<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______ to _______
Commission File Number 0-25400
DAISYTEK INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2421746
- ------------------------ --------------------------
(State of Incorporation) (I.R.S. Employer I.D. No.)
500 NORTH CENTRAL EXPRESSWAY, PLANO, TEXAS 75074
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 881-4700
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
At January 31, 1998 there were 6,818,658 shares of registrant's common stock
outstanding (After giving consideration for the two for one stock split
discussed in Note 8 to the accompanying consolidated financial statements,
there would have been 13,637,316 common shares outstanding at January 31,
1998).
<PAGE> 2
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
FORM 10-Q
DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 (Unaudited)
and March 31, 1997.................................................. 3
Unaudited Interim Consolidated Statements of Income for the
Three and Nine Months Ended December 31, 1997 and 1996 ............. 5
Unaudited Interim Consolidated Statements of Cash Flows for the
Nine Months Ended December 31, 1997 and 1996........................ 6
Notes to Unaudited Interim Condensed Consolidated Financial
Statements.......................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................................... 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................................ 16
SIGNATURES ......................................................................... 17
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
------
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
----------- ---------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 914 $ 552
Accounts receivable, net of allowance for doubtful
accounts of $2,262 and $2,360 at December 31, 1997 and
March 31, 1997, respectively 95,943 90,778
Inventories, net:
Inventories, excluding Priority Fulfillment Services Division 58,631 54,426
Inventories, Priority Fulfillment Services Division 11,664 10,354
Prepaid expenses and other current assets 2,616 1,214
Deferred income tax asset -- 565
---------- ---------
Total current assets 169,768 157,889
---------- ---------
PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment 24,249 20,949
Leasehold improvements 991 673
---------- ---------
25,240 21,622
Less - Accumulated depreciation and amortization (12,727) (9,648)
---------- ---------
Net property and equipment 12,513 11,974
EMPLOYEE RECEIVABLE 448 423
EXCESS OF COST OVER NET ASSETS ACQUIRED,
net of accumulated amortization of $741 and $608 at
December 31, 1997 and March 31, 1997, respectively 4,244 5,002
---------- ---------
Total assets $ 186,973 $ 175,288
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 4
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
----------- ---------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 367 $ 662
Trade accounts payable 65,194 69,321
Accrued expenses 7,415 6,260
Income taxes payable 1,940 1,398
Deferred income tax liability 1,068 --
---------- ---------
Total current liabilities 75,984 77,641
---------- ---------
LONG-TERM DEBT, less current portion 28,849 30,454
---------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized at December
31, 1997 and March 31, 1997; none issued
and outstanding -- --
Common stock, $0.01 par value; 20,000,000 shares
authorized at December 31, 1997 and March 31, 1997; 13,636,340 and
13,041,418 shares issued and outstanding at December 31, 1997 and March
31, 1997,
respectively 136 130
Additional paid-in capital 36,907 33,266
Retained earnings 46,939 35,103
Cumulative foreign currency translation adjustment (1,842) (1,306)
---------- ---------
Total shareholders' equity 82,140 67,193
---------- ---------
Total liabilities and shareholders' equity $ 186,973 $ 175,288
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE> 5
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------------- ------------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 186,586 $ 154,429 $ 538,966 $ 429,471
COST OF SALES 167,823 139,225 485,026 387,008
------------ ------------ ------------ -------------
Gross profit 18,763 15,204 53,940 42,463
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 11,508 9,375 33,143 26,078
------------ ------------ ------------ -------------
Income from operations 7,255 5,829 20,797 16,385
INTEREST EXPENSE 548 375 1,619 1,220
------------ ------------ ------------ -------------
Income before income taxes 6,707 5,454 19,178 15,165
PROVISION FOR INCOME TAXES 2,569 2,090 7,342 5,805
------------ ------------ ------------ -------------
NET INCOME $ 4,138 $ 3,364 $ 11,836 $ 9,360
============ ============ ============ =============
NET INCOME PER COMMON SHARE:(1)
Basic $ 0.30 $ 0.26 $ 0.87 $ 0.73
Diluted $ 0.29 $ 0.24 $ 0.83 $ 0.68
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:(1)
Basic 13,632 12,970 13,530 12,904
Diluted 14,308 13,834 14,260 13,832
</TABLE>
(1) In February 1998, the Company's Board of Directors approved a two for
one stock split which provides for each holder of Common Stock to receive one
additional share for each share held. The weighted average common share and net
income per common share calculations have been adjusted to reflect the split.
The accompanying notes are an integral part of these interim consolidated
statements.
5
<PAGE> 6
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------------------------
1997 1996
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,836 $ 9,360
Adjustments to reconcile net income to net cash
used in operating activities --
Depreciation and amortization 3,356 2,704
Provision for doubtful accounts 1,250 908
Deferred income tax provision 1,626 238
Changes in operating assets and liabilities --
Accounts receivable (7,415) (11,186)
Inventories, net (6,189) (12,196)
Trade accounts payable and accrued expenses (1,230) 4,386
Income taxes payable 710 198
Prepaid expenses and other current assets (1,516) 960
--------- ----------
Net cash provided by (used in) operating activities 2,428 (4,628)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,679) (3,932)
Acquisition of subsidiary -- (2,105)
Advances to employees, net (81) (94)
--------- -----------
Net cash used in investing activities (3,760) (6,131)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, net (1,382) 10,130
Payments on capital leases and notes payable (513) (478)
Net proceeds from exercise of stock options 3,601 1,492
--------- ----------
Net cash provided by financing activities 1,706 11,144
--------- ----------
EFFECT OF EXCHANGE RATES ON CASH (12) (32)
--------- -----------
NET INCREASE IN CASH 362 353
CASH, beginning of period 552 204
--------- ----------
CASH, end of period $ 914 $ 557
========= ==========
</TABLE>
The accompanying notes are an integral part of these interim consolidated
statements.
6
<PAGE> 7
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31,
1997 AND 1996 IS UNAUDITED.)
1. ORGANIZATION AND NATURE OF BUSINESS:
Daisytek International Corporation (a Delaware corporation) and
subsidiaries (the "Company") is a wholesale distributor of computer and office
automation supplies and accessories, whose primary products are laser toner,
copier toner, inkjet cartridges, optical storage products, printer ribbons,
diskettes, computer tape cartridges and accessories such as cleaning kits and
media storage files. The Company, through its wholly owned subsidiaries in the
U.S., Canada, Australia, Mexico and Singapore, sells products primarily in North
America, as well as in Latin America, Europe, the Far East, Africa and
Australia. The Company's customers include value-added resellers, computer
supplies dealers, office product dealers, contract stationers, buying groups,
computer and office product superstores, warehouse clubs and other retailers who
resell the products to end-users.
During fiscal year 1996, the Company formed Priority Fulfillment Services,
Inc. ("PFS"), a wholly owned subsidiary, to provide outsourcing solutions to its
business partners. Through PFS, the Company sells its core competencies in
call-center, product fulfillment, logistics and support services to client
companies worldwide, primarily on a fee-based relationship. PFS customizes these
services to meet specific requirements of these companies. PFS's call-center
services include: order entry, order tracking and customer service (inbound),
outbound telemarketing services and customized reporting of customer and call
information. PFS utilizes primarily the Company's centralized distribution
facility in Memphis, Tennessee to provide product fulfillment and logistics
services, with additional distribution facilities available in Florida, Canada,
Mexico and Australia. PFS maintains relationships with a number of shipping
companies to provide next business day delivery on domestic package orders,
truck shipments on larger domestic orders and a variety of air and surface
delivery options for international orders. PFS also provides other support
services such as invoicing, credit management and collection services, and
accounting and systems support.
2. INTERIM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
In the opinion of management, the Interim Unaudited Condensed Consolidated
Financial Statements of the Company include all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the Company's
financial position as of December 31, 1997, its results of operations for the
three and nine months ended December 31, 1997 and 1996, and its results of cash
flows for the nine months ended December 31, 1997 and 1996. Results of the
Company's operations for interim periods may not be indicative of results for
the full fiscal year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations promulgated by the Securities and Exchange Commission (the "SEC").
The Interim Unaudited Condensed Consolidated Financial Statements should be
read in conjunction with the audited Consolidated Financial Statements and
accompanying notes of the Company included in the Company's Form 10-K (File
Number 0-25400) as filed with the SEC on June 27, 1997 (the "Company's Form
10-K"). Accounting policies used in the preparation of the Interim Unaudited
Condensed Consolidated Financial Statements are consistent in all material
respects with the accounting policies described in the Notes to Consolidated
Financial Statements in the Company's Form 10-K.
Certain prior period data has been reclassified to conform to the current
period presentation. These reclassifications had no effect on previously
reported net income, shareholders' equity or cash flows.
7
<PAGE> 8
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31,
1997 AND 1996 IS UNAUDITED.)
3. INVENTORIES:
Inventories (merchandise held for resale, all of which is finished goods)
are stated at the lower of weighted average cost or market.
4. DEBT:
Debt as of December 31, 1997 and March 31, 1997, is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
------------ ---------
<S> <C> <C>
Revolving line of credit with commercial banks, interest
(weighted average rate of 6.8% at December 31, 1997)
at the Company's option at the prime rate of a bank
(8.5% at December 31, 1997) or the Eurodollar rate
plus 0.625% to 1.125% (6.8% at December 31, 1997),
due July 1, 1999 $ 26,000 $ 30,100
Revolving line of credit with commercial bank, interest
(weighted average of 5.6% at December 31, 1997) at
the Australian Bank Bill Rate plus 0.75% (5.6% at
December 31, 1997), due July 1, 1999 2,718 --
Notes payable and obligations under capital leases for
warehouse equipment, computer equipment, office
furniture and fixtures, interest at varying rates
ranging from 8% to 21%, with lease terms varying from
three to seven years 498 1,016
-------- --------
Long-term debt 29,216 31,116
Less: Current portion of long-term debt (367) (662)
-------- --------
Long-term debt, less current portion $ 28,849 $ 30,454
======== ========
</TABLE>
In May 1995, the Company entered into an agreement with certain banks for
an unsecured revolving line of credit facility (the "Facility") that, as amended
on February 13, 1998, has a maximum borrowing availability of $65.0 million and
expires on December 31, 2000. The maximum borrowing availability at December 31,
1997, prior to amendment, was $50 million. Availability under the Facility is
based upon amounts of eligible accounts receivable, as defined. The Facility
accrues interest, at the Company's option, at the prime rate of a bank or the
eurodollar rate plus an adjustment ranging from 0.625% to 1.125% depending on
the Company's financial performance. A commitment fee of 0.20% to 0.25% is
charged on the unused portion of the Facility. The Facility contains various
covenants including, among other things, the maintenance of certain financial
ratios (minimum fixed charge ratio and minimum level of tangible net worth) and
restrictions on certain activities of the Company, including loans and payments
to related parties, incurring additional debt, acquisitions, investments and
asset sales. As of December 31, 1997, $24.0 million was available under the
Facility for additional borrowings. This Facility is part of the Company's
integrated cash management system in which accounts receivable collections are
used to pay down the Facility and disbursements are paid from the Facility. This
system allows the Company to optimize its cash flow.
8
<PAGE> 9
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31,
1997 AND 1996 IS UNAUDITED.)
During October 1997, the Company's Australian subsidiary entered into an
agreement with an Australian bank for an unsecured revolving line of credit
facility (the "Australian Facility"). The Australian Facility, which expires on
July 1, 1999, allows the Company to borrow Australian dollars up to a maximum of
$7.5 million (Australian), or approximately $4.9 million (U.S.) at December 31,
1997. The Australian Facility accrues interest at the Australian Bank Bill Rate
plus 0.75%. A commitment fee of 0.25% is charged on the total amount of the
Australian Facility. As of December 31, 1997, the Company had borrowed
approximately $2.7 million (U.S.), leaving approximately $2.2 million (U.S.)
available under the Australian Facility for additional borrowings.
During December 1997, the Company's Canadian subsidiary entered into an
agreement with a Canadian bank for an unsecured revolving line of credit
facility (the "Canadian Facility"). The Canadian Facility, which expires on
July 1, 1999, allows the Company to borrow Canadian or U.S. dollars up to a
maximum of $15.0 million (Canadian), or approximately $10.5 million (U.S.) at
December 31, 1997. The Company had no borrowings outstanding under the Canadian
Facility at December 31, 1997. The Canadian Facility accrues interest at the
Company's option at the bank's prime rate, the bank's cost of funds plus 0.65%,
the bank's U.S. dollar commercial loan rate or LIBOR plus 0.65%. A commitment
fee of 0.25% is charged on the unused portion of the Canadian Facility.
5. SUPPLEMENTAL CASH FLOW INFORMATION (IN THOUSANDS):
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-----------------------
1997 1996
---------- ---------
<S> <C> <C>
Cash paid during the period for:
Interest $ 1,644 $ 1,274
Income taxes $ 2,832 $ 4,493
Acquisition of subsidiary:
Fair value of net assets acquired $ -- $ 2,896
Stock issued -- (791)
--------- ---------
Net cash paid for acquisition $ -- $ 2,105
--------- ---------
</TABLE>
6. STOCK OPTIONS:
During the nine months ended December 31, 1997, the Company granted options
to certain employees under its employee stock option plans (the "Plans" ). These
options were granted at the fair market value of the Company's common stock at
the date of the grant. Such options become exercisable over a three year period
starting with the date of grant, based on vesting percentages. In addition to
the options granted under the Plans, during the nine months ended December 31,
1997, the Company granted 79,266 non-plan options.
Also during the nine months ended December 31, 1997, the Company, at the
option of individual employees, canceled options issued during fiscal year 1997
and issued replacement options, granted at the fair market value of the
Company's common stock on the date of the replacement grant. Such options also
become exercisable over a three year period starting with the date of the
replacement grant, based on vesting percentages. The following table summarizes
stock option activity for the nine months ended December 31, 1997:
<TABLE>
<CAPTION>
Shares Price per Share
-------- ---------------
<S> <C> <C>
Outstanding, March 31, 1997 1,706,938 $ 0.64 - $20.00
Granted 1,286,650 $12.50 - $22.44
Exercised (592,384) $ 0.64 - $16.25
Canceled (646,302) $ 9.75 - $20.00
---------
Outstanding, December 31, 1997 1,754,902 $0.64 - $22.44
=========
</TABLE>
9
<PAGE> 10
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION RELATED TO THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31,
1997 AND 1996 IS UNAUDITED.)
7. RECENTLY ISSUED ACCOUNTING STANDARDS:
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This
statement establishes new standards for computing and presenting earnings per
share ("EPS"). The Company adopted SFAS No. 128 during the quarter ended
December 31, 1997, as it is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and earlier
application is not permitted. The Company restated its EPS data for all periods
presented.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." These statements are effective for fiscal years beginning
after December 15, 1997; however, earlier adoption is permitted. SFAS No. 130
requires the presentation of comprehensive income and its components in a full
set of financial statements. SFAS No. 131 requires the disclosure of financial
and descriptive information about reportable operating segments. Both SFAS No.
130 and 131 are modifications of existing disclosure requirements, which will
have no effect on the results of operations or financial condition of the
Company. The Company is currently evaluating the standards and their potential
impact on disclosures and will adopt these pronouncements in its fiscal year
1999 financial statements.
8. SUBSEQUENT EVENTS:
During January 1998, the Company purchased all of the common stock of
Steadi-Systems, Ltd. ("Steadi"). Steadi is an independent wholesale distributor
of media products to the filmed entertainment and multimedia industries. The
acquisition of Steadi will be accounted for using the purchase method of
accounting, and, accordingly, the purchase price will be allocated to the assets
and liabilities assumed based on the fair values at the date of acquisition. The
Company will record a one-time charge related to the completion of transition,
integration and merger activities, estimated at about $0.6 million, or
approximately $0.03 per share, in the Company's fourth financial quarter ending
March 31, 1998.
During January 1998, the Company entered into a promissory note agreement
with a bank which allows the Company to borrow up to a maximum of $10 million.
Amounts borrowed under this note agreement bear interest at the bank's
discretion, primarily based on a money market borrowing rate plus an adjustment.
The maturity date of any amounts borrowed will occur prior to January 1999, the
expiration date of the note.
In February 1998, the Company's Board of Directors approved a two for one
stock split which provides for each holder of Common Stock to receive one
additional share for each share held. These Unaudited Interim Condensed
Consolidated Financial Statements have been adjusted to reflect the split.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED DECEMBER 31, 1997 AND 1996.
Net Sales. Net sales for the three months ended December 31, 1997 were
$186.6 million as compared to $154.4 million for the three months ended December
31, 1996, an increase of $32.2 million, or 20.8%. The increase was the result of
an increase in U.S. net sales of $20.2 million, or 16.5%, and an increase in
international net sales of $12.0 million, or 37.4%. Net sales for the nine
months ended December 31, 1997 were $539.0 million as compared to $429.5 million
for the nine months ended December 31, 1996, an increase of $109.5 million, or
25.5%. This increase was the result of an increase in U.S. net sales of $65.7
million, or 18.6%, and an increase in international net sales of $43.8 million,
or 57.5%. The growth in U.S. and international net sales was primarily due to
new customers, increased sales volume to large national accounts, computer and
office product superstores, the Company's continued introduction of new
products, and the addition of net sales from its Australian subsidiary which was
acquired by the Company during the third quarter of fiscal year 1997. Net sales
to new customers for the nine months ended December 31, 1997 were approximately
$27 million, including the net sales from its new Australian subsidiary, while
net sales to existing customers increased by approximately $83 million during
this period.
During November 1997, the Company announced that it would not match lower
pricing offered by a competitor to one of the Company's largest customers. Net
sales to this customer ranged from approximately 5% to 7% of the Company's total
net sales during fiscal year 1997 and the first six months of fiscal year 1998.
The Company believes that the loss of net sales to this customer in the future
will reduce the Company's growth rate in net sales, gross profit and net income
for the remainder of this fiscal year and next fiscal year.
Gross Profit. Gross profit for the three months ended December 31, 1997 was
$18.8 million as compared to $15.2 million in the same period in 1996, an
increase of $3.6 million, or 23.4%, primarily as the result of increased sales
volume in the third quarter of fiscal year 1998. Gross profit for the nine
months ended December 31, 1997 was $53.9 million as compared to $42.5 million in
the same period in 1996, an increase of $11.4 million, or 27.0%, primarily as
the result of increased sales volume in the first nine months of fiscal year
1998. The Company's gross profit margin as a percent of net sales was 10.1% for
the three month period ended December 31, 1997 as compared to 9.8% for the same
period of 1996. The Company's gross profit margin as a percent of net sales was
10.0% for the nine month period ended December 31, 1997 as compared to 9.9% for
the same period in 1996. The increase in the Company's gross profit margin as a
percentage of net sales was a result of higher margin fee revenue business for
the Company's outsource providing subsidiary, Priority Fulfillment Services
("PFS"), and enhanced product sourcing in fiscal year 1998. The Company believes
that the competitive environment and consolidation of its wholesale customers
will continue to pressure downward the Company's gross profit margin percentage
during fiscal year 1998.
SG&A Expenses. SG&A expenses for the three months ended December 31, 1997
were $11.5 million, or 6.2% of net sales, as compared to $9.4 million, or 6.1%
of net sales, for the three months ended December 31, 1996. SG&A expenses for
the nine months ended December 31, 1997 were $33.1 million, or 6.1% of net
sales, as compared to $26.1 million, or 6.1% of net sales, for the nine months
ended December 31, 1996. The increase in SG&A expenses was primarily a result of
the increase in costs associated with the Company's increased sales volume. The
Company continues to incur incremental SG&A expenses to invest in growth areas
of the business, PFS in particular. SG&A as a percentage of net sales for the
first nine months of fiscal year 1998 remained unchanged as these incremental
SG&A expenses were offset by improved operating efficiencies and staff
productivity as a result of increased sales volume and continued technological
enhancements implemented by the Company.
Income from Operations. Income from operations for the three months ended
December 31, 1997 was $7.3 million as compared to $5.8 million for the same
period during 1996, an increase of $1.5 million, or 24.5%. Income from
operations for the nine months ended December 31, 1997 was $20.8 million as
compared to $16.4 million for the same period during 1996, an increase of $4.4
million, or 26.9%. This increase was due to increased sales volume and increased
gross profit partially offset by increased SG&A
11
<PAGE> 12
expenses related to the incremental volume. Income from operations as a
percentage of net sales was 3.9% for both the three and nine months ended
December 31, 1997 as compared to 3.8% for the corresponding periods ending
December 31, 1996.
Interest Expense. Interest expense for the three months ended December 31,
1997 was $0.5 million as compared to $0.4 million for the three months ended
December 31, 1996. Interest expense for the nine months ended December 31, 1997
was $1.6 million as compared to $1.2 million for the nine months ended December
31, 1996. Interest expense was higher during the three months ended December 31,
1997 primarily due to an increase in the average line of credit due to increased
sales volume in addition to a slight increase in interest rates during fiscal
year 1998. The weighted average interest rate was 6.9% and 6.7 % for the nine
month periods ended December 31, 1997 and 1996, respectively.
Income Taxes. The Company's provision for income taxes was $2.6 million for
the three months ended December 31, 1997 as compared to $2.1 million for the
three months ended December 31, 1996. The Company's provision for income taxes
was $7.3 million for the nine months ended December 31, 1997 as compared to $5.8
million for the nine months ended December 31, 1996. The increase was primarily
due to increased pretax profits. The effective tax rate for all periods
presented was approximately 38.3%.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary source of cash has been from financing
activities. During the nine months ended December 31, 1997, net cash of $1.7
million was provided by financing activities, compared to net cash provided by
financing activities of $11.1 million for the nine months ended December 31,
1996. Cash provided by financing activities was generated primarily from the
exercise of common stock options, and during the nine months ended December 31,
1996, an increase in the Company's revolving line of credit facility. Financing
activities should provide the Company's primary source of cash during the
remainder of fiscal year 1998, primarily to support the Company's growth.
During the nine months ended December 31, 1997, $2.4 million was provided
by operating activities, while net cash of $4.6 million was used in operating
activities for the nine months ended December 31, 1996. Increased working
capital requirements during the nine months ended December 31, 1997, were
funded by cash generated by the Company's operations. During the nine months
ended December 31, 1996, increased working capital required to support the
Company's growth were partially funded by cash generated from operating
activities.
The Company's principal use of funds for investing activities during the
nine months ended December 31, 1997 was for capital expenditures of $3.7
million. The principal use of funds for investing activities were for capital
expenditures of $3.9 million for the nine months ended December 31, 1996.
Capital expenditures during fiscal year 1998 have consisted primarily of
additions to upgrade the Company's management information systems, including the
Company's Internet based catalog and ordering tool (SOLOnet) and other methods
of electronic commerce, and general expansion of its facilities, both domestic
and foreign. The Company anticipates that its total investment in upgrades and
additions to facilities for fiscal year 1998 will be approximately $5 million to
$6 million, and for fiscal year 1999 will be approximately $5 million to $7
million.
Working capital increased to $93.8 million at December 31, 1997 from $80.2
million at March 31, 1997. This increase of $13.6 million was primarily
attributable to an increase in accounts receivable and inventory and a decrease
in accounts payable. During the nine month periods ended December 31, 1997 and
1996, the Company generally maintained an accounts receivable balance of
approximately 47 days of sales. Inventory turnover, excluding Priority
Fulfillment Services Division, was approximately 11 and 12 turns for the nine
month periods ended December 31, 1997 and 1996, respectively.
In May 1995, the Company entered into an agreement with certain banks for
an unsecured revolving line of credit facility (the "Facility") that, as amended
on February 13, 1998, has a maximum borrowing availability
12
<PAGE> 13
of $65.0 million and expires on December 31, 2000. The maximum borrowing
availability at December 31, 1997, prior to amendment, was $50 million.
Availability under the Facility is based upon amounts of eligible accounts
receivable, as defined. As of December 31, 1997, the Company had borrowed $26.0
million, leaving $24.0 million available under the Facility for additional
borrowings. The Facility accrues interest, at the Company's option, at the prime
rate of a bank or a eurodollar rate plus an adjustment ranging from 0.625% to
1.125% depending on the Company's financial performance. A commitment fee of
0.20% to 0.25% is charged on the unused portion of the Facility. The Facility
contains various covenants including, among other things, the maintenance of
certain financial ratios including the achievement of a minimum fixed charge
ratio and minimum level of tangible net worth, and restrictions on certain
activities of the Company, including loans and payments to related parties,
incurring additional debt, acquisitions, investments and asset sales.
During October 1997, the Company's Australian subsidiary entered into an
agreement with an Australian bank for an unsecured revolving line of credit
facility (the "Australian Facility"). The Australian Facility, which expires on
July 1, 1999, allows the Company to borrow Australian dollars up to a maximum
of $7.5 million (Australian), or approximately $4.9 million (U.S.) at December
31, 1997. The Australian Facility accrues interest at the Australian Bank Bill
Rate plus 0.75%. A commitment fee of 0.25% is charged on the total amount of the
Australian Facility. As of December 31, 1997, the Company had borrowed
approximately $2.7 million (U.S.), leaving approximately $2.2 million (U.S.)
available under the Australian Facility for additional borrowings.
During December 1997, the Company's Canadian subsidiary entered into an
agreement with a Canadian bank for an unsecured revolving line of credit
facility (the "Canadian Facility"). The Canadian Facility, which expires on July
1, 1999, allows the Company to borrow Canadian or U.S. dollars up to a maximum
of $15.0 million (Canadian), or approximately $10.5 million (U.S.) at December
31, 1997. The Company had no borrowings outstanding under the Canadian Facility
at December 31, 1997. The Canadian Facility accrues interest at the Company's
option at the bank's prime rate, the bank's cost of funds plus 0.65%, the bank's
U.S. dollar commercial loan rate or LIBOR plus 0.65%. A commitment fee of 0.25%
is charged on the unused portion of the Canadian Facility.
During January 1998, the Company entered into a promissory note
agreement with a bank which allows the Company to borrow up to a maximum of $10
million. Amounts borrowed under this note agreement bear interest at the
bank's discretion, primarily based on a money market borrowing rate plus an
adjustment. The maturity date of any amounts borrowed will occur prior to
January 1999, the expiration date of the note.
During the nine months ended December 31, 1997, approximately 22% of the
Company's net sales were sold through the Company's Canadian, Mexican,
Australian and U.S. export operations, including Latin America. The Company
believes that international markets represent further opportunities for growth.
The Company attempts to protect itself from foreign currency fluctuations by
denominating substantially all of its non-Canadian and non-Australian
international sales in U.S. dollars. In addition, on an annual basis, the
Company has entered into various one-year forward Canadian and various forward
Australian currency exchange contracts in order to hedge the Company's net
investment in, and its intercompany payable applicable to, its Canadian and
Australian subsidiaries. In May 1997, the Company entered into a $9.6 million
(U.S.) one-year forward Canadian currency exchange contract to replace the
previous contract, which matured during that same month. In October 1997, the
Company entered into a $1.8 million (U.S.) one-year forward Australian currency
exchange contract to replace a previous contract, which matured during that same
month. As of December 31, 1997, the Company had incurred unrealized gains of
approximately $0.4 million and $0.1 million, net of income taxes, on these
outstanding Canadian and Australian forward exchange contracts, respectively.
The Company may consider entering into other forward exchange contracts in order
to hedge the Company's net investment in its Canadian, Australian, Mexican, and
Singaporean subsidiaries, although no assurance can be given that the Company
will be able to do so on acceptable terms.
During January 1998, the Company purchased all of the common stock of
Steadi-Systems, Ltd. ("Steadi"). Steadi is an independent wholesale distributor
of media products to the filmed entertainment and multimedia industries. The
acquisition of Steadi will be accounted for using the purchase method of
accounting, and, accordingly, the purchase price will be allocated to the assets
and
13
<PAGE> 14
liabilities assumed based on the fair values at the date of acquisition. The
Company will record a one-time charge related to the completion of transition,
integration and merger activities, estimated at about $0.6 million, or
approximately $0.03 per share, in the Company's fourth financial quarter ending
March 31, 1998.
The Company may attempt to acquire other businesses to expand its product
line in its core wholesale business and/or in the call-center or public
warehousing industries in connection with its efforts to grow its PFS
subsidiary. The Company currently has no agreements to acquire any such
businesses. Should the Company be successful in acquiring other businesses, the
Company may require additional financing to consummate such a transaction.
Acquisitions involve certain risks and uncertainties, therefore, the Company can
give no assurance with respect to whether it will be successful in identifying
such a business to acquire, whether it will be able to obtain financing to
complete such an acquisition, or whether the Company will be successful in
operating the acquired business.
The Company believes it will be able to satisfy its working capital needs
for fiscal year 1998, as well as business growth and planned capital
expenditures, through funds available under the Company's various line of credit
facilities, trade credit, lease financing, internally generated funds and by
increasing the amount available under the Company's credit facilities. In
addition, depending on market conditions and the terms thereof, the Company may
also consider obtaining additional funds through an additional line of credit,
other debt financing or the sale of capital stock; however, no assurance can be
given in such regard.
The Company has developed plans to ensure its information systems are
capable of properly utilizing dates beyond December 31, 1999 (the "Year 2000"
issue). The Company believes that with upgrades or modifications to existing
software and conversion to new software, the impact of the Year 2000 issue can
be mitigated. However, if such upgrades, modifications and conversions are not
made, or are not made in a timely manner, the Year 2000 Issue could have a
material impact on the Company's operations. The total cost of implementing
these system upgrades and modifications is not expected to be material to the
Company's results of operations or cash flows, and the Company estimates
completion by December 31, 1998. The costs of the Year 2000 project and the date
on which the Company plans to complete Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
assurance that these estimates will be achieved and actual results could differ
materially from these estimates.
To the extent it can, the Company is also working with its customers,
suppliers and other service providers to ensure their systems are Year 2000
compliant. There can be no assurance that customers or suppliers will
successfully implement Year 2000 compliant systems. In the event that numerous
or significant customers or suppliers do not successfully implement Year 2000
compliant systems, the Company's operations could be materially affected. In the
event any service providers are unable to convert their systems appropriately,
the Company will switch to providers capable of performing such processing.
INVENTORY MANAGEMENT
The Company manages its computer consumable supplies inventories held for
sale in its wholesale distribution business by maintaining sufficient quantities
of product to achieve high order fill rates while at the same time maximizing
inventory turnover rates. Inventory balances will fluctuate as the Company adds
new product lines and makes large purchases from suppliers to take advantage of
attractive terms. To reduce the risk of loss to the Company due to supplier
price reductions and slow moving inventory, the Company's purchasing agreements
with many of its suppliers, including most of its major suppliers, contain price
protection and stock return privileges under which the Company receives credits
against future purchases if the supplier lowers prices on previously purchased
inventory or the Company can return slow moving inventory in exchange for other
products.
During fiscal year 1997, the Company, through its PFS subsidiary, began
providing product fulfillment and distribution services for third parties.
Certain of these distribution agreements provide
14
<PAGE> 15
that the Company own the related inventory, some of which also allow for the
third party to manage the levels of inventory held by the Company. As a result,
the levels of inventory held by the Company under these contracts is higher than
the Company would normally carry in its core wholesale business.
SEASONALITY
Although the Company historically has experienced its greatest sequential
quarter revenue growth in its fourth fiscal quarter, management has not been
able to determine the specific event, if any, of seasonal factors that may cause
quarterly variability in operating results. Management believes, however, that
factors that may influence quarterly variability include the overall growth in
the non-paper computer supplies industry and shifts in demand for the Company's
products due to a variety of factors, including sales increases resulting from
the introduction of new computer supplies products. The Company generally
experiences a relative slowness in sales during the summer months, which may
adversely affect the Company's first and second fiscal quarter results in
relation to sequential quarter performance. The Company believes that results of
operations for a quarterly period may not be indicative of the results for any
other quarter or for the full year.
INFLATION
Management believes that inflation has not had a material effect on the
Company's operations.
FORWARD-LOOKING INFORMATION
The matters discussed in this report on Form 10-Q, other than historical
information, and, in particular, information regarding future revenue, earnings
and business plans and goals, consist of forward-looking information under the
Private Securities Litigation Reform Act of 1995, and are subject to and involve
risks and uncertainties which could cause actual results to differ materially
from the forward-looking information. These risks and uncertainties include, but
are not limited to, the "Risk Factors" set forth in the Company's prospectus
dated January 25, 1996, and the matters set forth in the Company's Report on
Form 10-K filed on June 27, 1997, which are incorporated by reference herein, as
well as general economic conditions, industry trends, the loss of key suppliers
or customers, the loss of strategic product shipping relationships, customer
demand, product availability, competition (including pricing and availability),
risks inherent in acquiring and operating new businesses, concentrations of
credit risk, distribution efficiencies, capacity constraints, technological
difficulties, exchange rate fluctuations, and the regulatory and trade
environment (both domestic and foreign).
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This
statement establishes new standards for computing and presenting earnings per
share ("EPS"). The Company adopted SFAS No. 128 during the quarter ended
December 31, 1997, as it is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods, and earlier
application is not permitted. The Company restated its EPS data for all periods
presented.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements are effective for fiscal years beginning after
December 15, 1997; however, earlier adoption is permitted. SFAS No. 130 requires
the presentation of comprehensive income and its components in a full set of
financial statements. SFAS No. 131 requires the disclosure of financial and
descriptive information about reportable operating segments. Both SFAS No. 130
and 131 are modifications of existing disclosure requirements which will have no
effect on the results of operations or financial condition of the Company. The
Company is currently evaluating the standards and their potential impact on
disclosures and will adopt these pronouncements in its fiscal year 1999
financial statements.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
------- ---------------------------------------------------
<S> <C>
10.1 Lease Amending Agreement dated September 5, 1997
to Lease Agreement dated June 1, 1995 between GPM
Real Property (6) Ltd. And Endow (6) Inc. and
Daisytek (Canada) Inc.
10.2 Lease Agreement dated October 31, 1997 between
G.T.W. International PTE LTD and Daisytek Asia
PTE LTD.
10.3 Committed Credit Facility Agreement dated
October 22, 1997 between Daisytek Australia PTY LTD,
as Borrower, Daisytek International Corporation and
Daisytek, Inc., as Guarantors, and The First
National Bank of Chicago, as Lender.
10.4 Fourth Amendment to Credit Agreement dated December
11, 1997 between Daisytek, Incorporated, as
Borrower, Daisytek International Corporation and
Borrower's Subsidiaries, as Guarantors, and State
Street Bank and Trust Company, The First National
Bank of Chicago, and Texas Commerce Bank National
Association, as Lenders.
10.5 Revolving Credit and Foreign Exchange Facility
Agreement dated December 31, 1997 between
Daisytek (Canada) Inc., as Borrower, Daisytek, Inc.,
as Guarantor, and First Chicago NBD Bank, Canada, as
Lender.
11 Statement re: Computation of Earnings Per Share.
27 Financial Data Schedule.
</TABLE>
b) Reports on Form 8-K:
Form 8-K filed on November 5, 1997 reporting Item 5. the Company's
press release dated November 5, 1997.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 17, 1998
DAISYTEK INTERNATIONAL CORPORATION
By: /s/ Thomas J. Madden
-------------------------------
Thomas J. Madden
Chief Financial Officer,
Chief Accounting Officer,
Vice President - Finance
17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
- ---------- -----------------------
<S> <C>
10.1 Lease Amending Agreement dated September 5, 1997 to Lease Agreement
dated June 1, 1995 between GPM Real Property (6) Ltd. And Endow (6)
Inc. and Daisytek (Canada) Inc.
10.2 Lease Agreement dated October 31, 1997 between G.T.W. International PTE
LTD and Daisytek Asia PTE LTD.
10.3 Committed Credit Facility Agreement dated October 22, 1997 between
Daisytek Australia PTY LTD, as Borrower, Daisytek International
Corporation and Daisytek, Inc., as Guarantors, and The First National
Bank of Chicago, as Lender.
10.4 Fourth Amendment to Credit Agreement dated December 11, 1997 between
Daisytek, Incorporated, as Borrower, Daisytek International Corporation
and Borrower's Subsidiaries, as Guarantors, and State Street Bank and
Trust Company, The First National Bank of Chicago, and Texas Commerce
Bank National Association, as Lenders.
10.5 Revolving Credit and Foreign Exchange Facility Agreement dated
December 31, 1997 between Daisytek (Canada) Inc., as Borrower, Daisytek,
Inc., as Guarantor, and First Chicago NBD Bank, Canada, as Lender.
11 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
18
<PAGE> 1
EXHIBIT 10.1
LEASE AMENDING AGREEMENT
THIS AGREEMENT made as of the 5TH day of SEPTEMBER, 1997.
B E T W E E N:
GPM REAL PROPERTY (6) LTD. & ENDOW (6) INC.
(The "Lessor")
-and-
DAISYTEK (CANADA) INC.
(The "Lessee")
A. WHEREAS the Lessee entered into a lease dated the 1ST day of JUNE, 1995 (the
"Lease"), for a term of THREE (3) YEARS AND ONE (10) MONTH commencing on
the FIRST (1ST) day of July, 1995 and expiring on the THIRTY-FIRST (31ST)
day of JULY, 1998, the ("Term") whereunder the Lessee leased certain
premises comprising a leasable area of approximately 23,100 square feet
(the "demised premises") and designated as UNIT 1 shown outlined in red on
the plan attached to the Lease as Schedule "B" , located at 35 VALEYWOOD
DRIVE in the City of MARKHAM, in the Province of ONTARIO; and
B. WHEREAS the Lessor and Lessee entered into an Offer to Lease dated the
FOURTEENTH (14TH) day of JULY, 1997 (the "Offer") to amend the Lease as of
and effective from the EIGHTEENTH (18TH) day of SEPTEMBER, 1997 (the
"Effective Date"), subject to and upon the terms and conditions herein set
out; and
C. WHEREAS the Lessor and Lessee have agreed to expand the Demised Premises to
include UNIT 2 (the "Expansion Premises") comprising a leasable area of
39,631 square feet.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. The consideration for this Agreement is the mutual covenants and agreements
between the parties and the sum of One Dollar ($1.00) that has been paid by
each of the parties to the other, the receipt and sufficiency of which
acknowledged.
2. Clause 1 of the Lease (Premises) is hereby amended to reflect the leasable
area of the demised premises as of the Effective Date as being 62,731 square
feet, being UNITS 1 AND 2.
3. Clause 2 of the Lease (Term) is hereby amended to reflect a period of FOUR
(4) YEARS AND SIXTEEN (16) DAYS commencing of the FIFTEENTH (15TH) day of
SEPTEMBER, 1997 and expiring on the THIRTIETH (30TH) day of SEPTEMBER, 2001.
<PAGE> 2
4. Clause 4 of the Lease (Rent) is hereby amended as of the Effective Date to
reflect that the Lessee shall pay to the Lessor during the period:
(i) commencing on SEPTEMBER 15TH, 1997 and expiring on SEPTEMBER 30TH,
1999, as basic rent the annual sum of TWO HUNDRED AND NINETY-SEVEN
THOUSAND, NINE HUNDRED AND SEVENTY-TWO DOLLARS AND TWENTY-FIVE CENTS
($297,972.25), payable in equal consecutive monthly installments of
TWENTY-FOUR THOUSAND, EIGHT HUNDRED AND THIRTY-ONE DOLLARS AND TWO
CENTS ($24,831.02), each in advance on the (1st) day of each calendar
month during the aforesaid period, based on an annual rate of FOUR
DOLLARS AND SEVENTY-FIVE CENTS ($4.75) per square foot of the leasable
area of the demised premises;
(ii) commencing on OCTOBER 1ST, 1999 and expiring on SEPTEMBER 30TH, 2001,
as basic rent the annual sum of THREE HUNDRED AND THIRTEEN THOUSAND,
SIX HUNDRED AND FIFTY-FIVE DOLLARS AND ZERO CENTS ($313,655.00),
payable in equal consecutive monthly installments of TWENTY-SIX
THOUSAND, ONE HUNDRED AND THIRTY-SEVEN DOLLARS, AND NINETY-TWO CENTS
($26,137.92), each in advance on the first (1st) day of each calendar
month during the aforesaid period, based on an annual rate of FIVE
DOLLARS AND ZERO CENTS ($5.00) per square foot of the leasable area of
the demised premises.
Clause 4 of the Lease is further amended to reflect that the Lessor
acknowledges that it holds a deposit in the sum of FIFTY-FOUR THOUSAND, FIVE
HUNDRED and THIRTY-SIX DOLLARS and SEVENTY-SIX CENTS ($54,536.76) inclusive
of G.S.T. at 7% which shall be applied to the first month's and last month's
basic rent.
Only those sections of Paragraph 4 of the Lease shall be deemed amended to
incorporate the above and all other terms and conditions of Paragraph 4 of
the Lease shall prevail.
5. As of the Effective Date, the Option to Renew clause on Schedule "D" of the
Lease shall be amended to reflect that the Lessee shall have the option to
renew the Lease for one (1) additional term of one (1) year upon delivering
written notice to the Lessor no later than nine (9) months prior to the
expiry of the Term and upon the same terms and conditions save and except
for the rental rate, which is to be negotiated at the then current market
value, but in no event shall the rental rate be less than the rate in the
last year of the Term.
6. As of the Effective Date, the Right of First Refusal clause on Schedule "D"
of the Lease shall be deleted in its entirety.
7. Schedule "A" attached hereto replaces Schedule "B" of the Lease.
8. All other terms and conditions in the Lease are hereby ratified and
confirmed.
9. The parties confirm that the terms, covenants and conditions of the Lease
remain unchanged and in full force and effect, except as modified by this
Agreement. It is understood and agreed that all terms and expressions when
used in this Agreement, unless a contrary intention is expressed herein,
have the same meaning as they have in THE LEASE.
<PAGE> 3
ACKNOWLEDGEMENT
Lease between GPM Real Property (6) Ltd. & Endow (6) Inc.
(the "Landlord") and Daisytek (Canada) Inc. (the "Tenant")
dated the 1ST day of JUNE, 1995
WHEREAS a Guarantee and Indemnity Agreement was executed on JUNE 2, 1995,
attached hereto as Schedule "A", whereby Daisytek Incorporated, of Plano, Texas,
in the United State of America (the "Guarantor") did agree to indemnify the
Landlord against the failure of the Tenant to perform, observe and keep all of
the covenants and conditions of the lease dated June 1st, 1995 for premises
located at 35 Valleywood Drive, Markham, Ontario.
AND WHEREAS an Amendment to Lease dated the 18TH day of SEPTEMBER, 1997
increased the area from 23,100 square feet to 62,731 square feet (the "Demised
Premises") and extended the term to the THIRTIETH (30TH) day of SEPTEMBER, 2001
(the "Term").
NOW THEREFORE the Tenant and the Guarantor confirm and acknowledge that the
Guarantee and Indemnity Agreement dated JUNE 2ND, 1995 is hereby amended to
reflect the extension of the Term and the increase in square footage of the
Premises and the rent and that all other terms thereof shall remain in full
force and effect.
AGREED AND ACCEPTED this _______day of __________________, 1997.
DAISYTEK (CANADA) INC.
-----------------------------------
Tenant
AGREED AND ACCEPTED this _______day of __________________, 1997.
DAISYTEK INCORPORATED
---------------------------------c/s
Guarantor
<PAGE> 4
SCHEDULE "A"
GUARANTEE AND INDEMNITY
WHEREAS GPM REAL PROPERTY (6) LTD., and ENDOW (6) INC., (hereinafter
called the "Landlord") is the registered owner of the following described land:
35 Valleywood Drive, Markham, Ontario;
Parcel 5-2, Section M-2029, town of Markham, registered in the Land
Registry Office for the Land Titles Division of York Regions (No. 65)
at Newmarket, designated as Parts 2, 3, and 4, Plan 65R-6328 being
part block 5 on Plan 65M-2029
(hereinafter called the "Land"): and
WHEREAS the Landlord has agreed to demise and lease unto DAISYTEK
CANADA INC. (hereinafter call the "Tenant") a certain portion of the Land
pursuant to that Lease in writing (hereinafter called the "Lease") to which this
Guarantee and Indemnity is attached; and
WHEREAS it is a condition of the granting of the Lease by the Landlord
that DAISYTEK INCORPORATED, in the City of Plano, in the State of Texas, in the
United States of America, (hereinafter called the "Guarantor") execute and
deliver this Guarantee and Indemnity;
WHERE the Guarantor herein is composed of more than one person, the
obligations of the Lessee are joint and several obligations of each of such
persons;
NOW THEREFORE in consideration of the premises and the sum of TEN
($10.00) DOLLARS and in consideration of other good and valuable consideration
(the sufficiency and receipt whereof the Guarantor hereby acknowledges) the
Guarantor does hereby promise, covenant and agree to and with the Landlord as
follows:
(a) The guarantee and indemnity and the covenants and agreements
respecting the Guarantor as set forth in these presents shall be
as against the Guarantor construed as and be deemed a guarantee
and indemnity respecting all the obligations of the Tenant as set
forth in the Lease;
(b) In the event the Tenant, for any reason whatsoever including,
without limitation, bankruptcy, liquidation, or other insolvency
of the Tenant, fails to duly and timeously perform, observe, and
keep each and every covenant and condition in the Lease on the
Tenant's part to be performed, observed and kept, including the
payment of all monies, whether rent or otherwise then in any and
every such event and so often as the same shall happen up to the
expiry date specified in the Lease, or, in the event the Lease is
renewed or extended, up to the expiry date specified for any such
renewal or extension, provided the Tenant is not then in default
of any of its obligations under the Lease (hereinafter called the
"Expiry Date"), the Guarantor will perform, observe and keep such
covenants and conditions wherein the Tenant has failed, and where
such failure is default in payment or any money, the Guarantor
will promptly pay the same to the Landlord or such other party to
whom the same is payable in accordance with the provision of the
Lease.
(c) That the Landlord is not bound to exhaust its recourse against the
Tenant or any other party or parties nor realize upon any other
security it may hold before requiring the Guarantor to perform the
terms and conditions of the Guarantor's covenants herein;
(d) That the Guarantor shall not be released from the guarantee and
indemnity hereunder for any reason whatsoever and in particular
without restricting the generality of the foregoing, for any of
the following reasons:
(i) any delay, or any extension of the time granted or
permitted to the Tenant by the Landlord; or
(ii) any waiver or any neglect or forbearance by the Landlord
in requiring or enforcing the strict or other performance
of any of the covenants, conditions or agreements imposed
by the Lease on the Tenant; or
<PAGE> 5
(iii) any failure of the Landlord in notifying the Guarantor
of any default of the Tenant respecting the Lease; or
(iv) any amendment, variation or renewal of the Lease
negotiated between the Landlord and the Tenant whether
with or without the knowledge of the Guarantor,
including any increase in Basic Rent determined upon in
accordance with the term of the Lease; or
(v) any assignment of the Lease or any sub-letting or
abandonment of all or any part of the premises demised
pursuant to the Lease prior to the Expiry Date thereof
and whether effected by the Landlord in concert with the
Tenant or by the Landlord alone or the Tenant alone or
by the operation of law, other than by expropriation or
by condemnation of the demised premises by any competent
authority; or
(vi) any election of any liquidator or trustee in bankruptcy
of the Tenant to assign, surrender, abandon, or disclaim
the whole or any part of the demised premises or the
Lease; or
(vii) any distress, re-entry or dispossession by the
Landlord; or
(viii) any other cause or reason for which sureties or joint
and several debtors may be relieved.
e) That the liability of a Guarantor to pay or perform hereunder
shall arise from time to time when notice in writing is given by
personal service on the Guarantor, or if a corporation or an
officer of the address of the Guarantor last known to the
Landlord, and any such notice so sent shall be deemed to be given
to the Guarantor two (2) days following the day on which the same
was posted in a Post Office in Canada;
f) That in the event the Lease ends or is otherwise terminated or
becomes unenforceable prior the Expiry Date (hereinafter called
"Early Termination"). Then notwithstanding such Early Termination,
the Guarantor with respect to the Lease:
(i) hereby and by these presents indemnify and hold harmless the
Landlord from and against any and all loss, damage, liability
or expense which the Landlord may sustain or incur by reason
of such Early Termination and the loss of rentals and revenue
and all other monies which would otherwise have been payable
to the Landlord pursuant to the Lease for the period from
such Early Termination to the Expiry Date, and
(ii) will pay to the Landlord on demand from time to time the
amount(s) representing any such loss, damage, liability or
expense sustained or incurred by the Landlord to the date of
such demand.
g) That the acceptance of the surrender of the Lease from the Tenant
or the termination of the Lease by the Landlord or by a Court upon
the application of the Landlord in any of the foregoing cases due
to the failure of the Tenant to pay rental or to perform observe
and fulfill the covenants, conditions and agreements imposed by
the Lease on the Tenant shall be regarded as an Early Termination
pursuant to the immediately preceding clause hereof even though
such Early Termination has been brought about by the Landlord if a
consequence of such Early Termination is that the guarantee herein
fails, ceases to exist or becomes unenforceable.
h) That upon Early Termination of the Lease the Landlord shall be at
liberty (but shall not be obligated) to take such reasonably
prudent steps as the Landlord determines to let that portion of
the Lands subject to the Lease, so as to minimize the Landlord's
loss and the Guarantor's liability to the Landlord arising
hereunder. In the event that the Landlord so relets such portion
of the Lands, then all costs of such reletting, including
advertising, legal, commissions or fees paid to any rental agent,
repairs and the like shall be deemed a loss occasioned by an Early
Termination as contemplated in Clause (f) hereof.
<PAGE> 6
i) That this guarantee and indemnity shall be construed in accordance
with the laws in force in the Province of Ontario.
j) That this guarantee and indemnity shall extend to and enure to the
benefit of the Landlord, its successors and assigns and reference
herein to any one of the undersigned is a reference to and shall
be construed as including the heirs, executors, successors and
assigns of such Guarantor.
k) That notwithstanding anything herein or otherwise to the contrary
the Landlord shall not be required to proceed upon the guarantee
and exhaust its recourse in that regard or proceed against the
Tenant or any other securities it may hold prior to the Landlord
proceeding against the Guarantor or any of them under the
indemnity and that the taking of a judgment with respect to the
guarantee or the recovery of any part of the monies pursuant
thereto shall not constitute or be deemed to constitute a merger
of any of its other rights hereunder.
l) The Guarantor will fulfill all other Tenants covenants and
conditions in the Lease.
IN WITNESS WHEREOF these presents have been duly executed by the
Guarantor at the City of Plano, in the State of Texas, this _________ of
_________, 199__.
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF: )
)
)
)
)
- ------------------------------- ) ---------------------------
WITNESS ) GUARANTOR
)
)
)
) ---------------------------
) GUARANTOR
<PAGE> 1
EXHIBIT 10.2
THIS LEASE is made the 31st day of October
One Thousand Nine Hundred and Ninety Seven (1997) Between
G.T.W. INTERNATIONAL PTE LTD, a company incorporated in the
Republic of Singapore and having its registered office
address at 11 Tai Seng Drive, #01-00 GTW Building, Singapore
535226 (hereinafter called "the Landlord" which expression
shall where the context so admits include their successors
and assigns) of the one part And DAISYTEK ASIA PTE LTD a
company incorporated in the Republic of Singapore and having
its registered office at 21 Collyer Quay, #17-03 Hongkong
Bank Building, Singapore 049320 (hereinafter called "the
Tenant") of the other part.
NOW THIS LEASE WITNESSETH as follows :-
Demise In consideration of the rent, service charge, deposit, and
Tenant's covenants hereinafter reserved and contained, the
Landlord hereby lets unto the Tenant ALL the premises known
as #04-01 GTW BUILDING, NO. 11 TAI SENG DRIVE, SINGAPORE more
particularly described in the First Schedule hereto
(hereinafter called "the Demised Premises") TO HOLD the
Demised Premises unto the Tenant from the expiry of the Rent
free period for a term of twenty-four (24) months commencing
from the 1st January 1998 YIELDING AND PAYING THEREFOR unto
the Landlord during the said term:-
Rent 1. The monthly rent of Dollars Twenty-Three Thousand Eight
Hundred Only (S$23,800.00) and a further monthly sum of
Dollars Eight Thousand and Five Hundred ($8,500.00) at the
current sum of Fifty Cents ($0.50) per square foot by way of
service/maintenance charges (subject to revision as
hereinafter provided) (hereinafter collectively called the
"rent") in respect of
<PAGE> 2
the Demised Premises to be made on or before the signing of
this Agreement and subsequent payments to be made on the 15th
day of every succeeding calendar month, clear of all
deductions.
Rent free The Rent free period of one and a half months for fitting out
period shall commence on 1st November 1997 and end on 15th December
1997 or upon Jurong Town Corporation's written approval,
whichever is later and after the Tenant has executed the Lease
and paid one month advance rental including deposit as stated
in Clause 2(1).
Tenant's 2. The Tenant hereby covenants with the Landlord as follows:-
Covenants
Deposit (1) To furnish to the Landlord on or before the signing of
this Lease a Bank Guarantee for the sum of Dollars Ninety-
Six Thousand and Nine Hundred ($96,900.00) equivalent to
three (3) months' rent by way of deposit as security for
the due observance and performance by the Tenant of all
and singular the several covenants, conditions
stipulations and agreements on the part of the Tenant
herein contained which deposit shall not be deemed to be
or treated as payment of rent or service/maintenance
charge. The Tenant shall replace the aforesaid Bank
Guarantee by cash payment by the first week of
January 1998.
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<PAGE> 3
Rent (2) To pay the rent hereby served on the days and in the
manner aforesaid without any deduction or demand
whatsoever.
PUB (3) To pay or reimburse the Landlord for all charges
charges including any taxes now or in the future imposed in
respect of water, gas, electricity, and any other services
supplied to the Demised Premises which shall be consumed
by the Tenant and charged by the Power Supply Ltd or other
appropriate authority or undertaking to the Tenant in
respect of the Demised Premises.
Increase in (4) Notwithstanding Clause 1 hereof (insofar as it relates to
Service Charge service charges) in the event the service/maintenance
charges payable in respect of the Demised Premises shall
be increased beyond the current sum of Fifty Cents ($0.50)
per square foot, the Tenant hereby agree and confirm that
the Tenant shall bear the whole amount of such increase or
increases which shall be due and payable together with the
monthly rent hereby reserved on the 1st day of every month
and the Landlord shall notify the Tenant of such increase
or increases as soon as reasonably practical.
Cleaning (5) At its own costs and expense to enter into a contract of
Contractor service with a cleaning contractor for the purpose of
cleaning and keeping the premises in good and tidy order
and condition.
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<PAGE> 4
Telephone (6) To install at its own cost and expense all telephones and
and teleprinters (as the Tenant may require) in such a manner
teleprinter as shall be approved by the Landlord and all such works
installation shall be carried out by workmen of or engaged by the
Telecommunication Authority of Singapore or such other
appropriate authority, or in the absence of such workmen,
by a contractor nominated or approved by the Landlord.
Telephone (7) That before the Tenant applies to the Telecommunication
and Authority of Singapore or other appropriate authority for
teleprinters the installation of telephone and/or teleprinters it shall
submit for the approval of the Landlord or its engineer a
plan showing where the telephones and/or teleprinters are
to be installed and if any extra underfloor trunking and/
or accessories are required by the Tenant other than that
provided by the Landlord, the Landlord shall install such
underfloor trunking and/or accessories and the Tenant
shall bear the reasonable costs of such installation. No
wires shall be installed within the ducts intended for the
carriage of telephone wires other than those installed by
the Telecommunication Authority of Singapore or other
appropriate authority.
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<PAGE> 5
Internal (8) To carry out within the Demised Premises at its own cost
fitting and expense all or any of the following works as the
and works Tenant may consider necessary:-
(a) partitioning within the Demised Premises;
(b) installation of all necessary electrical wiring,
conduits, etc. for additional power points, light
fittings and all other ceiling fixtures and fittings
apart from those standard fixtures and fittings supplied
and installed by the Landlord ;
(c) all mechanical works of any kind whatsoever;
(d) provision of carpets, tiles (vinyl or otherwise) and
other floor covering or finishes of whatever kind ;
(e) where water or gas is to be supplied to the Demised
Premises, installation of water and other pipes,
apparatus, fittings, fixtures and all necessary plumbing
; and
(f) all alteration works relating to the existing ceiling
fixtures and fittings for lighting, air-conditioning and
fire protection devises originally supplied and installed
by the Landlord.
Installation (9) To use for carrying out the above installations,
and partitioning and other works materials of such standard as
partitions to type, quality, colour and size as the Landlord, its
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<PAGE> 6
architects or engineers shall approve and to cause such
installations, partitioning and other works to be carried
out in the Demised Premises in accordance with plans and
specifications that shall have received the prior written
approval of the Landlord, its architects or engineers,
such approval not to be unreasonably withheld or delayed
and the relevant governmental and/or statutory
authorities. Such installation, partitioning and other
works shall only be effected:-
(a) in the case of any electrical, plumbing or
air-conditioning works or installations (including
installations of wiring, conduits, ducts, vents, pipes,
appliances, apparatus, fixtures and fittings) by a
nominated contractor of the Landlord appointed by the
Tenant.
(b) in all other cases by a contractor appointed by the
Tenant and approved by the Landlord, such approval not
to be unreasonably withheld or delayed and in
accordance with approved plans and specifications and
under the supervision of an architect or engineer
appointed by the Landlord and the completion thereof
shall be subject to approval by the Landlord, its
architects of engineers, such approval not to be
unreasonably withheld or delayed. The Tenant shall
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<PAGE> 7
not make any additions, alterations, or renovations to
the said installations, partitions and other works
except with the prior approval in writing of the
Landlord, such approval not to be unreasonably
withheld or delayed. The reasonable fees of any
architect, engineer or other consultant employed by
the Landlord for the purpose of considering,
approving and supervising the plans, specifications,
materials and all works carried out by the Tenant and
all other costs, charges and expenses incurred by the
Landlord in connection therewith shall be borne by
the Tenant and paid by the Tenant to the Landlord on
demand. No delay not exceeding an aggregate period of
three (3) months in carrying out and completing all
or any of the installations, partitioning and other
works (including installation of the telephones and
teleprinters) in or at the Demised Premises, whether
caused by any governmental and/or statutory
authorities or otherwise, shall be a ground for
postponing the commencement of the term hereby
created or relieve in any way the Tenant from the
performance and observance of the covenants,
conditions, stipulations or agreements herein
contained and on its part to be performed and
observed.
Alterations (10) Not to make or permit to be made any alterations in or
and additions additions to the Demised Premises or any part
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<PAGE> 8
thereof or to the Landlord's fixtures, fittings and
decorations therein without having first obtained the
written consent of the Landlord and upon such
conditions as the Landlord may reasonably impose. In
the event of such consent being given, to carry out
at the Tenant's own expense such alterations or
additions with such materials in such manner and at
such times as shall be designated by the Landlord.
Upon the determination of the term hereby created if
requested by the Landlord, the Tenant shall restore
the Demised Premises as near to their original state
and condition as possible (fair wear and tear and
damage due to causes beyond the Tenant's control
excepted).
Tenantable (11) To keep the interior finishes of the Demised Premises
repair including the flooring and interior plaster or other
surface materials or rendering on walls and ceilings
and the Landlord's fixtures therein including doors,
windows, glass, locks, fastenings, electric wires and
installation and fittings for light and power in a
clean and good state of tenantable repair and
condition (fair wear and tear and damage due to causes
beyond the Tenant's control excepted) and to make good
to the satisfaction of the Landlord any damage or
breakage caused to any part of the Demised
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<PAGE> 9
Premises or to the Landlord's fixtures and fittings
therein by the bringing in or removal of the Tenant's
goods or effects or resulting from any neglect or
malicious act or default of the Tenant its employees
or invitees.
Notice (12) To give immediate notice to the Landlord of any damage
of damage as may be visible to the Tenant on inspection that may
occur to the Demised Premises and of any incident to
or defects in the water pipes, gas pipes, electrical
wiring, air-conditioning ducts or any other fittings,
fixtures or other facility provided by the Landlord.
(13) To replace all electric light bulbs, tubes and globes
in the Demised Premises which may become damaged or
broken or fail to light.
(14) To keep all doors and other means of access to the
Demised Premises securely fastened on all occasions
when the Demised Premises are left unoccupied.
Access to (15) Save in cases where time does not permit, upon the
premises Landlord giving not less than two (2) days' notice in
writing, to permit the Landlord and its duly
authorised agents with or without workmen and others
with or without appliances at all reasonable times to
enter upon the Demised Premises to examine the state
and condition thereof and to do such works and things
as may be
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<PAGE> 10
required for any repairs, alterations or improvements
to the Demised Premises and forthwith to repair and
mend in a proper and workmanlike manner any defects
for which the Tenant is liable and of which written
notice shall have been given to the Tenant or left on
the Demised Premises and to pay the Landlord's
reasonable costs of survey or otherwise in respect of
the preparation of any such notice. If the Tenant
shall not within fourteen (14) days after the receipt
of such notice proceed diligently with the execution
of such repairs or works, then the Landlord may enter
upon the Demised Premises an execute such repairs or
works and the costs thereof shall be a debt due from
the Tenant to the Landlord and recoverable forthwith
as such.
Use of (16) At all times to use and occupy the Premises strictly
Demised for light industrial use and no other purpose.
premises
Dangerous (17) Not to store or bring upon the Demised Premises or any
goods and part thereof arms, ammunition, unlawful goods, gun-
unlawful powder, salt-petre, chemicals, petrol, kerosene, gas
storage or any goods or things which may be in the opinion of
the Landlord of an obnoxious, dangerous or hazardous
nature or any explosive or combustible substance and
not to place or leave in the Estate any boxes or
rubbish or
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<PAGE> 11
otherwise encumber the same PROVIDED ALWAYS that if
combustible or inflammable materials are stored in
the Demised Premises or any part thereof with the
consent in writing of the Landlord any increase in
the premium of fire or other insurance as may have
been taken out by the Landlord shall be borne by the
Tenant.
Nuisance (18) Not to use the Demised Premises or any part for any
unlawful or immoral purpose and not to do or permit
to be done any act or thing which may be or become a
nuisance or to give cause for reasonable complaint
from the occupants of adjoining premises or other
parts of the Estate.
Other (19) Not to use the Demised Premises or any part thereof
non- or permit the same to be used as a laboratory or as a
permitted workshop, not to permit or suffer anyone to sleep or
uses and reside therein, and to ensure that all the doors of
security the Demised Premises are securely fastened and locked
at all times when the Demised Premises are not
occupied or remain unattended.
Auction (20) Not to permit or carry on any auction sale on the
sale Demised Premises.
Signs (21) Not to affix, paint or otherwise exhibit or permit to
be affixed, painted or otherwise exhibited or to upon
any part of or on the exterior of the Demised
Premises or on the
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<PAGE> 12
windows and doors thereof without the prior written
consent of the Landlord (whose consent shall not be
unreasonably withheld or delayed) any signboard,
announcement, placard, poster, advertisement,
nameplate, flag, flagstaff, or any other notices
whatsoever.
Exterior (22) To ensure that the decor and design of the exterior
decor and of the Demised Premises are in accordance with plans
design and specifications previously submitted and promptly
approved by the Landlord, and not to make any changes
to such external parts without the prior written
consent of the Landlord, such consent not to be
unreasonably withheld or delayed.
Sub-letting (23) Not to assign, underlet or otherwise part with the
and actual or legal possession or the use of the Demised
assignment Premises or any part thereof for any term whatsoever
without the previous consent in writing of the
Landlord, such consent not to be unreasonably
withheld or delayed and to ensure that every
assignment or underlease or sharing will include in
similar form all the covenants, conditions,
stipulations or agreements herein contained and on
the Tenant's part to be performed and observed.
12
<PAGE> 13
Avoidance (24) Not to do or permit or suffer to be done anything
of policy whereby the policy or policies of insurance on the
and additional Demised Premises against premium loss or damage
by fire or other risks for the time being subsisting
may become void or voidable or whereby the rate of
premium thereof may be increased and to make good all
damage suffered by the Landlord and to repay to the
Landlord all sums paid by the Landlord by way of
increased premiums and all expenses incurred by the
Landlord in or about any renewal of such policy or
policies rendered necessary by a breach or
non-observance of this covenant. For the purposes
aforesaid, the Landlord shall acquaint the Tenant
with the terms, conditions and covenants of such
policy or policies of Insurance effected by the
Landlord on the Demised Premises.
Excess (25) Not to load or permit or suffer to be loaded on any
Load part of the floors of the Demised Premises to a
weight greater than the weight applicable to the
Demised Premises as is specified in the Second
Schedule hereto and shall when required by the
Landlord distribute any load or any part of the floor
of the Demised Premises in accordance with the
directions and requirements of the Landlord and in
the interpretation and application of the provisions
of this clause the decision of the surveyor architect
or engineer of the Landlord shall be final and
binding on the Tenant.
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<PAGE> 14
Indemnity (26) That the Tenant shall indemnify and keep indemnified
the Landlord from and against:-
(a) all claims, demands, writs, summons,actions,
suits, proceedings, judgments, orders, decrees,
damages, costs, losses and expenses of any nature
whatsoever which the Landlord may suffer or incur
in connection with loss of life, personal injury
and/or damage to property arising from or out of
any occurrence in, upon or at the Demised
Premises caused directly or indirectly by the
negligence or wilful default of the Tenant or by
any of the Tenant's employees, independent
contractors, agents, invitees or licensees; and
(b) all loss and damage to the Demised Premises, the
Estate and to all property therein caused
directly or indirectly by the negligence or
wilful default of the Tenant or the Tenant's
employees, independent contractors, agents,
invitees or licensee and in particular but
without limiting the generality of the foregoing,
caused directly or indirectly by the negligent
use or misuse, waste or abuse of water, gas or
electricity or faulty fittings or fixtures of the
Tenant.
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<PAGE> 15
Tenant's (27) At all times during the term hereby created and during
insurance any period of holding over to keep current:-
(a) an adequate public liability insurance policy in
respect of the Demised Premises ;
(b) an adequate insurance policy which shall be taken
out with an insurance company as aforesaid on
internal partitions and all goods belonging to or
held in trust by the Tenant in the Demised
Premises against loss or damage by fire.
and to produce to the Landlord on demand the policies
referred to above as well as the receipts for payment
of premium in respect thereof.
Compliance (28) At all times during the term hereby created to comply
of statutes with promptly and at the Tenant's expense all such
requirements as may be imposed on the occupier of the
Demised Premises by any statute now or hereafter in
force and any orders, rules, regulations, requirements
and notices thereunder.
Information (29) Should the Tenant receive any notice from Government
to Landlord statutory, public or local authority in respect of the
Demised Premises to give notice thereof forthwith in
writing to the Landlord.
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<PAGE> 16
Rules and (30) To observe and perform and to cause all its employees,
regulations independent contractors, agents, invitees and
of Landlord licensees to observe and perform all the rules and
regulations made by the Management Corporation of the
Estate or its authorised agents and notified to the
Tenant.
Yield up (31) At the expiration or sooner determination of the term
Demised hereby stated to yield up the Demised Premises to
the Landlord with the fixtures therein (other than
trade fixtures) belonging to the Tenant), unless
required by the Landlord to be removed, in good and
tenantable repair and condition (fair wear and tear
and damage due to causes beyond the Tenant's control
excepted) together with the keys to the Demised
Premises and all doors therein, and if required by
the Landlord to remove from the Demised Premises all
letterings, internal partitions, fixtures and
installations of the Tenant or those which are
specified by the Landlord, and to reinstate all
air-conditioning installations or other electrical
installations to their original state to the
reasonable satisfaction of the Landlord, its
architect, engineer or consultant. Such removal
and/or reinstatement shall be carried out :-
(a) in the case of any electrical, plumbing or air-
conditioning works or installations (as described
in sub-clause (9) of this clause), by a nominated
contractor of the Landlord appointed by the
Tenant ;
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<PAGE> 17
(b) and in all other cases, by a contractor appointed
by the Tenant and approved by the Landlord (such
approval not to be unreasonably withheld or
delayed) ;
under the supervision of the Landlord's architect,
engineer or consultant and the Tenant shall pay all
reasonable fees and expenses of such architect,
engineer or consultant. All damage done to the
Demised Premises by such removal shall be made good
by the Tenant on or prior to the expiration of the
term hereby created and if the Tenant fails to do so
the Landlord may make good all such damage and the
costs incurred thereby shall be paid by the Tenant to
the Landlord within seven (7) days of the Landlord
notifying the Tenant of the amount thereof.
Reinstatement (32) At the expiration or sooner determination of the term
hereby created to reinstate the Demised Premises to
its original condition fair wear and tear and damage
due to causes beyond the Tenant's control excepted.
Legal costs (33) To pay all stamp duty and all the Landlord's legal
costs, charges and expenses of and incidental to the
preparation completion and stamping of this Lease and
or any assignment, sub-letting
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<PAGE> 18
surrender or other termination thereof otherwise than
by effluxion of time and in case of default by the
Tenant in performing or observing any covenants
herein contained or implied the Tenant shall pay to
the Landlord all legal and other costs (on an
indemnity basis) charges and expenses for any such
default within ten (10) days of the Landlord
notifying the Tenant of the amount thereof or with
any claim or legal proceedings which may be brought
by the Landlord against the Tenant in connection with
or arising out of this Lease.
Landlord's 3. The Landlord hereby covenants with the Tenant as
covenants follows:-
(1) To pay all present and future rates, taxes,
assessments and outgoings imposed upon or in respect
of the Demised Premises or any part
thereof.
Insurance (2) To insure and keep insured the Demised Premises
(excluding the fittings and fixtures installed by the
Tenant) against damage by fire or such other risks as
the Landlord may deem fit.
Quiet (3) That the Tenant paying the rent and the service
enjoyment charge hereby reserved and performing and observing
the several covenants herein contained and on its
part to be performed and observed shall peaceably
hold and enjoy the Demised
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<PAGE> 19
Premises without any interruption from the Landlord
or any person rightfully claiming under or in trust
for it.
To keep in (4) The Landlord shall keep the exterior and roof of the
repair Building and the lifts, corridors, passages,
staircases, and other common conveniences intended
for the use of the Tenant and the Landlord's other
tenants in the Building at all times in complete
repair and in proper and clean condition and the
stairs and passages leading to the Demised Premises
well and sufficiently lighted.
Indemnity (5) The Landlord shall indemnify and keep indemnified the
Tenant from all damages to property belonging to the
Tenant arising from or out of any negligence in upon
or at the Demised Premises caused directly or
indirectly by the Landlord and or any of the
Landlord's employees, individual contractors, agents,
invitees or licensees.
PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED
as follows:-
GST (1) In the event that any goods and services tax
Clause (hereinafter referred to as "GST" which expenses shall
include any tax of a similar nature that may be
substituted for it or levied in addition to it
whatsoever is now or hereafter chargeable by law on
any payment hereunder, by whatever name called, the
Tenant shall pay such GST in addition
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<PAGE> 20
to all other sums payable hereunder or relating
hereto as and when required to be paid, and the
Tenant agrees to indemnify the Landlord against the
payment if the Landlord is required by law to collect
and make payment in respect of such GST.
Re-entry (2) If the rent and/or service charge hereby reserved or
any part thereof shall at any time be unpaid for
fourteen (14) days after the same shall have become
due (whether formally demanded or not) or if any
covenant on the Tenant's part herein contained shall
not be performed or observed within twenty-one (21)
days of the Landlord's notice in writing to the
Tenant specifying the non-performance or
non-observance of such covenant or if the Tenant
being a company shall go into liquidation whether
voluntarily (save for the purpose of amalgamation or
re-construction) or compulsorily or if a receiver
shall be appointed of its undertaking, property or
assets, or being an individual shall have a receiving
order or an adjudicating order made against him or if
the Tenant shall make any arrangement with creditors
for liquidation of its debts by composition or
otherwise or if any execution or attachment shall be
levied upon or issued against any of the property or
assets of the Tenant and shall not be paid off or
discharged within fourteen (14) days thereof, then
and in any one of the said cases it shall be lawful
for the Landlord at any time thereafter to re-enter
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<PAGE> 21
upon the Demised Premises or any part thereof in the
name of the whole and thereupon the term hereby
created shall forthwith and absolutely cease and
determine but without prejudice to the right of action
of the Landlord in respect of any rent and/or service
charge or of any antecedent breach of the Tenant's
covenants herein contained.
Interest (3) In addition and without prejudice to any
on arrears other right, power or remedy of the Landlord, if
the rent and/or service charge hereby reserved or any
part thereof shall at any time remain unpaid for
fourteen (14) days after the same shall have become
due (whether any formal or legal demand therefor shall
have been made or not) then the Tenant shall pay to
the Landlord interest thereon at three per cent (3%)
above the current prime rate for advances for the time
being prescribed by The Development Bank of Singapore
Ltd. The Landlord shall be entitled to recover such
interest from the Tenant as if such interest were rent
in arrears.
Untenanta- (4) If the Demised Premises or any part thereof
bility shall be damaged or destroyed by fire, act of God or
other cause beyond the control of the Landlord so
as to render access thereto impossible, the Demised
Premises unfit for occupation and use (except where
such damage or destruction has been caused by the
act or default of the Tenant, its servant,
independent contractor, agent, visitors, invitees or
licensees) :-
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<PAGE> 22
(i) If the Demised Premises shall become totally
unfit for occupation and use by the Tenant or
access thereto is rendered impossible then the
rent and service charge payable herein shall
cease to be payable during the period whilst
the Demised Premises remains totally unfit for
occupation or use by the Tenant or access
thereto is rendered impossible; and
(ii) If the Demised Premises whilst not being
rendered unfit for occupation and use by the
Tenant is nevertheless damaged to such an extent
as to interfere with the Tenant's full and proper
enjoyment of the said premises then the rent
payable therein shall be reduced by a fair just
and rateable proportion having regard to the
extent of the damage and the interference and
inconvenience caused to the Tenant. The question
of whether the payment of the rent and service
charge shall be suspended or whether only a
proportion as aforesaid shall be payable and the
amount of such proportion of the period during
which the rent or service charge or any part
thereof shall be suspended shall in the event of
a failure to agree on the part of the Landlord
and the Tenant be determined in accordance with
the Arbitration Act (Cap. 10) or any
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<PAGE> 23
statutory modification or re-enactment for the
time being in force; and
PROVIDED ALWAYS that the Landlord may in its absolute
discretion decide that the Demised Premises are so
badly damaged that it will demolish and rebuild the
Demised Premises instead of repairing the same and in
any such event the Landlord may within ninety (90)
days after such damage has been sustained give notice
to the Tenant in writing of its decision and thereupon
this Lease shall terminate and the Tenant shall,
subject to the Landlord promptly refunding to it the
full amount of the deposit paid under Clause 2(1) less
any deductions properly made in accordance with the
terms herein (if still in occupation) vacate the
Demised Premises without compensation from the
Landlord.
Waiver of (5) No condoning, excusing or overlooking by the
covenant Landlord of any default, breach, non-
by Landlord observance or non-performance by the Tenant at any
time or times of any of the Tenant's obligations
herein contained shall operate as a waiver of the
Landlord's rights hereunder in respect of any
continuing or subsequent default, breach,
non-observance or non-performance, or so as to defeat
or affect in any way the rights of the Landlord herein
in respect of any such continuing or subsequent
default, breach, non-observance or non-performance
and no
23
<PAGE> 24
waiver by the Landlord shall be inferred from
or implied by anything done or admitted and signed by
the Landlord. Any consent given by the Landlord shall
operate as a consent only for the particular matter
to which it relates and shall in no way operate as a
consent only for the particular matter to which it
relates and shall in no way operate as a waiver or
release of any of the provisions hereof, nor shall it
be construed as dispensing with the necessity of
obtaining the specific written consent of the Landlord
in future, unless expressly so extended.
Landlord (6) The Landlord shall not be liable or in any
not liable for way responsible to the Tenant or to any of damages
the Tenant's employees, independent contractors,
agents, invitees or licensees or to any other person
for any injury, loss or damage which may be suffered
or sustained to any property or by any person in the
Demised Premises.
Service of (7) Any notice required to be served, delivered
notice or given under this Lease by one party to the other
shall be in writing and shall be sufficiently served
if sent by registered post to the last known address
of the other party and shall be deemed to have been
received by the other party within twenty-four (24)
hours of posting.
(8) Notwithstanding anything herein contained the Landlord
shall not be liable to the Tenant, nor shall the
Tenant have any claim against the Landlord in respect
of :-
24
<PAGE> 25
(a) any interruption in any of the services supplied
for the use and benefit of the occupiers of the
Estate and others by reason of necessary repair
or maintenance of any installations or apparatus
(provided that the Landlord shall make every
effort to ensure that such necessary repair or
maintenance does not disrupt the use of the
Demised Premises during working hours) or damage
thereof or destruction thereof by fire, water,
riot, act of God or other cause beyond the
Landlord's control or by reason of mechanical or
other defects or break-down or other inclement
conditions or shortage of manpower, fuel,
materials, electricity or water or by reason of
labour disputes ; and
(b) any act, omission, default, misconduct or
negligence of any porter, attendant or other
servant or employee, independent contractor
or agent of the Landlord in or about the
performance or purported performance of any duty
relating to the provision of the said services
or any of them.
Deposit (9) The deposit moneys held by the Landlord in
moneys terms of Clause 2(1) hereof shall be refunded to the
Tenant (free of interest)within fourteen (14) days of
the expiry or
25
<PAGE> 26
sooner determination of the term hereby created
subject to any deductions properly and reasonably made
for any breach or non-observance of the covenants and
conditions on the part of the Tenant to be performed
and observed herein.
Notice of (10) During the period of eight (8) weeks before
vacancy the expiry of the term hereby created the Landlord
shall be entitled to exhibit outside the Demised
Premises or on the doors thereof a notice stating that
the Demised Premises are to be vacant and for letting
and the Tenant shall permit (subject to being given
prior written notice four (4) days in advance) all
prospective tenants of the Demised Premises
accompanied by a representative of the Landlord free
ingress to and egress from the Demised Premises for
the purpose of viewing the Demised Premises.
Area (11) By the execution of this Lease the Tenant accepts as
final and correct the area of the Demised Premises as
herein described in the Schedule.
(12) This Lease is subject to approval being given by the
Jurong Town Corporation and all the relevant
authorities with regard to its use and proposed
renovations.
(13) The Tenant shall pay rental to the Landlord for the
period from 16th December 1997 to 31st December 1997
amounting to $16,634.50 plus Goods and Services Tax
thereon by way
26
<PAGE> 27
of a Banker's Guarantee to be given on the signing of
this Agreement and which shall be substituted by cash
payment by the first week of January 1998.
(14) (a) The Tenant shall not assign, sublet, grant a
licence or part with or share the possession or
occupation of the Demised Premises or any part
thereof or permit any other party or person by
way of a licence or otherwise to occupy the
Demised Premises or any part thereof at any time
during the term hereby created.
(b) The Tenant shall permit Jurong Town Corporation
and/or the Landlord or their respective servants
or agents with or without workmen, tools and
equipment during the term hereby created at all
reasonable times to enter upon the Demised
Premises and every part thereof to examine the
state and condition of the same and of defects
decays and wants of reparation and of all
breaches of covenant there found.
(c) The Tenant shall not cause or do or suffer to be
done any act or thing which may as between the
Landlord and Jurong Town Corporation constitute
or cause a breach by the Landlord of any of the
terms, covenants, conditions or stipulations on
the part of the Landlord to be observed or
performed
27
<PAGE> 28
by virtue of the lease or sublease between the
Landlord and Jurong Town Corporation but shall
do or permit to be done any act or thing to
comply with or to prevent a breach of any of such
terms, covenants, conditions, or
stipulations with no liability on the part of
Jurong Town Corporation for any inconvenience,
loss, damage, costs, expenses or compensation
whatsoever in the event that Jurong Town
Corporation its servants or authorised agents
with or without workmen, tools and equipment
should enter upon the Landlord's premises or the
Demised Premises to do any act or thing which the
Jurong Town Corporation is entitled to do by
virtue of the said lease or sublease or of any
laws, by-laws, rules or regulations.
(d) The Landlord shall for the purposes of
sub-clause (c) aforesaid acquaint the Tenant
with the terms, covenants, conditions and
stipulations of the lease or sublease between
the Landlord and Jurong Town Corporation and any
variations or amendments thereto.
(e) In the event that the Jurong Town Corporation at
any time before the expiry of the term hereby
created gives three (3) months' notice in
writing requiring that this Lease be terminated
or becomes entitled to and
28
<PAGE> 29
re-enters the Landlord's premises or any part
thereof in the name of the whole this Lease shall
upon the expiry of the said notice or upon the
said re-entry absolutely determine without
prejudice to any rights and/or remedies which
have accrued to either party against the other
under this Agreement and without the Jurong Town
Corporation being liable for any inconvenience,
loss, damages, compensation, costs or expenses
whatsoever.
(f) The Tenant shall at his own cost and expense and
subject to the prior approval in writing of the
Jurong Town Corporation and the relevant
Government authorities provide suitable and
proper foundation for all machinery, equipment
and installations in connection with the
approved usage at the Demised Premises. The
Jurong Town Corporation shall not be liable for
any loss, damage or inconvenience that the
Tenant may suffer in connection with any defects
caused to the ground/production floor slabs or
apron slabs by overloading and any subsidence or
cracking of the ground/production floor slabs,
aprons, drains and driveways of the production
floor slabs, aprons, drains and driveways of the
Demised Premises or from other defects inherent
or otherwise in the Demised Premises.
29
<PAGE> 30
Interpretation (15) In the interpretation of this Lease
except to the extent that such interpretation shall
be excluded by or repugnant to the context when used
herein :-
(a) "the Landlord" shall include the person for the
time being entitled to the reversion immediately
expectant upon the term hereby created ;
(b) "the Tenant" shall include, if the Tenant is an
individual, his personal representatives and
permitted assigns, or if the Tenant is a company,
its permitted assigns and successors in title ;
(c) "person" shall be deemed to include a
corporation.
(d) "Estate" means the land on which the Building is
erected.
(e) words importing the singular or plural number
shall be deemed to include the plural or singular
number respectively and words importing the
masculine gender shall include the feminine or
neuter gender and vice versa as the case may
require ; and
(f) where two or more persons are included in the
term "the Tenant" all covenants, agreements,
terms, conditions and restrictions shall be
30
<PAGE> 31
binding on them jointly and each of them
severally and shall also be binding on their
personal representatives and permitted assigns
respectively jointly and severally.
Marginal (16) The marginal notes appearing in this Lease are
notes inserted only as a matter of convenience and in no way
define, limit, construe or described the scope or
intent of the sections or clauses of this Lease, nor
in any way affect this Lease.
5. SPECIAL PROVISO
Upon the written request of the Tenant made not less
than three (3) calendar months before the expiration of the term hereby
created and if the Tenant shall have strictly and timeously performed
and observed all covenants undertakings and stipulations herein
contained and on its part to be performed and observed up to the
termination of the Tenancy hereby created the Landlord at the option of
the Tenant shall grant to the Tenant a tenancy of the premises for a
further term of two (2) years from the expiration of the term hereby
created at a rent mutually agreed between the Landlord and Tenant to be
in line with the prevailing market rent but otherwise containing the
like covenants and conditions as are herein contained excluding this
proviso for renewal.
31
<PAGE> 32
THE FIRST SCHEDULE ABOVE REFERRED TO
ALL THAT part particularly delineated in red in the plan annexed hereto
on the fourth story of the building (the "Building") known as 'GTW' Building
erected on private Lot A 13512 forming part of Government Survey Lot No 4726 MK
23 Paya Lebar and estimated to contain an area of 17,000 sq. feet and which said
unit is officially known as #04-01 GTW Building, No. 11 Tai Seng Drive,
Singapore.
<TABLE>
<CAPTION>
THE SECOND SCHEDULE ABOVE REFERRED TO
===================================================================
Maximum Permissible
Superimposed or Live
Storey Approved Use Load (KN/m2)
- -------------------------------------------------------------------
<S> <C> <C>
1st Loading/Unloading/Showroom 20 KN/m2
Water Tank / Pump Room 20 KN/m2
Transformer Room 16 KN/m2
Sprinkler Control Room & MDF Room /
Bin Centre 7.5 KN/m2
Consumer Switch Room 5.0 KN/m2
Staircase / Lift Lobby 4 KN/m2
Toilets 2 KN/m2
Warehouse 20 KN/m2
2nd to
6th
Staircase / Lift Lobby 4.0 KN/m2
Toilets 2.0 KN/m2
Roof Roof 1.5 KN/m2
Generator Room / Sprinkler Pump Room 7.5 KN/m2
Upper Roof 0.75 KN/m2
===================================================================
</TABLE>
32
<PAGE> 33
AS WITNESS the hands of the parties hereto the day and year first above
written.
SIGNED by )
for and on behalf of the )
Landlord in the presence of:- )
SIGNED by )
for and on behalf of the )
Tenant in the presence of :- )
33
<PAGE> 34
DATED THE DAY OF 1997
*************************************
LEASE AGREEMENT FOR
#04-01 GTW BUILDING
NO. 11 TAI SENG ROAD
SINGAPORE
*************************************
M/S B.T. TAN & CO
ADVOCATES & SOLICITORS
SINGAPORE
(REF : TBT.BH.495.978)
<PAGE> 1
EXHIBIT 10.3
September 22, 1997
Mr Tom Graham
Director of Cash Management
Daisytek International Corporation
500 North Central Expressway
Plano TEXAS 75074
Dear Tom,
RE: LETTER OF OFFER FOR A$7.5MM COMMITTED CREDIT FACILITY TO DAISYTEK
AUSTRALIA PTY LTD
I am pleased to advise that The First National Bank of Chicago (the 'Bank') has
agreed to provide a Committed Credit Facility (the 'Facility'), under which the
Bank will make advances at the request of DAISYTEK AUSTRALIA PTY LTD (ACN
075 675 795) (the 'Borrower') and as guaranteed jointly and severally by
DAISYTEK,INC AND DAISYTEK INTERNATIONAL CORPORATION (the 'Guarantor'). The
purpose of the Facility is for working capital needs of the Borrower and to
refinance existing intercompany debt.
1. FACILITY AMOUNT
The Facility Amount shall be A$7,500,000 (Australian Seven Million
Five Hundred Thousand Dollars).
2. FACILITY EXPIRATION DATE
The Bank's commitment to make Advances hereunder shall terminate on
July 1, 1999. All outstandings must be repaid no later than July 1,
1999 ('Final Maturity Date').
3. ADVANCES
3.1 Each Advance shall be repayable at the stated maturity date
established by the Borrower and confirmed by the Bank at or
about the time of Advance or, if no such stated maturity is
established, shall be rolled on a day to day basis. Subject
to this letter of offer the Bank will make Advances to the
Borrower no later than 11:00 A.M. on any business day.
3.2 Interest for each Advance shall be calculated to be the
aggregate of
3.2.1 A Margin of 0.75% per annum; and
3.2.2 The Bank Bill Rate - defined as, in respect of any
Advance to the Borrower of A$500,000 or more, the
average determined "mid rate" (rounded if necessary to
the nearest two decimal places) for bills accepted by
a bank having a tenor which most closely approximates
the interest period of the Advance and published on
the "BBSY" reference page of the Reuters Monitor
System at or about 10:10 A.M (Sydney time) or
3.2.3 the Bank Bill Rate - defined as, in respect of any
Advance to the Borrower of less than A$500,000, the
rate of interest which the Bank would be prepared to
purchase bank accepted bills on that day of the amount
and tenor required by the Borrower
3.3 Interest shall be calculated daily and be paid monthly in
arrears, save that the last interest payment shall be made on
the Final Maturity Date.
3.4 The Borrower may prepay an Advance in whole (but not in part)
before the maturity date of that Advance if, but only if:
3.4.1 The Borrower gives the Bank at least 3 business days
irrevocable notice in writing of the Borrower's
intention to prepay;
3.4.2 The Borrower makes payment to the Bank of all moneys
payable pursuant to subparagraph 3.5;
3.4.3 The Borrower makes payment on the day of payment
specified in the notice;
3.5 In the event that the Borrower wishes to make early repayment
of an Advance or if for any reason early repayment of an
Advance is demanded by the Bank, the Borrower shall pay to the
Bank in addition to all other moneys then payable an amount
sufficient to compensate and to indemnify the Bank for and
against all losses (including loss of profits), costs,
<PAGE> 2
damages and expenses which the Bank reasonably determines that
the Bank suffers or incurs as a result of such early
repayment. The Borrower acknowledges that the Bank may have
arranged or entered into an interest rate swap agreement or
other commitment in relation to the Advances before the date
of the notice under Clause 3.4. and may as a consequence of
this (whether directly or indirectly) suffer or incur losses,
costs, damages or expenses in the event that all or part of
the relevant advance is repaid prior to the due date of
payment.
3.6 Any Advance may, at the discretion of the Bank, be made by
First Chicago Australia Limited ('FCAL'), a subsidiary of the
Bank. In such event the Bank shall be agent of FCAL in all
matters dealing with payment and recovery.
3.7 Any amounts repaid under Clause 3.1 or prepaid under Clause
3.4 may be redrawn.
4. LINE FEE & ESTABLISHMENT FEE
The Borrower shall pay a line fee of 0.25% of the total Facility
Amount, quarterly in arrears. The Borrower shall pay a one off upfront
payment of $7,500 (being 0.1% of the Facility Amount).
5. TERMINATION
The Bank may, with a minimum 30 days notice in writing to the
Borrower, terminate the Facility should there be deemed an Event of
Default as specified in Section 6. The Borrower may at any time upon
7 days notice, terminate or permanently reduce the Facility Amount in
whole or in part by delivering a letter to the Bank requesting such
termination or reduction. The facility may not be reduced below the
level of outstanding Advances.
6. DEFAULT
If any of the following events occur, ('Events of Default'), then the
Bank may, at its discretion, terminate this facility and/or declare all
outstanding amounts immediately due and payable whereupon the Facility
shall be terminated and such amounts become immediately due and
payable.
6.1 Any of the material representations and warranties proves to
be untrue in a material respect at the time it was made.
6.2 Failure by the Borrower to repay advances and/or interest on
the advances when due within 7 days of the due date unless
that failure was due to a failure in the banking system.
6.3 An order or resolution is made or passed to wind up the
Borrower or the Guarantor, or the Borrower or Guarantors
admits insolvency or petitions for an order or resolution to
wind up the Borrower, or consents to such an order, or a
petition for bankruptcy or winding up the Borrower or the
Guarantor is filed except where the petition is vexatious or
frivolous and is not dismissed within 30 days.
6.4 The Borrower fails to duly pay any debt constituting principal
and interest owed by it to any other persons other than the
Bank with respect to borrowed money or money otherwise owed
under any note, bond, or similar instrument or fails to pay
when the same becomes due and payable in excess of A$35,000
and which breach or default has not been waived and, with
notice or the passage of time, or both, allows the maturity of
such debt to be accelerated.
6.5 The Borrower suspends payment of debt or ceases to carry on
business
6.6 Failure by the Borrower to observe or performs any of its
other material obligations under the Facility, and if such
failure is capable of remedy within 14 days of such failure,
it is not remedied to the reasonable satisfaction of the Bank
within such period,
6.7 A receiver or receiver and manager, official manager, trustee
or similar officer is appointed by a court of competent
jurisdiction for all or any part of the assets or undertaking
of the Borrower or the Guarantor
6.8 The Guarantor shall cease, directly or indirectly, to own free
and clear of all liens or other encumbrances, 75% of the
issued share capital of the Borrower.
6.9 The Guarantor's guaranty of the Borrower's obligations shall
fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or
unenforceability of such guaranty, or the Guarantor shall fail
to comply with any of the terms or provisions of such
guaranty, or the Guarantor denies that it has any further
liability under such guaranty, or gives notice to such effect
6.10 The Guarantor fails to duly pay any debt constituting
principal and interest owed by it to any other persons other
than the Bank with respect to borrowed money or money
otherwise owed under any note, bond, or similar instrument or
fails to pay when the same becomes due and payable in excess
of US$25,000 and which breach or default has not been waived
and, with notice or the passage of time, or both, allows the
maturity of such debt to be accelerated.
<PAGE> 3
Failure to act immediately on any default will not affect the
Bank's rights against the Borrower.
7. REMEDIES
The Borrower is liable to the Bank for all reasonable costs and
expenses of every kind incurred in collecting any moneys under the
Facility including without limitation, reasonable legal fees and costs
and expenses incurred by the Bank in any bankruptcy, reorganisation,
insolvency or other similar proceeding.
8. WAIVERS
No delay on the part of the Bank in the exercise of any right or remedy
shall operate as a waiver. No single or partial exercise by the Bank
of any right or remedy shall preclude any other future exercise of that
right or remedy or the exercise of any other right or remedy. No
waiver or indulgence by the Bank of any default shall be effective
unless it is in writing and signed by the Bank, nor shall a waiver on
one occasion be construed as a bar to or waiver of that on any future
occasion.
9. TAXES
The Borrower shall forthwith pay any and all stamp duty, registration,
and similar taxes or charges imposed by governmental authorities which
may have been paid or may be payable or determined to be payable in
connection with the Facility or this letter or any transaction in
relation thereto (including without limitation all financial
institutions duty and bank debit taxes) and shall indemnify the Bank
against any and all liabilities with respect of or resulting from any
delay or omission to pay such taxes or charges including any fines or
penalties.
10. CONDITIONS PRECEDENT
The granting of the Facility is subject to the Bank receiving in a form
and substance reasonably satisfactory to the Bank:
10.1 A duly executed original of this letter signed by authorised
signatories.
10.2 A certified copy of the Board Resolution of the Borrower
authorising the Borrower to enter into this agreement and
appointing authorised persons to sign all applications,
notices and documents to be delivered hereunder;
10.3 Specimen signatures of the authorised persons under the Board
resolution referred to in para 10.2.
10.4 A duly executed and original guarantee from the Guarantors in
favour of the Bank in a form acceptable to the Bank.
10.5 A certified copy of the Board Resolution of the Guarantors
authorising the issuance of the Guarantee mentioned in para
10.4, and appointing authorised persons to sign the guarantee;
and the provision of specimen signatures of the authorised
persons.
10.6 There exists no Event of Default.
10.7 Each of the representations and warranties of the Borrower set
forth herein are true and correct.
11. MISCELLANEOUS
11.1 This Facility is governed by the laws of New South Wales.
11.2 The terms of the Facility are binding on the Borrower and the
Guarantor s and its respective successors, and shall inure to
the benefit of the Bank, its successors and assigns.
11.3 Headings are for convenience of reference only and shall not
affect the interpretation of this letter.
11.4 The Bank may act upon the oral instruction of any of the
following persons in the position of : Chief Financial
Officer, Treasurer, Controller, Director of Cash Management of
the Guarantor or Financial Controller of the Borrower.
11.5 All sums falling due hereunder by way of interest or fees on
a per annum percentage basis shall be calculated on the basis
of a 365 day and the actual number of days elapsed.
12. FINANCIAL INFORMATION
The Borrower shall from time to time supply the Bank with any financial
or other information regarding the Borrower as the Bank may reasonably
request in writing. The Borrower shall, without request by the Bank,
supply to the Bank with copies of annual audited accounts within 120
days of each financial year and unaudited half yearly management
accounts within 60 days
<PAGE> 4
of each half year end. The Guarantor shall, without request by the
Bank, supply to the Bank copies of the audited annual accounts as
contained in a 10K format within 120 days of each financial year and
unaudited quarterly accounts in a 10Q format within 60 days of each
calendar quarter.
13. INCREASED COSTS
(a) If as a result of any change in, any making of, or any change
in the interpretation of any law, official directive or
request (including without limitation with respect to
taxation, reserve, liquidity, capital adequacy, special
deposit or other similar requirement), the cost to the Bank of
making available or maintaining any Advance is increased or
the Bank's effective return is reduced by a material amount,
the Borrower will, on demand, compensate the Bank for such
increased costs or reduced return. The Bank's calculations
shall be sufficient in the absence of evidence to the
contrary.
(b) If the Borrower is required to make a payment under this
Clause, it may prepay the whole (but not part only) of any
affected Advance (original principal and accrued interest)
upon giving not less than 14 days notice to the Bank which
notice shall be irrevocable. The Bank's rights under this
clause shall survive the termination of this Facility.
14. OVERDUE MONEYS
The Borrower will pay interest on demand on all amounts due and unpaid
at the rate being 2% per annum above Bank's Prime Rate as announced
from time to time from the date such moneys fall due for payment until
they are paid or satisfied.
15. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank that:
15.1 It has the power to enter into this agreement and to borrow
under it.
15.2 It has taken all action necessary to authorise the execution,
delivery and performance of the Letter of Offer.
15.3 This Letter of Offer will constitute the legal, valid and
binding obligation of the Borrower in all material respects
except to the extent that it is affected by laws relating to
creditors rights generally or doctrines of equity.
15.4 The Borrower is not materially in default under any other
credit arrangement and after signing this Letter of Offer the
Borrower is not in violation of any applicable law, rule or
regulation.
15.5 Each financial statement and all other information given by
the Borrower or on its behalf to the Bank in relation to this
Facility is true and correct in every material particular and
there has been no material change, that would adversely affect
performance under this agreement, in the Borrower's financial
condition or the results of the Borrower's operations.
15.6 There is no litigation, tax claim, dispute or administrative
proceeding current or, to the Borrower's knowledge,
threatened, which is likely to have a material adverse effect
upon the Borrower or the Borrower's ability to perform its
obligations under this Facility Letter.
The representations and warranties set out above will survive the
execution and delivery of, and the provision of accommodation under,
the Letter of Offer. They shall be deemed repeated on each date an
Advance is made.
16. WITHHOLDING/EXPENSES
All payments shall be made free and clear of any withholding taxes,
provided the Bank is an Australian resident, duties, reserves and other
expenses, all of which are for the account of the Borrower. Legal
expenses (on a solicitor/client basis) and all reasonable out of pocket
expenses of the Bank are to be for the account of the Borrower.
17. ACCEPTANCE
If the terms and conditions in this letter are acceptable to you,
please arrange for the copy of this letter to be duly executed by
authorised persons and returned to the Bank by OCTOBER 18, 1997. This
offer is open for acceptance until September 30, 1997.
We are pleased with this opportunity to expand our relationship with Daisytek
Australia Pty Ltd.
<PAGE> 5
SIGNED for and on behalf of SIGNED for and on
behalf of THE FIRST NATIONAL BANK OF CHICAGO FIRST CHICAGO AUSTRALIA LIMITED
BY: BY:
- ----------------------------------- --------------------------------
IN THE PRESENCE OF: IN THE PRESENCE OF:
- ----------------------------------- --------------------------------
THE ABOVE TERMS AND CONDITIONS ARE HEREBY ACCEPTED
SIGNED FOR AND ON BEHALF OF
DAISYTEK AUSTRALIA PTY LTD
BY:
- ---------------------- -------------------------
NAME Signature
IN THE PRESENCE OF:
- ---------------------- -------------------------
NAME Signature
<PAGE> 6
CONTINUING GUARANTY
GUARANTY: To induce the First National Bank of Chicago (ARBN 064 474 102) of
Level 32, 60 Margaret Street, Sydney, New South Wales, 2000, and First Chicago
Australia Limited (ACN 001007469) of Level 32, 60 Margaret Street, Sydney, New
South Wales 2000, (referred to collectively as the 'Bank') at its option, to
make loans, extend credit or some other benefit, including letters of credit
and foreign exchange contracts, present or future, direct or indirect, and
whether several, joint or joint and several (referred to collectively as
"Liabilities"), TO DAISYTEK AUSTRALIA PTY LTD (ACN 075675795) and its
successors (the "Borrower"), and because the undersigned (the "Guarantor") has
determined that executing this Guaranty is in its interest and to its financial
benefit, the Guarantor absolutely and unconditionally guaranties to the Bank,
as primary obligor and not merely as surety, that the Liabilities will be paid
when due, whether by acceleration of otherwise. The Guarantor will not only
pay the Liabilities , but will also reimburse the Bank for accrued and unpaid
interest, and any expenses, including reasonable attorneys' fees, that the Bank
may pay in collecting from the Borrower or the Guarantor, and for liquidating
any collateral.
LIMITATION: The Guarantor's obligation under this Guaranty is UNLIMITED.
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Guaranty until it receives written notice of
termination from the Guarantor. That notice shall be effective at the opening
of the Bank for business on the day after receipt of the notice. If
terminated, the Guarantor will continue to be liable to the Bank for any
Liabilities created, assumed or committed to at the time the termination
becomes effective, and all subsequent renewals, extensions, modifications and
amendments of the Liabilities.
ACTION REGARDING BORROWER: If any monies become available that the Bank can
apply to the Liabilities, the Bank may apply them in any manner it chooses,
including but not limited to applying them against liabilities which are not
covered by this Guaranty. The Bank may take any action against the Borrower,
any collateral, or any other person liable for any of the Liabilities. The
Bank may release the Borrower or anyone else from the Liabilities, either in
whole or in part, or release any collateral, and need not perfect a security
interest in any collateral. The Bank does not have to exercise any rights that
it has against the Borrower or anyone else, or make any effort to realise on
any collateral or right of set-off. If the Borrower requests more credit or
any other benefit, the Bank may grant it and the Bank may grant renewals,
extensions, modifications and amendments of the Liabilities and otherwise deal
with the Borrower or any other person as the Bank sees fit and as if this
Guaranty were not in effect. The Guarantor's obligations under this Guaranty
shall not be released or affected by (a) any act or omission of the Bank; (b)
the voluntary or involuntary liquidation, sale or other disposition of all or
substantially all of the assets of the Borrower, or any receivership,
insolvency, bankruptcy, reorganisation, or other similar proceedings affecting
the Borrower or any of its assets; or (c) any change in the composition or
structure of the Borrower or Guarantor, including a merger or consolidation
with any other person or entity.
NATURE OF GUARANTY: This Guaranty is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay immediately,
and the Bank is not required to attempt to collect first from the Borrower, any
collateral, or any other person liable for the Liabilities. The obligation of
the Guarantor shall be subject to no conditions of any kind, and shall be
absolute, regardless of the unenforceability of any provisions of any agreement
between the Borrower and the Bank, or the existence of any defense, set-off or
counterclaim which the Borrower may assert.
OTHER GUARANTORS: If there is more than one Guarantor, the obligations under
this Guaranty shall be joint and several. In addition, each Guarantor shall be
jointly and severally liable with any other
DAISYTEK GUARANTEE PAGE 1 OF 3
<PAGE> 7
guarantor of the Liabilities. If the Bank elects to enforce its rights against
less than all guarantors of the Liabilities, that election shall not release
the Guarantor from its obligations under this Guaranty. The compromise or
release of any of the obligations of any of the other guarantors or the
Borrower shall not serve to waive, alter or release the Guarantor's
obligations. This Guaranty is not conditioned on anyone else executing this or
any other guaranty.
WAIVER OF SUBROGATION: The Guarantor expressly waives any and all rights of
subrogation, contribution, reimbursement, indemnity, exoneration, implied
contract, recourse to security or any other claim (including any claim, as that
term is defined in the federal Bankruptcy Code, and any amendments) which the
Guarantor may now have or later acquire against the Borrower, any other entity
directly or contingently liable for the Liabilities or against the Collateral,
arising from the existence or performance of the Guarantor's obligations under
this Guaranty.
The Guarantor further agrees that should any payments to the Bank on the
Liabilities be in whole or in part, invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act or code, state or federal law, common
law or equitable doctrine, this Guaranty and any Collateral shall remain in
full force and effect (or be reinstated as the case may be) until payment in
full of any such amounts, which payment shall be due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of the
following matters before the Bank enforces any of its rights: (a) the Bank's
acceptance of this Guaranty; (b) any credit that the Bank extends to the
Borrower; (c) the Borrower's default; (d) any demand; or (e) any action that
the Bank takes regarding the Borrower, anyone else, any collateral, or any
Liability, which it might be entitled to be law or under any other agreement.
Any waiver shall affect only the specific terms and time period stated in the
waiver. The Bank may waive or delay enforcing any of its rights without losing
them. No modification or waiver of this Guaranty shall be effective unless it
is in writing and signed by the party against whom it is being enforced.
REPRESENTATIONS BY GUARANTOR: If the Guarantor is a corporation, it represents
that it is a corporation duly organised, existing and in good standing under
the laws of its state of incorporation, and that the execution and delivery of
this Guaranty and the performance of the obligations it imposes are within its
corporate powers, have been duly authorized by all necessary action of its
board of directors, and do not contravene the terms of its articles of
incorporation or by-laws. If the Guarantor is a general or limited
partnership, it represents that it is duly organised and existing and that the
execution and delivery of this Guaranty and the performance of the obligations
it imposes do not conflict with any provision of its partnership agreement and
have been authorized by all necessary action of its partners. Each Guarantor
represents that the execution and delivery of this Guaranty and the performance
of the obligations it imposes do not violate any law, do not conflict with any
agreement by which it is bound, do not require the consent or approval of any
governmental authority or any third party, and that this Guaranty is a valid
and binding agreement, enforceable according to its terms. Each Guarantor
further represents that all balance sheets, profit and loss statements, and
other information, if any, furnished to the Bank are accurate and fairly
reflect the financial condition of the organisations and persons to which they
apply on their effective dates, including contingent liabilities of every type,
which financial condition has not changed materially and adversely since those
dates.
NOTICES: Notice from one party to another relating to the Guaranty shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or telecopier number set
forth under its name by any of the following means: (a) hand delivery; (b)
registered or certified mail, postage prepaid, with return receipt requested;
(c) first class or express mail, postage prepaid; (d) Federal Express,
Purolator Courier or like overnight courier service; or (e) telecopy, telex or
other wire transmission with request for assurance of receipt in a manner
typical with respect to
DAISYTEK GUARANTEE PAGE 2 OF 3
<PAGE> 8
communications of that type. Notice made in accordance with this section shall
be deemed delivered on receipt if delivered by hand or wire transmission, on
the third business day after mailing if mailed by first class, registered or
certified mail, or on the next business day after mailing or deposit with an
overnight courier service if delivered by express mail or overnight courier.
Notwithstanding the foregoing, notice of termination of this Guaranty shall be
deemed received only upon the receipt of actual written notice by the Bank in
accordance with the paragraph above labelled "Continued Reliance."
LAW AND JUDICIAL FORUM THAT APPLY: This Agreement is governed by Illinios law.
The Guarantor agrees that any legal action or proceeding against it with
respect to any of its obligations under this Guaranty may be brought in any
state or federal court located in the State of Illinios, as the Bank in its
sole discretion may elect. By the execution and delivery of this Guaranty, the
Guarantor submits to and accepts, with regard to any such action or proceeding,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts. The Guarantor waives any claim that the State of
Illinios is not a convenient forum or the proper venue for any such suit,
action or proceeding.
FOREIGN CURRENCY: This Guaranty arises in the context of an international
transaction, and the specification of payment in the following currency
AUSTRALIAN DOLLARS ("Foreign Currency") at THE FIRST NATIONAL BANK OF CHICAGO,
SYDNEY BRANCH ("Conversion Location") is of the essence. The Foreign Currency
shall be the currency of account and payment under this Guaranty. The
obligation of the Guarantor shall not be discharged by an amount paid in any
other currency or at another place, whether pursuant to a judgment or
otherwise, to the extent that the amount so paid, on prompt conversion into the
Foreign Currency and transfer to the Conversion Location under normal banking
procedure, does not yield the amount of Foreign Currency due under this
Guaranty. In the event that any payment, whether pursuant to a judgment or
otherwise, upon conversion and transfer, does not result in payment of the
amount of Foreign Currency due under this Guaranty, the Bank shall have an
independent cause of action against the Guarantor for the Foreign Currency
deficiency.
MISCELLANEOUS: The Guarantor's liability under this Guaranty is independent of
its liability under any other guaranty previously or subsequently executed by
the Guarantor or any one of them, singularly or together with others, as to all
or any part of the Liabilities, and may be enforced for the full amount of this
Guaranty regardless of the Guarantor's liability under any other guaranty.
This Guaranty is binding on the Guarantor's heirs, successors and assigns, and
will operate to the benefit of the Bank and its successors and assigns. The
use of headings shall not limit the provisions of this Guaranty. All
discussions and documents arising between this Guaranty and the last guaranty
signed by the Guarantor as to the Borrower are merged into this Guaranty.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this Guaranty or any related instrument
or agreement, or any of the transactions contemplated by this Guaranty, or any
course of conduct, dealing, statement (whether oral or written), or actions of
either of them. Neither the Bank nor the Guarantor shall seek to consolidate
by counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Guarantor except by a written instrument
executed by both of them.
Date:
-------------------------
GUARANTORS:
DAISYTEK GUARANTEE PAGE 3 OF 3
<PAGE> 9
Signed for and on behalf Signed for and on behalf of
DAISYTEK, INC DAISYTEK INTERNATIONAL CORPORATION
Address: Address:
By: By:
- --------------------------- ----------------------------------
Signature Signature
- --------------------------- ----------------------------------
Name/Title Name/Title
DAISYTEK GUARANTEE PAGE 4 OF 3
<PAGE> 1
EXHIBIT 10.4
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated
and effective as of December ___, 1997, is among DAISYTEK, INCORPORATED, a
Delaware corporation (hereinafter referred to as "Borrower"), DAISYTEK
INTERNATIONAL CORPORATION, a Delaware corporation ("Guarantor"), each of
Borrower's Subsidiaries identified under the caption "SUBSIDIARY GUARANTORS" on
the signature pages of this Amendment or that, pursuant to Section 8.1(n) of
the Credit Agreement (as hereinafter defined), become a "Subsidiary Guarantor"
(individually, a "Subsidiary Guarantor," and, collectively, the "Subsidiary
Guarantors"), STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
("State Street"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("First Chicago"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association ("TCB"), as a lender and as administrative agent
for itself, State Street and First Chicago (State Street, First Chicago, TCB
and any assignee lender pursuant to Section 11.4A of the Credit Agreement being
referred to, collectively, as "Lenders"). All capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such terms in the
Credit Agreement.
RECITALS
WHEREAS, Borrower, Guarantor, certain Subsidiary Guarantors, State
Street, First Chicago (as assignee, effective June 30, 1997, of NBD Bank, a
Michigan banking corporation) and TCB are parties to that certain Credit
Agreement dated as of May 22, 1995, as amended by that certain First Amendment
to Credit Agreement dated as of April 15, 1996, that certain Second Amendment
to Credit Agreement dated as of November 14, 1996 and effective as of November
18, 1996, and that certain Third Amendment to Credit Agreement dated and
effective as of June 30, 1997 (as so amended, the "Credit Agreement"),
establishing a revolving credit facility in the aggregate maximum principal
amount of $50,000,000, with funding commitments thereunder shared forty percent
(40%) by TCB, forty percent (40%) by State Street and twenty percent (20%) by
First Chicago; and
WHEREAS, the parties desire to increase the maximum cash portion of
total consideration payable in acquisitions in a Fiscal Year from $5,000,000 to
$15,000,000, and to increase the maximum aggregate amount of permitted
unsecured Funded Debt pursuant to Section 8.2(m) of the Credit Agreement from
$5,000,000 to $18,000,000.
NOW, THEREFORE, in consideration of the recitals set forth above, the
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower, Guarantor,
Subsidiary Guarantors and Lenders hereby agree as follows:
1. Amendment of Section 8.2(g). Section 8.2(g) of the Credit
Agreement is amended to read in its entirety as follows:
"(g) Acquisitions. No Daisytek Corporation will acquire
the stock or, in a transaction outside the ordinary course of
business, the assets of any other Person; provided, however, that the
foregoing shall not prevent acquisitions if (i) the cash portion of
the total consideration paid in a Fiscal Year in connection with such
acquisitions is Fifteen Million Dollars ($15,000,000) or less and the
total consideration paid in a Fiscal Year in connection with such
acquisitions is Twenty Five Million Dollars ($25,000,000) or less and
(ii) with respect to each such acquisition, the most
<PAGE> 2
recent annual audited income statement of the Person acquired, or, in
the case of the purchase of less than all or substantially all of the
assets of such Person, of the division or other identifiable business
segment of such Person, discloses positive net operating income. For
purposes of the foregoing sentence, the payment of consideration shall
include the assumption of Debt."
2. Amendment of Section 8.2(m). Section 8.2(m) of the Credit
Agreement is amended to read in its entirety as follows:
"(m) Limitations on Funded Debt. No Daisytek Corporation
shall permit, as of any date, the creation, incurrence, assumption or
sufferance to exist of Funded Debt of such corporation, other than (i)
the Obligations, (ii) Funded Debt existing on the Closing Date and
fully described in the Initial Financial Statements (other than the
Funded Debt referred to in Footnote 2 to the Consolidated financial
statements of Guarantor included in the Prospectus as the revolving
line of credit agreement with commercial banks), (iii) Funded Debt
secured as permitted by Section 8.2(a), (iv) unsecured Funded Debt of
up to Ten Million Dollars ($10,000,000) to a Lender incurred under a
money market line of credit, and (v) unsecured Funded Debt of such
Daisytek Corporation which, together with the Funded Debt pursuant to
this clause (v) of all other Daisytek Corporations, does not exceed
Eighteen Million Dollars ($18,000,000)."
3. Other Documents. Borrower shall provide such other documents
incidental and appropriate to this Amendment as Agent or Agent's counsel may
reasonably request, all such documents being in form and substance reasonably
satisfactory to Agent.
4. Terms of Agreement. Except as expressly amended by this
Amendment, the Credit Agreement is and shall be unchanged.
5. Effect of Amendment. The Credit Agreement and any and all
other documents heretofore, now or hereafter executed and delivered pursuant to
the terms of the Credit Agreement are hereby amended so that any reference to
the Credit Agreement in the Credit Agreement or the other documents shall mean
a reference to the Credit Agreement as amended hereby.
6. Reaffirmation; No Default. Each Daisytek Corporation hereby
represents and warrants to Lenders that (a) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed and
delivered in connection herewith have been authorized by all requisite
corporate action on the part of such Daisytek Corporation and will not violate
the certificate of incorporation (or other charter documents) or bylaws of any
Daisytek Corporation, (b) except for an increase in the number of authorized
shares of common stock of Guarantor, neither the certificate of incorporation
(or other charter documents) nor bylaws of any Daisytek Corporation have been
amended or revoked since May 22, 1995, (c) the representations and warranties
contained in the Credit Agreement, as amended by this Amendment, and any other
Loan Document are true and correct on and as of the date hereof as though made
on and as of the date hereof, (d) no Event of Default has occurred and is
continuing and no event or condition has occurred that with the giving of
notice or lapse of time or both would be an Event of Default, and (e) each
Daisytek Corporation is in full compliance with all covenants and agreements
contained in the Credit Agreement, as amended hereby.
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE> 3
7. Enforceability. Each Daisytek Corporation hereby represents
and warrants that, as of the date of this Amendment, the Credit Agreement and
all documents and instruments executed in connection therewith are in full
force and effect and that there are no claims, counterclaims, offsets or
defenses to any of such documents or instruments.
8. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF
TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA.
CHAPTER 15 OF TEXAS REVISED CIVIL STATUTES ARTICLE 5069 (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL
NOT APPLY TO THE CREDIT AGREEMENT, AS AMENDED BY THIS AMENDMENT, OR THE NOTES.
9. Maximum Interest Rate. Regardless of any provisions contained
in this Amendment or in any other Loan Documents, Lenders shall never be deemed
to have contracted for or be entitled to receive, collect or apply as interest
on the Notes or otherwise any amount in excess of the maximum rate of interest
permitted to be charged by applicable law, and if Lenders ever receive, collect
or apply as interest any such excess, or if acceleration of the maturity of the
Notes or if any prepayment by Borrower results in Borrower having paid any
interest in excess of the maximum rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Notes for which such excess was received, collected or applied, and, if the
principal balances of Notes are paid in full, any remaining excess shall
forthwith be paid to Borrower. All sums paid or agreed to be paid to Lenders
for the use, forbearance or detention of the indebtedness evidenced by the
Notes and/or the Credit Agreement, as amended by this Amendment, shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment in full so
that the rate or amount of interest on account of such indebtedness does not
exceed the maximum lawful rate permitted under applicable law. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the maximum rate of interest permitted by law, Borrower and Lenders
shall, to the maximum extent permitted under applicable law, (i) characterize
any non-principal payment as an expense, fee or premium, rather than as
interest; and (ii) exclude voluntary prepayments and the effect thereof; and
(iii) compare the total amount of interest contracted for, charged or received
with the total amount of interest which could be contracted for, charged or
received throughout the entire contemplated term of the Notes at the maximum
lawful rate under applicable law.
10. Counterparts. This Amendment may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Amendment.
11. WAIVER OF TRIAL BY JURY. EACH DAISYTEK CORPORATION WAIVES ANY
AND ALL RIGHTS THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM
OR OTHER ACTION, OF ANY NATURE WHATSOEVER, RELATING TO OR ARISING OUT OF THIS
AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. EACH DAISYTEK
CORPORATION ACKNOWLEDGES THAT THE FOREGOING JURY TRIAL WAIVER IS A MATERIAL
INDUCEMENT TO EACH LENDER'S ENTERING INTO THIS AMENDMENT AND THE
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE> 4
OTHER LOAN DOCUMENTS AND THAT EACH LENDER IS RELYING ON SUCH WAIVER IN ITS
FUTURE DEALINGS WITH SUCH CORPORATION. EACH SUCH CORPORATION WARRANTS AND
REPRESENTS TO EACH LENDER THAT SUCH CORPORATION HAS REVIEWED THE FOREGOING JURY
TRIAL WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH SUCH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, THE FOREGOING JURY TRIAL WAIVER MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
12. WAIVER OF DTPA RIGHTS. EACH DAISYTEK CORPORATION HEREBY
WAIVES ALL OF ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT (TEX. BUS. & COM. CODE Section 17.41 ET SEQ.), A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND REPRESENTS AND WARRANTS TO EACH
LENDER THAT SUCH CORPORATION (A) HAS ASSETS OF $5,000,000 OR MORE (EXCEPT THAT
ONLY BORROWER, GUARANTOR AND DAISYTEK (CANADA) INC. MAKE THE REPRESENTATION IN
THIS CLAUSE (A)), (B) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLE SUCH CORPORATION TO EVALUATE THE MERITS AND RISKS OF THE
TRANSACTIONS CONTEMPLATED BY THIS AMENDMENT, (C) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION, AND (D) IS REPRESENTED BY LEGAL COUNSEL IN
CONNECTION WITH SUCH TRANSACTIONS.
13. OTHER AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS
AMENDMENT, AND THE OTHER LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE
PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY, RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF. THE WRITTEN CREDIT AGREEMENT, AS
AMENDED BY THIS AMENDMENT, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES.
[The balance of this page is intentionally left blank.]
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 4
<PAGE> 5
THIS AMENDMENT is executed and effective as of the date first written
above.
BORROWER:
DAISYTEK, INCORPORATED
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
GUARANTOR:
DAISYTEK INTERNATIONAL
CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SUBSIDIARY GUARANTORS:
WORKING CAPITAL OF AMERICA,
INC., a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
HOME TECH DEPOT, INC., a Delaware
corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
DAISYTEK (CANADA) INC., a Canadian
corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 5
<PAGE> 6
PRIORITY FULFILLMENT SERVICES WORKING CAPITAL CANADA INC., a
OF AUSTRALIA PTY. LIMITED, corporation
an Australian corporation
By: By:
------------------------------ --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
--------------------------- -----------------------------------
DAISYTEK ASIA PTY. LIMITED, DAISYTEK DE MEXICO, S.A. DE C.V.,
a Singapore corporation a Mexican corporation
By: By:
------------------------------ --------------------------------------
Name: Name:
---------------------------- ------------------------------------
Title: Title:
--------------------------- -----------------------------------
SUPPLIES EXPRESS, INC., a Delaware
corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
DAISYTEK LATIN AMERICA, INC., a
Florida corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
PRIORITY FULFILLMENT SERVICES
DE MEXICO, S.A. DE C.V., a
Mexican corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
DAISYTEK DE MEXICO SERVICES, S.A. DE
C.V., a Mexican corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 6
<PAGE> 7
PRIORITY FULFILLMENT SERVICES,
INC., a Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
DAISYTEK AUSTRALIA PTY. LIMITED,
an Australian corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
PRIORITY FULFILLMENT SERVICES
OF CANADA, INC., a Canadian
corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
AGENT:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking
association
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
LENDERS:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking
association
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 7
<PAGE> 8
STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust
By:
------------------------------------
Michael St. Jean,
Vice President
THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association
By:
------------------------------------
James F. Gable,
Authorized Agent
FOURTH AMENDMENT TO CREDIT AGREEMENT - Page 8
<PAGE> 1
EXHIBIT 10.5
LETTER AGREEMENT
December 23, 1997
Daisytek (Canada) Inc.
35 Valley Wood Drive
Unit #1
Markham, Ontario
L3R 5L9
Attention: Corporate Secretary
and
Daisytek, Inc.
500 North Central Expressway
Plano, Texas
75074-6763
Attention: Mr. Thomas Graham
Dear Sirs:
We are pleased to inform you that First Chicago NBD Bank, Canada has approved a
revolving credit facility (the "SEGMENT 1 FACILITY") and a foreign exchange
facility (the "SEGMENT 2 FACILITY") to Daisytek (Canada) Inc. (the Segment 1
Facility and the Segment 2 Facility are collectively referred to as the "CREDIT
FACILITY").
The authorization is subject to the following terms and conditions:
BORROWER: DAISYTEK (CANADA) INC. (the "BORROWER")
LENDER: FIRST CHICAGO NBD BANK, CANADA (the "BANK").
GUARANTOR: DAISYTEK, INC. (the "GUARANTOR")
PURPOSE OF
SEGMENT 1
FACILITY: To finance working capital for general corporate
purposes.
LETTER AGREEMENT
<PAGE> 2
-2-
PURPOSE OF
SEGMENT 2
FACILITY: To hedge against foreign exchange rate fluctuations.
SEGMENT 1
FACILITY: Committed revolving credit facility of up to a
maximum of Cdn $15,000,000 (or the Equivalent Amount
in US Dollars) (the "SEGMENT 1 AMOUNT").
The Segment 1 Facility is available by way of:
1. loans in Canadian Dollars based on the Prime
Rate ("PRIME LOANS"),
2. the acceptance of bankers' acceptances in
Canadian Dollars based on the Discount Rate
("B/AS"),
3. loans in Canadian Dollars based on the Cost of
Funds ("COF LOANS"),
4. loans in US Dollars based on the US Base Rate
("US BASE LOANS"), and
5. loans in US Dollars based on Libor ("LIBOR
LOANS").
Each use of the Segment 1 Facility by way of any of
the foregoing methods is referred to as a
"BORROWING". The maximum amount payable to the
holders of any B/A and the principal amount of all
Borrowings outstanding shall be used in determining
the amount outstanding under the Segment 1 Facility
from time to time. Where a Borrowing is available in
US Dollars the amount outstanding from time to time
shall be determined in Canadian Dollars in accordance
with the Currency Conversion provision.
SEGMENT 2
FACILITY: Uncommitted foreign exchange facility of up to a
maximum notional amount of US$1,000,000 based on the
Bank's credit risk exposure determined by the Bank in
accordance with its standard practices relating to
Hedge Contracts as defined below (the "SEGMENT 2
AMOUNT").
The Segment 2 Facility is available by way of foreign
exchange rate hedging techniques such as currency
swaps, foreign exchange forward contracts and foreign
exchange options ("HEDGE CONTRACTS").
AVAILABILITY: The Segment 1 Facility is available subject to the
following:
During the period (the "REVOLVING PERIOD") starting
on the date of this Agreement and ending on July 1,
1999 (the "MATURITY DATE"), the
LETTER AGREEMENT
<PAGE> 3
-3-
Borrower may borrow, repay and reborrow up to the
Segment 1 Amount at any time and from time to time,
with respect to a Prime Loan or US Base Loan by
withdrawing the money in increments of Cdn$10,000, or
US$10,000, as applicable, from its Revolvement
Accounts, as defined below, and otherwise subject to
notice in accordance with Schedule "B".
Borrowings outstanding by way of Libor Loans, COF
Loans and B/As may only be repaid on their respective
maturity dates.
INTEREST
AND FEES: The following interest rates and fees apply to the
Credit Facility:
1. Segment 1
Prime Loan - Prime Rate
B/A - Discount Rate + an acceptance fee of
0.65 % per annum
COF Loan - Cost of Funds + 0.65 % per annum
US Base Loan - US Base Rate
Libor Loan - Libor + 0.65 % per annum
2. Segment 2
Hedge Contracts - rate indicated on issue
Prime Loans and US Base Loans
The Borrower shall, for value on the first Business
Day following each month, pay interest on any Prime
Loan in Canadian Dollars and interest on any US Base
Loan in US Dollars calculated monthly in arrears at
the rates set out above accruing daily on the actual
number of days elapsed and based on a year of 365
days. Any change in the rates of interest applicable
to any Prime Loan or US Base Loan shall be effective
as of the opening of business on the day such change
takes place.
COF Loans
The Borrower shall, for value on each COF Interest
Date, pay interest on COF Loans in Canadian Dollars,
calculated in arrears at the rates set out above,
accruing daily on the actual number of days elapsed
and based on a year of 365 days.
Libor Loans
The Borrower shall, for value on each Libor Interest
Date, pay interest on Libor Loans in US Dollars,
calculated in arrears at the rates set out above,
LETTER AGREEMENT
<PAGE> 4
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accruing daily on the actual number of days elapsed
and based on a year of 360 days.
Acceptance Fees
The Borrower shall pay acceptance fees in Canadian
Dollars at the rates set out above in advance on the
date of issue of each B/A. Acceptance fees shall be
calculated on the face amount of the B/A issued and
based on the number of days in the term of such B/A
and a year of 365 days.
Arrangement Fee
The Bank is authorized to collect an arrangement fee
of Cdn.$15,000 by way of debit to the Borrower's
Revolvement Account, as defined below, following the
execution of this Agreement by the Bank and the
Borrower.
Commitment Fee
The Borrower shall pay a Commitment Fee, calculated
and payable quarterly in arrears for value on the
last Business Day of each quarter until the Maturity
Date and on the Maturity Date, of 0.25% per annum on
the unborrowed and uncancelled portion of the Segment
1 Amount, accruing daily from and including the date
of acceptance of this offer, and based on a year of
365 days.
Loan Administration Fee
The Borrower shall pay a loan administration fee of
US$500 on the first Business Day of each calendar
quarter.
Miscellaneous
The annual rates of interest or fees to which the
rates calculated in accordance with the foregoing
paragraphs of this Interest and Fees provision are
equivalent, are the rates so calculated multiplied by
the actual number of days in the calendar year and
divided by 365 or, in the case of Libor Loans, 360.
Interest and fees payable under this provision are
payable both before and after any or all of default,
demand and judgement.
Overdue Payments
Any overdue payment in Canadian Dollars shall be
deemed to be a Prime Loan with interest payable at
the Prime Rate + 3% per annum. Any
LETTER AGREEMENT
<PAGE> 5
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overdue payment in US Dollars shall bear interest
payable at the US Base Rate +3%.
EXCHANGE
RATE: If, due to exchange rate changes, the value of
Borrowings outstanding under the Segment 1 Facility,
when converted to Canadian Dollars, exceeds the
Segment 1 Amount, the Borrower shall repay, provide
cash cover for or otherwise retire or provide
collateral satisfactory to the Bank for outstanding
Borrowings to the extent of such excess.
REVOLVEMENT: The Bank shall establish two accounts: one
denominated in Canadian Dollars and the other in US
Dollars (each a "REVOLVEMENT ACCOUNT"). The
Revolvement Accounts shall record the Borrower's day
to day banking business other than pursuant to this
agreement. If the balance in either Revolvement
Account:
(a) is a credit, the Bank may apply the amount of
such credit or any part thereof, rounded to
the nearest Cdn$10,000 or US$10,000, as
applicable, as a repayment of Borrowings
outstanding under Segment 1, or
(b) is a debit, the Bank shall make available a
Borrowing under Segment 1 by way of Prime
Loan or US Base Loan, as applicable, in an
amount, rounded to the nearest Cdn$10,000 or
US$10,000, as applicable, required to place
the Borrower in a minimum net credit position
of zero, provided there are sufficient funds
available under the Segment 1 Amount.
B/A
CONDITIONS: Each B/A shall be issued and shall mature on a
Business Day in accordance with the following
conditions:
(a) B/As shall be issued in minimum face amounts
of Cdn$100,000 for terms of not less than 30
and not more than 180 days with each issue
being for an aggregate face amount of
Cdn$1,000,000 or such larger amounts as are
whole multiples of Cdn$100,000,
(b) the proceeds of a B/A issue shall be credited
to the Borrower's account,
(c) the Borrower shall, on the day on which a B/A
becomes payable only, by no later than noon,
pay to the Bank an amount equal to the face
amount of such B/A,
LETTER AGREEMENT
<PAGE> 6
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(d) if the Borrower fails to fund a maturing B/A
from other sources and has not notified the
Bank of the method of Borrowing it intends to
use to fund such maturing instrument, then the
face amount of such maturing instrument shall
be deemed to be a Prime Loan under the Segment
1 Facility as of the maturity date of such
instrument, and
(e) B/As shall mature on or before the Maturity
Date.
COF LOAN
CONDITIONS: The Borrower may borrow by way of COF Loans in
minimum amounts of Cdn$1,000,000 or such larger
amounts as are whole multiples of Cdn$100,000. The
Borrower may select COF Interest Periods and shall
notify the Bank of the COF Interest Periods so
selected. The COF Interest Period may not be less
than 30 days and not more than one year and may not
expire after the Maturity Date.
LIBOR LOAN
CONDITIONS: The Borrower may borrow by way of Libor Loans in
minimum amounts of US$1,000,000 or such larger
amounts as are whole multiples of US$100,000. The
Borrower may select Libor Interest Periods and shall
notify the Bank of the Libor Interest Periods so
selected. The Libor Interest Period may not be less
than 30 days and not more than 180 days and may not
expire after the Maturity Date.
Indemnity
The Borrower shall reimburse the Bank for any loss,
cost or expense (including without limitation the
cost to the Bank of redeploying funds obtained to
fund or maintain any Libor Loan) incurred as a result
of:
(a) repayments or prepayments relative to Libor
Loans effected on other than the last day of a
Libor Interest Period applicable to the amount
being repaid or prepaid, or
(b) failure to draw down a Libor Loan on the
requested date.
Availability
If the Bank determines, which determination is final,
conclusive and binding upon the Borrower, that:
(a) adequate and fair means do not exist for
ascertaining the rate of interest on a Libor
Loan,
LETTER AGREEMENT
<PAGE> 7
-7-
(b) the making of a Libor Loan has become
impracticable by reason of circumstances which
materially or adversely affect the London
interbank market,
(c) deposits in US Dollars are not available to
the Bank in the London interbank market in
sufficient amounts in the ordinary course of
business for the applicable period to make,
fund or maintain a Libor Loan during such
period, or
(d) the relevant rate of interest referred to in
the definition of "Libor" does not accurately
reflect the cost to the Bank of funding Libor
Loans for the relevant Libor Interest Period,
then Libor Loans shall not be available under this
Agreement.
Illegality
If it should become unlawful or prohibited for the
Bank to make or maintain Libor Loans, the Libor
Loans, together with all accrued but unpaid interest,
shall automatically be converted to US Base Loans and
the Borrower's ability to borrow by way of Libor Loan
shall terminate forthwith, unless such law or
prohibition is subsequently withdrawn.
HEDGE
CONTRACT
CONDITIONS: Each Hedge Contract is subject to documentation in
form and substance satisfactory to the Bank. The
Bank may, at its sole discretion, decline to make any
particular or all methods of hedging available to the
Borrower at any time. If Hedge Contracts are entered
into over the telephone, the terms shall be confirmed
in writing. The Borrower will indemnify the Bank for
and hold it harmless from any loss, cost or expense
suffered or incurred by the Bank as a result of
acting upon instructions given or agreements made
over the telephone with Responsible Officers
reasonably believed by the Bank to have been acting
on the Borrower's behalf. The foregoing indemnity
applies to all instructions given or agreements made
with respect to Hedge Contracts, whether such
instructions or agreements relate to the Borrower and
the Bank only or involve crediting the accounts of
third parties.
INCREASED
COSTS: The Borrower shall reimburse the Bank that amount
which compensates the Bank for any additional cost,
reduction in income or reduction in the Bank's return
on capital or assets caused by:
LETTER AGREEMENT
<PAGE> 8
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(a) an imposition of or increase in, or the
withdrawal or termination of a previously
granted exemption with respect to, any taxes
on amounts payable by the Borrower to the Bank
under this Agreement other than taxes on the
capital or overall net income of the Bank,
(b) a regulatory imposition of or increase in
reserve, liquidity, cash margin, special
deposit, deposit insurance or similar
requirements against assets held or deposits
in or for the account of, loans by or any
other acquisition of funds related to
Borrowings under this Agreement,
(c) a change in the manner or the extent to which
the Bank is required by the Superintendent of
Financial Institutions to allocate capital to
assets acquired or commitments made pursuant
to this Agreement, or
(d) the imposition of any other condition with
respect to this Agreement by any governmental
body or persons acting under the authority of
any governmental body, through any law,
statute, directive, regulation, request,
order, judgement or requirement with which
financial institutions operating in Canada are
accustomed to or have generally complied,
whether or not having the force of law.
The Bank shall provide the Borrower with 30 days
prior written notice of the Bank's intention to rely
on this provision. Such notice will give details of
the circumstances giving rise to the Bank's action
with copies of any relevant law, directive,
regulation, request or requirement, if available.
The notice will be accompanied by a certificate
signed by an officer of the Bank setting out the
manner in which the Bank has calculated any required
compensation which shall be, in the absence of
manifest error, conclusive evidence of the amount of
any compensation required. The Borrower shall pay
the Bank the amount of any such required compensation
in accordance with the requirements of any such
notice. The Bank will use its reasonable best
efforts to minimize the effect of any such required
compensation on the Borrower's cost of borrowing but
any costs or expenses associated with the early
termination of any Borrowing are for the account of
the Borrower.
REPAYMENT AND
REDUCTION OF
CREDIT
FACILITY:
1. Segment 1 Facility - All outstanding
Borrowings under the Segment 1 Facility shall
be repaid in full on the Maturity Date.
LETTER AGREEMENT
<PAGE> 9
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2. The Bank may, without notice, cancel any
unused portions of the Segment 2 Amount at any
time, from time to time.
CANCELLATION: Upon 5 Business Days written notice to the Bank, the
Borrower may cancel any undrawn portion of the Credit
Facility without penalty. Any such cancellation is
irrevocable and any portion of the Credit Facility
cancelled shall not be reinstated.
EVIDENCE OF
INDEBTEDNESS: The Bank shall open and maintain accounts and records
evidencing the Borrowings and Hedge Contracts made
available to the Borrower by the Bank. The Bank shall
record the principal amount of such Borrowings, the
payment of principal, interest and fees, and all
other amounts becoming due to the Bank, including
amounts due under Hedge Contracts.
The Bank's accounts and records constitute, in the
absence of manifest error, prima facie evidence of
the indebtedness of the Borrower to the Bank.
The Borrower authorizes and directs the Bank to
automatically debit, by mechanical, electronic or
manual means, any bank account of the Borrower for
all amounts payable by the Borrower to the Bank
including, but not limited to, the repayment of
principal and the payment of interest, fees and all
charges for the keeping of such bank account.
This provision shall be interpreted as a separate
contract between the parties, independent of all
other terms of this Agreement and shall remain in
full force and effect notwithstanding that this
Agreement shall have otherwise ceased to have any
force or effect.
CONDITIONS
PRECEDENT: The effectiveness of this Agreement is subject to and
conditional upon the receipt, in form and substance
satisfactory to the Bank of:
(a) a duly executed copy of this Agreement,
(b) a duly executed Promissory Note given by the
Borrowers in favour of the Bank,
(c) a duly executed guarantee given by the
Guarantor, in favour of the Bank, of the
Borrower's obligations under this Agreement
(the "GUARANTEE"),
(d) an opinion of legal counsel to the Guarantor
in respect of the enforceability of the
Guarantee,
LETTER AGREEMENT
<PAGE> 10
-10-
(e) an officer's certificate of the Borrower
attaching copies of the articles of
incorporation, by-laws, directors' resolutions
and specimen signatures of the persons
authorized to sign this Agreement,
(f) an officer's certificate of the Guarantor
attaching copies of the articles of
incorporation, by-laws, directors' resolutions
and specimen signatures of the persons
authorized to sign the Guarantee,
(g) a signing authorization package of the Bank
(banking resolution, signature cards, list of
officers and directors) completed by the
Borrower,
(h) a duly executed foreign exchange forward
contract request,
(i) a duly executed B/A undertaking, and
(j) a copy of the executed loan agreement between
First Chicago NBD Bank and the Guarantor (the
"GUARANTOR LOAN AGREEMENT") along with any
waivers, extensions or replacement facilities.
It shall be a condition precedent to each Borrowing
under the Segment 1 Facility and each Hedge Contract
under the Segment 2 Facility that no event or
condition has occurred which with the giving of
notice or lapse of time would constitute an Event of
Default.
REPRESENTATIONS
AND
WARRANTIES: Borrower represents and warrants to the Bank, which
representations and warranties are repeated, mutatis
mutandis, with each Borrowing and each Hedge Contract
that:
1a it is a corporation validly incorporated and
subsisting under the laws of its jurisdiction
of incorporation, and that it is duly
registered or qualified to carry on business
in all jurisdictions where the nature of its
properties, assets or its business makes such
registration or qualification necessary and is
in compliance in all material respects with
applicable laws;
2a the execution and delivery of this Agreement
has been duly authorized by all necessary
actions and does not (i) violate any law,
regulation or rule by which it is bound, (ii)
violate any provision of its constating
documents, by-laws or any unanimous
shareholders' agreement to which it is
subject, or (iii) result in a breach of, a
default under, or the creation of any
encumbrance on its properties
LETTER AGREEMENT
<PAGE> 11
-11-
and assets or under any agreement or
instrument to which it is a party or by which
it or any of its properties and assets may be
bound or affected;
3a this Agreement constitutes a legal valid and
binding obligation of the Borrower subject to
bankruptcy, insolvency, winding up,
re-organization, moratorium or other laws
affecting creditors' rights generally and that
equitable remedies such as specific
performance and injunction are available at
the discretion of the court;
4a there are no proceedings that have been
commenced or that are pending or threatened
which if determined adversely would have a
material adverse effect on the business or
financial condition of the Borrower or its
ability to meet its obligations under this
Agreement;
5a its income statements and balance sheets for
the fiscal quarter ended September 30, 1997
are materially correct and complete in all
respects and no material adverse change has
taken place in its financial condition since
the date of such statements and balance
sheets; and
6a no event has occurred which constitutes, or
which with giving of notice, lapse of time or
other condition would constitute, a default
having a material adverse effect on its
financial condition under or in respect of any
agreement, undertaking or instrument to which
it or any of its properties or assets may be
subject.
REPORTING
REQUIREMENTS: The Borrower shall provide the Bank with the
following statements and reports, each of which shall
be signed by an officer of the Borrower or the
Guarantor, as applicable:
1a Quarterly income statements and balance sheets
of the Borrower not later than 60 days
subsequent to each quarter-end;
2a Annual audited financial statements of the
Guarantor not later than 120 days subsequent
to each fiscal year-end;
3a Quarterly financial statements of the
Guarantor not later than 60 days subsequent to
each quarter end;
4a Quarterly compliance letters from the
Guarantor confirming that it is not in breach
of any covenants under any of its Debt; and
LETTER AGREEMENT
<PAGE> 12
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5a Such other financial information as the Bank
may reasonably request.
COVENANTS: The Borrower covenants and agrees with the Bank,
while this Agreement is in effect or any Borrowings
or Hedge Contracts are outstanding:
1a to pay all sums of money when due under this
Agreement as applicable;
2a to do or cause to be done all things necessary
to keep in full force and effect its corporate
existence and all material rights, franchises,
licences and qualifications to carry on its
businesses or own its properties and assets in
each jurisdiction in which it carries on
business or owns property or assets from time
to time;
3a to provide the Bank with copies of all
amendments, waivers, extensions or replacement
facilities to the Guarantor Loan Agreement;
4a to comply in all material respects with all
applicable laws required for it to carry on
its business;
5a to conduct its business in a proper, efficient
and business-like manner and maintain its
property, plant, and equipment used in the
conduct of its business and which is neither
obsolete nor unnecessary in a good and
workmanlike manner;
6a to insure and to keep insured its properties
customarily insured by companies carrying on a
similar business in similar locations, or
owning or operating similar properties,
against all risks, including but not limited
to business interruption insurance;
7a to notify the Bank of any proceedings that are
pending, threatened or commenced seeking
damages from it in excess of $150,000 in
respect of a single proceeding or $500,000 in
the aggregate for all such proceedings;
8a to give the Bank prompt notice of any Event of
Default or any event which, with notice or
lapse of time, or both, would constitute an
Event of Default;
9a to file all material income tax returns which
are or will be required to be filed, to pay or
make provision for payment of all material
taxes (including interest and penalties) which
are or will become
LETTER AGREEMENT
<PAGE> 13
-13-
due and payable and to provide adequate
reserves for the payment of any tax the
payment of which is being contested; and
10a to maintain a system of accounting established
and administered in accordance with GAAP
consistently applied and to permit the Bank or
its representatives to examine its books and
financial records and to discuss its affairs,
finances and accounts with the auditors of the
Borrower at such reasonable times and as may
reasonably be requested by the Bank.
EVENTS OF
DEFAULT: Upon the occurrence of any one or more of the
following events ("EVENTS OF DEFAULT") the Bank may,
by written notice to the Borrower, declare an Event
of Default:
(a) the non-payment when due of principal,
interest, fee, or any other amounts due under
this Agreement;
(b) the breach by the Borrower of any provision of
this Agreement or any other agreement with the
Bank and such breach is not remedied within 15
days after the earlier of: (1) a Responsible
Offer of a Daisytek Corporation becoming aware
thereof or (2) notice thereof being given by
the Bank to the Borrower, provided that the
breach is capable of being of being remedied;
(c) the breach by the Guarantor of any provision
of the Guarantor Loan Agreement or any other
agreement with First Chicago NBD Bank and such
breach is not remedied within 15 days provided
that the breach is capable of being remedied;
(d) termination, for any reason, of the Guarantor
Loan Agreement;
(e) if any representation or warranty made herein
or in any document, agreement or certificate
delivered pursuant hereto shall be false or
inaccurate in any material respect;
(f) if a distress or execution or any similar
process be levied or enforced against any
material property or assets of the Borrower or
the Guarantor having an aggregate market value
of $100,000 or more unless such distress or
execution is being contested in good faith by
appropriate legal proceedings and the person
levying or enforcing the distress or execution
is stayed during the course of such
proceedings;
LETTER AGREEMENT
<PAGE> 14
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(g) if Borrower or Guarantor:
(1) institutes proceedings for its
winding-up, liquidation, or dissolution
or consents to the filing of any
petition with respect thereto including,
without limitation, taking any action in
furtherance of the foregoing under the
Winding- Up Act (Canada) or its
incorporating statute or similar act
applicable to it in any applicable
jurisdiction,
(2) files a notice, plan, petition, answer
or consent seeking reorganization,
readjustment, arrangement, composition
or similar relief under any applicable
law or consents to the filing of any
such plan or petition or to the
appointment of a receiver, liquidator,
trustee or similar officer of itself or
any part of its property, including,
without limitation, taking or consenting
to others taking any action pursuant to
the Bankruptcy and Insolvency Act
(Canada), or the Companies' Creditors
Arrangement Act (Canada),
(3) makes an assignment for the benefit of
creditors,
(4) is unable or admits in writing its
inability to pay its Debts as they
become due or otherwise acknowledges its
insolvency, or
(5) is deemed for the purposes of any
applicable law to be insolvent,
or takes any action in furtherance of any of
the foregoing;
(h) if, with respect to Borrower or Guarantor or
both of them, any third party:
(1) makes any application under the
Companies' Creditors Arrangement Act
(Canada), or similar act applicable to
it in any jurisdiction,
(2) files a proposal and/or notice of
intention to file a proposal under the
Bankruptcy and Insolvency Act (Canada)
or similar act applicable to it in any
jurisdiction,
(3) institutes a winding-up proceeding under
the Winding-Up Act (Canada), any
relevant incorporating statute or any
similar act applicable to it in any
jurisdiction, or
LETTER AGREEMENT
<PAGE> 15
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(4) presents a petition in bankruptcy under
the Bankruptcy and Insolvency Act
(Canada) or similar act applicable to it
in any jurisdiction,
(each of which shall be treated as a default
hereunder) and if any such application,
filing, proceeding or petition is not
dismissed, stayed or withdrawn within 30 days
of the Borrower or Guarantor, as applicable,
receiving notice or otherwise having knowledge
of the institution thereof or if relief is
granted or judgement entered to or in favour
of any third person in respect of any such
application, filing, proceeding or petition;
or
(i) the seizure of all or any material part of the
Borrower's or Guarantor's assets by any
creditor or creditor's representative,
including without limitation, a privately
appointed receiver or sheriff.
Upon the declaration of an Event of Default, the
ability of the Borrower to make further Borrowings or
Hedge Contracts under the Credit Facility shall
immediately terminate and the Bank may, by written
notice to the Borrower, declare the Borrowings and
Hedge Contracts outstanding under the Credit Facility
to be immediately due and payable. The Borrower shall
immediately pay to the Bank all amounts outstanding
under Credit Facility.
INDEMNITY: The Borrower shall indemnify the Bank from and
against all losses, damages, expenses and liabilities
which the Bank sustains or incurs as a consequence of
any default by the Borrower under any of the
provisions of this Agreement or any misrepresentation
by the Borrower contained in, or delivered in writing
in connection with, this Agreement.
SCHEDULES: The Schedules attached to this Agreement are
incorporated in this Agreement by reference as if set
out in full herein.
WHOLE
AGREEMENT: This Agreement and any agreements delivered pursuant
to or referenced in this Agreement constitute the
whole and entire agreement between the parties and
cancel and supersede any prior agreements including
undertakings, declarations or representations,
written or verbal, in respect of the Credit Facility.
EXPENSES: The Borrower shall pay the reasonable fees
(including, but not limited to, all fees of the
Bank's counsel on a solicitor and client basis) and
expenses incurred by the Bank in connection with the
preparation, negotiation,
LETTER AGREEMENT
<PAGE> 16
-16-
documentation and operation of the Credit Facility
whether or not any amounts are advanced under the
Credit Facility.
CURRENCY
CONVERSION: If, for the purpose of obtaining judgement in any
court, determining the amount outstanding under this
Agreement or for any other purpose, it is necessary
to convert an amount in one currency (the "ORIGINAL
CURRENCY") into another currency (the "SECOND
CURRENCY"), the Equivalent Amount of the Second
Currency shall be used. If the conversion relates to
a judgement, the conversion shall be performed as of
the date 2 Business Days preceding that on which
judgement is given. For all other purposes, the
conversion shall be performed as of the date and time
of determination.
The Borrower agrees that any obligations in respect
of any Original Currency due from it to the Bank
shall, notwithstanding any judgement or payment in
any Second Currency, be discharged only to the extent
that, on the Business Day following receipt of any
sum so paid or adjudged to be due in the Second
Currency, the Bank may, in accordance with normal
banking procedures, purchase, in the Toronto foreign
exchange market, the Original Currency with the
amount of the Second Currency so paid or so adjudged
to be due; and if the amount of the Original Currency
so purchased is less than the amount of the Original
Currency due to the Bank, the Borrower agrees, as a
separate obligation and notwithstanding any such
payment or judgement, to pay the Bank the amount of
the Second Currency required to purchase the amount
of the Original Currency necessary to make up such
difference on such date together with interest (at
the Prime Rate per annum) and expenses (including
legal fees on a solicitor and client basis) from such
date to the date of payment.
NO DEDUCTION: All payments to be made by the Borrower under this
Agreement shall be made in full, without any set-off
or counterclaim whatsoever.
GROSSING-UP
FOR TAXES: If at any time the Borrower is required to make any
deduction or withholding in respect of Taxes,
excluding Taxes on income, from any payment due under
this Agreement for the account of the Bank, the sum
due from the Borrower in respect of such payment
shall be increased to the extent necessary to ensure
that, after the making of such deduction or
withholding, the Bank receives on the due date for
such payment (and retains, free from any liability in
respect of such deduction or withholding) a net sum
equal to the sum which it would have received had no
such deduction or withholding been required to be
made and the Borrower shall indemnify the Bank
against any losses or costs incurred by reason of any
failure of the Borrower to make any such deduction or
withholding or by
LETTER AGREEMENT
<PAGE> 17
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reason of any increased payment not being made on the
due date for such payment. The Borrower shall
promptly deliver to the Bank any receipts,
certificates or other proof evidencing the amounts
(if any) paid or payable in respect of any deduction
or withholding as aforesaid.
ASSIGNMENT
AND
PARTICIPATION: This Agreement shall be binding upon and enure to the
benefit of the Bank and the Borrower and their
respective successors and permitted assigns. The
Bank may assign or transfer its rights, benefits and
obligations under the Credit Facility to any other
financial institution ("ASSIGNEE") subject to the
prior consent of the Borrower, which consent shall
not be unreasonably withheld. After any such
assignment or transfer, the term "Bank" as used in
this Agreement with respect to the Credit Facility
(as appropriate) shall be deemed to be the Assignee
to the extent of its interest.
The Bank may sell participation in the Credit
Facility to any third party, provided that no such
participant shall have any rights under this
Agreement as against the Borrower.
In assigning, transferring or participating all or
any part of its rights or obligations as aforesaid,
the Bank may reveal to potential Assignees or
participants all or any information regarding the
Borrower or the Guarantor and their Subsidiaries as
the Bank deems necessary or desirable.
The Borrower may not assign any of its rights under
this Agreement.
GAAP: Unless otherwise provided, all accounting terms used
in this Agreement shall be interpreted in accordance
with GAAP, consistently applied.
SEVERABILITY: If any provision of this Agreement is or becomes
prohibited or unenforceable in any jurisdiction, such
prohibition or unenforceability shall not invalidate
or render unenforceable the provision concerned in
any other jurisdiction nor shall it invalidate,
affect or impair any of the remaining provisions.
GOVERNING
LAW: This Agreement shall be construed in accordance with
and governed by the laws of the Province of Ontario
and of Canada applicable therein and the parties
attorn to the non-exclusive jurisdiction of the
courts of the Province of Ontario.
LETTER AGREEMENT
<PAGE> 18
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COUNTERPARTS: The parties may sign this Agreement in any number of
counterparts, all of which taken together and when
delivered to the Bank shall constitute one and the
same instrument.
If the above terms and conditions are acceptable to you, as they are to the
Bank, please sign and return the enclosed acknowledgement copy of this letter
no later than December 31, 1997. This offer supersedes any previous offers of
credit.
Sincerely,
Acknowledged by:
FIRST CHICAGO NBD BANK, CANADA, as DAISYTEK (CANADA) INC., as Borrower
the Bank
By: By: /s/ [ILLEGIBLE]
-------------------------------- ------------------------------------
Name: Name: [ILLEGIBLE]
Title: Title: VP Admin
Date: 12-31-97
By: By: /s/ SUZANNE BARRETTE
-------------------------------- ------------------------------------
Name: Name: Suzanne Barrette
Title: Title: Secretary
Date: December 31, 1997
DAISYTEK, INC., as Guarantor
By: /s/ [ILLEGIBLE]
------------------------------------
Name: [ILLEGIBLE]
Title: VP Admin
Date 12-31-97
By:
------------------------------------
Name:
Title:
LETTER AGREEMENT
<PAGE> 19
SCHEDULE A
DEFINITIONS
"BUSINESS DAY" means a day, excluding Saturday, Sunday, and any other day which
shall be in the City of Toronto a legal holiday or a day on which banking
institutions are closed and, with respect to a Libor Loan, "Business Day" means
a day with the foregoing characteristics which is also a day on which dealings
in US Dollar deposits by and between leading banks in the London interbank
market may be conducted.
"CANADIAN DOLLARS" and "CDN$" and "$" each means lawful money of Canada.
"COF INTEREST DATE" means the last day of each COF Interest Period and, if the
Borrower selects a COF Interest Period longer than 90 days, the COF Interest
Date shall also be the date falling every 90 days after the beginning of such
COF Interest Period.
"COF INTEREST PERIOD" means, with respect to a COF Loan, the initial period
(subject to availability) as selected by the Borrower in accordance with the
terms hereof commencing with the date on which a COF Loan is made and
thereafter each successive period commencing on the last day of the immediately
prior COF Interest Period.
"COST OF FUNDS" means the Bank's cost of funds as determined by it in
accordance with its usual practice.
"DAISYTEK CORPORATION" means Daisytek (Canada) Inc. or Daisytek, Inc.
"DEBT" means (a) indebtedness for borrowed money or for the deferred purchase
price of goods or services (including trade obligations), (b) obligations under
leases which are or should be, in accordance with GAAP, reported as capital
leases, (c) obligations under letters of credit or guarantees or indemnities
given in connection therewith, whether issued for the benefit of the Borrower
or another or others, (d) obligations arising pursuant to bankers' acceptance
facilities, (e) all other contingent obligations such as, without limitation,
guarantees, endorsements of bills of exchange (other than for collection or
deposit in the ordinary course of business), obligations to purchase assets and
obligations to make advances or otherwise provide financial assistance to any
other entity.
"DISCOUNT RATE" means the percentage discount rate of the Bank calculated on
the basis of a year of 365 days, which it would, in accordance with normal
practices at or about 10:30 a.m. on the date of drawdown of the B/A, be
prepared to purchase bankers' acceptances accepted by it as having a comparable
face value and an identical issue and maturity date to the face value and issue
and maturity date of such B/A.
"EQUIVALENT AMOUNT" means, with respect to any given amount of any currency,
the amount of any other currency required to purchase that amount of the first
currency through the Bank in Toronto in accordance with the Bank's usual
procedures.
"GAAP" means generally accepted accounting principles as applied in Canada.
A - 1 LETTER AGREEMENT
<PAGE> 20
"LIBOR" means, with respect to each Libor Interest Period, the average rates of
interest, rounded upwards, if necessary, to the nearest whole multiple of one
sixteenth of one percent (1/16th%), at which the Bank, in accordance with its
normal practice, would be prepared to offer US Dollar deposits to leading banks
in the London interbank market for delivery on the first day of such Libor
Interest Period for a period comparable to such Libor Interest Period based on
the number of days comprised therein, in aggregate amount comparable to the
amount of the Libor Loan to which such Libor Interest Period relates, at or
about 11:00 a.m. (Toronto time) 2 Business Days prior to the first day of such
Libor Interest Period, (the "INTEREST DETERMINATION DATE").
"LIBOR INTEREST DATE" means the last day of each Libor Interest Period and, if
the Borrower selects a Libor Interest Period longer than 90 days, the Libor
Interest Date shall also be the date falling every 90 days after the beginning
of such Libor Interest Period.
"LIBOR INTEREST PERIOD" means, with respect to a Libor Loan, the initial period
(subject to availability) as selected by the Borrower in accordance with the
terms hereof commencing with the date on which a Libor Loan is made and
thereafter each successive period commencing on the last day of the immediately
prior Libor Interest Period.
"PRIME RATE" means the annual rate of interest announced by the Bank from time
to time as being a reference rate then in effect for determining interest rates
on Canadian Dollar commercial loans in Canada.
"RESPONSIBLE OFFICER" means the Chief Executive Officer Chief Financial
Officer, Vice President Finance, Treasurer, Chief Accounting Officer, Director
of Cash Management and Corporate Controller.
"SUBSIDIARY" means a corporation which the Borrower, alone or together with any
other Subsidiary or Subsidiaries, controls, whether by way of direct ownership
or control of the corporation or corporations having direct ownership (such
control being derived from direct or indirect share ownership, contract or
otherwise) voting securities of the first mentioned corporation carrying at
least 51% of the votes for the election of the directors of such corporation.
"TAXES" means all present and future taxes, levies, imposts, duties, fees or
charges of whatever nature together with any interest thereon and penalties in
respect thereof.
"US BASE RATE" means the annual rate of interest announced by the Bank from
time to time as being a reference rate then in effect for determining interest
rates on US Dollar commercial loans made in Canada.
"US DOLLARS" and "US$" each means lawful money of the United States of America
in same day immediately available funds or, if such funds are not available,
the form of money of the United States of America that is customarily used in
the settlement of international banking transactions on the day payment is due
hereunder.
A - 2 LETTER AGREEMENT
<PAGE> 21
SCHEDULE B
NOTICE REQUIREMENTS
LIBOR LOANS
Prior Notice
by 10:00 a.m. on the Interest Determination Date
B/AS, COF LOANS, PRIME LOANS AND US BASE LOANS*
PRIOR NOTICE
BY 10:00 A.M. ON THE DAY OF DRAWDOWN
- --------------------
*With respect to Prime Loans and US Base Loans, notice is required only
for those drawdowns not made by way of cheques on the Revolvement Accounts.
B - 1 LETTER AGREEMENT
<PAGE> 22
CONTINUING GUARANTY
- --------------------------------------------------------------------------------
GUARANTY: To induce FIRST CHICAGO NBD BANK, CANADA (the "Bank"), of 161 Bay
Street, #4240, Toronto, Ontario M5J 2S1 at its option, to make loans, extend or
continue credit or some other benefit, including letters of credit and foreign
exchange contracts as set out in the loan agreement date December 23, 1997, as
amended, extended or replaced from time to time, whether several, joint or
joint and several (referred to collectively as "Liabilities"), to Daisytek
(Canada) Inc. and its successors (the "Borrower").
(Name of Borrower)
and because the undersigned (the "Guarantor") has determined that executing
this Guaranty is in its interest and to its financial benefit, the Guarantor
absolutely and unconditionally guaranties to the Bank, as primary obligor and
not merely as surety, that the Liabilities will be paid when due, whether by
acceleration or otherwise. The Guarantor will not only pay the Liabilities, but
will also reimburse the Bank for accrued and unpaid interest, and any expenses
including reasonable attorneys' fees, that the Bank may pay in collecting from
the Borrower or the Guarantor and for liquidating any collateral.
LIMITATION: The Guarantor's obligation under this Guaranty is UNLIMITED.
Notwithstanding the foregoing, if these blank lines are completed, regardless
of the amount of Liabilities outstanding at any time, the Guarantor's
obligation under this Guaranty shall not exceed the principal amount of Fifteen
Million Canadian Dollars (CAD$15,000,000), plus interest, expenses, fees, and
any additional amount relating to exposure under a US$1 million foreign
exchange credit facility.
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to the
Borrower based on this Guaranty until it receives written notice of termination
from the Guarantor. That notice shall be effective at the opening of the Bank
for business on the day after receipt of the notice. If terminated, the
Guarantor will continue to be liable to the Bank for any Liabilities created,
assumed or committed to at the time the termination becomes effective, and all
subsequent renewals, extensions, modifications and amendments of the
Liabilities.
INCORPORATION: (This paragraph applies if the blanks are filled in.) The
Guarantor agrees that so long as any Liability remains outstanding, the
covenants and events of default set forth in the Loan Agreement dated December
23, 1997 between Texas Commerce Bank National Association, State Street Bank
and Trust Company, and the Guarantor, as amended (the "Agreement"), are
incorporated by reference. Those covenants and events shall remain in force
until this Guaranty is no longer in force, notwithstanding any termination of
the Agreement.
NEGATIVE PLEDGE: The Guarantor will not allow any lien to exist on any of its
property, except liens known to the Bank and existing on the date of this
Guaranty, and new liens which, in aggregate, total less than US$7,000,000.
For purposes of the following paragraphs, "any collateral" shall include
the Guarantor's Collateral and any other collateral securing the Liabilities.
ACTION REGARDING BORROWER: The Bank may take any action against the Borrower,
any collateral, or any other person liable for any of the Liabilities. The Bank
may release the Borrower or anyone else from the Liabilities, either in whole
or in part, or release any collateral, and need not perfect a security interest
in any collateral. The Bank does not have to exercise any rights that it has
against the Borrower or anyone else, or make any effort to realize on any
collateral or right of set-off. If the Borrower requests more credit or any
other benefit, the Bank may grant it and the Bank may grant renewals,
extensions, modifications and amendments of the Liabilities and otherwise deal
with the Borrower or any other person as the Bank sees fit and as if this
Guaranty were not in effect. The Guarantor's obligations under this Guaranty
shall not be released or affected by (a) any act or omission of the Bank, (b)
the voluntary or involuntary liquidation, sale or other disposition of all or
substantially all of the assets of the Borrower, or any receivership,
insolvency, bankruptcy, reorganization, or other similar proceedings affecting
the Borrower or any of its assets, or (c) any change in the composition or
structure of the Borrower or Guarantor, including a merger or consolidation
with any other person or entity.
NATURE OF GUARANTY: This Guaranty is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay immediately,
and the Bank is not required to attempt to collect first from the Borrower, any
collateral, or any other person liable for the Liabilities. The obligation of
the Guarantor shall be subject to no conditions of any kind, and shall be
absolute, regardless of the unenforceability of any provision of any agreement
between the Borrower and the Bank, or the existence of any defense, setoff or
counterclaim which the Borrower may assert.
OTHER GUARANTORS: If there is more than one Guarantor, their obligations under
this Guaranty shall be joint and several. In addition, each Guarantor shall be
jointly and severally liable with any other guarantor of the Liabilities. If
the Bank elects to enforce its rights against less than all guarantors of the
Liabilities, that election shall not release Guarantor from its obligations
under this Guaranty. The compromise or release of any of the obligations of any
of the other guarantors or the Borrower shall not serve to waive, alter or
release the Guarantor's obligations. This Guaranty is not conditioned or anyone
else executing this or any other guaranty.
WAIVER OF SUBROGATION: The Guarantor expressly waives any and all rights of
subrogation, contribution, reimbursement, indemnity, exoneration, implied
contract, recourse to security or any other claim (including and claim, as that
term is defined in the federal Bankruptcy Code, and any amendments) which the
Guarantor may now have or later acquire against the Borrower, any other entity
directly or contingently liable for the Liabilities or against the Collateral,
arising, from the existence or performance of the Guarantor's obligations under
this Guaranty until such time as the Liabilities have been repaid in full.
The Guarantor further agrees that should any payments to the Bank on the
Liabilities be in whole or in part invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy act or code, state or federal law, common law
or equitable doctrine, this Guaranty and any Collateral shall remain in full
force and effect (or be reinstated as the case may be) until payment in full of
any such amounts, which payment shall be due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of the
following matters before the Bank enforces any of its rights: (a) the Bank's
acceptance of this Guaranty, (b) any credit that the Bank extends to the
Borrower, (c) the Borrower's default, (d) any demand, or (e) any action that
the Bank takes regarding the Borrower, anyone else, any collateral, or any
Liability, which it might be entitled to by law or under, any other agreement.
Any waiver shall affect only the specific terms and time period stated in the
waiver. The Bank may waive or delay enforcing any of its rights without losing
them. No modification or waiver of this Guaranty shall be effective unless it
is in writing and signed by the party against whom it is being enforced.
REPRESENTATIONS BY GUARANTOR: Each Guarantor represents: (a) that the execution
and delivery of this Guaranty and the performance of the obligations it imposes
do not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority, or any third
party; that this Guaranty is a valid and binding agreement, enforceable
according to its terms, and (c) that all balance sheets, profit and loss
statements, and other financial statements furnished to the Bank fairly reflect
the financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Guarantor, if other than a natural person, further represents: (a) that it
is duly organized, existing and in good standing under the laws where it is
organized; and (b) that the execution and delivery of this Guaranty and
<PAGE> 23
the performance of the obligations it imposes (i) are within its powers; (ii)
have been duly authorized by all necessary action of its governing body; and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by-laws, or any agreement governing its affairs.
NOTICES: Notice from one party to another relating to this Guaranty shall be
deemed effective if made in writing (including telecommunications) and delivered
to the recipient's address, telex number of facsimile number set forth under its
name by any of the following means: a) hand delivery, b) registered or certified
mail, postage prepaid, with return receipt requested, c) first class or express
mail, postage prepaid, d) Federal Express, Purolator Courier or like overnight
courier service, or (c) facsimile, telex or other wire transmission with request
for assurance of receipt in a manner typical with respect to communications of
that type. Notice made in accordance with this section shall be deemed delivered
on receipt if delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class, registered or certified mail, or on the
next business day after mailing or deposit with an overnight courier service if
delivered by express mail or overnight courier. Notwithstanding, the foregoing,
notice of termination of this Guaranty shall be deemed received only upon the
receipt of actual written notice by the Bank in accordance with the paragraph
above labelled "Continued Reliance."
LAW AND JUDICIAL FORUM THAT APPLY: This agreement is governed by Illinois law.
The Guarantor agrees that any legal action or proceeding against it with respect
to any of its obligations under this Guaranty may be brought in any state or
federal court located in the State of Illinois, as the Bank in its sole
discretion may elect. By the execution and delivery of this Guaranty, the
Guarantor submits to and accepts, with regard to any such action or proceeding,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of those courts. The Guarantor waives any claim that the State of
Illinois is not a convenient forum or the proper venue for any such suit, action
or proceeding.
FOREIGN CURRENCY: (This paragraph applies if the blanks are filled in.) This
Guaranty arises in the context of an international transaction, and the
specification of payment in the following currency
CANADIAN DOLLARS____________________________________________________________
(Name of Currency)
("Foreign Currency") at TORONTO, CANADA__________________("Conversion Location")
(City and Country)
is of the essence. The Foreign Currency shall be the currency of account and
payment under this Guaranty. The obligation of the Guarantor shall not be
discharged by an amount paid in any other currency or at another place, whether
pursuant to a judgment or otherwise, to the extent that the amount so paid, on
prompt conversion into the Foreign Currency and transfer to the Conversion
Location under normal banking procedure, does not yield the amount of Foreign
Currency due under this Guaranty.
MISCELLANEOUS: The Guarantor's liability under this Guaranty is independent of
its liability under any other guaranty previously or subsequently executed by
the Guarantor or any one of them, singularly or together with others, as to all
or any part of the Liabilities, and may be enforced for the full amount of this,
Guaranty regardless of the Guarantor's liability under any other guaranty. This
Guaranty is binding on the Guarantor's heirs, successors and assigns, and will
operate to the benefit of the Bank and its successors and assigns. The use of
headings shall not limit the provisions of this Guaranty. All discussions and
documents arising between this Guaranty and the last guaranty signed by the
Guarantor as to the Borrower are merged into this Guaranty.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this Guaranty or any related instrument
or agreement, or any of the transactions contemplated by this Guaranty, or any
course of conduct, dealing, statement (whether oral or written), or actions of
either of them. Neither the Bank nor the Guarantor shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Guarantor except by a written instrument
executed by both of them.
Dated: December 31, 1997 GUARANTOR:
DAISYTEK, INC.
Address: /s/ THOMAS J. MUDDEN
--------------------------------
[ILLEGIBLE]
- ------------------------------ --------------------------------
- ------------------------------ --------------------------------
<PAGE> 1
EXHIBIT 11
DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES
STATEMENTS RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 4,138 $ 3,364 $ 11,836 $ 9,360
========== ========== ========== ==========
Weighted average common shares
outstanding:
Basic (1) 13,632 12,970 13,530 12,904
========== ========== ========== ==========
Diluted (1) 14,308 13,834 14,260 13,832
========== ========== ========== ==========
Net income per common share:
Basic $ 0.30 $ 0.26 $ 0.87 $ 0.73
========== ========== ========== =========
Diluted $ 0.29 $ 0.24 $ 0.83 $ 0.68
========== ========== ========== =========
Calculation of weighted average common
shares outstanding:
Basic weighted average of common stock
outstanding (1) 13,362 12,970 13,530 12,904
Weighted average common stock options,
utilizing the treasury stock method (1)(2) 676 864 730 928
---------- ---------- ---------- ----------
Diluted weighted average common stock
outstanding (1) 14,308 13,834 14,260 13,832
========== ========== ========== ==========
</TABLE>
(1) On February 5, 1998, the Company's Board of Directors approved a stock
split which provides for each holder of common stock to receive 1
additional share for each share held (the "2 for 1 Stock Split"). The
weighted average common stock calculations have been adjusted to reflect
the 2 for 1 Stock Split.
(2) Utilizing the weighted average stock price of $38.41 and $37.90 per share
for the three and nine months ended December 31, 1997, respectively, and
the weighted average stock price of $38.18 and $39.40 per share for the
three and nine months ended December 31, 1996, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DAISYTEK INTERNATIONAL CORPORATION AND SUBSIDIARIES FOR
THE NINE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 914
<SECURITIES> 0
<RECEIVABLES> 98,205
<ALLOWANCES> 2,262
<INVENTORY> 70,295
<CURRENT-ASSETS> 169,768
<PP&E> 25,240
<DEPRECIATION> 12,727
<TOTAL-ASSETS> 186,973
<CURRENT-LIABILITIES> 75,984
<BONDS> 29,216
0
0
<COMMON> 136
<OTHER-SE> 82,004
<TOTAL-LIABILITY-AND-EQUITY> 186,973
<SALES> 538,966
<TOTAL-REVENUES> 538,966
<CGS> 485,026
<TOTAL-COSTS> 485,026
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,250
<INTEREST-EXPENSE> 1,619
<INCOME-PRETAX> 19,178
<INCOME-TAX> 7,342
<INCOME-CONTINUING> 11,836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,836
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.83
</TABLE>
