<PAGE> 1
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): February 26, 1999
DANKA BUSINESS SYSTEMS PLC
(Exact name of registrant as specified in its charter)
UNITED KINGDOM 0-20828 98-0052869
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 727-576-6003
<PAGE> 2
ITEM 5. OTHER EVENTS.
As previously reported, the Company entered into a six-year $1.275
billion multicurrency credit agreement (the "Credit Agreement") with a
consortium of international banks in December 1996. The Credit Agreement
provided the Company with a revolving component in the aggregate amount of up
to $725.0 million, and a term loan component of $550.0 million. In December
1997, the revolving component was reduced by $115.0 million, to $610.0 million,
bringing the full capacity of the Credit Agreement to $1.160 billion. As of
December 31, 1998 the full capacity of the Credit Agreement had been reduced to
$1.050 billion with the term loan component totaling $490.0 million and the
revolving component totaling $560.0 million. The Credit Agreement is secured
and guaranteed by certain of the company's subsidiaries and a covenant that the
Company will not pledge its assets except as specifically permitted under the
terms of the Credit Agreement. The Credit Agreement contains negative and
affirmative covenants and agreements which place restrictions on the Company
regarding disposition of assets, capital expenditures, additional indebtedness,
permitted liens and payment of dividends, as well as requiring the maintenance
of certain financial ratios. The adjustable interest rate on the Credit
Agreement is, at the option of the Company, either: (i) the applicable
InterBank Offered Rate plus a tiered margin based on leverage for the periods
of one, two, three or six months or (ii) an alternative base rate, consisting
of the higher of the lead bank's prime rate or the Federal Funds Rate plus
0.5%. The Credit Agreement was first amended on December 5, 1997, primarily to
provide for the adjustment of certain definitions set forth therein.
On July 28, 1998, the Company entered into a Second Amendment to its
Credit Agreement (the "Second Amendment"). The Second Amendment principally
provided for: (i) the revision to certain definitions; (ii) an adjustment to
certain financial ratios required to be maintained by the Company; (iii) an
increase in the tiered margin applied to the Interbank Offered Rate under the
Credit Agreement; (iv) an increase in the applicable commitment fee paid by the
Company for the maintenance of the Credit Agreement; and (v) the inclusion of
certain additional covenants related to the year 2000 issue. A copy of the
Second Amendment to the Credit Agreement was included with a Form 8-K Current
Report, dated July 28, 1998 as Exhibit 4.10 thereto and any description or
summary set forth in this Report is qualified in its entirety by reference to
the complete terms and conditions of the Credit Agreement as amended.
On October 20, 1998 the Company obtained a waiver of its obligation to
comply with certain financial covenants of the Credit Agreement and any adverse
effect resulting from such non-compliance for a period from September 30, 1998
through February 28, 1999. Upon granting of the waiver the lenders advanced $20
million in new loans to the Company. Terms of the waiver included a .7%
increase in the interest rate applicable to certain of the Company's loans
under the Credit Agreement during the period the waiver is in effect. The total
commitment under the Credit Agreement was reduced by $50 million and the banks'
obligations to make new loans during the waiver period were limited to $20
million advanced upon the granting of the waiver, plus $55 million of
additional loans which are subject to the Company's providing projections and a
business plan deemed satisfactory by the banks and similar matters. The Company
has agreed, at its expense, to cooperate with the banks' and their
representatives' review of its assets. The Company has also agreed to use its
best efforts to maintain during the waiver period at least $30 million in lines
of credit outside the United States. The Company has also agreed that it shall
incur no additional Indebtedness (as defined in the Credit Agreement) except
Indebtedness under the Credit Agreement and Indebtedness under the lines of
credit required to be maintained outside the United States. During the term of
the waiver, the Company cannot make dividend payments on other distributions
and the banks' consent is required for any acquisitions or investments by the
Company. A copy of the waiver was included with a Form 8-K Current Report, as
Exhibit 4.11 thereto and any description or summary set forth in this Report is
qualified in its entirety by reference to the complete terms and conditions of
the Credit Agreement as amended thereby.
On February 26, 1999 the Company obtained a waiver extending the
waiver of its obligation to comply with certain financial covenants of the
Credit Agreement and any adverse effect resulting from such non-compliance for
a period from March 1, 1999 through August 27, 1999. Terms of the extension
included provision for $30 million in new loans under the Credit Agreement and
a 1.5% increase in the interest rate applicable to those new loans. The total
commitment under the Credit Agreement (not including the $30 million of new
loans) for the revolving loan component was limited to the sum of the revolving
loan component outstanding on October 20, 1998 plus $90 million, and for
2
<PAGE> 3
International Swing Line Loans was limite to $65,121,721. Additionally, the
banks limited their obligations to make new loans to $30 million for loans made
at any time between April 1, 1999 and the occurrence of a sale of assets or
equity of the DSI or Omnifax divisions, which principal amount must be reduced
to $15 million during the interim between the receipt of proceeds from either
of these sales and the receipt of proceeds from the second of these sale or of
proceeds from the International division, at which time the new loans must be
paid off in full. The Company has agreed to pay 60% of the first $200 million
of net proceeds, 80% of the next $200 million of net proceeds, and 90% of any
additional amount of net proceeds from the above sales to the Banks upon
receipt of these proceeds in order to reduce the amount of the term loan and
revolving loan. The Company has also agreed, at its expense, to cooperate with
the banks' and their representatives' review of its assets. The Company has
also agreed to use its best efforts to maintain during the waiver period at
least $30 million in lines of credit outside the United States. The Company has
also agreed that it shall incur no additional Indebtedness (as defined in the
Credit Agreement) except Indebtedness under the Credit Agreement and
Indebtedness under the lines of credit required to be maintained outside the
United States. During the term of the waiver, the Company cannot make dividend
payments or other distributions and the banks' consent is required for any
acquisitions or investments by the Company. A copy of the waiver was included
with a Form 8-K Current Report, as Exhibit 4.12 hereto and any description or
summary set forth in this Report is qualified in its entirety by reference to
the complete terms and conditions of the Credit Agreement as amended thereby.
The Company also obtained a waiver extending the waiver of its
obligation to comply with the same financial covenants of the Credit Agreement
and any adverse effect resulting from such non-compliance for a period from
March 1, 1999 through August 27, 1999 as incorporated by reference into a
Participation Agreement, dated November 15, 1995, among Danka Holding Company,
as lessee, First Security Bank, N.A., as owner trustee, NationsBank, N.A., as a
holder, NationsBank, N.A., as administrative agent and SunTrust Bank, Tampa
Bay, as co-agent. A portion of the Company's real estate has been financed
under the Credit Agreement dated November 15, 1995 among the parties to the
Participation Agreement and the other lenders which were party thereto under
tax retention operating leases. The terms of this waiver include an obligation
to provide up to $15 million in cash collateral to secure the loan made by the
lenders under the November 15, 1995 Credit Agreement, out of the net proceeds
of sale of certain assets or divisions by the Company. A copy of the waiver is
included with this Form 8-K Current Report, as Exhibit 4.13 hereto and any
description or summary set forth in this Report is qualified in its entirety by
reference to that exhibit.
3
<PAGE> 4
ITEM 7(c). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<S> <C>
4.12 Waiver dated February 26, 1999, of certain financial
covenants contained in the Credit Agreement among
Danka Business Systems PLC, Dankalux Sarl & Co., SCA
and Danka Holding Company, NationsBank, N.A., each
other Bank signatory to the Credit Agreement and
NationsBank, N.A., as agent.
4.13 Participation Agreement, dated November 15, 1995,
among Danka Holding Company, as lessee, First
Security Bank, N.A., as owner trustee, NationsBank,
N.A., as a holder, NationsBank, N.A., as
administrative agent and SunTrust Bank, Tampa Bay,
as co-agent.
99.1 Press Release dated February 26, 1999 by Danka
Business Systems PLC announcing extension of bank
waiver.
</TABLE>
4
<PAGE> 5
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/ F. Mark Wolfinger
---------------------------------
F. Mark Wolfinger
Its: Chief Financial Officer, and
Principal Accounting Officer
Dated: March 5, 1999
5
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<S> <C>
4.12 Waiver dated February 26, 1999, of certain financial
covenants contained in the Credit Agreement among
Danka Business Systems PLC, Dankalux Sarl & Co., SCA
and Danka Holding Company, NationsBank, N.A., each
other Bank signatory to the Credit Agreement and
NationsBank, N.A., as agent.
4.13 Participation Agreement, dated November 15, 1995,
among Danka Holding Company, as lessee, First
Security Bank, N.A., as owner trustee, NationsBank,
N.A., as a holder, NationsBank, N.A., as
administrative agent and SunTrust Bank, Tampa Bay,
as co-agent.
99.1 Press Release dated February 26, 1999 by Danka
Business Systems PLC announcing extension of bank
waiver.
</TABLE>
6
<PAGE> 1
EXHIBIT 4.12
[NATIONSBANK LETTERHEAD]
March 2, 1999
Danka Holding Company
11201 Danka Circle North
St. Petersburg, Florida
Re: Credit Agreement dated as of December 5, 1998 among Danka Business Systems
PLC, a limited liability company incorporated in England and Wales (Registered
Number 1101386) ("Danka PLC"), Dankalux Sarl & Co. SCA, a Luxembourg company
("Dankalux"), and Danka Holding Company, a Delaware corporation ("Danka
Holding") (Danka PLC, Dankalux and Danka Holding are herein collectively the
"Companies"), NationsBank, National Association, a national banking association
formerly known as NationsBank, National Association (Carolina), each other Bank
signatory hereto (each individually, a "Bank" and collectively, the "Bank"), and
NationsBank National Association in its capacity as agent for the Banks (in such
capacity, the "Agent"), as amended (the "Credit Agreement"). Capitalized terms
contained herein and not otherwise defined shall have the meaning set forth in
the Credit Agreement.
Ladies and Gentlemen:
NationsBank, N.A., as Agent under the Credit Agreement has received the
agreement of the Majority Banks to the waiver of the enforcement of the
financial convenants contained in Section 8.3 of the Credit Agreement and the
waiver of any adverse effect resulting therefrom for the Waiver Period, as
such term is defined in the letter (the "Request Letter") dated February 18,
1999 from the Companies, a copy of which is attached hereto, subject to the
terms and conditions set forth in the Request Letter.
NATIONSBANK, N.A., as Agent
By: /s/ Dewitt W. King III
-------------------------
Dewitt W. King III
Senior Vice President
<PAGE> 2
February 18, 1999
NationsBank, N.A., as Agent
101 North Tryon Street, NC1-001-1504
Charlotte, North Carolina 28255
Re: Credit Agreement dated as of December 5, 1996 among Danka Business
Systems PLC, a limited liability company incorporated in England and
Wales (Registered Number 1101386) ("Danka PLC"), Dankalux Sarl & Co.
SCA, a Luxembourg company ("Dankalux"), and Danka Holding Company, a
Delaware corporation ("Danka Holding") (Danka PLC, Dankalux and Danka
Holding are herein each a "Company" and collectively the
"Companies"), NationsBank, National Association, a national banking
association formerly known as NationsBank, National Association
(Carolinas), each other Bank signatory thereto (each individually , a
"Bank" and collectively, the "Banks"), and NationsBank, National
Association, in its capacity as agent for the Banks (in such
capacity, the "Agent"), as amended (the "Credit Agreement")
Ladies and Gentlemen:
The Companies hereby request that NationsBank, as Agent, seek to obtain
from the Banks a waiver of the enforcement of the financial covenants contained
in Section 8.3 of the Credit Agreement and a waiver of any adverse effect
resulting therefrom, such waiver to be effective as of March 1, 1999 and for a
period from March 1, 1999 through the later of (i) August 27, 1999 and (ii) the
Extension Date (as defined below) (the "Waiver Period"), subject to the
provisions of Section 1 below. The Companies jointly and severally acknowledge
and agree that the consent of the Banks and of the
<PAGE> 3
Agent to such waiver shall be subject to the following terms and conditions (to
which the Banks and the Agent and the Companies agree by such consent):
1. As used herein, the term "Extension Date" means the earlier of (i) the
date (the "Company Estimated Closing Date") (which may not be later than
December 27, 1999 unless a later date is approved by the Majority Banks) that
is specified in a certificate (a "Company Extension Request") sent by the Chief
Executive Officer of Danka PLC to the Banks (care of the Agent) and containing
the information described below and (ii) the date (the "Consummation Date") on
which each of (1) the closing of all Affected Transactions (as defined below)
shall have occurred, (2) all sales proceeds of such Affected Transactions shall
have been received by the Companies (or their affiliates) and (3) the
appropriate portion thereof shall have been paid to the Agent as provided in
Section 9 below. There shall be no Extension Date, and the Waiver Period shall
accordingly end on August 27, 1999, unless on or before August 17, 1999, a
Company Extension Request is received by the Agent which certifies: (i) that a
Regulatory Review Condition (as defined below) has occurred and that, as a
result thereof, the Companies request an extension of the termination of the
Waiver Period, (ii) that a definitive sales contract has been executed and
delivered by all parties thereto with respect to each transaction that the
Company desires to treat as an Affected Transaction, (iii) in reasonable
detail, the conditions constituting each Regulatory Review Condition, the
Companies' plans to resolve such conditions and the time by which the Companies
reasonably believe such conditions will be so resolved, (iv) in reasonable
detail, the Companies' plans with respect to obtaining all required shareholder
approval of each Affected Transaction and causing the Consummation Date to
occur in respect thereof and the time by which the Companies reasonably believe
each material step in such process will be completed and (v) that the Company
Estimated Closing Date which has been specified is reasonably related to the
matters set forth pursuant to clauses (iii) and (iv) above. The Companies may
from time to time obtain an extension of the Company Estimated Closing Date if
the facts then in existence demonstrate the need for such
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extension and an additional Company Extension Request specifying the matters
set forth in clauses (i) through (v) above has been delivered to the Banks
(care of the Agent). "Affected Transactions" are transactions for the sale of
the assets or equity of any or all of the Omnifax division of Danka Office
Imaging Company ("Omnifax") or the divisions or business unit(s) of the
Companies commonly referred to as "DSI" (hereinafter "DSI") or "International"
(hereinafter "International") as to which there shall have occurred either (i)
Securities and Exchange Commission review of a proxy statement with respect to
shareholder approval of such transaction or (ii) any delay in receiving
shareholder approval of such transaction due to applicable London Stock
Exchange or similar United Kingdom requirements (either of the circumstances
described in the foregoing clauses (i) and (ii) being hereinafter referred to
as a "Regulatory Review Condition"). Notwithstanding anything to the contrary
contained in this letter (this "Request Letter"), the Waiver Period shall
terminate on any day (1) which is three (3) days after Agent has delivered to
the Companies a written notice stating that the Companies have ceased using all
reasonable efforts to resolve any Regulatory Review Condition with respect to
any Affected Transaction, to obtain all required shareholder approval with
respect to such Affected Transaction or to cause the Consummation Date to occur
in respect thereof, in each case as promptly as practicable, unless the same
has been remedied in Agent's sole judgment within such three (3) day period,
(2) on which the Chief Executive Officer of Danka PLC shall have failed to
certify to the Banks, within five (5) days of any written request therefor sent
by the Agent, that the Companies have continuously used, and are continuing to
use, all reasonable efforts to, as promptly as practicable, resolve all
Regulatory Review Conditions, obtain all required shareholder approvals and
cause the Consummation Date to occur with respect to all Affected Transactions,
or (3) which is three (3) days after Agent has delivered to the Companies a
written notice stating that the Companies have failed to use their best efforts
to cause the closing to occur as quickly as possible with respect to the sale
of the assets or equity of each of Omnifax, DSI and International, unless the
same has been remedied in Agent's sole judgment within such three (3) day
period.
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2. During the Waiver Period the Applicable Margin on (i) outstanding
Offshore Rate Loans (other than any New Loans, as defined below) shall be
2.00%, (ii) outstanding Offshore Rate Loans that are New Loans shall be 3.50%
and (iii) outstanding Base Rate Loans that are New Loans shall be 1.50% per
annum higher than the Applicable Margin thereon otherwise in effect.
3. The Companies acknowledge and agree that the Agent has caused its
counsel to retain PricewaterhouseCoopers LLP as independent business consultant
(the "Consultant") to assess on behalf of the Agent, its counsel and the Banks
the operations, finances, and business affairs of Danka PLC and its
Subsidiaries and to furnish reports of its findings and recommendations solely
to the Agent, its counsel and the Banks. The Companies jointly and severally
agree to pay all reasonable fees, costs, and expenses of the Consultant
incurred in connection with the performance by the Consultant of its duties
described in this paragraph. The Companies shall, and shall cause all
Subsidiaries, to cooperate fully and in a timely manner with the Consultant,
including its agents and employees.
4. The Companies acknowledge and agree that the Agent (or appropriate
sub-agent) for the benefit of the Banks has been granted, in connection with
the waiver request letter dated October 16, 1998 from Danka PLC and its
Subsidiaries to the Agent (the "Prior Request Letter"), first priority Liens
(subject to certain encumbrances and subject to certain exceptions, exclusions,
prior interests or subordinations provided for in the Loan Documents or any
amendments thereof entered into after the date of execution thereof (including,
without limitation, the Third Amendment and the proposed Fourth Amendment (in
such form as may be entered into hereafter) to the Credit Agreement)) on all of
the assets of Danka Holding and its Subsidiaries, including but not limited to
inventory, accounts receivable, property, plant and equipment, cash, depositary
accounts, contract rights and general intangibles, located within the United
States (the "Bank Liens") securing the timely payment of certain Loans made
pursuant to the Credit Agreement, provided, however, the Banks shall have no
security interest, claim or other Lien on any property of, or any equity of,
any Restricted Subsidiary or any
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<PAGE> 6
property of any of the Companies or the Subsidiaries which is the subject of a
negative pledge agreement pursuant to any agreement or in connection with any
transaction described in Section 16 hereof (but solely with respect to the
building and other real and personal property financed by the facility
referenced in said Section and in any event not more restrictive than the
negative pledge agreement currently included in such facility) or in Section 3
of the Third Amendment to Credit Agreement, as supplemented by any subsequent
amendment to the Credit Agreement. Danka Holding and its Subsidiaries hereby
agree that upon the agreement by the Majority Banks to the waiver requested
pursuant to this Request Letter, (i) the Bank Liens will secure the timely
payment of any and all Obligations (including, without limitation, all
obligations incurred or Loans made at any time prior to, on or after the date
hereof pursuant to, or in connection with, the Credit Agreement, the Prior
Request Letter or this Request Letter), and (ii) Danka Holdings shall take, and
shall cause all of its Subsidiaries to take, as soon as practicable and at
their sole cost and expense, all steps that the Agent shall determine to be
reasonably necessary or advisable, pursuant to documentation in form and
substance satisfactory to the Agent, to cause the Bank Liens to secure the
timely payment of any and all Obligations (including, without limitation, all
Loans) as provided in clause (i) above.
5. The Companies shall furnish to the Agent and the Banks as soon as
practicable but in any event within thirty (30) days of the end of each
calendar month the monthly consolidated balance sheet and consolidated
statements of earnings and cash flow of Danka PLC and its Subsidiaries,
certified in writing by any representative authorized to provide the
certification required by Section 7.1(c) of the Credit Agreement to have been
prepared in accordance with United States GAAP in a manner consistent with past
practices of Danka PLC, and to the best knowledge of such signatory to be true,
correct, and complete in all material respects, subject to necessary audit
adjustments. On or before each Wednesday, the Companies shall deliver to the
Banks cash flow projections on a weekly basis for a 13-week period and actual
results for the prior week, in form consistent with the projections and results
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<PAGE> 7
heretofore delivered to the Banks or such other form as may be reasonably
acceptable to the Companies and the Agent.
6. Nothing contained in this Request Letter or otherwise shall affect the
obligation of the Companies to make the repayments of the Term Loans required
pursuant to Section 2.9(c) of the Credit Agreement on each and every date
referred to on Schedule V to the Credit Agreement which occurs during the
Waiver Period.
7. (a) Notwithstanding anything to the contrary contained in the Credit
Agreement, the Prior Request Letter or otherwise, but subject to the provisions
of clause (a)(ii) below, during the Waiver Period the Companies shall not be
entitled to receive any Loans (other than the New Loans (as defined in clause
(b) below)) under the Credit Agreement or any International Swing Line Loans
under the International Swing Line Facility. For purposes of the foregoing
limitation, it is hereby understood and agreed that (i) the aggregate
outstanding principal amount of all Revolving Loan Outstandings (other than in
respect of New Loans) shall not exceed an amount equal to the sum of (1) the
Revolving Loan Outstandings as of October 20, 1998 and (2) $90,000,000 and the
aggregate outstanding amount of all International Swing Line Loans shall not
exceed $65,121,721 and (ii) neither any borrowing of Revolving Loans or Swing
Line Loans or International Swing Line Loans (as the case may be) up to the
limitations described in this clause (a)(i) hereof, nor any continuations or
conversions of Loans pursuant to Section 2.4(a) of the Credit Agreement, shall
constitute Loans or International Swing Line Loans that violate the first
sentence of this clause (a), or New Loans.
(b) On or after April 1, 1999, the Companies may borrow, and the Banks
shall make, new Revolving Loans during the Waiver Period in an aggregate
principal outstanding amount not to exceed the limitations provided for in
clause (c) and clause (d) below (the "New Loans"). As a precondition to any New
Loan, the Chief Executive Officer or Chief Financial Officer of Danka PLC
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<PAGE> 8
shall have, on or before the date of proposed borrowing of the New Loans,
delivered a certificate to the Banks (care of the Agent) certifying in
reasonable detail that the then current financial condition (including, without
limitation, the then current cash balances and cash flow projections) of the
Companies requires the Companies to borrow such New Loans in order for the
Companies to be able to operate their businesses in the ordinary course of
business (a "Need Certificate").
(c) The New Loans shall be in an aggregate outstanding amount of not more
than $30,000,000 at any one time on or after April 1, 1999 and prior to the
date which is one business day following the date on which the proceeds of the
sale of the assets or equity of Omnifax (the "Omnifax Proceeds") or DSI (the
"DSI Proceeds") shall have been received by the Companies (or their
affiliates). Within one business day of such receipt of the Omnifax Proceeds or
the DSI Proceeds, the aggregate outstanding principal amount of all New Loans
shall be reduced (including, without limitation, as a result of the payment to
the Agent of a portion of such sales proceeds pursuant to Section 9 below, such
payment to qualify as a reduction in the New Loans notwithstanding the fact
that such proceeds shall have also reduced Term Loan Outstandings as provided
in said Section 9) to an aggregate amount not in excess of $15,000,000.
(d) The New Loans shall be in an aggregate outstanding amount of not more
than $15,000,000 at any one time on or after one business day following the
date of receipt of the Omnifax Proceeds or the DSI Proceeds (as described in
clause (c) above) and prior to the date which is one business day following the
date on which the proceeds of the sale of the assets or equity of Omnifax or
DSI (whichever is the entity not sold first as described in clause (c) above)
or International (the "Additional Proceeds") shall have been received by the
Companies (or their affiliates). For purposes of calculating the $15,000,000
maximum amount of New Loans described in this clause (d), any payment to the
Agent of a portion of the Omnifax Proceeds or DSI Proceeds (as described in
clause (c) above) shall
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<PAGE> 9
not be deemed to have reduced the aggregate outstanding amount of New Loans
except to the extent that immediately prior to such payment such aggregate
outstanding amount exceeded $15,000,000. Within one business day of such
receipt of the Additional Proceeds, all New Loans shall be paid in full
(including, without limitation, as a result of the payment to the Agent of a
portion of such sales proceeds pursuant to Section 9 below, such payment to
qualify as a reduction in the New Loans notwithstanding the fact that such
proceeds shall have also reduced Term Loan Outstandings as provided in said
Section 9).
8. During the Waiver Period (i) Danka PLC shall not pay any dividends or
make any distributions, (ii) neither the Companies nor any of their
Subsidiaries shall make any Acquisitions, and (iii) neither the Companies nor
any of their Subsidiaries will make any Investments (except, if the proposed
Fourth Amendment to the Credit Agreement becomes effective, as permitted
thereby).
9. During and after the Waiver Period, notwithstanding the provisions set
forth in Section 2.9(f)(i) of the Credit Agreement, 60% of the first
$200,000,000 of Net Proceeds, 80% of the next $200,000,000 of Net Proceeds and
90% of any additional Net Proceeds shall be paid to the Agent on behalf of the
Banks within one business day after receipt of such Net Proceeds by the
Companies (or their affiliates) in order to prepay or otherwise permanently
reduce Term Loans Outstandings, or if there are no Term Loan Outstandings,
Revolving Loan Outstandings (with a simultaneous reduction in Revolving
Commitments). As used in this Section 9 and in the Credit Agreement, the term
"Net Proceeds" shall mean, with respect to the sale, lease, transfer or other
disposition of assets of Danka PLC or any Subsidiary or affiliate thereof
(including sales of equity interests in a Subsidiary or other affiliate of
Danka PLC or any Subsidiary to a person other than Danka PLC or its
Subsidiaries), the cash proceeds from such sale plus the fair market value of
all non-cash proceeds, if any, from such sale, less the reasonable expenses of
such sale, and taxes actually paid or payable as a result of such sale and any
secured Indebtedness required to be repaid in connection with such sale.
Notwithstanding anything to
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<PAGE> 10
the contrary contained herein or in the Credit Agreement, there shall not be
any deduction in calculating Net Proceeds for, and the Companies shall satisfy
out of their portion of Net Proceeds as provided above in this Section 9, any
and all payments to Eastman Kodak Company for the purpose of reducing existing
accounts payable or otherwise.
10. The Companies shall pay to the Agent for the benefit of each of the
Banks which shall have consented to the waiver requested by this Request Letter
a waiver fee equal to 1/8% of such Banks' Commitment.
11. The Companies shall, at their expense, permit and fully cooperate with
the Agent and its representatives in a review and evaluation of all assets of
the Companies and their Subsidiaries located in the United States.
12. The Companies and their Subsidiaries shall use their best efforts at
all times during the Waiver Period to maintain existing committed and/or
discretionary lines of credit outside the United States of at least
$30,000,000; and the Companies shall promptly notify the Agent in writing of
any termination of lines of credit outside the United States.
13. The Companies will be liable for prompt payment of (i) all reasonable
legal and other out-of-pocket expenses incurred by any member of the Bank
Steering Committee to the extent such expenses relate to the activities of such
member on the Bank Steering Committee and (ii) all reasonable fees and expenses
of Wachtell, Lipton, Rosen & Katz, Smith Helms Mulliss & Moore, L.L.P. and
PricewaterhouseCoopers, as advisors to the Agent.
14. Neither the Companies nor their Subsidiaries shall incur additional
Indebtedness except as permitted by Section 7 hereof or to the extent necessary
to comply with Section 12 above.
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<PAGE> 11
15. The Companies and the Guarantors acknowledge that they have no
existing defense, counterclaim, offset, cross-complaint, claim or demand of any
kind or nature whatsoever that can be asserted to reduce or eliminate all or
any part of their respective liability to pay the full indebtedness outstanding
under the terms of the Credit Agreement and any other documents which evidence,
guaranty or secure the Obligations (including, without limitation, the Prior
Request Letter and this Request Letter). The Companies and the Guarantors
hereby release and forever discharge the Agent, the Banks and all of their
officers, directors, employees, attorneys, consultants and agents from any and
all actions, causes of action, debts, dues, claims, demands, liabilities and
obligations of every kind and nature, both in law and in equity, known or
unknown, whether matured or unmatured, absolute or contingent.
16. The Companies shall have received a waiver of violations of the
financial covenants incorporated in the tax retention operating lease documents
and shall have provided a copy of such waiver to the Agent.
17. During and after the Waiver Period, in the event that Danka PLC or any
of its Subsidiaries shall receive any foreign or United States federal or state
tax refunds in an amount (for each individual tax refund or series of related
tax refunds) of at least $100,000, an amount equal to 100% of the amount of
such tax refunds shall be paid to the Agent on behalf of the Banks to repay or
otherwise permanently reduce Term Loan Outstandings, or if there are no Term
Loan Outstandings, Revolving Loan Outstandings (with a simultaneous reduction
in Revolving Commitments).
18. Promptly upon their execution, the Companies shall deliver to each
Bank true and correct copies of all executed sales contracts with respect to
Omnifax, DSI and International, and all proxy statements and other filings in
connection with such sales that are filed with the Securities and Exchange
Commission, the London Stock Exchange or any other United Kingdom or other
foreign
-10-
<PAGE> 12
regulatory authority (to the extent not prohibited by applicable law,
rules or regulations). The Companies shall promptly upon obtaining knowledge
thereof deliver a notice to the Banks (care of the Agent) specifying the first
date on which the Companies (or their affiliates) are entitled to receive any
sales proceeds with respect to the sale of Omnifax, DSI or International, and
further specifying the reasons for any delay in such date of receipt that may
be agreed to by the Companies.
19. On or before April 30, 1999, the Companies will deliver to the members
of the Bank Steering Committee the proposed business plan for the Companies for
the five year period following the Waiver Period, and the proposed
restructuring proposal of the Companies for the restructuring after the Waiver
Period of all outstanding Loans and other Obligations under the Credit
Agreement.
20. The provisions of this Request Letter supersede any provisions of the
Credit Agreement, the other Loan Documents, the International Swing Line
Agreements and the Prior Request Letter to the extent they are inconsistent
herewith.
The Companies further acknowledge and agree that any breach during the
Waiver Period in the timely performance, observance, or fulfillment of any of
the terms or conditions stated above shall constitute an Event of Default under
the Credit Agreement and, unless the Majority Banks shall otherwise agree in
writing, shall terminate the effectiveness of any waiver obtained by the Agent
from the Banks pursuant to this Request Letter. The Companies further
acknowledge and agree that, except to the extent expressly modified by the
provisions of this Request Letter, nothing contained herein is intended to or
shall limit any of the provisions of the Loan Documents as currently in effect,
except that, should the Agent obtain the waiver of Section 8.3 of the Credit
Agreement requested hereby, the enforcement of such provisions shall be waived
during the Waiver Period as well as any adverse effect resulting therefrom,
subject to the Companies' full and timely compliance with the terms and
conditions
-11-
<PAGE> 13
of such waiver stated above; provided, however, that an Event of Default shall
be deemed to have occurred as of the last day of the Waiver Period if Danka PLC
and its Subsidiaries are not in compliance with any of the financial covenants
set forth in Section 8.3 of the Credit Agreement as of such day, using, in the
case of clauses (i) or (iii) of said Section, the relevant financial
information for Danka PLC and its Subsidiaries for the twelve-month period most
recently ended before such day of measurement (rather than the four fiscal
quarter period otherwise required by such covenants). Capitalized terms used
herein without definition shall have the meanings ascribed thereto in the
Credit Agreement.
Very truly yours,
DANKA BUSINESS SYSTEMS PLC
By: _________________________
Name: _______________________
Title: ______________________
DANKA HOLDING COMPANY
By: _________________________
Name: _______________________
Title: ______________________
DANKALUX SARL & CO. SCA
By: DANKALUX SARL, COMMANDITE
By: _________________________
Name: _______________________
Title: ______________________
-12-
<PAGE> 14
The Guarantors hereby consent to the foregoing:
AMERICAN BUSINESS CREDIT CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
AMERITREND CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
CORPORATE CONSULTING GROUP, INC.
By: _________________________
Name: _______________________
Title: ______________________
DI INVESTMENT MANAGEMENT, INC.
By: _________________________
Name: _______________________
Title: ______________________
DANKA IMAGING DISTROBITOPM.INC.
By: _________________________
Name: _______________________
Title: ______________________
-13-
<PAGE> 15
DANKA MANAGEMENT COMPANY, INC.
By: _________________________
Name: _______________________
Title: ______________________
DANKA OFFICE IMAGING COMPANY
By: _________________________
Name: _______________________
Title: ______________________
DYNAMIC BUSINESS SYSTEMS, INC.
By: _________________________
Name: _______________________
Title: ______________________
HERMAN ENTERPRISES, INC.
By: _________________________
Name: _______________________
Title: ______________________
KIS IMAGING SERVICES, INC.
By: _________________________
Name: _______________________
Title: ______________________
-14-
<PAGE> 1
EXHIBIT 4.13
[NationsBank Letterhead]
February 26, 1999
Danka Holding Company
11201 Danka Circle North
St. Petersburg, Florida 33716
Re: Participation Agreement dated as of November 15, 1995, as amended (the
"Participation Agreement") among Danka Holding Company, as
Construction Agent ("Holding"), Holding, as Lessee, First Security
Bank N.A., as owner trustee (the "Owner Trustee"), NationsBank, N.A.,
as a Holder (the "Holder"), NationsBank, N.A., as Administrative Agent
and SunTrust Bank, Tampa Bay, as Co-Agent. Capitalized terms contained
herein and not otherwise defined shall have the meaning set forth in
the Participation Agreement.
Ladies and Gentlemen:
NationsBank, N.A., as Administrative Agent under the Participation Agreement
and Credit Agreement has received the waiver for the period March 1, 1999
through August 27, 1999 (and subject to further extensions as provided in the
attached letter), by the Majority Lenders of the violation of Section 8.3 of
that certain Credit Agreement dated as of December 5, 1996, as amended, among
Danka Business Systems PLC, Dankalux Sarl & Co. SCA, Danka Holding Company,
NationsBank, N.A. as Agent and the Lenders party thereto and the waiver of any
adverse affect resulting therefrom, subject to the terms and conditions set
forth in the letter dated February 26, 1999, from you, a copy of which is
attached hereto.
NATIONSBANK, N.A., as Administrative Agent
By: /s/ Nicholas D. Jewitt
--------------------------------------
Nicholas D. Jewitt
Vice President
<PAGE> 2
February 25, 1999
NationsBank, National Association, as Agent
101 North Tryon Street, NO1-001-15-04
Charlotte, North Carolina 28255
Re: Participation Agreement dated as of November 15, 1995, as amended (the
"Participation Agreement") among Danka Holding Company, as
Construction Agent ("Holding"), Holding, as Lessee, First Security
Bank, N.A., as owner trustee (the "Owner Trustee"), NationsBank, N.A.,
as a Holder (the "Holder"), NationsBank, N.A., as Administrative
Agent and SunTrust Bank, Tampa Bay, as Co-Agent.
Ladies and Gentlemen:
Pursuant to the Participation Agreement and a Credit Agreement dated as of
November 15, 1995, as amended (the "Credit Agreement") among the Owner Trustee,
the several lenders party thereto (the "Lenders"), the Administrative Agent and
the Co-Agent, the Lenders and the Holder agreed to make loans and Holder
Advances to the Owner Trustee which would be used to acquire land and make
improvements thereon, which land and improvements are leased to Holding
pursuant to a Lease Agreement, dated as of November 15, 1995, as amended (the
"Lease Agreement") between the Owner Trustee and Holding. Capitalized terms
used herein without definition shall have the meaning set forth in the
Participation Agreement and the Credit Agreement.
Section 28.1(a) of the Lease Agreement incorporates by reference various
covenants contained in Article VII and Article VIII of that certain Credit
Agreement dated as of December 5, 1996, as amended (the "Existing Danka Credit
Agreement") among Danka Business Systems PLC ("Danka PLC"), Dankalux Sarl & Co.
SCA, Holding, the financial institutions party thereto and NationsBank N.A., as
agent and prohibits the waiver of compliance with such incorporated covenants
without the written consent of the Majority Lenders. Holding hereby requests
that the Agent Seek the written consent of the Majority Lenders to
non-compliance with Section 8.3 of the Existing Danka Credit Agreement and a
waiver of any adverse effect resulting thereby, such waiver to be effective as
of March 1, 1999, and for a period from March 1, 1999,
<PAGE> 3
through August 27, 1999 (as may be further extended, as provided herein, the
"Waiver Period").
Holding acknowledges and agrees that the consent of the Lenders, Owner
Trustee, Holder, Administrative Agent and Co-Agent to such waiver shall be
subject to the following terms and conditions.
1. During the Waiver Period the "Applicable Margin" shall be 2.10%.
2. Holding acknowledges and agrees that the Administration Agent has caused
its counsel to retain PricewaterhouseCoopers LLP as independent business
consultant (the "Consultant") to assess on behalf of the Administrative Agent,
its counsel and the Lenders and Holder, the operations, finances, and business
affairs of Danka Business Systems PLC ("Danka PLC") and its Subsidiaries and to
furnish a report of its findings and recommendations solely to the
Administrative Agent, its counsel and the Lenders and Holder. Holding agrees to
pay all fees, costs, and expenses of the Consultant incurred in connection with
the performance by the Consultant of its duties described in this paragraph.
Holding shall, and shall cause all Subsidiaries, to cooperate fully and in a
timely manner with the Consultant including its agents and employees.
3. Holding shall furnish to the Administrative Agent, the Lenders and the
Holder as soon as practicable but in any event within thirty (30) days of the
end of each calendar month, commencing with the calendar month ending January
31, 1999, the monthly consolidated balance sheet and consolidated statements of
earnings and cash flow of Danka PLC and its Subsidiaries, certified in writing
by any representative authorized to provide the certificates required by Section
7.1(c) of the Credit Agreement to have been prepared in accordance with GAAP in
a manner consistent with past practices of Danka PLC, and to the best knowledge
of such signatory to be true, correct, and complete in all material respects,
subject to routine audit adjustments.
4. During the Waiver Period (i) Danka PLC shall not pay any dividends or make
any distributions, (ii) neither Danka PLC nor any of its Subsidiaries shall make
any Acquisitions, and (iii) neither Danka PLC nor any of its Subsidiaries will
make any investments except as otherwise agreed to by the Banks under the
Existing Danka Credit Agreement.
5. Holding shall deposit with Holder 5% of the first $200,000,000.00 in "Net
Proceeds" that are payable to Holding or any subsidiary or affiliate of Holding
(collectively, a "Danka Party") from the sale of any Danka Party (including, but
not limited to those divisions or subsidiaries commonly known as "Omnifax,"
"DSI," and "International") or any of their capital assets as collateral for the
Loan and up to 2% of any "Net Proceeds" that are payable to any Danka Party of
subsequent sales of any Danka Party (including, but not limited to those
divisions or subsidiaries commonly known as "Omnifax," "DSI," and
"International") or any of their capital assets (collectively the "Sale
Proceeds") up to a maximum pledge amount of $15,000,000.00.
<PAGE> 4
The term "Net Proceeds" shall have the meaning as defined in the Existing Danka
Credit Agreement prior to (and Net Proceeds shall include) any payments
contemplated or required by any previous or subsequent amendment to the
Existing Danka Credit Agreement or any amendment to any security (or similar)
agreement related to the Existing Danka Credit Agreement. Such Net Proceeds
shall be held in a cash collateral account bearing interest at a market rate
at the Administrative Agent and shall be pledged as additional collateral for
the Loan. To the extent that any assets of a Danka Party are sold and Sale
Proceeds are used to reduce the principal balance of the Loan in accordance
with the Lease Agreement, the collateral required by this paragraph shall be
reduced by an amount that is equal to the percentage of principal reduction on
the Loan. For example, if the principal amount of the Loan is reduced from
$50,000,000.00 to $45,000,000.00, the amount of the required cash collateral
pursuant to this paragraph shall be reduced from $15,000,000.00 to
$13,500,000.00.
6. The amount of funds that can be advanced under the Credit Agreement with
respect to the Roosevelt Corporate Center III that is located in the St.
Petersburg, Florida (the "Project"), shall be limited to $4,485,261.00. Any
additional advances with respect to the Project shall be at the sole discretion
of the Lenders.
7. The Commitments of Lenders are hereby reduced from $58,200,000.00 to
$51,000,000.00.
8. Holding shall use its best efforts to (i) modify the Lease Agreement and
the Mortgage Instrument so that the parking facility at the Project is
encumbered by such documents and (ii) provides the Lenders evidence that any
additional property that is included in the Lease Agreement and the Mortgage
Instrument is not subject to any other liens or encumbrances. No advances will
be made with respect to the Project until all items required by this paragraph
have been provided to and approved by the Lenders.
9. Holding shall use its best efforts to provide Holder all documents or
items that are required in the January 14, 1999 letter from David Singleton to
Keith Nelson, a copy of which is attached hereto. No advances will be made with
respect to the Project until all items required by this paragraph have been
provided to and approved by the Lenders.
10. In addition to the provisions of Section 5 hereof, Holding shall pay to
Holder an amount equal to the Termination Value with respect to such property
for any property to be released from the Operative Documents and Holder,
Lenders and Administrative Agent consent to the release of such property and
payment of the Termination Value upon such release notwithstanding any other
requirements of the Operative Documents. For purposes of this waiver letter,
"Termination Value" shall mean the amount funded by Lenders against such
property or properties being released plus a pro rata share of all other costs
advanced by Lenders for such property or properties being released.
<PAGE> 5
11. The Waiver Period shall be automatically extended to a date that is the
same as the waiver extension date agreed to by the Lenders under the Existing
Danka Credit Agreement, which date may not be beyond December 27, 1999, except
as permitted by the Banks under the Existing Danka Credit Agreement (including a
waiver thereunder) for any regulatory review.
12. Holding will pay all reasonable legal, inspector and appraisal costs of
each Lender and all travel costs and expenses of each Lender in connection
herewith.
13. Holding shall pay to the Administrative Agent for the benefit of the
Lenders and Holder a waiver fee of $200,000.00
14. Holding shall at its expense, permit and fully cooperate with the
Administrative Agent and its representatives in a review and evaluation of all
assets of Holding and its Subsidiaries located in the United States.
15. Danka PLC shall have received from the required lenders under such credit
agreement a waiver of compliance with the financial covenants set forth in the
Existing Danka Credit Agreement dated December 5, 1996 among Danka PLC, Dankalux
Sarl & Co., SCA, Holding NationsBank, N.A., as agent and the lenders party
thereto.
16. Holding acknowledges and agrees that it has no existing defense,
counterclaim, offset, claim or demand in respect of the transaction described
herein and hereby releases the Lenders, Owner Trustee, Holder, Administrative
Agent and Co-Agent from any claims, causes of action or other liabilities
arising in connection with this transaction. Holding further acknowledges and
agrees that the total amount of principal indebtedness (including Loans and
Holder Advances), outstanding in connection with the tax retention operating
lease financing is $46,564,739.00.
17. Holding shall cooperate fully with Lender and the Administrative Agent in
their efforts to examine, evaluate, or appraise the Properties, including
providing reasonable access to the Properties, plans, specifications,
construction papers, contractors, subcontractors, books and records relating to
the Properties.
18. Holding shall deliver to the Administrative Agent a marketing plan within
60 days of the date hereof which delineates any proposed marketing of the
Properties by Holding. Holding shall then use its best efforts to implement such
marketing plan and to sell Properties in accordance with such marketing plan to
reduce the principal balance of the Loan.
19. Holding shall deliver to the Administrative Agent prior to any request for
advance, a schedule of proposed additional draws during the Waiver Period which
schedule shall be acceptable to the Administrative Agent and Majority Lenders,
in their sole discretion , and at the time of any such subsequent advances the
Administrative Agent shall have received all documents required by Credit
Agreement and Operative Agreements, including a draw request and a progress
report for all Properties then
<PAGE> 6
under construction, which drew request and progress payments shall be
acceptable to the Administrative Agent and Majority Lenders.
20. Within five Business Days of the date hereof, all domestic subsidiaries of
Holding which have guaranteed payment of indebtedness under the Existing Danka
Credit Agreement and have not delivered a guaranty of payment of obligations of
Holding under the Lease Agreement, shall deliver a guaranty.
21. Holding has not entered and shall not enter into any further sublease of
any of the Properties to any Person other than a Danka Party. Holding shall not
be entitled to substitute any new Properties for any existing Properties.
22. The provisions of this document supersede any provisions of the Credit
Agreement, the Participation Agreement or any Other Operative Agreement to the
extent they are inconsistent.
Holding further acknowledges and agrees that any breach during the Waiver
Period in the timely performance, observance, or fulfillment of any of the terms
or conditions stated above shall constitute an Event of Default under the Lease
Agreement and unless the Majority Lenders shall otherwise agree in writing,
shall terminate the effectiveness of any waiver obtained by the Administrative
Agent from the Lenders pursuant to this request. Holding further acknowledges
and agrees that nothing contained herein is intended to or shall limit any of
the provisions of the Participation Agreement, Lease Agreement or any Operative
Agreement as currently in effect, except as expressly stated herein and except
that, should the Administrative Agent obtain the waiver of Section 8.3 of the
Existing Danka Credit Agreement requested hereby, the enforcement of such
provisions shall be waived during the Waiver Period as well as any adverse
effect resulting therefrom subject to full and timely compliance with the terms
and conditions of such waiver stated above.
Very truly yours,
DANKA HOLDING COMPANY
By: /s/ Larry K. Switzer
--------------------------------
Name: Larry K. Switzer
Title: Chairman
<PAGE> 7
The undersigned Guarantors hereby consent to the foregoing and hereby
confirm their guaranty of payment of obligations arising under the tax retention
operating lease transaction.
AMERICAN BUSINESS CREDIT
CORPORATION
AMERITREND CORPORATION
CORPORATE CONSULTING GROUP, INC.
D.I. INVESTMENT MANAGEMENT, INC.
DANKA IMAGING DISTRIBUTION, INC.
DANKA MANAGEMENT COMPANY, INC.
DANKA OFFICE IMAGING COMPANY
(Successor by merger to Danka Corporation)
DANKA PLC
KIS IMAGING SERVICES, INC.
By: /s/ Larry K. Switzer
------------------------
Name: Larry K. Switzer
----------------------
Title: Director
---------------------
DANKA BUSINESS SYSTEMS PLC
By: /s/ Larry K. Switzer
------------------------
Name: Larry K. Switzer
----------------------
Title: Director
---------------------
<PAGE> 1
Exhibit 99.1
[OBJECT OMITTED] [OBJECT OMITTED]
FOR IMMEDIATE RELEASE PAUL K. SUIJK
(727) 576-6003
FEBRUARY 26, 1999 PAUL G. DUMOND
011-44171-399-3000
DANKA ANNOUNCES EXTENSION OF BANK WAIVER
St. Petersburg, Florida (February 26, 1999) - Danka Business Systems PLC
(NASDAQ: DANKY) today announced that it obtained from its bank lenders a six
month extension on the waiver of certain financial covenants and the
consequences of failing to comply with such covenants under its Credit
Agreement. Larry K. Switzer, Danka's Chief Executive Officer, commented, "We
are pleased with this important development and the confidence our bank lenders
have in our plans to move forward and focus on the business at hand." The
Company's bank lenders also approved its request to make $30.0 million in new
loans available to the Company.
Danka Business Systems PLC, headquartered in London, England and St.
Petersburg, Florida, is one of the world's largest independent suppliers of
office equipment and related services, parts and supplies. Danka employs
approximately 20,000 people and provides office products and services in more
than 30 countries around the world.
#
11201 Danka Circle North 33 Cavendish Square
St. Petersburg, FL 33716 London, England W1M 0DE
