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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): December 31, 1996
________________________________
DANKA BUSINESS SYSTEMS PLC
(Exact name of registrant as specified in its charter)
UNITED KINGDOM 33-68278 98-0052869
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 813-576-6003
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective December 31, 1996 (the "Closing Date") and pursuant to an
Asset Purchase Agreement dated as of September 6, 1996, as amended by Amendment
No. 1 to Asset Purchase Agreement dated December 20, 1996 (the "Purchase
Agreement") between Danka Business Systems PLC (together with its subsidiaries
the "Company") and Eastman Kodak Company and its subsidiaries ("Kodak") the
Company and certain of its subsidiaries purchased (i) the assets primarily
related to the marketing, sale, distribution, maintenance, service and repair
of electrophotographic systems for office imaging and reprographics and the
marketing, sale and distribution of related parts, supplies and consumables and
(ii) the assets primarily related to and the issued and outstanding stock of
certain subsidiaries of Kodak which are engaged in the facilities management
services business known as Kodak Imaging Services (collectively, the "Sales and
Services Business"), for a net cash purchase price of $688 Million which is
subject to post-closing adjustment.
The source of funds used by the Company in this transaction was the
Company's $1.275 billion credit facility described in the Company's 8-K filed
on December 16, 1996.
In connection with the Purchase Agreement, Kodak and certain
affiliates of the Company entered into a number of agreements effective
December 31, 1996 relating to the purchase and sale of electrophotographic
equipment and related software, supplies, accessories and spare parts
manufactured or re-manufactured by Kodak (the "Supply Agreements").
Pursuant to the Supply Agreements, Kodak has granted to the Company
the exclusive right to purchase and resell Kodak's currently existing line of
electrophotographic equipment and related software, supplies, accessories and
spare parts manufactured or remanufactured by Kodak ("Current Products") with
limited exceptions for certain applications, market segments and geographic
areas. The Company will also receive the right of first refusal to exclusively
distribute in such territories each proposed new electrophotographic product
other than electrophotographic equipment capable of producing full color images
("Future Products"). Until the earlier of (i) the termination of the Company's
exclusivity
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rights described below and (ii) five years from the date of the Supply
Agreements, the Company shall have the nonexclusive right to distribute in such
territories certain electrophotographic equipment capable of producing full
color images and related software, supplies, accessories and spare parts
developed and manufactured by Kodak.
Certain exclusivity rights with respect to certain Current Products
for limited markets shall terminate upon the earlier of (i) the Company's
failure to purchase ninety percent or more of the minimums required under the
Supply Agreements and (ii) the Company's failure to pay any contributions to
research and development required by the Research and Development Agreement
dated effective December 31, 1996 between Kodak and the Company (the "R & D
Agreement"). Kodak may terminate the Company's exclusivity rights with respect
to any Future Product if the Company fails to meet the minimum purchase
requirements for such product.
Kodak may not assign any of its rights under the Supply Agreements to
an unaffiliated party or sell its manufacturing division during the first 30
months of the Supply Agreements. Thereafter, the Company shall have the right
of first offer to purchase Kodak's manufacturing division. Kodak has also
agreed not to market, sell, distribute, maintain, service or repair any
equipment that is a Current Product or a Future Product, except as expressly
permitted by the Supply Agreements, until such time that the Company's
exclusivity rights with respect to Current Products terminate.
The Company has agreed to contribute a total of $190.0 million (plus
an additional $30.0 million if certain research milestones are met) to Kodak's
ongoing research and development for new electrophotographic products over a
six year period. The Company and Kodak shall each appoint three
representatives to serve as members of an advisory committee which shall meet
on a regular basis to discuss overall research and development progress.
The Supply Agreements and the R & D Agreement have an initial term of
ten (10) years and may be renewed for an additional term of three (3) years
upon the mutual agreement of the parties. The Supply Agreements and the R & D
Agreement may be terminated (i) by mutual agreement of the parties; (ii) after
material breach of one of the parties; or (iii) by Kodak after the third
anniversary thereof if it determines that the manufacturing business has failed
to achieve adequate profitability, in which case it may elect to begin a 24
month winding down period at the end of which Kodak shall cease to engage in
such business and the Supply Agreements and the R & D Agreement will be
terminated.
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Copies of the Purchase Agreement (excluding schedules and similar
attachments) are filed with this Report and any description of the Purchase
Agreement set forth in this report is qualified in its entirety by reference to
the terms and conditions contained in the Purchase Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements.
It is impracticable at this time to provide the required
financial statements for the Sales and Services Business at the time this Report
is being filed. The Company undertakes to file the required financial
statements as soon as they are available as an amendment to this Report, but no
later than sixty (60) days after the date this Report was required to be filed.
(b) Pro Forma Financial Information.
For the reasons set forth in Item 7(a), it is impracticable to
provide the pro forma financial information that would be required pursuant to
Article 11 of Regulation S-X.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth
elsewhere herein.
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SIGNATURE
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 hereunto duly authorized.
DANKA BUSINESS SYSTEMS PLC
By: /s/ DAVID C. SNELL
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David C. Snell
Its: Chief Operating Officer
Dated: January 15, 1997
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
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2.1 Asset Purchase Agreement between Eastman Kodak Company and
Danka Business Systems PLC dated as of September 6, 1996
(previously filed as Exhibit 2 in the Company's Form 8-K
filed on November 14, 1996 and incorporated herein by
reference).
2.2 Amendment No. 1 to Asset Purchase Agreement between Eastman
Kodak Company and Danka Business Systems PLC dated December
20, 1996. (Excluding schedules and similar attachments).
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Exhibit 2.2
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
AMENDMENT No. 1, dated December 20, 1996, to the Asset
Purchase Agreement, dated as of September 6, 1996 (the "Agreement"), by and
between Eastman Kodak Company, a corporation organized under the laws of New
Jersey ("Seller"), and Danka Business Systems PLC, a public limited company
organized under the laws of England and Wales ("Purchaser"). All terms used
but not defined herein have the meanings set forth in the Agreement.
WHEREAS, Seller and Purchaser wish to amend the Agreement as
set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and undertakings contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Table of Contents of the Agreement is hereby
amended to add a new Section 5.28, entitled "OEM Modification", and a new
Section 5.29 entitled "Residuals", and to replace the Exhibits and Schedules
section to read as set forth in Attachment A hereto.
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2. The third WHEREAS clause of the Recitals is hereby
amended in its entirety to read as follows:
"WHEREAS, Kodak operates a multinational facilities management
service that, among other things, provides, on behalf of its
customers, copier/duplicator, administrative, mailroom and/or print on
demand services ("KIS");"
3. The fourth WHEREAS clause of the Recitals is hereby
amended in its entirety to read as follows:
"WHEREAS, the parties hereto desire that Kodak and the
Subsidiaries sell, transfer, assign, license and lease to Purchaser
and the Purchaser Buyers and that Purchaser and the Purchaser Buyers
purchase, license, lease and assume from Kodak and the Subsidiaries
certain assets and liabilities of OI, CES and KIS and the issued and
outstanding stock of certain subsidiaries that form a part of KIS, all
as more specifically provided herein;"
4. The sixth WHEREAS clause of the Recitals is hereby
amended in its entirety to read as follows:
"WHEREAS, at the Closing, Kodak and certain of its
Subsidiaries and one or more of the Purchaser Buyers will enter into
certain supply agreements and a research and development agreement
(together, the "Supply Agreement"), in the forms annexed hereto as
Exhibit 5.19(a), which will replace the existing Master Supply
Agreement and Reseller Purchase Agreements and may be subsequently
assigned to certain Purchaser Buyers, pursuant to which, effective as
of the closing of the transactions contemplated by this Agreement,
Kodak will supply electrophotographic systems (digital and analog) for
office imaging and reprographics to Purchaser and the Purchaser Buyers
for marketing and resale by Purchaser and the Purchaser Buyers, and
conduct certain research and development related thereto; and"
5. The last WHEREAS clause of the Recitals is hereby
amended in its entirety to read as follows:
"WHEREAS, at the Closing, Kodak and one of the Purchaser
Buyers will enter into an Emerging
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Territories Marketing and Promotion Agreement and Kodak and one of the
Purchaser Buyers will enter into a U.S. Territory Marketing and
Promotion Assistance Agreement (together, the "Promotional
Agreement"), in the form annexed hereto as Exhibit 5.19(b)."
6. The definition of Ancillary Agreements in Section 1.1
of the Agreement shall be amended by deleting "(h)" therein and substituting
"(i)" therefor.
7. The definition of "LAR Amount" in Section 1.1 of the
Agreement is hereby amended in its entirety to read as follows:
"LAR Amount" shall mean the sum of all of the costs associated
with the actions set forth on Schedule 1.1(c) hereto in Brazil, Chile,
Colombia, Mexico, Panama and Venezuela."
8. The definition of "OEM Modification" in Section 1.1
of the Agreement is hereby amended in its entirety as follows:
"OEM Modification" shall mean the execution of the agreement
among Danka Luxembourg SARL, Danka Group B.V. and Canon Inc., dated as
of even date herewith."
9. The definition of "Residuals" in Section 1.1 of the
Agreement is hereby amended to insert before the word "electrophotographic"
therein, the phrase "residual value at the end of the lease term of" and to
delete the phrase "and have a book value of $3.9 million" at the end thereof.
10. The Agreement is amended to delete each reference to
the term "Retention Bonuses" and substitute therefor the term "Transition
Bonuses" to accurately reflect the substance of the bonuses.
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11. The definition of "Retention Bonuses" in Section 1.1
of the Agreement is hereby amended to read as follows:
"'Transition Bonuses'" shall mean the $3.1 million payable to
Applicable Employees who will be Transferred Employees pursuant to those
certain letters to individual Employees, dated January 26, 1996 in connection
with their commitment to stay with the Business during the repositioning."
and to move such definition before the definition of "Unaudited Balance Sheet"
therein.
12. Section 2.1 of the Agreement is hereby amended to
insert in subsection (j) thereof the word "UK" prior to the word "Residuals"
therein.
13. Section 2.2(e) of the Agreement shall be amended in
its entirety to read as follows:
"(e) all finance lease receivables and all equipment
underlying such finance lease receivables and the Canadian
Residuals;"
14. Section 2.2(k) of the Agreement is hereby amended to
insert the phrase ", all assets located in Turkey, Thailand and Dubai" after
the words "Schedule 2.2(k)" therein.
15. Section 2.3 of the Agreement is hereby amended by
adding before the period at the end of the second sentence thereof the
following:
"as a result of this Agreement, the Transitional Advisory
Agreement or the Ancillary Agreements."
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16. Section 2.5 of the Agreement is hereby amended to
delete the figure "684.2" therein and to substitute therefor the figure
"643.259".
17. Section 2.6(a) of the Agreement is hereby amended to:
(a) insert after the phrase "Exhibit 3.7" of the first
sentence thereof, the following:
"(except that any amounts accrued at December 31, 1996 in
respect of the Kodak Executive Deferred Compensation Plan and
all assets located in Turkey, Thailand and Dubai shall not be
reflected therein notwithstanding the Unaudited Balance
Sheet)";
(b) add at the end of the first sentence thereof "except
there shall be no change in the amount set forth with respect to the
Residuals"; and
(c) insert at the end of the first sentence thereof
immediately prior to the period thereof, the following:
"; it being understood that to the extent a payable is
reflected on the Closing Date Balance Sheet but is paid by
Kodak, Purchaser shall reimburse Kodak promptly for such
payable, or such payable shall be deemed to be excluded from
the Closing Date Balance Sheet for purposes of Section 2.6(d),
as agreed by the parties, and to the extent a receivable is
reflected on the Closing Date Balance Sheet but is collected
by Kodak, Kodak shall reimburse Purchaser promptly for such
receivable, or such receivable shall be deemed to be excluded
from the Closing Date Balance Sheet for purposes of Section
2.6(d), as agreed by the parties"
18. Section 2.8(a) is hereby amended to delete "684.2"
therefrom and to substitute therefor "643.259".
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19. Section 2.9 of the Agreement is hereby amended to add
the phrase "except as otherwise provided in Section 5.8" before the word
"Kodak" on the first line thereof.
20. Section 3.20 of the Agreement is hereby amended to
add the phrase "except as otherwise provided in Section 5.8" before the phrase
"will transfer" on the second line thereof.
21. Section 3.21(a) of the Agreement is hereby amended
to:
(a) delete the phrase "dated hereof" from the second line
thereof and to substitute therefor the phrase "Closing Date".
(b) insert after the word "Closing" in the sixth line
thereof the following:
"or as of such later date that, in accordance with Section
5.8, any such Assigned Lease is assigned or any property
listed on Schedule 1.1(b) is subleased or licensed (the "Later
Delivery Date").
(c) insert after the word "Closing" in the tenth line
thereof the following:
"or in the case of any Assigned Lease which is assigned or any
property listed on Schedule 1.1(b) which is subleased or
licensed on a Later Delivery Date, as of such Later Delivery
Date."
22. Section 5.4(g)(i) of the Agreement is hereby amended
to delete the first sentence thereof and to substitute therefor the following:
"The parties to this Agreement agree that the allocation of
the total consideration transferred by Purchaser and the
Purchaser Buyers to Kodak and the Subsidiaries pursuant to
this Agreement (the "Consideration") in accordance with the
fair
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market value of the assets and liabilities transferred is as
set forth on Exhibit 5.4 hereto."
23. Section 5.5(a) of the Agreement shall be amended to:
(a) replace the number "669" in the fifth line thereof
with the number "513;"
(b) add the following clause immediately following the
words "Closing Date" on the 25th line thereof:
"; it being understood that the number of FTEs that are not
hired by Purchaser in accordance with this Section and who are
given notice of their termination of employment by Kodak
within six months of the Closing Date will be treated for
purposes of this Agreement as if they had been hired by
Purchaser and then severed by Purchaser following the Closing
Date; it being further understood that any payments made by
Kodak in respect of such FTEs shall be counted towards the cap
on Kodak's severance obligations of $75 million set forth in
Section 5.5(c)"
and by adding the word "further" immediately following the words "it being" on
the 25th line thereof;
(c) add the following two sentences immediately prior to
the last sentence thereof:
"Notwithstanding anything to the contrary contained in this
Agreement, Applicable Employees and FTEs shall include the
Employees in the countries listed in Schedule 1.1(c) hereto,
notwithstanding the fact that, consistent with the actions
contemplated by Schedule 1.1(c) hereto, Kodak may have
terminated the employment of such Applicable Employees or
FTEs, or such Applicable Employees or FTEs may have resigned
prior to the Closing Date. Purchaser shall not be obligated
to offer employment to the Employees listed on Schedule 5.5(a)
hereto; it being understood that, to the extent that Kodak
terminates the employment of any employee set forth on
Schedule 5.5(a),
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Kodak and Purchaser shall share the costs of severance for such
Employees as provided by Schedule 5.5(a); it being further
understood that any payments made by Kodak as provided by
Schedule 5.5(a) shall be counted towards the cap on Kodak's
severance obligations of $75 million set forth in
Section 5.5(c).
24. Section 5.5(i) of the Agreement is hereby amended to
add the following clause immediately prior to the period at the end thereof:
"and against 50% of any Losses imposed on the Kodak
Indemnified Parties arising out of the termination of
employment of the Employees in the countries listed in
Schedule 1.1(c) hereto in violation of any law, regulation or
agreement (including employee contracts) with respect to such
Employees."
25. Section 5.8 of the Agreement is hereby amended to
insert after the word Closing in the first line thereof, the following:
"or, in the case of any assignment of an Assigned Leases or
any sublease or license agreement referenced in clauses (ii)
or (iv) of this Section with respect to which the Landlord's
consent, if required, has not been obtained, at such time that
such consent is obtained,"
26. Section 5.19 of the Agreement is hereby amended to
delete the second sentence thereof.
27. The Agreement is hereby amended to add the following
at the end of Article V hereof:
"Section 5.28 OEM Modification. Purchaser shall not, without
Kodak's written consent, attempt to enforce any of the
provisions under the OEM Modification relating to (i)
Engineering Specifications, Engineering Change Control or
Production Quality Assurance or (ii) trademarks or trade names
of Kodak or the Subsidiaries. Purchaser shall notify Kodak
immediately upon
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reasonably suspecting that Canon Inc. is, has or will breach
any of the OEM Modification provisions relating to the items
listed in (i) or (ii) of the preceding sentence. To the
extent that Kodak issues any purchase orders to Purchaser for
parts for Canon Inc. - manufactured, Kodak - remanufactured
electrophotographic systems (digital and analog), Purchaser
shall cause an order to be placed with Canon Inc. under the
OEM Modification for the parts ordered on the Kodak purchase
order and shall sell them to Kodak at the cost charged by
Canon Inc. to Purchaser. Purchaser shall not, and shall cause
the Purchaser Subsidiaries not to, remove, alter, conceal or
destroy any Kodak or Subsidiary brand nameplates, logos or
dataplates that were placed on any product supplied under the
OEM Modification. Purchaser further agrees that it shall not
agree to any amendment or modification of the OEM Modification
or take any action or fail to take any action that would
adversely affect Kodak's treatment or rights under the OEM
Modification as of the date thereof. Upon Kodak's request,
Danka shall participate in any arbitration proceeding under
the Canon/Kodak Agreement, by and between Canon Inc. and
Kodak, dated December 20, 1996. Kodak agrees that it will use
all parts purchased from Danka that Danka purchased from Canon
Inc. for Kodak solely for use in the remanufacturing of
electrophotographic equipment to be sold to Danka.
Section 5.29. Residuals. Kodak shall sell, transfer and
deliver to Purchaser at the termination of each finance lease
in Canada the equipment underlying such finance lease for an
amount equal to One Canadian Dollar for each piece of
equipment."
28. Section 7.2(a) of the Agreement is hereby amended to:
(a) delete the word "and" immediately preceding the term
"(iv)" thereof and to substitute therefor a comma.
(b) insert immediately prior to the period at the end
thereof:
"and (v) Section 3.2 (other than clause (4) thereof) of the
Canon/Kodak Agreement, by and between Kodak and Canon Inc.,
dated December 20,
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1996 or any breach by Purchaser or any of its Affiliates of
the OEM Modification or Purchaser's or Purchaser's
Subsidiaries' marketing, sales or service of products under
the OEM Modification."
29. Section 7.3(a) of the Agreement is hereby amended to:
(a) delete the word "and" immediately preceding the term
"(vi)" thereof and to substitute therefor a comma.
(b) insert immediately prior to the period at the end
thereof:
"and (vii) Section 24.4 (4) of the OEM Modification to the
extent related to Kodak's brand name, trademarks, trade names
or other proprietary marks."
30. Section 9.4 of the Agreement is hereby amended to add
the following sentence at the end thereof:
"Purchaser shall indemnify the Kodak Indemnified Parties from,
against and in respect of any Losses directly or indirectly
relating to, arising out of or resulting from the existence of
the local contracts that would not have existed but for such
local contracts."
31. The Agreement is amended by adding a new Schedule
1.1(c) thereto, which Schedule 1.1(c) is attached hereto.
32. Schedule 1.1(a) of the Agreement is hereby amended in
its entirety by removing the existing Schedule 1.1(a) and replacing with
Schedule 1.1(a) attached hereto.
33. Schedule 1.1(b) of the Agreement is hereby amended in
its entirety by removing the existing Schedule 1.1(b) and replacing with
Schedule 1.1(b) attached hereto.
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34. Schedule 1.1(d) of the Agreement is hereby amended in
its entirety by removing the existing Schedule 1.1(d) and replacing with
Schedule 1.1(d) attached hereto.
35. Schedule 2.1(d) of the Agreement is hereby amended in
its entirety by removing the existing Schedule 2.1(d) and replacing it with
Schedule 2.1(d) attached hereto.
36. Schedule 2.2(k) of the Agreement is hereby amended in
its entirety by removing the existing Schedule 2.1(d) and replacing it with
Schedule 2.2(k) attached hereto.
37. Schedule 3.2(a) is hereby amended by deleting
therefrom any reference to Kodak Imaging Services - Austria and any information
related thereto.
38. Schedule 3.10(i) is hereby amended in its entirety by
removing the existing schedule 3.10(i) and replacing with Schedule 3.10(i)
attached hereto.
39. The Agreement is amended by adding new Schedules 5.4
and 5.5(a) thereto, which Schedules 5.4 and 5.5(a) are attached hereto.
40. The Agreement is hereby amended to delete each of
Exhibit 5.19(a) and 5.19(b) and to substitute therefor Exhibits 5.19(a) and
5.19(b) attached hereto and to add Exhibit 1.1(i) attached hereto.
41. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an
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original, but all of which together shall constitute one and the same
instrument.
42. THE AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to the Agreement to be duly executed as of the date first above
written.
EASTMAN KODAK COMPANY
By: /s/ CARL F. KOHRT
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Carl F. Kohrt
DANKA BUSINESS SYSTEMS PLC
By: /s/ PAUL G. DUMOND
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Paul G. Dumond
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