14
assure you that the prices charged to us, or by us, under these agreements are
not higher or lower than the prices that may be charged by, or to, unaffiliated
third parties for similar services.
THROUGH ITS OWNERSHIP OF OUR STOCK, DAISYTEK WILL BE ABLE TO EXERT SUBSTANTIAL
INFLUENCE OVER OUR MANAGEMENT AND CORPORATE AFFAIRS.
After the completion of this offering, Daisytek will own approximately
82.2% of our outstanding shares of common stock, or approximately 80.1% if the
underwriters exercise their over-allotment option in full. As long as Daisytek
owns a majority of our outstanding common stock, Daisytek will continue to be
able to elect our entire board of directors and to remove any director, with or
without cause, and generally to determine the outcome of all corporate actions
requiring stockholder approval. As a result, Daisytek will be in a position to
continue to control all matters affecting our company, including:
- the composition of our board of directors and, through it, any decisions
with respect to the direction and policies of our company, including the
appointment and removal of officers;
- any decisions with respect to mergers or other business combinations
involving our company;
- the acquisition or disposition of assets by our company;
- future issuances of common stock or other securities of our company;
- the incurrence of debt by our company;
- amendments, waivers and modifications to our transaction management
services agreement with Daisytek and other agreements relating to our
spin-off from Daisytek;
- the payment of dividends on our common stock; and
- decisions with respect to treatment of items in those of our tax returns
which are consolidated or combined with Daisytek tax returns.
WE MAY HAVE POTENTIAL BUSINESS CONFLICTS OF INTEREST WITH DAISYTEK.
Daisytek will continue to be one of our largest customers for a significant
period of time and, unless and until Daisytek completes the spin-off of our
common stock, it will continue to be our controlling stockholder. As a result,
conflicts of interest may arise between us and Daisytek in a number of areas,
including:
- the nature, quality and pricing of services we provide to Daisytek;
- the nature, quality and pricing of transitional services Daisytek has
agreed to provide to us;
- labor, tax, employee benefit and other matters relating to the spin-off
of our company from Daisytek;
- the incurrence of debt by our company and business combinations by our
company;
- sales or distributions by Daisytek of all or any portion of its ownership
interest in our company; and
- Daisytek's ability to control the management and affairs of our company.
We cannot assure you that we will be able to resolve any potential
conflicts or that, if resolved, we would not be able to receive more favorable
resolution if we were dealing with an unaffiliated party. Our transaction
management services agreement with Daisytek and the other agreements we will
enter into with Daisytek may be amended from time to time upon agreement between
the parties. As long as we are controlled by Daisytek, we cannot assure you that
Daisytek would not require us to agree to an amendment to the transaction
management services agreement or any other agreement that may be more or less
favorable to us than the current terms of the agreement. In addition, our
ability to incur indebtedness, make acquisitions and dispositions and issue
stock is restricted under the terms of an agreement that we will enter into with
Daisytek.
11