ELEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this "ELEVENTH AMENDMENT")
is made and entered into as of March 28, 2001 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"), AMERICAN BUSINESS CREDIT CORPORATION, AMERITREND
CORPORATION, CORPORATE CONSULTING GROUP, INC., D.I. INVESTMENT MANAGEMENT, INC.,
DANKA IMAGING DISTRIBUTION, INC., DANKA MANAGEMENT COMPANY, INC., DANKA OFFICE
IMAGING COMPANY, DYNAMIC BUSINESS SYSTEMS, INC., XXXXXX ENTERPRISES, INC. OF
SOUTH FLORIDA, QUALITY BUSINESS, INC. (collectively with Danka Holding, the
"GRANTORS"), the entities listed on the signature pages hereof as International
Swing Line Borrowers (collectively the "INTERNATIONAL BORROWERS" and together
with the Grantors and the Companies, the "DANKA PARTIES"), BANK OF AMERICA,
NATIONAL ASSOCIATION (formerly known as NationsBank, National Association, a
national banking association formerly known as NationsBank, National Association
(Carolinas)), each other Bank listed on the signature pages hereof (each
individually, a "BANK" and collectively, the "BANKS"), and BANK OF AMERICA,
NATIONAL ASSOCIATION (formerly known as NationsBank, National Association), in
its capacity as agent for the Banks (in such capacity, the "AGENT"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Companies, the Banks and the Agent have entered into a
Credit Agreement dated as of December 5, 1996, as amended and supplemented by a
First Amendment dated as of December 5, 1997, a Second Amendment dated as of
July 28, 1998, a Third Amendment dated as of December 31, 1998, a Fourth
Amendment dated as of March 29, 1999, a Fifth Amendment dated as of June 15,
1999, a Sixth Amendment dated as of July 9, 1999 (the "SIXTH AMENDMENT"), a
Seventh Amendment dated as of December 1, 1999, an Eighth Amendment dated as of
March 24, 2000, a Ninth Amendment dated as of October 31, 2000, a Tenth
Amendment dated as of December 15, 2000, a Waiver Letter Agreement dated as of
October 20, 1998 and a Waiver Letter Agreement dated as of February 18, 1999 (as
further amended hereby and as from time to time further amended, supplemented or
modified, the "CREDIT AGREEMENT"), pursuant to which the Banks agreed to make
certain revolving credit, term loan and letter of credit facilities available to
the Companies; and
WHEREAS, Article VIII of the Credit Agreement contains financial
covenants, compliance with which cannot be waived or amended without the written
consent of the Majority Banks; and
WHEREAS, the Danka Parties have requested that the Banks provide
written consent to the amendment of the financial covenants as provided herein;
and
WHEREAS, the Banks and the Danka Parties have agreed to amend certain
provisions of the Credit Agreement and to certain other agreements of the
parties, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and sufficient consideration, receipt of which is hereby
acknowledged, the Danka Parties and the Banks do hereby agree as follows:
1. DEFINITIONS. Any capitalized terms used herein without definition
shall have the meaning set forth in the Credit Agreement.
2. AMENDMENT OF CREDIT AGREEMENT. Subject to the terms and conditions
set forth herein, Section 8.3 of the Credit Agreement is amended to add new
clause (viii) as follows:
"(viii) Notwithstanding anything to the contrary contained in
this SECTION 8.3, compliance with the financial covenants in
clauses (i) through (v) of this SECTION 8.3 shall be deemed
satisfied for the period beginning on or after March 28, 2001 and
through and including the earlier of (1) July 16, 2001 and (2)
the date on which there shall have occurred a "Designated Event"
as such term is defined in that certain indenture dated March 13,
1995, between Danka PLC, as issuer, and The Bank of New York, as
trustee, pursuant to which Danka PLC issued the Convertible
Subordinated Notes, and any Event of Default that may have
existed on or after March 28, 2001 as a result of any failure by
the Danka Parties to comply therewith during such period shall be
waived, if the Danka Parties do not permit:
(a) The Consolidated Fixed Charge Coverage Ratio as at
the end of the four fiscal quarter period ending on March
31, 2001 to be less than 0.90 to 1.00;
(b) At any time on and after March 28, 2001 and on or
prior to July 16, 2001 the Adjusted Consolidated Net Worth
of Danka PLC and its Subsidiaries to be less than
$286,000,000;
(c) The Consolidated Total Leverage Ratio as at the end
of March 31, 2001 for the four fiscal quarter period then
ending to exceed 5.50 to 1.00;
(d) The cumulative Consolidated EBITDA of Danka PLC and
its Subsidiaries for the four fiscal quarter period ending
on
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March 31, 2001 to be less than $149,000,000; and
(e) The ratio of (A) Consolidated EBITDA to (B) gross
interest expense in each case of Danka PLC and its
Subsidiaries as at the end of the four fiscal quarter period
ending on March 31, 2001 to be less than 1.90 to 1.00.
For purposes of subsections (a), (c), (d) and (e) in this Section 8.3(viii), the
calculation of the Consolidated EBITDA for the four fiscal quarter period ending
March 31, 2001 shall add to income from continuing operations the actual
restructuring or special charges for such period in an amount not to exceed
$82,340,000. In addition, for purposes of subsections (a), (b) and (e) in this
SECTION 8.3(VIII), the impact of the $10,000,000 waiver extension fee under the
Sixth Amendment dated as of July 9, 1999 on the interest expense for such period
shall be excluded. Notwithstanding anything to the contrary in this Agreement,
upon any occurrence of the circumstances described in subclause (2) of clause
(viii) of this SECTION 8.3, then immediately, automatically and without any
prior notice thereof, an "Event of Default" as such term is defined in SECTION
9.1 of this Agreement shall be deemed to have occurred."
3. DIVIDENDS, DISTRIBUTIONS, INVESTMENTS. During the period from and
after March 28, 2001 (i) Danka PLC shall not pay any dividends or make any
distributions, except as permitted pursuant to the first paragraph of Section
8.5 of the Credit Agreement, (ii) neither the Companies nor any of their
Subsidiaries shall make any Acquisitions, and (iii) neither the Companies nor
any of their Subsidiaries shall make any Investments; PROVIDED, HOWEVER, that
the Banks hereby consent to consummation of the following transactions (as
further described in Schedule I hereto):
(a) Conversion of the existing intercompany loan in the aggregate
principal amount of $2,000,000 owed by Danka Philippines, Inc. to
Dankalux into share capital.
(b) Payment by Dankalux to Danka Belgium N.V. of approximately Euro
2,000,000 to comply with capital requirements of local law;
PROVIDED THAT not more than three business days after such payment
Danka Belgium N.V. shall repay to Dankalux the principal amount
outstanding under the existing intercompany loan owed by Danka
Belgium N.V. to Dankalux, together with any accrued and unpaid
interest thereon, in an aggregate amount not less than the amount
of such payment.
(c) (i) Payment by Dankalux to Danka Hungary kft of $200,000; PROVIDED
THAT not more than three days after such payment Danka Hungary kft
shall repay to Dankalux the principal amount outstanding under the
existing intercompany loan owed by Danka Hungary kft to Dankalux,
together with any accrued and unpaid
-3-
interest thereon, in an aggregate amount not less than $200,000;
and (ii) redenomination from U.S. Dollars to Euros of an existing
intercompany loan owed by Danka Hungary kft to Dankalux in the
aggregate principal amount of $469,000, each of (i) and (ii) above
to comply with capital requirements of local law;.
(d) (i) Conversion of a portion of the existing intercompany loan owed
by Danka Suisse S.A. (previously known as Danka Office Imaging
S.A.) to Dankalux in the aggregate principal amount of $3,360,000
into share capital to comply with capital requirements of local
law; and (ii) if required to comply with capital requirements of
local law, payment by Dankalux to Danka Suisse S.A. of $3,360,000;
PROVIDED THAT if such payment is made, then not more than three
days after such payment Danka Suisse S.A. shall repay to Dankalux
the principal amount outstanding under such intercompany loan,
together with any accrued and unpaid interest thereon, in an
aggregate amount not less than the amount of such payment.
The Danka Parties represent and warrant that the payments and transfers
described in this paragraph 3 comply with all applicable laws, rules and
regulations of every Governmental Authority, foreign and domestic.
4. INDEBTEDNESS. Subject to the terms and conditions set forth herein,
Section 8.13 of the Credit Agreement is amended to add at the end of the last
paragraph thereof as follows: "Notwithstanding anything to the contrary herein,
the Companies may incur Subordinated Indebtedness in an aggregate principal
amount not in excess of $30,000,000 at any time outstanding."
5. AMENDMENT FEES; EXPENSES. Promptly upon the execution of this
Eleventh Amendment by the Majority Banks, the Danka Parties shall pay to the
Agent for the benefit of each of the Banks which shall have executed this
Eleventh Amendment an amendment fee equal to 1/4% of such Banks' Commitment (the
"AMENDMENT FEE"). The Danka Parties agree promptly to pay or reimburse
reasonable expenses of the Steering Committee and its members (including the
reasonable fees and expenses of outside counsel for the Steering Committee and
each of its members) incurred in connection with the Credit Agreement and the
other Loan Documents. 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
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Companies shall, and shall cause all Subsidiaries to, cooperate fully and in a
timely manner with the Consultant, including its agents and employees.
6. EFFECTIVENESS. This Eleventh Amendment shall become effective upon
(a) receipt by the Agent of an executed copy of this Eleventh Amendment (which
may be signed in counterparts and may be received by facsimile transmission)
signed by the Danka Parties and the Majority Banks, (b) payment by the Danka
Parties to the Agent of the Amendment Fee, and (c) receipt by the Agent of a
copy of a waiver (in form and substance satisfactory to the Agent) of violations
of the financial covenants incorporated in the tax retention operating lease
documents.
7. ACKNOWLEDGMENT; RELEASE.
(a) The Companies and the Grantors 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 any 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. The
Companies and the Grantors hereby release and forever discharge
the Agent, the International Swing Line Banks, 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.
(b) The International Swing Line Borrowers acknowledge that they
have no existing defense, counterclaim, offset, cross-complaint,
claim or demand or 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 owed by any of
them under the terms of the International Swing Line Agreement
or any separate facility which has been made available to any of
them by any International Swing Line Bank or a Designated Local
Lender (as defined in the International Swing Line Agreement)
and any agreements related thereto. The International Swing Line
Borrowers hereby release and forever discharge the Agent, the
International Swing Line Banks and the Designated Local Lenders
(as defined in the International Swing Line Agreement) 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
-5-
nature, both in law and in equity, known or unknown, whether
matured or unmatured, absolute or contingent.
(c) The Danka Parties further acknowledge and agree that any breach
by the Danka Parties in the timely performance, observance, or
fulfillment of any of the terms or conditions stated herein
shall, unless the Majority Banks shall otherwise agree in
writing, constitutes an Event of Default under the Credit
Agreement.
8. ENTIRE AGREEMENT. This Eleventh Amendment sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter.
9. DEEMED AMENDMENT OF OTHER LOAN DOCUMENTS; FULL FORCE AND EFFECT. To
the extent necessary to give effect to the provisions hereof, the International
Swing Line Agreement and Security Agreement shall be deemed amended and
supplemented by the terms hereof. Except as hereby specifically amended,
modified or supplemented, the Credit Agreement and all other Loan Documents are
hereby confirmed and ratified in all respects and shall remain in full force and
effect according to their respective terms.
10. COUNTERPARTS. This Eleventh Amendment may be executed in any number
of counterparts (including, without limitation, counterparts sent by facsimile
transmission), each of which shall be deemed an original as against any party
whose signature appears thereon and all of which shall together constitute one
and the same instrument.
11. GOVERNING LAW. This Eleventh Amendment shall in all respects be
governed by the laws and judicial decisions of the State of Florida.
12. ENFORCEABILITY. Should any one or more of the provisions of this
Eleventh Amendment be determined to be illegal or unenforceable as to one of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.
13. AUTHORIZATION. This Eleventh Amendment has been duly authorized,
executed and delivered by the parties hereto and constitutes a legal, valid and
binding obligations of the parties hereto, except as may be limited by general
principles of equity or by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
WITNESS: 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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AMERICAN BUSINESS CREDIT CORPORATION
AMERITREND CORPORATION
CORPORATE CONSULTING GROUP, INC.
D.J. INVESTMENT MANAGEMENT, INC.
DANKA IMAGING DISTRIBUTION, INC.
DANKA MANAGEMENT COMPANY, INC.
DANKA OFFICE IMAGING COMPANY
DYNAMIC BUSINESS SYSTEMS, INC.
XXXXXX ENTERPRISES, INC. OF SOUTH FLORIDA
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
QUALITY BUSINESS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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INTERNATIONAL SWINGLINE BORROWERS
DANKA CHILE COMERCIAL LTDA
DANKA DO BRASIL LIMITADA
DANKA MEXICANA S DE RL DE CV
DANKA DE PANAMA X.X.
XXXXX DE COLOMBIA
PUERTO RICO DANKA INC.
DANKA DE VENEZUELA X.X.
XXXXX AUSTRALIA PTY LIMITED &
DANKA NEW ZEALAND LIMITED
DANKA OFFICE IMAGING (JAPAN)
DANKA PHILIPPINES INC.
DANKA FRANCE S.A.R.L.
DANKA FRANCE XX
XXXXX OFFICE PRODUCTS B.V.
DANKA OFFICE IMAGING GMBH,
DANKA DEUTSCHLAND GMBH,
DANKA DISTRIBUTION GMBH,
DANKA DEUTSCHLAND HOLDING GMBH
DANKA OFFICE PRODUCTS B.V.
DANKA ITALIA S.P.A., BASSILLICHI INFOTEC
S.P.A., DANKA S.P.A. & DANKA OFFICE
IMAGING S.P.A.
DANKA HOLDINGS BV, DANKA EUROPE BV,
DANKA DISTRIBUTION BV (FKA INFOTEC
EUROPE BV), INFOTEC NEDERLAND BV,
DANKA GROUP BV, DANKA SERVICES
INTERNATIONAL BV, DANKA OFFICE
PRODUCTS BV, INFOTEC PARTICIPATIE BV,
AND DANKA NEDERLAND BV
DANKA OFFICE PRODUCTS BV
DANKA BUSINESS SYSTEMS PLC,
DANKALUX SARL & Co. SCA &
DANKA HOLDING COMPANY
By: ___________________________________
Name: F. Xxxx Xxxxxxxxx
Title: Director
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BANK OF AMERICA, NATIONAL
ASSOCIATION. (formerly known as
NationsBank, N.A.), as Agent and
Issuing Bank, and individually as
an International Swing Line Bank
and a Bank
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE BANK OF NOVA SCOTIA
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE BANK OF NEW YORK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CIBC INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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PNC BANK, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FIRST UNION NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SUNTRUST BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE FUJI BANK AND TRUST COMPANY,
LIMITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ABN AMRO BANK N.V.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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BNP PARIBAS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HIBERNIA NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SAN PAOLO IMI SPA
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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LLOYDS TSB BANK PLC
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BANCA COMMERCIALE ITALIANA
New York Branch
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
AMSOUTH BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-00-
XXX XXXX XX XXXXX-XXXXXXXXXX, LTD.,
NEW YORK BRANCH
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BANKERS TRUST COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE DAI-ICHI KANGYO BANK, LIMITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
NATIONAL AUSTRALIA BANK LIMITED
ACN 004044937
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-00-
XXX XXXXX XXXX XXXXXXX, XXX XXXX BRA
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
WACHOVIA BANK, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
NATIONAL WESTMINSTER BANK PLC
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BANCA NAZIONALE DEL LAVORO S.p.A. -
LONDON BRANCH
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CREDIT AGRICOLE INDOSUEZ
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-00-
XXXXX XXXXXX XXXX AND TRUST COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CHASE SECURITIES, INC.,
as agent for The Chase Manhattan Ban
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LAZARD BANK LIMITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SOUTHTRUST BANK, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BT HOLDINGS (NEW YORK) INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
XXXXXX BROTHERS BANKHAUS AG, LONDON
BRANCH
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
-16-
SCHEDULE I - INVESTMENTS
1. Philippines
Danka is currently in the process of liquidating its operation in the
Philippines. Dankalux has an approximate $2,000,000 intercompany loan to Danka
Philippines, Inc. Under Philippine law, if Danka were to forgive this debt as
part of the liquidation of the company, it would create income which would be
subject to Philippine cash taxes of roughly USD 600,000. There is no offsetting
benefit in other jurisdictions for this cash tax. Therefore, Dankalux requests
approval to capitalize its loan balance, which would be subsequently written-off
when the Philippines is dissolved. There is no cash movement in this Investment.
2. Belgium
Based on Belgian law, historical losses have reduced Shareholders'
Capital to a level which puts the company in potential non-compliance with local
capital rules. By investing up to Euro 2.0 million, into Danka Belgium NV,
Dankalux will restore the net worth position of the company to approximately
Euro 1.0 million. Danka Belgium will use the Euro 2.0 million to repay existing
intercompany principal and interest to Dankalux.
Timing: 3 Days. Cash will leave and fully return to Dankalux
3. Hungary
Hungary was historically capitalized with a US dollar loan of $669,000
from Dankalux. As a result of foreign exchange movements between the Hungarian
Forint and the US dollar, Danka Hungary kft is in a negative equity position and
subject to Thin Capitalization concerns. In order for Danka Hungary to be in
compliance with loan laws (debt to equity ratio of 4:1), Dankalux needs to
infuse USD 200,000 of capital into Danka Hungary. Danka Hungary will in turn
repay USD $200,000 of its intercompany loan to Dankalux and Dankalux will
redenominate the remaining USD $469,000 intercompany debt into Euro.
Timing: 3 days. Cash will leave and fully return to Dankalux
4. Switzerland
According to article 725 (1) of Swiss Company Law, free capital (share
capital plus reserves) must be twice the level of retained losses. Rather than
infuse new equity into Danka Suisse S.A. (previously known as Danka Office
Imaging S.A.), Dankalux will convert CHF 5.6 million (USD 3.36 million) of
intercompany debt into share capital to allow the Swiss Company to remain in
compliance with local capital rules. No cash movement is expected with the
Investment. However, if local rules require actual cash movement and
intercompany repayment, cash will return to Dankalux from Danka Suisse S.A. in
thee days or less.
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