
Miscellaneous
Section 8.1 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and, except as expressly modified and superseded
by this Amendment, the terms and provisions of the Credit Agreement and the
other Loan Documents are ratified and confirmed and shall continue in full force
and effect. Each of the Obligated Parties, the Agent, and the Lenders agree that
the Credit Agreement as amended hereby and the other Loan Documents shall
continue to be legal, valid, binding, and enforceable in accordance with their
respective terms.
Section 8.2 Representations and Warranties. Each Obligated Party hereby
represents and warrants to the Agent and the Lenders that, as of the date of and
after giving effect to this Amendment, (a) the execution, delivery, and
performance of this Amendment and any and all
14
other Amendment Documents executed and/or delivered in connection herewith
have been authorized by all requisite action on the part of such Obligated Party
and will not violate such Obligated Party's organizational or governing
document, (b) the representations and warranties contained in the Credit
Agreement and in the other Loan Documents are true and correct on and as of the
date hereof, in all material respects, as if made again on and as of the date
hereof except for such representations and warranties limited by their terms to
a specific date, and (c) after giving effect to this Amendment, no Default or
Event of Default exists.
Section 8.3 Survival of Representations and Warranties. All representations
and warranties made in this Amendment or any other Loan Document, including any
Loan Document furnished in connection with this Amendment, shall survive the
execution and delivery of this Amendment and the other Loan Documents, and no
investigation by the Agent or any Lender, or any closing, shall affect the
representations and warranties or the right of the Agent and the Lenders to rely
upon them.
Section 8.4 Reference to Credit Agreement. Each of the Loan Documents,
including the Credit Agreement, the Amendment Documents, and any and all other
agreements, documents, or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as
amended hereby, are hereby amended so that any reference in such Loan Documents
to the Credit Agreement, whether direct or indirect, shall mean a reference to
the Credit Agreement as amended hereby.
Section 8.5 Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 8.6 Amendment Fee. The Obligated Parties jointly and severally
agree to pay to the Agent and the Lenders on the date hereof an amendment fee in
the aggregate amount of $625,000 as additional consideration for the Agent's and
the Lenders agreement to amend the Agreement, waive the Specified Defaults, and
consent to the Subordination.
Section 8.7 Arrangement and Structuring Fee. The Obligated Parties jointly
and severally agree to pay to the Agent, for its own account, on the date hereof
an arrangement and structuring fee of $75,000, in consideration of the
arrangement and structuring of this Amendment.
Section 8.8 Effect of Amendment. The effect of the waivers contained in
Section 3.1 of this Amendment are expressly limited as provided herein, and in
order to induce the Agent and the Lenders to agree to such waivers, each of the
Obligated parties agrees that such waivers shall not constitute or be deemed a
waiver of any other Event of Default, now existing or hereafter arising, or a
waiver of any rights or remedies arising as a result of any such other Event of
Default. No consent or waiver, express or implied, by the Agent or any Lender to
or for any breach of or deviation from any covenant, condition, or duty by any
Obligated Party shall be deemed a consent or waiver to or of any other breach of
the same or any other covenant, condition, or duty. Each of the Obligated
Parties (individually, a "subject Obligated Party") hereby (a) consents to the
execution and delivery of this Amendment by the other Obligated
15
Parties, (b) agrees that this Amendment shall not limit or diminish the
obligations of the subject Obligated Party under its certain Loan Documents
delivered in connection with the Credit Agreement, executed or joined in by the
subject Obligated Party and delivered to the Agent, (c) reaffirms the subject
Obligated Party's obligations under each of such Loan Documents, and (d) agrees
that each of such Loan Documents remains in full force and effect and is hereby
ratified and confirmed.
Section 8.9 Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE U.S.
Section 8.10 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Obligated Parties, the Agent, and the Lenders
and their respective successors and assigns, except no Obligated Party may
assign or transfer any of its respective rights or obligations hereunder without
the prior written consent of the Lenders.
Section 8.11 Counterparts. This Amendment may be executed in one or more
counterparts, and on telecopy counterparts each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 8.12 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 8.13 General. This Amendment, when signed by each signatory as
provided hereinbelow (a) shall be deemed effective prospectively as of the
Amendment Date, (b) contains the entire agreement among the parties and may not
be amended or modified except in writing signed by all parties, (c) shall be
governed and construed according to the laws of the State of Texas, (d) may be
executed in any number of counterparts, each of which shall be valid as an
original and all of which shall be one and the same agreement, and (e) shall
constitute a Loan Document. A telecopy or other electronic transmission of any
executed counterpart shall be deemed valid as an original.
Section 8.14 Entire Agreement. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
(Remainder of page intentionally left blank)
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in several counterparts effective as
of the Effective Date specified in the preamble hereof.
OBLIGATED PARTIES:
-----------------
THE PARENT:
----------
DAISYTEK INTERNATIONAL
CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
BORROWERS:
DAISYTEK, INCORPORATED
ARLINGTON INDUSTRIES, INC.
DAISYTEK LATIN AMERICA, INC.
DIGITAL STORAGE, INC.
X.X. XXXXX COMPANY
THE TAPE COMPANY
XXXXXXXXXXXX.XXX, INC.
VIRTUAL DEMAND, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
17
AGENT:
BANK OF AMERICA, NATIONAL ASSOCIATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
LENDERS:
BANK OF AMERICA, NATIONAL ASSOCIATION
By:
------------------------------------------
Name:
----------------------------------------
Title:
--------------------------------------
JPMORGAN CHASE BANK
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
BANK ONE, NA
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
18
COMERICA BANK, a Michigan banking corporation
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
FLEET CAPITAL CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
FOOTHILL CAPITAL CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SIEMENS FINANCIAL SERVICES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
19
UPS CAPITAL CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
20
