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Exhibit 10.5
AMENDMENT NO. 1
TO
THE DEALER SECURITY AGREEMENT
THIS AMENDMENT NO. 1 to the DEALER SECURITY AGREEMENT (this
"Amendment"), dated as of July 25, 1995, is by and between CITICORP DEL-LEASE,
INC., doing business as CITICORP DEALER FINANCE ("Lender"), and M&M PROPERTIES,
INC. and XxXXXXX & FALCONITE EQUIPMENT CO., INC. (jointly and severally referred
to herein as "Borrower").
W I T N E S S E T H:
WHEREAS, Lender and each Borrower are parties to a Dealer Security
Agreement each dated June 19, 1995 (each Dealer Security Agreement being
referred to herein as the "Agreement"; capitalized terms not otherwise defined
in this Amendment shall have the meanings attributed thereto in the Agreement);
and
WHEREAS, Lender and Borrower have agreed to amend the Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender and Borrower hereby agree to amend the Agreement as
follows:
SECTION 1. DEFINITIONS.
(a) The first line of the Agreement is hereby amended by deleting the
parenthetical ("Agreement") and substituting therefor the parenthetical "(as
amended or otherwise modified from time to time, "Agreement")."
(b) All capitalized terms not otherwise defined in this Amendment shall
have the meanings given to them in the Agreement. The following Section 13
shall be added to the Agreement immediately following Section 12 thereof:
"13. DEFINITIONS. Whenever the following terms are used in the
Agreement, they shall have the following meanings unless the context requires
otherwise:
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"Account" means, any right to payment for goods sold or leased or for
services rendered, including but not limited to "accounts" as defined in
Section 9-106 of the Uniform Commercial Code of the State of New York in effect
as of the date hereof, whether or not such right is evidenced by an instrument
or chattel paper and whether or not it has been earned by performance.
"Account Percentage" means zero percent (0%) initially or such other
percentage established by Lender.
"Adjusted Libor Rate" means, a rate of interest equal to three hundred
fifty six basis points (3.56%) per annum above the Libor Rate.
"Borrowing Base" means, the lesser of (a) $5,000,000 or (b) the sum of
(i) Eligible Accounts multiplied by the Account Percentage, plus (ii) Eligible
Parts Inventory multiplied by the Parts Inventory Percentage plus (iii) the
then-amount of Eligible Rental Equipment Inventory determined by the fully
depreciated book value thereof multiplied by the Rental Equipment Inventory
Percentage. The depreciated book value of the Eligible Rental Equipment
Inventory shall be computed in accordance with the method of depreciation being
used by Borrower (not to exceed unless otherwise approved by Lender (a) for
boom lifts and cranes, the lO-year, straight line depreciation method with a
salvage value of 25%, (b) for air compressors, forklifts and scissor lifts, the
7-year, straight line depreciation method with a salvage value of 25%, (c) for
back hoes and skid steers, the 10-year, straight line depreciation method with a
salvage value of zero and (d) for personnel lifts, the 5-year, straight line
depreciation method with a salvage value of 25%).
"Borrowing Base Certificate" means, the Borrowing Base Certificate
detailing the components of the Borrowing Base in substantially the form of
Exhibit A attached hereto.
"Borrowing Certificate" means, the Borrowing Certificate required with
each Extension of Credit and payment in substantially the form of Exhibit B
attached hereto.
"Business Day" means, any day of the year on which commercial banks in
the State of New York are not required or authorized to be closed and on which
commercial banks in London are open for dealings in U.S. dollar deposits in the
London Interbank Market.
"Effective Date" means, July 25, 1995.
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"Eligible Accounts" means the Accounts of Borrower which are and at all
times shall continue to be in all respects acceptable to Lender in its
reasonable credit judgment, but excluding (a) Accounts which do not consist of
ordinary trade accounts receivable owned by Borrower, payable in cash in United
States dollars and arising out of the final sale of Inventory or provision of
services in the ordinary course of Borrower's business as presently conducted
by it; (b) Accounts which are not due and payable, absolutely and
unconditionally, within thirty (30) days from the date of the original invoice
applicable thereto; (c) Accounts with respect to which more than ninety (90)
days have elapsed since the date of the original invoice applicable thereto,
and all Accounts owed by a particular account debtor if 50% or more of such
Accounts fail to be Eligible Accounts by virtue of this clause (c); (d)
Accounts with respect to which the account debtor is an affiliate of Borrower;
(e) Accounts with respect to which the account debtor is the United States of
America or any department, agency or instrumentality thereof; (f) Accounts with
respect to which the account debtor is not a resident of the United States,
unless the account debtor has supplied the Borrower with an irrevocable
commercial letter of credit, issued by a financial institution and in form and
substance satisfactory to Lender, and, if so requested by Lender, delivered to
Lender or its agent in pledge for negotiation and presentment; (g) Accounts
with respect to which the account debtor is the subject of bankruptcy or a
similar insolvency proceeding, or has made an assignment for the benefit of
creditors, or whose assets have been conveyed to a receiver or trustee, or who
has failed or gone out of business; (h) Accounts that are proceeds of financed
inventory, parts or equipment; (i) Accounts with respect to which the account
debtor is also a creditor of Borrower, but only to the extent of the amount
owed by Borrower to such account debtor if such amount is less than the amount
of all Accounts with respect to such account debtor which otherwise would be
Eligible Accounts; (j) Accounts which are evidenced by a promissory note or
other instrument; (k) any Accounts with respect to which Lender does not have a
first prior perfected Lien; (l) Accounts for any warranty services rendered by
Borrower; and (m) Accounts with respect to which the terms or conditions
prohibit or restrict assignment or collection rights; provided, however, that
notwithstanding the foregoing, Lender may determine from time to time, in the
good faith exercise of its reasonable discretion, which Accounts comprise
Eligible Accounts.
"Eligible Parts Inventory" menas Parts Inventory of Borrower (including
raw materials and finished products) which is and at all times shall continue
to be in good condition and in all respects acceptable to Lender in its
reasonable credit judgment, but excluding (a) work-in-process; (b) any Parts
Inventory which is the subject of an Eligible Receivable; (c) any Parts
Inventory not in the lawful possession of Borrower at a place of business of
Borrower; (d) any Parts Inventory which is not usable and saleable in the
ordinary course of Borrower's business; (e) any Parts Inventory for which there
is a warehousemen's receipt, xxxx of lading, or other document of title which
is negotiable and which is not delivered to Lender; (f) any Parts Inventory
with respect to which Lender does not have a first prior perfected Lien; (g)
any Parts Inventory unit held in inventory twelve or more months from the
invoice date unless the same type of unit has been sold during the
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twelve month period prior to the date of determination of the Borrowing Base;
and (h) any Parts Inventory unit consisting of tools, used engines or units
marked or otherwise deemed unacceptable by Borrower; provided, however, that,
notwithstanding the foregoing, Lender may determine from time to time, in the
good faith exercise of its reasonable discretion, which Parts Inventory
comprises Eligible Parts Inventory.
"Eligible Rental Equipment Inventory" means Rental Equipment Inventory
which (a) was acquired by Borrower in new or used condition for lease, all in
the ordinary course of business, (b) is and at all times shall continue to be
in good condition and in all respects acceptable to Lender in its reasonable
credit judgment and (c) has been included as an asset on Borrower's financial
statements, but excluding (a) any Rental Equipment Inventory which has been sold
and the purchase price thereof is not due and payable, absolutely and
unconditionally, within thirty (30) days of the date of the original invoice,
(b) any Rental Equipment Inventory which has been sold and more than thirty
(30) days have elapsed since the date of the earlier of the original invoice
date or the delivery date, (c) any Rental Equipment Inventory subject to any
Lien except for Lender's Lien and those Liens permitted herein, (d) any Rental
Equipment Inventory upon which Borrower owes specific indebtedness to a
creditor other than Lender under the Revolving Credit Note, (e) any Rental
Equipment Inventory which has been sold and only partial payment has been
received by Borrower in which case the amount of the partial payment shall be
excluded, (f) any Rental Equipment Inventory which is on the balance sheet of
Borrower at book salvage value for more than one (1) year and (g) any Rental
Equipment Inventory which is in the process of being refurbished in a manner
requiring more than forty (40) hours of service.
"Libor Rate" means, a fluctuating rate of interest per annum as shall
be in effect from time to time which rate shall be at all times equal to the
rate of interest per annum at which deposits in U.S. dollars are offered by
Citibank, N.A. to prime banks in the London or, at the option of Lender, the
Nassau interbank market at 11:00 a.m. (London time or Bahamas time) two (2)
Business Days before such rate shall become effective hereunder in an amount
substantially equal to the unpaid principal balance outstanding under the
Revolving Credit Note and for a period equal to ninety (90) days.
"Lien" means, any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Parts Inventory" means, all of Borrower's replacement parts and kits
of parts held for sale or lease or to be furnished under contracts of service,
or raw materials, work in process or materials used or consumed in its
business.
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"Parts Inventory Percentage" means, zero percent (0%) initially
or such other percentage established by Lender.
"Rental Equipment Inventory Percentage" means, 90% initially or
such other percentage established by Lender.
"Revolving Credit Loan" shall have the meaning set forth in
subsection 14(a).
"Standby Term Loan Note" means, a promissory note in the form
of Exhibit "C" attached hereto.
"Revolving Credit Note" shall have the meaning set forth in
subsection 14(b).
"Termination Date" means, July 25, 1996.
SECTION 2. New Sections. The following sections shall be added to the
Agreement immediately following Section 13 thereof:
14. Revolving Credit Loan.
(a) Subject to, and upon the terms and conditions
contained herein, Lender, in its sole and absolute discretion, may make loans
to Borrower in the aggregate principal amount at any one time outstanding not
to exceed the Borrowing Base (the "Revolving Credit Loan"); provided, however,
Borrower expressly understands that Lender, with or without cause, may refuse
to loan any sum of money under the Revolving Credit Loan. It is contemplated
that Borrower will repay and reborrow under the Revolving Credit Loan in
accordance with the terms of the Agreement. Unless either party elects to
terminate it sooner in accordance with the terms hereof, the Revolving Credit
Loan shall be available from the Effective Date to and including the
Termination Date provided all conditions precedent have been and are at the
time of each advance complied with.
(b) The Revolving Credit Loan shall be evidenced by a
Revolving Credit Note, in substantially the form of Exhibit D hereto (the
"Revolving Credit Note") with appropriate insertions, which shall be issued and
delivered by Borrower to Lender, evidencing the obligation of Borrower to pay
the aggregate unpaid principal amount of all advances made by Lender pursuant
to the Revolving Credit Loan together with interest thereon at the Adjusted
Libor Rate.
(c) Borrower may request or make up to an aggregate of
four (4) advances or principal repayments of the Revolving Credit Loan during
any calender month unless otherwise agreed to in writing by Lender. Any
advance or principal repayment of the Revolving Credit Loan shall be in the
amount of $25,000.00 or more; provided, however, that Borrower shall pay the
actual amount of any excess of the Revolving Credit Loan outstanding over the
Borrowing Base as necessary from time to time.
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(d) Not later than noon (eastern standard time) of the
day at least one (1) Business Day prior to the date of any proposed borrowing
under the Revolving Credit Loan, Borrower shall give written notice of its
intention to borrow to Lender and specify the Business Day on which the
proposed loan will take place and the amount thereof. Unless otherwise provided
in the Agreement, Lender will disburse the loan as requested by Borrower in
accordance with Borrower's written instructions.
(e) Borrower shall repay the Revolving Credit Loan on
the Termination Date. To enable Borrower to do so, Lender in its sole
discretion, may make a loan to Borrower, jointly and severally, in an original
principal sum equal to the aggregate amount of their Obligations to Lender,
which loan shall be evidenced by the Standby Term Loan Note, upon such terms as
Lender may determine in the sole and exclusive exercise of its credit judgment.
Such terms shall include an amortization schedule not to exceed forty-eight
(48) monthly payments, an interest rate as mutually agreed upon by Borrower and
Lender and, if the parties agree upon a fixed-rate of interest, a prepayment
fee as Lender requires to compensate Lender for its loss of bargain. No
prepayment fee shall be payable in the event the parties agree upon a floating
rate of interest.
(f) Interest at the Adjusted Libor Rate shall accrue on
each Extension of Credit from the date advanced by Lender until paid in full.
Interest accrued hereunder shall be computed on the basis of a 360 day year for
the actual number of days elapsed and shall be payable monthly in arrears on
the 15th day of each calendar month, commencing on the first such date to occur
immediately following the date on which the initial Extension of Credit is
advanced. The Adjusted Libor Rate shall change in accordance with changes in
the Libor Rate. Lender's determination of the Libor Rate shall be conclusive
and binding upon Borrower. Each change in the Adjusted Libor Rate shall take
effect on the same day as the corresponding change in the Libor Rate.
(g) Borrower shall submit to Lender a Borrowing
Certificate with each requested advance and each repayment of the Revolving
Credit Loan.
(h) Lender may, in its reasonable credit judgment,
from time to time, change the percentage specified for the Account Percentage,
the Parts Inventory Percentage and the Rental Equipment Inventory Percentage.
Lender may, in its reasonable credit judgment, from time to time, determine and
revise the criteria for Eligible Accounts, Eligible Parts Inventory and
Eligible Rental Equipment Inventory.
15. FINANCIAL COVENANTS. Borrower agrees that so long as
any obligations remain outstanding Borrower shall:
(a) Combined Leverage: maintain a combined ratio of
total liabilities to tangible net worth of not more than (i) 5.25 to 1 for any
fiscal quarter ending through September 30, 1995 and (ii) 4.5 to 1 for any
fiscal quarter ending thereafter;
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(b) Minimum Net Worth: maintain total tangible assets
less total liabilities of at least $1,800,000 until December 31, 1995, which
amount (as recalculated each quarter pursuant to this subsection) shall be
increased at the end of each fiscal quarter thereafter by 50% of the net profit
of Borrower; provided, however, that in no event shall such minimum amount be
decreased if Borrower suffers a net loss;
(c) Debt Service: maintain an annualized combined
ratio of Borrower's earnings before interest, taxes, depreciation and
amortization ("EBITDA") to Debt (defined below) greater than 33% measured at
the end of any fiscal quarter. "Debt" means all short and long-term
obligations of Borrower which should be classified as liabilities on the
combined balance sheet of Borrower (including, but not limited to, the
indebtedness evidenced by the Revolving Credit Note, short term rentals,
floorplan financing, mortgages, term and other amortizing loans);
(d) Capital Expenditures: limit to a maximum of
$6,000,000 during fiscal-year 1995 and $2,500,000 during fiscal-year 1996
Borrower's acquisition of Rental Equipment Inventory exclusive of replacement
units (that is, units acquired by Borrower to replace sold units of similar or
like kind)."
16. CONDITIONS PRECEDENT. The effectiveness of this
Amendment, and as a condition precedent to Lender making the Revolving Credit
Loan to Borrower, is subject to the delivery of each of the following documents
in form and substance satisfactory to Lender:
(a) a duly executed Revolving Credit Note;
(b) duly executed original counterparts of this
Amendment;
(c) a duly executed Borrowing Base Certificate;
(d) a duly executed Borrowing Certificate;
(e) a duly executed Corporate Guaranty of each
Borrower;
(f) a duly executed Personal Guaranty of Xxxxxxx
Xxxxxxxxx and Xxxxx XxXxxxx;
(g) proof of insurance of the Collateral including the
naming of Lender as loss payee;
(h) UCC-1 financing statements covering the Collateral
executed by Borrower and duly filed in the State of Alabama;
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(i) copies of termination statements or releases of collateral
duly filed in the State of Alabama by prior, competing secured parties having
an interest in the Collateral; and
(j) an audit conducted by a third-party, chosen by Lender at
the expense of Borrower, to verify the Borrowing Base Certificate."
SECTION 3. COVENANTS. The following subsections shall be added to
Section 4 of the Agreement:
"p. On or before the 15th day of each month, to provide Lender with
(i) a Borrowing Base Certificate as of the end of the preceding calendar month;
q. Borrower agrees that it will not change the Rental Equipment
Inventory depreciation method or the salvage value without the prior written
consent of Lender;
r. In the event that the Borrowing Base is less than the unpaid
Revolving Credit Loan outstanding, to immediately repay to Lender an amount
equal to the excess of the unpaid Revolving Credit Loan outstanding over the
Borrowing Base (as determined by the most recent Borrowing Base Certificate);
s. To grant Lender at all times access to and the right to examine,
inspect and audit the Collateral and Borrower's books of account, records,
reports and other papers (and to make copies and extracts therefrom) in order
to verify the accuracy of the Borrowing Base Certificate;
t. As soon as available, and in any event not more than ninety (90)
days after the end of each fiscal year of Borrower, to furnish to Lender a copy
of the annual combined audited financial statements of Borrower (consisting of
at least a combined balance sheet and related statements of income, retained
earnings and changes in financial condition), all in reasonable detail and
audited by a firm of public accountants acceptable to Lender, to the effect
that such statements have been prepared in accordance with generally accepted
accounting principles consistently maintained and applied (except for changes
with which such accountants concur);
u. As soon as available, and in any event not more than forty-five
(45) days after the end of the first three fiscal quarters of each fiscal year
of Borrower, to furnish to Lender a copy of the combining balance sheet and
related statements of income, retained earnings and changes in financial
condition for such quarter, all in reasonable detail and certified by a
Responsible Officer of each Borrower as being true, correct and complete, and
as having been prepared in accordance with generally accepted accounting
principles consistently maintained and applied, subject to year-end
adjustments;
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v. that Xxxxx XxXxxxx shall participate in the conduct
of Borrower's affairs and devote his entire time thereto and shall not, without
the prior written consent of Lender, engage in any business or occupation
directly or indirectly other than Borrower;
w. that Borrower shall not lend or advance money,
credit or property to any owner, director or officer of Borrower if, after
giving effect thereto, the aggregate outstanding principal balance of all such
loans, advances or other extensions of credit to all such persons shall exceed
the sum of $200,000 at any one time."
SECTION 4. REMEDIES. The following subsection shall be added to
Section 8 of the Agreement:
"d. Upon the occurrence of an Event of Default, the
Revolving Credit Loan shall automatically and immediately terminate."
SECTION 5. OTHER. The following provisions shall be added to the
Agreement:
(a) at the end do subparagraph 4(a) add: "Without
limiting the generality of the foregoing, Borrower agrees that all Collateral
and components thereof will be complete and have no missing parts. All
Collateral will be maintained to its manufacturer's recommended guidelines
for preventive maintenance throughout the term hereof and will be able to pass
performance tests within the manufacturer's specifications and, if applicable,
lift the weight for which it was originally designed. Tires will have 60% or
better tread remaining and be of original casings; lifts and lift cylinders
will be kept dry and free of leaks; all Collateral will be kept free of oil
leaks; transmission and differential will be in good condition as determined by
the manufacturer; engines will be kept free of smoke and knocks; and, all drive
pumps and motors will be in good condition;"
(b) at the end of subparagraph 4(k) add: "Lender or
its representatives may, from time to time, in the reasonable credit judgment
of Lender, audit the books and records of the Borrower and the cost of such
audit shall be borne by Borrower;"
SECTION 6. MISCELLANEOUS. The obligations of Borrower under the
Agreement as amended hereby shall be the joint and several obligations of each
of them. The terms and conditions of this Amendment are hereby incorporated
into the Agreement. This Amendment shall take precedence in the event any
terms and conditions of the Agreement conflict herewith. Except as provided
herein, all other terms and conditions of the Agreement shall remain in full
force and effect and are hereby ratified and confirmed.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the day and year first above written.
M&M PROPERTIES, INC.
By: /s/ Xxxxx XxXxxxx
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Name: Xxxxx XxXxxxx
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Title: President
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XXXXXXX & FALCONITE EQUIPMENT
CO., INC.
By: /s/ Xxxxx XxXxxxx
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Name: Xxxxx XxXxxxx
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Title: President
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CITICORP DEL-LEASE, INC., d/b/a
CITICORP DEALER FINANCE
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
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Title: Vice President
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