UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 29, 2012
Electro Rent Corporation
(Exact Name of Registrant as Specified in Charter)
California | 0-9061 | 95-2412961 | ||
(State or Other Jurisdiction of | (Commission File Number) | (IRS Employer Identification | ||
Incorporation) | No.) |
6060 Sepulveda Boulevard, Van Nuys, CA | 91411-2501 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (818) 787-2100
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On November 29, 2012, Electro Rent Corporation (“Electro Rent”) entered into a sixth amendment to commercial credit agreement (“Credit Agreement Amendment”) with Union Bank, N.A. (“Union Bank”). The Credit Agreement Amendment amends the commercial credit agreement between Electro Rent and Union Bank dated September 29, 2008 (the “Commercial Credit Agreement”), pursuant to which Union Bank provides a revolving line of credit to Electro Rent.
The Credit Agreement Amendment amends the Commercial Credit Agreement by:
· | increasing the permitted maximum aggregate outstanding principal amount under the Commercial Credit Agreement from $25,000,000 to $50,000,000; |
· | extending the term and maturity date of the Commercial Credit Agreement from October 1, 2015 to November 30, 2015; |
· | deleting the quick ratio financial covenant; |
· | amending the amounts and payment dates of the annual commitment fees such that Electro Rent agrees to pay (i) a $25,000 commitment fee on November 30, 2012, (ii) a $50,000 commitment fee on November 20, 2013 and (iii) a $50,000 commitment fee on November 30, 2014; |
· | amending the minimum tangible net worth financial covenant in the Commercial Credit Agreement such that Electro Rent covenants that our tangible net worth will not be less than (i) $195 million at the close of the fiscal quarter ending August 31, 2012, (ii) as of the close of the fiscal quarter (and fiscal year) ending May 31, 2013, an amount equal to the sum of (x) $195 million plus (y) twenty-five percent (25%) of our consolidated net profit after taxes for such previous fiscal year plus (z) one hundred percent (100%) of any net equity proceeds we raised after November 30 of such fiscal year and (iii) as of the close of each fiscal quarter ending during each fiscal year thereafter, an amount equal to the sum of (x) the minimum tangible net worth required with respect to the prior fiscal year plus (y) twenty-five percent (25%) of our consolidated net profit after taxes for such previous fiscal year plus (z) one hundred percent (100%) of any net equity proceeds we raised during such fiscal year; and |
· | replacing the positive net earnings financial covenant with an EBITDA financial covenant such that Electro Rent covenants that Electro Rent will achieve EBITDA of not less than $70 million to be measured as of the close of each fiscal quarter for the twelve month fiscal period immediately preceding the date of the calculation. For purposes of this financial covenant, EBITDA means (a) the consolidated net profits after taxes of Electro Rent and its subsidiaries for each fiscal quarter, plus (b) interest expense of Electro Rent and its subsidiaries for such fiscal quarter, plus (c) the aggregate amount of federal and state tax expense of Electro Rent and its subsidiaries for such fiscal quarter, plus (d) depreciation, amortization and all other non-cash expenses of Electro Rent and its subsidiaries for such fiscal quarter. |
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Electro Rent currently does not have any loan balance under the Commercial Credit Agreement, as amended. Electro Rent plans to borrow approximately $25 million under the Commercial Credit Agreement shortly prior to the payment of the dividends discussed below under Item 8.01 to partially fund the dividends, which will cost approximately $29 million. The balance of the cost of the dividends will be paid from cash on hand.
The Credit Agreement Amendment is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth under Item 1.01, above, is incorporated herein by reference as if fully set forth herein.
Item 8.01. | Other Events. |
On November 29, 2012, Electro issued a press release announcing that Electro Rent’s Board of Directors has declared a regular quarterly cash dividend of $0.20 per common share and a special dividend of $1.00 per common share. Both dividends will be paid on December 21, 2012 to the Company’s shareholders of record as of December 10, 2012.
A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 9.01. | Financial Statements and Exhibits. |
10.1 |
Sixth Amendment to Commercial Credit Agreement dated November 29, 2012.
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99.1 | Press Release dated November 29, 2012. |
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SIGNATURES
Pursuant to the requirement 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.
Electro Rent Corporation | ||
Date: November 29, 2012 | By: | /s/ Daniel Greenberg |
Daniel Greenberg | ||
Chief Executive Officer |
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SIXTH AMENDMENT TO COMMERCIAL CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO COMMERCIAL CREDIT AGREEMENT ("Sixth Amendment"), dated as of November 29, 2012, is made and entered into by and between ELECTRO RENT CORPORATION, a California corporation ("Borrower"), and UNION BANK, N.A., a national banking association ("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Commercial Credit Agreement dated as of September 29, 2008, as amended by (i) that certain First Amendment dated as of March 6, 2009, (ii) that certain Second Amendment dated as of September 17, 2009, (iii) that certain Third Amendment dated as of September 22, 2010, (iv) that certain Fourth Amendment dated as of September 28, 2011 and (v) that certain Fifth Amendment dated as of February 3, 2012 (as so amended, the "Agreement"), pursuant to which Bank agreed to extend credit to Borrower in the amounts provided for therein.
B. Borrower has requested that Bank agree to (i) increase the permitted maximum aggregate outstanding principal amount of the Revolving Loan from $25,000,000 to $50,000,000, (ii) extend the termination date of the Revolving Loan (as such term is defined in Section 1.1 of the Agreement) from October 1, 2015 to November 30, 2015 and (iii) amend the Agreement in certain other respects. Bank is willing to agree to so increase the permitted maximum aggregate outstanding principal amount of the Revolving Loan, so extend the termination date of the Revolving Loan and so amend the Agreement, subject, however, to the terms and conditions of this Sixth Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and conditions contained herein, Borrower and Bank agree as follows:
1. Defined Terms. Initially capitalized terms used herein which are not otherwise defined shall have the meanings assigned thereto in the Agreement.
2. Amendments to the Agreement.
(a) Section 1.1 of the Agreement is hereby amended by substituting the amount “$50,000,000” for the amount “$25,000,000” appearing in the third line thereof.
(b) Section 1.1 of the Agreement is hereby further amended by substituting the date “November 30, 2015” for the date “October 1, 2015” appearing in the eighth line thereof.
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(c) Section 1.1.1 of the Agreement is hereby further amended by substituting the date “November 30, 2015” for the date “October 1, 2015” appearing in the last line thereof.
(d) Section 1.1.2 of the Agreement is hereby further amended by substituting the date “November 30, 2015” for the date “October 1, 2015” appearing in the last line thereof.
(e) Section 3(a) of the Agreement is hereby amended to read in full as follows:
“(a) Borrower shall pay to Bank annual commitment fees as follows: (i) on November 30, 2012, for the period from November 30, 2012 through and including November 30, 2013, a commitment fee in the sum of $25,000, (ii) on November 30, 2013, for the period from November 30, 2013 through and including November 30, 2014, a commitment fee in the sum of $50,000 and (iii) on November 30, 2014, for the period from November 30, 2014 through and including November 30, 2015, a commitment fee in the sum of $50,000, all of which commitment fees when paid shall be non-refundable.”
(f) Section 7.1(a) of the Agreement is hereby amended to read in full as follows:
“(a) [Intentionally Deleted]”
(g) Section 7.1(b) of the Agreement is hereby amended to read in full as follows:
“(b) On a consolidated basis for Borrower and its subsidiaries, Tangible Net Worth of not less than (i) as at the close of the fiscal quarter ending August 31, 2012, $195,000,000, (ii) as at the close of the fiscal quarter (and fiscal year) ending May 31, 2013, an amount equal to the sum of (x) $195,000,000 plus (y) twenty-five percent (25%) of the consolidated net profit after taxes of Borrower and its subsidiaries for such previous fiscal year plus (z) one hundred percent (100%) of any net equity proceeds raised by Borrower and its subsidiaries after November 30, 2011 of such fiscal year and (iii) as at the close of each fiscal quarter ending during each fiscal year thereafter, an amount equal to the sum of (x) the minimum Tangible Net Worth required hereunder with respect to the prior fiscal year plus (y) twenty-five percent (25%) of the consolidated net profit after taxes of Borrower and its subsidiaries for such previous fiscal year plus (z) one hundred percent (100%) of any net equity proceeds raised by Borrower and its subsidiaries during such fiscal year. As used herein, ‘Tangible Net Worth’ shall mean the consolidated net worth of Borrower and its subsidiaries, increased by the consolidated indebtedness of Borrower and its subsidiaries subordinated to Bank in form satisfactory to Bank and decreased by patents, licenses, trademarks, trade names, goodwill and other similar intangible assets, organizational expenses, and monies due from affiliates (including officers, shareholders and directors), in each case with respect to Borrower and its subsidiaries.”
(h) Section 7.1(c) of the Agreement is hereby amended to read in full as follows:
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“(c) Borrower will achieve EBITDA of not less than Seventy Million Dollars ($70,000,000), to be measured as of the close of each fiscal quarter for the twelve (12) month fiscal period immediately preceding the date of calculation. As used in this Agreement, “EBITDA” shall mean (a) the consolidated net profit after taxes of Borrower and its subsidiaries for each fiscal quarter, plus (b) interest expense of Borrower and its subsidiaries for such fiscal quarter, plus (c) the aggregate amount of federal and state tax expense of Borrower and its subsidiaries for such fiscal quarter, plus (d) depreciation, amortization and all other non-cash expenses of Borrower and its subsidiaries for such fiscal quarter.”
3. Effectiveness of this Sixth Amendment. This Sixth Amendment shall become effective as of the date hereof when, and only when, Bank shall have received all of the following, in form and substance satisfactory to Bank:
(a) A counterpart of this Sixth Amendment, duly executed by Borrower;
(b) Replacement Guaranties, duly executed by ER International, Inc. and Electro Rent Asia, Inc., each in the principal amount of $50,000,000 (exclusive of accrued interest and Bank’s expenses, for which each such Guarantor shall also be obligated);
(c) A legal documentation fee in connection with the preparation of this Sixth Amendment in the sum of Six Hundred Dollars ($600), which legal documentation fee shall be non-refundable; and
(d) Such other documents, instruments or agreements as Bank may reasonably deem necessary in order to effect fully the purposes of this Sixth Amendment.
4. Ratification.
(a) Except as specifically amended hereinabove, the Agreement shall remain in full force and effect and is hereby ratified and confirmed; and
(b) Upon the effectiveness of this Sixth Amendment, each reference in the Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like import referring to the Agreement shall mean and be a reference to the Agreement as amended by this Sixth Amendment.
5. Representations and Warranties. Borrower represents and warrants as follows:
(a) Each of the representations and warranties contained in Section 5 of the Agreement, as amended hereby, is hereby reaffirmed as of the date hereof, each as if set forth herein;
(b) The execution, delivery and performance of this Sixth Amendment are within Borrower's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary approvals, if any, and do not contravene any law or any contractual restriction binding on Borrower;
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(c) This Sixth Amendment is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms; and
(d) No event has occurred and is continuing or would result from this Sixth Amendment which constitutes an Event of Default under the Agreement, or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
6. Governing Law. This Sixth Amendment shall be deemed a contract under and subject to, and shall be construed for all purposes and in accordance with, the laws of the State of California.
7. Counterparts. This Sixth Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
WITNESS the due execution hereof as of the date first above written.
“Borrower”
ELECTRO RENT CORPORATION
By: | /s/Steven Markheim | |
Steven Markheim | ||
President and Chief Operating Officer |
“Bank”
UNION BANK, N.A.
By: | /s/John C. Kase | |
John C. Kase | ||
Vice President |
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FOR IMMEDIATE RELEASE
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For more information, contact: Daniel Greenberg, Chairman and CEO |
PondelWilkinson Inc. 310-279-5980 pwinvestor@pondel.com |
ELECTRO
RENT CORPORATION DECLARES SPECIAL YEAR-END CASH DIVIDEND
AND REGULAR QUARTERLY CASH DIVIDEND
VAN NUYS, Calif. – November 29, 2012 – Electro Rent Corporation (NASDAQ:ELRC) announced today that its Board of Directors has declared a special year-end cash dividend of $1.00 per common share. The special dividend will be paid on December 21, 2012 to shareholders of record as of December 10, 2012. Electro Rent also declared a regular quarterly cash dividend of $0.20 per common share. The regular quarterly dividend will be paid on December 21, 2012 to shareholders of record as of December 10, 2012.
“This special dividend continues our long-standing commitment to sharing our success with our shareholders,” said Daniel Greenberg, Chairman and CEO of Electro Rent. “I, along with the rest of Electro Rent’s board members, believe that we can return capital to our shareholders while maintaining the balance sheet flexibility necessary to act swiftly should strategic opportunities arise.”
About Electro Rent
Electro Rent Corporation (www.ElectroRent.com) is one of the largest global organizations devoted to the rental, leasing and sales of general purpose electronic test equipment, personal computers and servers.
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Corporate Headquarters: 6060 Sepulveda Boulevard, Van Nuys, California 91411–2525 Toll Free (800) 866 – 1111 Local (818) 787 – 2100 Fax (818) 786 – 4345 |