Exhibit 10.25
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SIXTH AMENDMENT TO PROMISSORY NOTE
AND LOAN AGREEMENT
(TERM LOAN)
Paragon Technologies, Inc., formerly,
SI Handling Systems, Inc. and Ermanco Incorporated
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
(Hereinafter referred to as "Borrower")
Wachovia Bank, National Association
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(Hereinafter referred to as "Bank")
THIS SIXTH AMENDMENT TO PROMISSORY NOTE AND LOAN AGREEMENT is entered
into as of November 13, 2002 by and between Bank and Borrower.
RECITALS
Bank is the holder of a Term Note executed and delivered by Borrower,
dated September 30, 1999, in the original principal amount of $14,000,000.00 (as
amended, the "Note"); and certain other loan documents, including without
limitation, a Loan Agreement, dated September 30, 1999 (as amended, the "Loan
Agreement").
Borrower and Bank have agreed to modify the terms of the Note and Loan
Agreement.
In consideration of Bank's continued extension of credit and the
agreements contained herein, the parties agree as follows:
AGREEMENT
ACKNOWLEDGMENT OF BALANCE. Borrower acknowledges that the most recent Commercial
Loan Invoice sent to Borrower with respect to the Obligations under the Note is
correct.
MODIFICATIONS.
1. The Note is hereby modified by amending the provision regarding repayment
terms as follows:
Repayment Terms. On November 13, 2002, Borrower shall pay Bank
$2,350,000.00. Of such amount $1,200,000.00 shall be applied
immediately toward the principal under this Note which is not hedged
under the Swap and $1,150,000.00 shall be held in escrow by Bank.
Commencing December 31, 2002, and continuing on March 31, 2003, June
30, 2003 and September 30, 2003, quarterly principal payments of
$287,500.00 each shall be released from such escrow and applied to the
principal portion of the Note covered by the Swap. Commencing on
December 31, 2002, and continuing on March 31, 2003, June 30, 2003 and
September 30, 2003, quarterly payments of accrued interest only shall
be due and payable. Commencing on December 31, 2003, and continuing on
each quarterly anniversary thereafter, this Note shall be due and
payable in consecutive quarterly payments of principal of $575,000.00,
together with accrued interest. In any event, all principal and accrued
interest shall be due and payable on September 30, 2006.
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2. The Loan Agreement is hereby modified by amending the provision regarding
Funds Flow Coverage Ratio as follows:
Funds Flow Coverage Ratio. Borrower shall, for the quarters
ending December 31, 2002, March 31, 2003, June 30, 2003 and
September 30, 2003, maintain a Funds Flow Coverage Ratio, to
be measured quarterly, as follows:
Quarter ending Required Min. Ratio
-------------- -------------------
December 31, 2002 1.00:1
March 31, 2003 1.50:1
June 30, 2003 2.75:1
September 30, 2003 4.25:1
"Funds Flow Coverage Ratio" shall mean the sum of quarterly
earnings (excluding quarterly earnings attributed to SI/Xxxxx)
before interest expense, taxes, depreciation, amortization,
and extraordinary gains as defined in generally accepted
accounting principles, plus quarterly dividends distributed by
SI/Xxxxx and paid to Borrower divided by interest expense for
the subject quarter.
Commencing with the quarter ending December 31, 2003, and
thereafter, Borrower shall maintain a Funds Flow Coverage
Ratio of not less than 1.25 to 1.00, measured quarterly.
Commencing with the quarter ending December 31, 2003 and
thereafter, "Funds Flow Coverage Ratio" shall mean the sum of
quarterly earnings (excluding quarterly earnings attributed to
SI/Xxxxx) before interest expense, taxes, depreciation,
amortization, and extraordinary gains as defined in generally
accepted accounting principles, plus quarterly dividends
distributed by SI/Xxxxx and paid to Borrower divided by the
sum of the current maturity of long term debt plus interest
expense due and payable for the subject quarter.
3. The Loan Agreement is hereby modified by amending the provision regarding
Minimum Liquidity as follows:
Minimum Liquidity. Borrower shall, at all times, maintain not
less than $4,000,000.00 in cash, measured at quarters end, and
shall include the remaining balance of the original
$1,150,000.00 held in escrow by Bank as provided in Paragraph
1 above.
4. The Loan Agreement is hereby modified by adding the following provision as
an additional Affirmative Covenant:
Agreement of Sale. By November 29, 2002, Borrower shall
deliver to Bank an executed copy of an Agreement of Sale for
the sale of Borrower's property located in Easton,
Pennsylvania, with a sale date specified to occur on or before
April 30, 2003.
5. The Loan Agreement is hereby modified by amending the provision regarding
Subordinated Debt as follows:
Subordinated Debt. Borrower shall be permitted to make
payments of interest only on Subordinated Debt, or at
Borrower's option, such interest may accrue without being
paid. Through the quarter ending September 30, 2003, such
interest payments shall either accrue or be made in shares of
Borrower's common stock, at Borrower's option. Beginning with
the quarter ending December 31, 2003, and thereafter, Borrower
shall be permitted to make cash payments of interest only on
Subordinated Debt only if Borrower is in full compliance with
all Financial Covenants as set forth herein, including without
limitation, the modified Funds Flow Coverage Ratio as set
forth herein.
6. Attached hereto as Exhibit "A" is a revised Compliance Certificate which is
hereby substituted for the prior Compliance Certificate in its place and
stead.
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WAIVER. Borrower has failed to comply with the required Funds Flow Coverage
Ratio for the quarter ending September 30, 2002. Borrower has requested Bank's
waiver, and Bank does hereby waive this failure to meet the Funds Flow Coverage
Ratio for the quarter ending September 30, 2002. This is a one-time waiver only.
After the quarter ending September 30, 2002, the provision regarding Funds Flow
Coverage Ratio shall remain in full force and effect as set forth herein.
WAIVER FEE. Simultaneously with the execution of this Agreement by Borrower,
Borrower shall deliver to Bank a modification fee in the amount of $5,000.00. In
addition, Borrower shall pay all legal fees associated with preparing this
Agreement.
ACKNOWLEDGMENTS AND REPRESENTATIONS. Borrower acknowledges and represents that
the Note and other Loan Documents, as amended hereby, are in full force and
effect without any defense, counterclaim, right or claim of set-off; that, after
giving effect to this Agreement, no default or event that with the passage of
time or giving of notice would constitute a default under the Loan Documents has
occurred, all representations and warranties contained in the Loan Documents are
true and correct as of this date, all necessary action to authorize the
execution and delivery of this Agreement has been taken; and this Agreement is a
modification of an existing obligation and is not a novation.
MISCELLANEOUS. This Agreement shall be construed in accordance with and governed
by the laws of the applicable state as originally provided in the Loan
Documents, without reference to that state's conflicts of law principles. This
Agreement and the other Loan Documents constitute the sole agreement of the
parties with respect to the subject matter thereof and supersede all oral
negotiations and prior writings with respect to the subject matter thereof. No
amendment of this Agreement, and no waiver of any one or more of the provisions
hereof shall be effective unless set forth in writing and signed by the parties
hereto. The illegality, unenforceability or inconsistency of any provision of
this Agreement shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
the other Loan Documents. This Agreement and the other Loan Documents are
intended to be consistent. However, in the event of any inconsistencies among
this Agreement and any of the Loan Documents, the terms of this Agreement, and
then the Note, shall control. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts. Each such
counterpart shall be deemed an original, but all such counterparts shall
together constitute one and the same agreement. Terms used in this Agreement
which are capitalized and not otherwise defined herein shall have the meanings
ascribed to such terms in the Note.
DEFINITIONS. The term "Loan Documents" used in this Agreement and other Loan
Documents refers to all documents, agreements, and instruments executed in
connection with any of the Obligations (as defined herein), and may include,
without limitation, modification agreements, a commitment letter that survives
closing, a loan agreement, any note, guaranty agreements, security agreements,
security instruments, financing statements, mortgage instruments, letters of
credit and any renewals or modifications, whenever any of the foregoing are
executed, but does not include swap agreements (as defined in 11 U.S.C. ss.
101). The term "Obligations" used in this Agreement refers to any and all
indebtedness and other obligations of every kind and description of the Borrower
to the Bank or to any Bank affiliate, whether or not under the Loan Documents,
and whether such debts or obligations are primary or secondary, direct or
indirect, absolute or contingent, sole, joint or several, secured or unsecured,
due or to become due, contractual, including, without limitation, swap
agreements (as defined in 11 U.S.C. ss. 101), arising by tort, arising by
operation of law, by overdraft or otherwise, or now or hereafter existing,
including, without limitation, principal, interest, fees, late fees, expenses,
attorneys' fees and costs that have been or may hereafter be contracted or
incurred.
Borrower reaffirms and restates the following with respect to the Note as
modified herein:
CONFESSION OF JUDGMENT. THE FOLLOWING PARAGRAPH SETS FORTH A POWER OF AUTHORITY
FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING THIS WARRANT
OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER, THE BORROWER, FOLLOWING
CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE
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COUNSEL FOR BORROWER AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY
KNOWINGLY, INTENTIONALLY, VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES
ANY AND ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN
OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE
UNITED STATES OF AMERICA, COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING,
WITHOUT LIMITATION, A HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE
BORROWER'S BANK ACCOUNT AND OTHER ASSETS. BORROWER ACKNOWLEDGES AND UNDERSTANDS
THAT BY ENTERING INTO THIS AGREEMENT CONTAINING A CONFESSION OF JUDGMENT CLAUSE
THAT BORROWER IS VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL
RIGHTS, INCLUDING CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO NOTICE
AND A HEARING BEFORE JUDGMENT CAN BE ENTERED AGAINST BORROWER AND BEFORE THE
BORROWER'S ASSETS, INCLUDING, WITHOUT LIMITATION, ITS BANK ACCOUNTS, MAY BE
GARNISHED, LEVIED, EXECUTED UPON AND/OR ATTACHED. BORROWER UNDERSTANDS THAT ANY
SUCH GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL RENDER THE PROPERTY
GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY UNAVAILABLE TO
BORROWER. IT IS SPECIFICALLY ACKNOWLEDGED BY BORROWER THAT THE BANK HAS RELIED
ON THIS WARRANT OF ATTORNEY AND THE RIGHTS WAIVED BY BORROWER HEREIN IN
RECEIVING THIS AGREEMENT AND AS AN INDUCEMENT TO GRANT FINANCIAL ACCOMMODATIONS
TO THE BORROWER.
If a Default occurs under the Note or any other Loan Documents, each Borrower
hereby jointly and severally authorizes and empowers any attorney of any court
of record or the prothonotary or clerk of any county in the Commonwealth of
Pennsylvania, or in any jurisdiction where permitted by law or the clerk of any
United States District Court, to appear for Borrower in any and all actions
which may be brought hereunder and enter and confess judgment against the
Borrower or any of them in favor of the Bank for such sums as are due or may
become due hereunder or under any other Loan Documents, together with costs of
suit and actual collection costs including, without limitation, reasonable
attorneys' fees equal to 5% of the Obligations then due and owing but in no
event less than $5,000.00, with or without declaration, without prior notice,
without stay of execution and with release of all procedural errors and the
right to issue executions forthwith. To the extent permitted by law, Borrower
waives the right of inquisition on any real estate levied on, voluntarily
condemns the same, authorizes the prothonotary or clerk to enter upon the writ
of execution this voluntary condemnation and agrees that such real estate may be
sold on a writ of execution; and also waives any relief from any appraisement,
stay or exemption law of any state now in force or hereafter enacted. Borrower
further waives the right to any notice and hearing prior to the execution, levy,
attachment or other type of enforcement of any judgment obtained hereunder,
including, without limitation, the right to be notified and heard prior to the
garnishment, levy, execution upon and attachment of Borrower's bank accounts and
other property. If a copy of the Agreement verified by affidavit of any officer
of the Bank shall have been filed in such action, it shall not be necessary to
file the original thereof as a warrant of attorney, any practice or usage to the
contrary notwithstanding. The authority herein granted to confess judgment shall
not be exhausted by any single exercise thereof, but shall continue and may be
exercised from time to time as often as the Bank shall find it necessary and
desirable and at all times until full payment of all amounts due hereunder and
under any other Loan Documents. The Bank may confess one or more judgments in
the same or different jurisdictions for all or any part of the Obligations
arising hereunder or under any other Loan Documents to which Borrower is a
party, without regard to whether judgment has theretofore been confessed on more
than one occasion for the same Obligations. In the event that any judgment
confessed against the Borrower is stricken or opened upon application by or on
behalf of Borrower or any obligor for any reason, the Bank is hereby authorized
and empowered to again appear for and confess judgment against Borrower for any
part or all of the Obligations owing under the Note and/or for any other
liabilities, as herein provided.
WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
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AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS
AGREEMENT.
BORROWER AND BANK AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE AND HEREBY WAIVE ANY RIGHT OR
CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY HAVE NOW OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION OR JUDICIALLY.
IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement the
day and year first above written.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Agreement
and the Loan Documents were executed in the Commonwealth of Pennsylvania and
delivered to Bank in the Commonwealth of Pennsylvania.
Wachovia Bank, National Association Paragon Technologies, Inc.
By: /s/ Xxxxx Xxxx By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------ -------------------------------------
Xxxxx Xxxx, Vice President Xxxxxxx X. Xxxxxxx, President
Ermanco Incorporated
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx, Treasurer
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Exhibit A
Compliance Certificate
Borrower: Paragon Technologies, Inc.
Account#______________
Wachovia Bank, National Association No. ___________________________
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000 Date ___________________________
We hereby certify that as of ___________________________, the Borrower is in
full and complete compliance with all terms, conditions and covenants contained
in that certain Loan Agreement dated September 30, 1999 between First Union
National Bank, now Wachovia Bank, National Association and the Borrower, as
amended, and all Loan Documents as referenced therein, including without
limitation, the following financial covenants:
1. Funds Flow Coverage Ratio for the subject quarter is _________ to 1.00,
calculated as follows:
(a) Quarterly Earnings before interest expense, taxes,
depreciation, amortization and extraordinary gains (as
defined by generally accepted accounting principles)...... $_________
Minus quarterly earnings attributed to SI/Xxxxx........... $_________
Plus quarterly dividends distributed by SI/Xxxxx.......... $_________
Total...................................................................................... $_________
(b) Current maturity of long-term debt due & payable for subject quarter
[Beginning with quarter ending 12/31/03]................................... $_________
Quarterly Interest Expense................................................. $_________
(c) Total...................................................................................... $_________
(a) Divided by (c) = ____ to 1.00 [for quarter ending 12/31/02 not less than 1.00 to 1.00]
[for quarter ending 3/31/03 not less than 1.50 to 1.00]
[for quarter ending 6/30/03 not less than 2.75 to 1.00]
[for quarter ending 9/30/03 not less than 4.25 to 1.00]
[for quarter ending 12/31/03 and thereafter not less than 1.25 to 1.00]
2. Total Liabilities to Net Worth Ratio is ________ to 1.00, calculated as follows:
(a) Total Assets............................................................................... $_________
(b) Total Liabilities (excluding subordinated debt)............................................ $_________
(c) Net Worth (a less b)...................................... $_________
Total Liabilities (excluding subordinated debt) to Net Worth Ratio (b divided by c) is _____ to 1.00
[must not be more than 1.75 to 1.00]
3. Current Ratio is ________ to 1.00, calculated as follows:
(a) Current Assets............................................................................. $_________
(b) Current Liabilities........................................................................ $_________
(a) Divided by (b) = ______ to 1.00 [must be not less than 1.20 to 1.00]
4. Borrower's Aggregate Debt
Borrower's Outstanding Debt (List)
Obligations to Bank....................................... $_________
Obligations to Other Institutional Lenders................ $_________
Obligations to Shareholders, Subsidiaries and Other
Affiliates................................................ $_________
Capital Lease Obligations................................. $_________
Other...................................................................................... $_________
(a) Total Outstanding Obligations.............................................................. $_________
Bank Obligations ($________)
Subordinated Notes to former Ermanco shareholders ($________)
[not to exceed $3,000,000.00]
(b) Total...................................................................................... $_________
(a) minus (b) = $____________
[not to exceed $400,000.00]
5. Minimum Liquidity is $________ [must not be less than $4,000,000.00 but includes remaining balance of $1,150,000.00
escrow]
I hereby certify to the best of the undersigned's knowledge, information, and
belief, this above financial information, as derived from Borrower's accounting
records, as true and correct, and that no material adverse change in the
financial condition of Borrower has occurred since the date of this
certification.
Paragon Technologies, Inc.
By: ___________________________________________________
Name:______________________________________________
Title:_____________________________________________
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