Eleventh Amendment to Credit Agreement among Danka Business Systems PLC, Affiliates, and Bank of America

Summary

This amendment, dated March 28, 2001, modifies the existing Credit Agreement between Danka Business Systems PLC and its affiliates (the Danka Parties) and Bank of America, along with other participating banks. The amendment temporarily relaxes certain financial covenants and waives related defaults for a specified period, provided the Danka Parties meet specific financial ratios and conditions. It also restricts dividends, acquisitions, and investments during this period, with limited exceptions for certain intercompany transactions. The changes are effective until July 16, 2001 or the occurrence of a designated event, whichever comes first.

EX-4.26 2 0002.txt ELEVENTH AMENDMENT TO CREDIT AGREEMENT THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this "ELEVENTH AMENDMENT") is made and entered into as of March 28, 2001 among DANKA BUSINESS SYSTEMS PLC, a limited liability company incorporated in England and Wales (Registered Number 1101386) ("DANKA PLC"), DANKALUX SARL & CO. SCA, a Luxembourg company ("DANKALUX"), and DANKA HOLDING COMPANY, a Delaware corporation ("DANKA HOLDING") (Danka PLC, Dankalux and Danka Holding are herein each a "COMPANY" and collectively the "COMPANIES"), AMERICAN BUSINESS CREDIT CORPORATION, AMERITREND CORPORATION, CORPORATE CONSULTING GROUP, INC., D.I. INVESTMENT MANAGEMENT, INC., DANKA IMAGING DISTRIBUTION, INC., DANKA MANAGEMENT COMPANY, INC., DANKA OFFICE IMAGING COMPANY, DYNAMIC BUSINESS SYSTEMS, INC., HERMAN ENTERPRISES, INC. OF SOUTH FLORIDA, QUALITY BUSINESS, INC. (collectively with Danka Holding, the "GRANTORS"), the entities listed on the signature pages hereof as International Swing Line Borrowers (collectively the "INTERNATIONAL BORROWERS" and together with the Grantors and the Companies, the "DANKA PARTIES"), BANK OF AMERICA, NATIONAL ASSOCIATION (formerly known as NationsBank, National Association, a national banking association formerly known as NationsBank, National Association (Carolinas)), each other Bank listed on the signature pages hereof (each individually, a "BANK" and collectively, the "BANKS"), and BANK OF AMERICA, NATIONAL ASSOCIATION (formerly known as NationsBank, National Association), in its capacity as agent for the Banks (in such capacity, the "AGENT"): W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Companies, the Banks and the Agent have entered into a Credit Agreement dated as of December 5, 1996, as amended and supplemented by a First Amendment dated as of December 5, 1997, a Second Amendment dated as of July 28, 1998, a Third Amendment dated as of December 31, 1998, a Fourth Amendment dated as of March 29, 1999, a Fifth Amendment dated as of June 15, 1999, a Sixth Amendment dated as of July 9, 1999 (the "SIXTH AMENDMENT"), a Seventh Amendment dated as of December 1, 1999, an Eighth Amendment dated as of March 24, 2000, a Ninth Amendment dated as of October 31, 2000, a Tenth Amendment dated as of December 15, 2000, a Waiver Letter Agreement dated as of October 20, 1998 and a Waiver Letter Agreement dated as of February 18, 1999 (as further amended hereby and as from time to time further amended, supplemented or modified, the "CREDIT AGREEMENT"), pursuant to which the Banks agreed to make certain revolving credit, term loan and letter of credit facilities available to the Companies; and WHEREAS, Article VIII of the Credit Agreement contains financial covenants, compliance with which cannot be waived or amended without the written consent of the Majority Banks; and WHEREAS, the Danka Parties have requested that the Banks provide written consent to the amendment of the financial covenants as provided herein; and WHEREAS, the Banks and the Danka Parties have agreed to amend certain provisions of the Credit Agreement and to certain other agreements of the parties, all as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and sufficient consideration, receipt of which is hereby acknowledged, the Danka Parties and the Banks do hereby agree as follows: 1. DEFINITIONS. Any capitalized terms used herein without definition shall have the meaning set forth in the Credit Agreement. 2. AMENDMENT OF CREDIT AGREEMENT. Subject to the terms and conditions set forth herein, Section 8.3 of the Credit Agreement is amended to add new clause (viii) as follows: "(viii) Notwithstanding anything to the contrary contained in this SECTION 8.3, compliance with the financial covenants in clauses (i) through (v) of this SECTION 8.3 shall be deemed satisfied for the period beginning on or after March 28, 2001 and through and including the earlier of (1) July 16, 2001 and (2) the date on which there shall have occurred a "Designated Event" as such term is defined in that certain indenture dated March 13, 1995, between Danka PLC, as issuer, and The Bank of New York, as trustee, pursuant to which Danka PLC issued the Convertible Subordinated Notes, and any Event of Default that may have existed on or after March 28, 2001 as a result of any failure by the Danka Parties to comply therewith during such period shall be waived, if the Danka Parties do not permit: (a) The Consolidated Fixed Charge Coverage Ratio as at the end of the four fiscal quarter period ending on March 31, 2001 to be less than 0.90 to 1.00; (b) At any time on and after March 28, 2001 and on or prior to July 16, 2001 the Adjusted Consolidated Net Worth of Danka PLC and its Subsidiaries to be less than $286,000,000; (c) The Consolidated Total Leverage Ratio as at the end of March 31, 2001 for the four fiscal quarter period then ending to exceed 5.50 to 1.00; (d) The cumulative Consolidated EBITDA of Danka PLC and its Subsidiaries for the four fiscal quarter period ending on -2- March 31, 2001 to be less than $149,000,000; and (e) The ratio of (A) Consolidated EBITDA to (B) gross interest expense in each case of Danka PLC and its Subsidiaries as at the end of the four fiscal quarter period ending on March 31, 2001 to be less than 1.90 to 1.00. For purposes of subsections (a), (c), (d) and (e) in this Section 8.3(viii), the calculation of the Consolidated EBITDA for the four fiscal quarter period ending March 31, 2001 shall add to income from continuing operations the actual restructuring or special charges for such period in an amount not to exceed $82,340,000. In addition, for purposes of subsections (a), (b) and (e) in this SECTION 8.3(VIII), the impact of the $10,000,000 waiver extension fee under the Sixth Amendment dated as of July 9, 1999 on the interest expense for such period shall be excluded. Notwithstanding anything to the contrary in this Agreement, upon any occurrence of the circumstances described in subclause (2) of clause (viii) of this SECTION 8.3, then immediately, automatically and without any prior notice thereof, an "Event of Default" as such term is defined in SECTION 9.1 of this Agreement shall be deemed to have occurred." 3. DIVIDENDS, DISTRIBUTIONS, INVESTMENTS. During the period from and after March 28, 2001 (i) Danka PLC shall not pay any dividends or make any distributions, except as permitted pursuant to the first paragraph of Section 8.5 of the Credit Agreement, (ii) neither the Companies nor any of their Subsidiaries shall make any Acquisitions, and (iii) neither the Companies nor any of their Subsidiaries shall make any Investments; PROVIDED, HOWEVER, that the Banks hereby consent to consummation of the following transactions (as further described in Schedule I hereto): (a) Conversion of the existing intercompany loan in the aggregate principal amount of $2,000,000 owed by Danka Philippines, Inc. to Dankalux into share capital. (b) Payment by Dankalux to Danka Belgium N.V. of approximately Euro 2,000,000 to comply with capital requirements of local law; PROVIDED THAT not more than three business days after such payment Danka Belgium N.V. shall repay to Dankalux the principal amount outstanding under the existing intercompany loan owed by Danka Belgium N.V. to Dankalux, together with any accrued and unpaid interest thereon, in an aggregate amount not less than the amount of such payment. (c) (i) Payment by Dankalux to Danka Hungary kft of $200,000; PROVIDED THAT not more than three days after such payment Danka Hungary kft shall repay to Dankalux the principal amount outstanding under the existing intercompany loan owed by Danka Hungary kft to Dankalux, together with any accrued and unpaid -3- interest thereon, in an aggregate amount not less than $200,000; and (ii) redenomination from U.S. Dollars to Euros of an existing intercompany loan owed by Danka Hungary kft to Dankalux in the aggregate principal amount of $469,000, each of (i) and (ii) above to comply with capital requirements of local law;. (d) (i) Conversion of a portion of the existing intercompany loan owed by Danka Suisse S.A. (previously known as Danka Office Imaging S.A.) to Dankalux in the aggregate principal amount of $3,360,000 into share capital to comply with capital requirements of local law; and (ii) if required to comply with capital requirements of local law, payment by Dankalux to Danka Suisse S.A. of $3,360,000; PROVIDED THAT if such payment is made, then not more than three days after such payment Danka Suisse S.A. shall repay to Dankalux the principal amount outstanding under such intercompany loan, together with any accrued and unpaid interest thereon, in an aggregate amount not less than the amount of such payment. The Danka Parties represent and warrant that the payments and transfers described in this paragraph 3 comply with all applicable laws, rules and regulations of every Governmental Authority, foreign and domestic. 4. INDEBTEDNESS. Subject to the terms and conditions set forth herein, Section 8.13 of the Credit Agreement is amended to add at the end of the last paragraph thereof as follows: "Notwithstanding anything to the contrary herein, the Companies may incur Subordinated Indebtedness in an aggregate principal amount not in excess of $30,000,000 at any time outstanding." 5. AMENDMENT FEES; EXPENSES. Promptly upon the execution of this Eleventh Amendment by the Majority Banks, the Danka Parties shall pay to the Agent for the benefit of each of the Banks which shall have executed this Eleventh Amendment an amendment fee equal to 1/4% of such Banks' Commitment (the "AMENDMENT FEE"). The Danka Parties agree promptly to pay or reimburse reasonable expenses of the Steering Committee and its members (including the reasonable fees and expenses of outside counsel for the Steering Committee and each of its members) incurred in connection with the Credit Agreement and the other Loan Documents. The Companies acknowledge and agree that the Agent has caused its counsel to retain PricewaterhouseCoopers LLP as independent business consultant (the "Consultant") to assess on behalf of the Agent, its counsel and the Banks the operations, finances, and business affairs of Danka PLC and its Subsidiaries and to furnish reports of its findings and recommendations solely to the Agent, its counsel and the Banks. The Companies jointly and severally agree to pay all reasonable fees, costs, and expenses of the Consultant incurred in connection with the performance by the Consultant of its duties described in this paragraph. The -4- Companies shall, and shall cause all Subsidiaries to, cooperate fully and in a timely manner with the Consultant, including its agents and employees. 6. EFFECTIVENESS. This Eleventh Amendment shall become effective upon (a) receipt by the Agent of an executed copy of this Eleventh Amendment (which may be signed in counterparts and may be received by facsimile transmission) signed by the Danka Parties and the Majority Banks, (b) payment by the Danka Parties to the Agent of the Amendment Fee, and (c) receipt by the Agent of a copy of a waiver (in form and substance satisfactory to the Agent) of violations of the financial covenants incorporated in the tax retention operating lease documents. 7. ACKNOWLEDGMENT; RELEASE. (a) The Companies and the Grantors acknowledge that they have no existing defense, counterclaim, offset, cross-complaint, claim or demand of any kind or nature whatsoever that can be asserted to reduce or eliminate all or any part of any of their respective liability to pay the full indebtedness outstanding under the terms of the Credit Agreement and any other documents which evidence, guaranty or secure the Obligations. The Companies and the Grantors hereby release and forever discharge the Agent, the International Swing Line Banks, the Banks and all of their officers, directors, employees, attorneys, consultants and agents from any and all actions, causes of action, debts, dues, claims, demands, liabilities and obligations of every kind and nature, both in law and in equity, known or unknown, whether matured or unmatured, absolute or contingent. (b) The International Swing Line Borrowers acknowledge that they have no existing defense, counterclaim, offset, cross-complaint, claim or demand or any kind or nature whatsoever that can be asserted to reduce or eliminate all or any part of their respective liability to pay the full indebtedness owed by any of them under the terms of the International Swing Line Agreement or any separate facility which has been made available to any of them by any International Swing Line Bank or a Designated Local Lender (as defined in the International Swing Line Agreement) and any agreements related thereto. The International Swing Line Borrowers hereby release and forever discharge the Agent, the International Swing Line Banks and the Designated Local Lenders (as defined in the International Swing Line Agreement) and all of their officers, directors, employees, attorneys, consultants and agents from any and all actions, causes of action, debts, dues, claims, demands, liabilities and obligations of every kind and -5- nature, both in law and in equity, known or unknown, whether matured or unmatured, absolute or contingent. (c) The Danka Parties further acknowledge and agree that any breach by the Danka Parties in the timely performance, observance, or fulfillment of any of the terms or conditions stated herein shall, unless the Majority Banks shall otherwise agree in writing, constitutes an Event of Default under the Credit Agreement. 8. ENTIRE AGREEMENT. This Eleventh Amendment sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. 9. DEEMED AMENDMENT OF OTHER LOAN DOCUMENTS; FULL FORCE AND EFFECT. To the extent necessary to give effect to the provisions hereof, the International Swing Line Agreement and Security Agreement shall be deemed amended and supplemented by the terms hereof. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 10. COUNTERPARTS. This Eleventh Amendment may be executed in any number of counterparts (including, without limitation, counterparts sent by facsimile transmission), each of which shall be deemed an original as against any party whose signature appears thereon and all of which shall together constitute one and the same instrument. 11. GOVERNING LAW. This Eleventh Amendment shall in all respects be governed by the laws and judicial decisions of the State of Florida. 12. ENFORCEABILITY. Should any one or more of the provisions of this Eleventh Amendment be determined to be illegal or unenforceable as to one of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 13. AUTHORIZATION. This Eleventh Amendment has been duly authorized, executed and delivered by the parties hereto and constitutes a legal, valid and binding obligations of the parties hereto, except as may be limited by general principles of equity or by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally. -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. WITNESS: DANKA BUSINESS SYSTEMS PLC By: --------------------------------- Name: ------------------------------- Title: ------------------------------ DANKA HOLDING COMPANY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ DANKALUX SARL & CO. SCA BY: DANKALUX SARL, COMMANDITE By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -7- AMERICAN BUSINESS CREDIT CORPORATION AMERITREND CORPORATION CORPORATE CONSULTING GROUP, INC. D.J. INVESTMENT MANAGEMENT, INC. DANKA IMAGING DISTRIBUTION, INC. DANKA MANAGEMENT COMPANY, INC. DANKA OFFICE IMAGING COMPANY DYNAMIC BUSINESS SYSTEMS, INC. HERMAN ENTERPRISES, INC. OF SOUTH FLORIDA By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- QUALITY BUSINESS, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- -8- INTERNATIONAL SWINGLINE BORROWERS DANKA CHILE COMERCIAL LTDA DANKA DO BRASIL LIMITADA DANKA MEXICANA S DE RL DE CV DANKA DE PANAMA S.A. DANKA DE COLOMBIA PUERTO RICO DANKA INC. DANKA DE VENEZUELA S.A. DANKA AUSTRALIA PTY LIMITED & DANKA NEW ZEALAND LIMITED DANKA OFFICE IMAGING (JAPAN) DANKA PHILIPPINES INC. DANKA FRANCE S.A.R.L. DANKA FRANCE SA DANKA OFFICE PRODUCTS B.V. DANKA OFFICE IMAGING GMBH, DANKA DEUTSCHLAND GMBH, DANKA DISTRIBUTION GMBH, DANKA DEUTSCHLAND HOLDING GMBH DANKA OFFICE PRODUCTS B.V. DANKA ITALIA S.P.A., BASSILLICHI INFOTEC S.P.A., DANKA S.P.A. & DANKA OFFICE IMAGING S.P.A. DANKA HOLDINGS BV, DANKA EUROPE BV, DANKA DISTRIBUTION BV (FKA INFOTEC EUROPE BV), INFOTEC NEDERLAND BV, DANKA GROUP BV, DANKA SERVICES INTERNATIONAL BV, DANKA OFFICE PRODUCTS BV, INFOTEC PARTICIPATIE BV, AND DANKA NEDERLAND BV DANKA OFFICE PRODUCTS BV DANKA BUSINESS SYSTEMS PLC, DANKALUX SARL & Co. SCA & DANKA HOLDING COMPANY By: ___________________________________ Name: F. Mark Wolfinger Title: Director -9- BANK OF AMERICA, NATIONAL ASSOCIATION. (formerly known as NationsBank, N.A.), as Agent and Issuing Bank, and individually as an International Swing Line Bank and a Bank By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE BANK OF NOVA SCOTIA By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE BANK OF NEW YORK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ CREDIT LYONNAIS NEW YORK BRANCH By: --------------------------------- Name: ------------------------------- Title: ------------------------------ CIBC INC. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -10- PNC BANK, N.A. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ FIRST UNION NATIONAL BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ SUNTRUST BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE FUJI BANK AND TRUST COMPANY, LIMITED By: --------------------------------- Name: ------------------------------- Title: ------------------------------ ABN AMRO BANK N.V. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -11- BNP PARIBAS By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ HIBERNIA NATIONAL BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ SAN PAOLO IMI SPA By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -12- LLOYDS TSB BANK PLC By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ BANCA COMMERCIALE ITALIANA New York Branch By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ AMSOUTH BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -13- THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH By: --------------------------------- Name: ------------------------------- Title: ------------------------------ BANKERS TRUST COMPANY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE DAI-ICHI KANGYO BANK, LIMITED By: --------------------------------- Name: ------------------------------- Title: ------------------------------ NATIONAL AUSTRALIA BANK LIMITED ACN 004044937 By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -14- THE TOKAI BANK LIMITED, NEW YORK BRA By: --------------------------------- Name: ------------------------------- Title: ------------------------------ WACHOVIA BANK, N.A. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ NATIONAL WESTMINSTER BANK PLC By: --------------------------------- Name: ------------------------------- Title: ------------------------------ BANCA NAZIONALE DEL LAVORO S.p.A. - LONDON BRANCH By: --------------------------------- Name: ------------------------------- Title: ------------------------------ CREDIT AGRICOLE INDOSUEZ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -15- STATE STREET BANK AND TRUST COMPANY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ CHASE SECURITIES, INC., as agent for The Chase Manhattan Ban By: --------------------------------- Name: ------------------------------- Title: ------------------------------ LAZARD BANK LIMITED By: --------------------------------- Name: ------------------------------- Title: ------------------------------ SOUTHTRUST BANK, N.A. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ BT HOLDINGS (NEW YORK) INC. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ LEHMAN BROTHERS BANKHAUS AG, LONDON BRANCH By: --------------------------------- Name: ------------------------------- Title: ------------------------------ -16- SCHEDULE I - INVESTMENTS 1. Philippines Danka is currently in the process of liquidating its operation in the Philippines. Dankalux has an approximate $2,000,000 intercompany loan to Danka Philippines, Inc. Under Philippine law, if Danka were to forgive this debt as part of the liquidation of the company, it would create income which would be subject to Philippine cash taxes of roughly USD 600,000. There is no offsetting benefit in other jurisdictions for this cash tax. Therefore, Dankalux requests approval to capitalize its loan balance, which would be subsequently written-off when the Philippines is dissolved. There is no cash movement in this Investment. 2. Belgium Based on Belgian law, historical losses have reduced Shareholders' Capital to a level which puts the company in potential non-compliance with local capital rules. By investing up to Euro 2.0 million, into Danka Belgium NV, Dankalux will restore the net worth position of the company to approximately Euro 1.0 million. Danka Belgium will use the Euro 2.0 million to repay existing intercompany principal and interest to Dankalux. Timing: 3 Days. Cash will leave and fully return to Dankalux 3. Hungary Hungary was historically capitalized with a US dollar loan of $669,000 from Dankalux. As a result of foreign exchange movements between the Hungarian Forint and the US dollar, Danka Hungary kft is in a negative equity position and subject to Thin Capitalization concerns. In order for Danka Hungary to be in compliance with loan laws (debt to equity ratio of 4:1), Dankalux needs to infuse USD 200,000 of capital into Danka Hungary. Danka Hungary will in turn repay USD $200,000 of its intercompany loan to Dankalux and Dankalux will redenominate the remaining USD $469,000 intercompany debt into Euro. Timing: 3 days. Cash will leave and fully return to Dankalux 4. Switzerland According to article 725 (1) of Swiss Company Law, free capital (share capital plus reserves) must be twice the level of retained losses. Rather than infuse new equity into Danka Suisse S.A. (previously known as Danka Office Imaging S.A.), Dankalux will convert CHF 5.6 million (USD 3.36 million) of intercompany debt into share capital to allow the Swiss Company to remain in compliance with local capital rules. No cash movement is expected with the Investment. However, if local rules require actual cash movement and intercompany repayment, cash will return to Dankalux from Danka Suisse S.A. in thee days or less. -17-