EXHIBIT 10.42
THE BANK OF NOVA SCOTIA
York Commercial Banking Centre
625 Cochrane Drive, Suite 200
Markham, Ontario
Canada L3R 9R9
Tel: (905) 470-5060
Fax: (905) 470-0503
[SCOTIABANK LOGO]
April 3, 2002
Daisytek (Canada) Inc.
c/o Daisytek International Corporation
1025 Central Expressway South
Allen, Texas
75013
Attention: Mr. Jeff Malanga,
Treasurer
Dear Sir:
We confirm that subject to acceptance by you, The Bank of Nova
Scotia (the "Bank") will make available to Daisytek (Canada) Inc. (the
"Borrower"), credit facilities on the terms and conditions set out in the
attached Terms and Conditions Sheet and Schedule "A".
If the arrangements set out in this letter, and in the attached
Terms and Conditions Sheet and Schedule "A" (collectively the "Commitment
Letter") are acceptable to you, please sign the enclosed copy of this letter in
the space indicated below and return the letter to us by the close of business
on April 17, 2002, after which date this offer will lapse.
This Commitment Letter replaces all previous commitments issued by
the Bank to the Borrower.
Very truly yours,
/s/ J.A. NEATE /s/ I.C. McFETTERS
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J.A. Neate I.C. McFetters
Senior Relationship Manager Vice-President and Manager
The arrangements set out above and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
hereby acknowledged and accepted by:
DAISYTEK (CANADA), INC.
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Name:
By: /s/ LEE WEINER
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Title: Director of Treasury
Date: 4/8/02
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By: /s/ RALPH MITCHELL
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Title: EVP & CFO
Date: 4/8/02
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Page 1
TERMS AND CONDITIONS
CREDIT NUMBER: 01 AUTHORIZED AMOUNT: $20,000,000
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TYPE
Revolving Term
PURPOSE
Assist with financing of day-to-day general operating requirements.
CURRENCY
Canadian and/or U.S. dollar equivalent thereof.
AVAILMENT
The Borrower may avail the Credit by way of direct advances evidenced by
Demand Promissory Notes and/or Bankers' Acceptances in Canadian dollars in
multiples of $500,000 and having terms of maturity of 30 to 364 days
without grace.
TERMINATION
Provided the Borrower is in compliance with all terms and conditions
outlined, the Revolving term facility is committed to the earlier of March
20, 2004, or the expiration of Daisytek, Incorporated's loan facility
(presently December 19, 2003). Advances are repayable the earlier of the
expiry of the facility or on demand by the Bank if the Borrower is in
default of the terms and conditions outlined herein.
In the event of extension, the Borrower is to provide written notice not
less than 40 days and up to 90 days prior to expiry, requesting extension
for a further period, subject to no event of default having occurred and
with extension subject to the Bank's approval.
INTEREST RATE AND FEES
(Canadian dollars:) The Bank's Prime Lending Rate, plus 75 basis points,
from time to time, with interest payable monthly.
(U.S. dollars:) The Bank's U.S. Dollar Base Rate in New York plus 75 basis
points, with interest payable monthly.
(Bankers' Acceptances:) Bankers' Acceptance Fee of 225 basis points,
subject to a minimum fee of $500 per transaction, payable at the time of
each acceptance.
OTHER FEES
A Standby Fee of 1/4% per annum on the daily unused portion of the Credit
payable in Canadian dollars, is payable monthly from the date of
acceptance of this commitment.
A Commitment Fee of $25,000 is payable upon acceptance of this commitment.
Page 2
REPAYMENT
The Borrower may make repayment of advances under the Revolving Term
facility at any time, other than term instruments which may be repaid at
maturity.
PREPAYMENT
Floating Interest Rate Advances
Prepayment is permitted without penalty at any time in whole or in part
except for Bankers' Acceptances which may be prepaid on maturity date.
Prepayments are to be applied against installments of principal in the
inverse order of their maturities.
SPECIFIC SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credit:
Bankers' Acceptance Agreement
Power of Attorney - Bankers' Acceptances.
CONDITION PRECEDENT
The following condition is to be met to the satisfaction of the Bank and
its solicitors prior to any advances or availments being made under the
Credit which will result in total advances or availments exceeding
$15,000,000 CAD:
A formal accepted commitment from the Toronto-Dominion Bank making
available credit facilities in the same amount and subject to the
same security, terms, conditions and pricing as contained in this
offer.
ADDITIONAL FACILITIES
a) Subject to availability and execution of mutually satisfactory
documentation the Borrower may enter into Forward Exchange Contracts with
the Bank for maximum terms of up to one year.
Maximum aggregate Forward Exchange Contracts outstanding at any one time
are not to exceed $10,000,000 U.S. dollars or the equivalent thereof in
other approved currencies.
b) Subject to availability, and to execution of mutually satisfactory
documentation, based on the Bank's standard International Swap Dealers
Association (ISDA) Master Agreement and Schedule, incorporating all
security held pursuant to this Commitment Letter, the Borrower shall have
the option, available until August 31, 2002 to enter into Interest Rate
Swap transactions. The swap transactions are limited to U.S. and Canadian
only, for terms not exceeding 3 years from the date of drawdown of the
amount to be swapped. The aggregate amount of all outstanding transactions
at any one time is not to exceed $15,000,000.
Page 3
GENERAL SECURITY, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to the
Bank and registered or recorded as required by the Bank, is to be provided
prior to any advances or availment being made under the Credits:
General Security Agreement, with an agreed delay of attachment until
negotiated trigger events occur, over all present and future
personal property with appropriate insurance coverage, loss if any,
payable to the Bank.
Inter-Creditor Agreement between The Bank of Nova Scotia and The
Toronto-Dominion Bank, covering but not limited to advances,
repayment, security, defaults, cross default, realization, etc.
Postponement and Subordination by Daisytek, Incorporated and any
subsidiary identified by the Bank, as to intercorporate obligations
including inventory return.
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been
discharged in full, the following conditions will apply in respect of
the Credits:
Revolving Term advances are not to exceed the lesser of the
Revolving Term limit or the Borrowing Base which is defined as
80% of good quality accounts receivable (excluding accounts
over 90 days, accounts due by employees, offsets and
inter-company accounts), plus 50% of net inventory, less
security interests or charges held by other parties and
specific payables which have or may have priority over the
Bank' s security.
Advances against inventory are limited to $7,500,000.
Net inventory is defined as the sum of finished goods and raw
materials, valued at the lower of cost or market, less unpaid
inventory received from suppliers during the past 30 days.
The ratio of Current Assets to Current Liabilities is to be
maintained at all times at 1.2:1 or better. Current
Liabilities is to include amounts outstanding under the
Revolving Term Facilities provided by the Toronto-Dominion
Bank and The Bank of Nova Scotia.
Minimum Shareholder's Equity of $20,000,000 is to be
maintained at all times.
Shareholder's Equity is defined as the sum of share capital
earned and contributed surplus.
Leverage Ratio shall not exceed 3:1 at any time. The leverage
ratio is calculated on a rolling four quarter basis and is
defined as total funded debt over EBITDA for the four
financial quarters ending at that time.
EBITDA is defined as net income before extraordinary and other
non-recurring items plus interest, income tax, depreciation
and amortization expenses during the period.
Page 4
Any default under the Credit Agreement dated December 18, 2000
and as subsequently amended, of Daisytek, Incorporated
constitutes a default under the terms of credits outlined
herein regardless of cure, amendment or forbearance under the
credit arrangements for Daisytek, Incorporated.
The Borrower agrees that the terms and conditions including
without limitation any security granted by the Borrower to any
other lender, including The Toronto-Dominion Bank shall not be
more favourable than the terms and conditions set out herein.
In the event that the Borrower does not grant more favourable
terms, conditions or security to any other lender, the
Borrower agrees that it shall grant the same terms and
conditions including equal ranking security to the Bank
hereunder.
Without the Bank's prior written consent:
No change in ownership is permitted.
No dividends, withdrawals, advances to shareholders or
affiliates are permitted.
No payments are to be made to any affiliates other than
for the normal course of business.
Guarantees or other contingent liabilities are not to be
entered into and assets are not to be further
encumbered.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged in
full, the Borrower will provide the Bank with the following:
Annual Internally Prepared Unconsolidated Financial Statements,
within 120 days of the Borrower's fiscal year end, duly signed.
Annual Financial Statements of Daisytek, Incorporated within 120
days of fiscal year end, duly signed.
Annual Audited Consolidated Financial Statements of Daisytek
International Corporation within 120 days of fiscal year end, duly
signed.
Quarterly Internally Prepared Unconsolidated Financial Statements of
the Borrower within 60 days of period end.
Quarterly Compliance Certificate from the Borrower certifying
compliance with all conditions of its credit facilities.
Quarterly Prepared Consolidated Financial Statements of Daisytek
International Corporation within 60 days of period end.
Quarterly Compliance Certificate from Daisytek, Incorporated
certifying compliance with all conditions of its credit facilities.
Quarterly Aged Listing of Accounts Receivable for the Borrower
within 60 days of period end.
Page 5
Monthly Borrowing Base Calculation for the Borrower, to
include information on inventory, accounts receivable, and
accounts payable, within 20 days of period end.
A copy of any amendment to Daisytek, Incorporated's Credit
Agreement or any new Credit Agreement in its entirety at the
time of execution.
Annual Unconsolidated Quarterly Projections of the Borrower
for the current year, within 120 days of fiscal year end.
Page 6
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
Calculation and Payment of Interest
1. Interest on loans/advances made in Canadian dollars will be calculated on
a daily basis and payable monthly on the 22nd day of each month (unless
otherwise stipulated by the Bank). Interest shall be payable not in
advance on the basis of a calendar year for the actual number of days
elapsed both before and after demand of payment or default and/or
judgment.
2. Interest on loans/advances made in U.S. dollars will be calculated on a
daily basis and payable monthly on the 22nd day of each month, (unless
otherwise stipulated by the Bank). Interest shall be payable not in
advance on the basis of a 360 day year for the actual number of days
elapsed both before and after demand of payment or default and/or
judgment. The rate of interest based on a 360 day year is equivalent to a
rate based on a calendar year of 365 days of 365/360 times the rate of
interest that applies to the U.S. dollar loans/advances.
Interest on Overdue Interest
3. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue,
but shall be compounded monthly and be payable on demand, both before and
after demand and judgment.
Indemnity Provision
4. If the introduction or implementation of, or any change in, or in the
interpretation of, or any change in its application to the Borrower of,
any law or any regulation or guideline issued by any central bank or other
governmental authority (whether or not having the force of law),
including, without limitation, any reserve or special deposit requirement
or any tax (other than tax on the Bank's general income) or any capital
requirement, has due to the Bank's compliance the effect, directly or
indirectly, of (i) increasing the cost to the Bank of performing its
obligations hereunder or under any availment hereunder; (ii) reducing any
amount received or receivable by the Bank or its effective return
hereunder or in respect of any availment hereunder or on its capital; or
(iii) causing the Bank to make any payment or to forgo any return based on
any amount received or receivable by the Bank hereunder or in respect of
any availment hereunder, then upon demand from time to time the Borrower
shall pay such amount as shall compensate the Bank for any such cost,
reduction, payment or forgone return (collectively "Increased Costs") as
such amounts are calculated in a certificate reasonably prepared by the
Bank. The Bank agrees to provide written notice of any such increased
costs.
In the event of the Borrower becoming liable for such Increased Costs, the
Borrower shall have the right to prepay in full, without penalty, the
outstanding principal balance under the affected credit other than the
face amount of any document or instrument issued or accepted by the Bank
for the account of the Borrower, including, without limitation, a Letter
of Credit, a Letter of Guarantee or a Bankers' Acceptance. Upon any such
prepayment, the Borrower shall also pay the then accrued interest on the
amount prepaid and the Increased Costs to the date of prepayment together
with such amount as will compensate the Bank for the cost of any early
termination of its funding arrangements in accordance with its normal
practices, as such amounts are calculated in a certificate reasonably
prepared by the Bank.
Page 7
Calculation and Payment of Bankers' Acceptance Fee
5. The fee for the acceptance of each Bankers' Acceptance will be payable on
the face amount of each Bankers' Acceptance at the time of acceptance of
each draft calculated on the basis of a calendar year for the actual
number of days elapsed from and including the date of acceptance to the
due date of the draft.
Calculation and Payment of Standby Fee
6. Standby fees shall be calculated daily and payable monthly on the basis of
a calendar year for Canadian dollar credits and on the basis of a 360 day
year for U.S. dollar credits from the date of acceptance by the Borrower
of this Commitment Letter.
Environment
7. The Borrower agrees:
(a) to obey all applicable laws and requirements of any federal,
provincial, or any other governmental authority relating to the
environment and the operation of the business activities of the
Borrower;
(b) to allow the Bank upon reasonable prior notice and at reasonable
times access to the business premises of the Borrower to monitor and
inspect all property and business activities of the Borrower;
(c) to notify the Bank from time to time of any business activity
conducted by the Borrower which involves the use or handling of
hazardous materials or wastes or which increases the environmental
liability of the Borrower in any material manner;
(d) to notify the Bank of any proposed change in the use or occupation
of the property of the Borrower prior to any change occurring;
(e) to provide the Bank with immediate written notice of any
environmental problem and any hazardous materials or substances
which have an adverse effect on the property, equipment, or business
activities of the Borrower and with any other environmental
information requested by the Bank from time to time;
(f) to conduct all environmental remedial activities which a
commercially reasonable person would perform in similar
circumstances to meet its environmental responsibilities and if the
Borrower fails to do so, the Bank may perform such activities; and
(g) to pay for any environmental investigations, assessments or remedial
activities with respect to any property of the Borrower that may be
performed for or by the Bank from time to time, subject to written
approval by the Borrower, which will not be unreasonably withheld.
Page 8
If the Borrower notifies the Bank of any specified activity or
change or provides the Bank with any information pursuant to
subsections (c), (d), or (e), or if the Bank receives any
environmental information from other sources, the Bank, in its sole
discretion, may decide that an adverse change in the environmental
condition of the Borrower or any of the property, equipment, or
business activities of the Borrower has occurred which decision will
constitute, in the absence of manifest error, conclusive evidence of
the adverse change. Following this decision being made by the Bank,
the Bank shall notify the Borrower of the Bank's decision concerning
the adverse change.
If the Bank decides or is required to incur expenses in compliance
or to verify the Borrower's compliance with applicable environmental
or other regulations, the Borrower shall indemnify the Bank in
respect of such expenses, which will constitute further advances by
the Bank to the Borrower under this Agreement, subject to the
stipulations noted in subsection (g).
Evidence of Indebtedness
8. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this
Credit, repayments on account thereof and the indebtedness of the Borrower
to the Bank.
Acceleration
9. (a) All indebtedness and liability of the Borrower to the Bank payable
on demand, is repayable by the Borrower to the Bank at any time on
demand;
(b) All indebtedness and liability of the Borrower to the Bank not
payable on demand, shall, at the option of the Bank, become
immediately due and payable, the security held by the Bank shall
immediately become enforceable, and the obligation of the Bank to
make further advances or other accommodation available under the
Credits shall terminate, if any one of the following Events of
Default occurs:
(i) the Borrower or any guarantor fails to make when due, whether
on demand or at a fixed payment date, by acceleration or
otherwise, any payment of interest, principal, fees,
commissions or other amounts payable to the Bank;
(ii) there is a breach by the Borrower or any guarantor of any
other term or condition contained in this Commitment Letter or
in any other agreement to which the Borrower and/or any
guarantor and the Bank are parties;
(iii) any default occurs under any security listed in this
Commitment Letter under the headings "Specific Security" or
"General Security" or under any other credit, loan or security
agreement to which the Borrower and/or any guarantor is a
party;
(iv) any bankruptcy, re-organization, compromise, arrangement,
insolvency or liquidation proceedings or other proceedings for
the relief of debtors are instituted by or against the
Borrower or any guarantor and, if instituted against the
Borrower or any guarantor, are allowed against or consented to
by the Borrower or any guarantor or are not dismissed or
stayed within 60 days after such institution;
Page 9
(v) a receiver is appointed over any property of the Borrower or
any guarantor or any judgment or order or any process of any
court becomes enforceable against the Borrower or any
guarantor or any property of the Borrower or any guarantor or
any creditor takes possession of any property of the Borrower
or any guarantor;
(vi) any course of action is undertaken by the Borrower or any
guarantor or with respect to the Borrower or any guarantor
which would result in the Borrower's or guarantor's
reorganization, amalgamation or merger with another
corporation or the transfer of all or substantially all of the
Borrower's or any guarantor's assets;
(vii) any guarantee of indebtedness and liability under the Credit
Line is withdrawn, determined to be invalid or otherwise
rendered ineffective;
(viii) any adverse change occurs in the environmental condition of:
(A) the Borrower or any guarantor of the Borrower; or
(B) any property, equipment, or business activities of the
Borrower or any guarantor of the Borrower.
Costs
10. All costs, including legal and appraisal fees incurred by the Bank
relative to security and other documentation and the enforcement thereof,
shall be for the account of the Borrower and may be charged to the
Borrower's deposit account when submitted.
Judgment Currency
11. The obligations of the Borrower or any Guarantor shall be payable in
(Canadian/US) Dollars. Such obligations shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in
or converted into any other currency except to the extent to which such
tender or recovery shall result in the effective receipt by the Bank of
the full amount of (Canadian/US) Dollars so payable. Accordingly, the
obligation of the Borrower shall be enforceable as an alternate or
additional cause of action for the purpose of recovery in (Canadian/US)
Dollars of the amount (if any) by which such effective receipt shall fall
short of the full amount of (Canadian/U.S.) Dollars so payable and shall
not be affected by any judgment being obtained for any other sum due
hereunder.