Exhibit 10.33
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LOAN AGREEMENT
(Term Loan A-$2,012,500.00 and Term Loan B - $2,012,500.00)
Wachovia Bank, National Association
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(Hereinafter referred to as the "Bank")
Paragon Technologies, Inc.
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Ermanco Incorporated
0000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into June 5, 2003, by and between
Bank and Borrower.
This Agreement applies to the loan or loans (individually and collectively, the
"Loan") evidenced by one or more promissory notes dated the date hereof or other
notes subject hereto, as modified from time to time (whether one or more, the
"Note") and all Loan Documents. The terms "Loan Documents" and "Obligations," as
used in this Agreement, are defined in the Note.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete in all material respects. Any such information relating to Borrower's
financial condition will accurately reflect Borrower's financial condition as of
the date(s) thereof, (including all contingent liabilities of every type), and
Borrower further represents that its financial condition has not changed
materially and adversely since the date(s) of such documents heretofore
provided. Authorization; Non-Contravention. The execution, delivery and
performance by Borrower and any guarantor, as applicable, of this Agreement and
other Loan Documents to which it is a party are within its power, have been duly
authorized as may be required and, if necessary, by making appropriate filings
with any governmental agency or unit and are the legal, binding, valid and
enforceable obligations of Borrower and any guarantors; and do not (i)
contravene, or constitute (with or without the giving of notice or lapse of time
or both) a violation of any provision of applicable law, a violation of the
organizational documents of Borrower or any guarantor, or a default under any
agreement, judgment, injunction, order, decree or other instrument binding upon
or affecting Borrower or any guarantor, (ii) result in the creation or
imposition of any lien (other than the lien(s) created by the Loan Documents) on
any of Borrower's or any guarantor's assets, or (iii) give cause for the
acceleration of any obligations of Borrower or any guarantor to any other
creditor. Asset Ownership. Borrower has good and marketable title to all of the
properties and assets reflected on the balance sheets and financial statements
supplied Bank by Borrower, and all such properties and assets are free and clear
of mortgages, security deeds, pledges, liens, charges, and all other
encumbrances, except as otherwise disclosed to Bank by Borrower in writing and
approved by Bank ("Permitted Liens"). To the knowledge of Borrower's senior
management, no default has occurred under any Permitted Liens and no claims or
interests adverse to Borrower's present rights in its properties and assets have
arisen. Discharge of Liens and Taxes. Borrower has duly filed, paid and/or
discharged all taxes or other claims which may become a lien on any of its
property or assets, except to the extent that such items are being appropriately
contested in good faith and an adequate reserve for the payment thereof is being
maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Note and any other
Loan Documents, will not be, insolvent within the meaning of 11 U.S.C. ss.
101(32). Compliance with Laws. Borrower is in compliance in all material
respects with all federal, state and local laws, rules and regulations
applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. ss. 3617, et seq.) or narcotics (including 21 U.S.C. ss. 801, et seq.)
and/or any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), if applicable. Organization
and Authority. Each corporation, partnership or limited liability company
Borrower and/or guarantor, as applicable, is duly created, validly existing and
in good standing under the laws of the state of its organization, and has all
powers, governmental licenses, authorizations, consents and approvals required
to operate its business as now conducted. Each corporation, partnership or
limited liability company Borrower and/or guarantor, as applicable, is duly
qualified, licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers, and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate,
could have a material adverse effect on the business, financial position,
results of operations, properties or prospects of Borrower or any such
guarantor. No Litigation. There are no pending or, to the knowledge of
Borrower's senior management, threatened suits, claims or demands against
Borrower or any guarantor that have not been disclosed to Bank by Borrower in
writing, and approved by Bank. Regulation U. None of the proceeds of the credit
extended pursuant to this Agreement shall be used directly or indirectly for the
purpose of purchasing or carrying any margin stock in violation of any of the
provisions of Regulation U of the Board of Governors of the Federal Reserve
System ("Regulation U"), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock or
for any other purchase which might render the Loan a "Purpose Credit" within the
meaning of Regulation U. ERISA. Each employee pension benefit plan, as defined
in ERISA, maintained by Borrower meets, as of the date hereof, the minimum
funding standards of ERISA and all applicable regulations thereto and
requirements thereof, and of the Internal Revenue Code of 1986, as amended. No
"Prohibited Transaction" or "Reportable Event" (as both terms are defined by
ERISA) has occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will: Access to Books and Records. Allow Bank, or its agents,
during normal business hours, access to the books, records and such other
documents of Borrower as Bank shall reasonably require, and allow Bank to make
copies thereof at Bank's expense. Accounts Payable Aging. Deliver to Bank, from
time to time hereafter but not less than monthly within 15 days of the end of
each such period, a detailed payables report including aging of payables by
total, vendor names and addresses, a reconciliation statement, and the original
date of each invoice. Accounts Receivable Aging. Deliver to Bank, from time to
time hereafter but not less than monthly within 15 days of the end of each such
period, a detailed receivables report including totals, customer names and
addresses, a reconciliation statement, and the original date of each invoice.
Business Continuity. Conduct its business in substantially the same manner and
locations as such business is now being conducted. Compliance with Laws. Comply,
in all material respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment, discrimination,
labor and other laws and regulations. Compliance with Other Agreements. Comply
with all terms and conditions contained in this Agreement, and any other Loan
Documents, and swap agreements in connection therewith, as defined in the 11
U.S.C. ss. 101. Estoppel Certificate. Furnish, within 15 days after request by
Bank, a written statement duly acknowledged of the amount due under the Loan and
whether offsets or defenses exist against the Obligations. Insurance. Maintain
adequate insurance coverage with respect to its properties and business against
loss or damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance, workers
compensation insurance, and business interruption insurance; all acquired in
such amounts and from such companies as Bank may reasonably require. Inventory
Reports. Deliver to Bank, from time to time hereafter but not less than monthly
within 15 days of the end of each such period, an inventory report showing
individual values for raw materials, work-in-progress, finished products and any
inventory obsolescence. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent
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allowed by this Agreement. Non-Default Certificate From Borrower. Deliver to
Bank, with the Financial Statements required below, a certificate signed by a
principal financial officer of Borrower in the form of Exhibit "A" attached
hereto and made a part hereof, stating that Borrower is in compliance with the
financial covenants certified herein, setting forth the applicable calculations,
and warranting that no "Default" as specified in the Loan Documents nor any
event which, upon the giving of notice or lapse of time or both, would
constitute such a Default, has occurred. Notice of Default and Other Notices.
(a) Notice of Default. Furnish to Bank immediately upon becoming aware of the
existence of any condition or event which constitutes a Default (as defined in
the Loan Documents) or any event which, upon the giving of notice or lapse of
time or both, may become a Default, written notice specifying the nature and
period of existence thereof and the action which Borrower is taking or proposes
to take with respect thereto. (b) Other Notices. Promptly notify Bank in writing
of (i) any material adverse change in its financial condition or its business;
(ii) any default under any material agreement, contract or other instrument to
which it is a party or by which any of its properties are bound, or any
acceleration of the maturity of any indebtedness owing by Borrower; (iii) any
material adverse claim against or affecting Borrower or any part of its
properties; (iv) the commencement of, and any material determination in, any
litigation with any third party or any proceeding before any governmental agency
or unit affecting Borrower in excess of $50,000.00; and (v) at least 30 days
prior thereto, any change in Borrower's name or address as shown above, and/or
any change in Borrower's structure. Other Financial Information. Deliver
promptly such other information regarding the operation, business affairs, and
financial condition of Borrower which Bank may reasonably request. Payment of
Debts. Pay and discharge when due, and before subject to penalty or further
charge, and otherwise satisfy before maturity or delinquency, all obligations,
debts, taxes, and liabilities of whatever nature or amount, except those which
Borrower in good faith disputes. Reports and Proxies. Deliver to Bank, promptly,
a copy of all financial statements, reports, notices, and proxy statements, sent
by Borrower to stockholders, and all regular or periodic reports required to be
filed by Borrower with any governmental agency or authority.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal
year from December 31 without the consent of Bank. Encumbrances. Create, assume,
or permit to exist any mortgage, security deed, deed of trust, pledge, lien,
charge or other encumbrance on any of its assets, whether now owned or hereafter
acquired, other than: (i) security interests required by the Loan Documents;
(ii) liens for taxes contested in good faith; (iii) liens accruing by law for
employee benefits; or (iv) Permitted Liens. Guarantees. Guarantee or otherwise
become responsible for obligations of any other person or persons, other than
the endorsement of checks and drafts for collection in the ordinary course of
business. Investments. Purchase any stock, securities, or evidence of
indebtedness of any other person or entity except (a) investments in AIM Funds
with Bank, (b) investments in direct obligations of the United States
Government, and (c) certificates of deposit of United States commercial banks
having a tier 1 capital ratio of not less than 6% and then in an amount not
exceeding 10% of the issuing bank's unimpaired capital and surplus. Dividends.
Declare or pay dividends in an amount in excess of fifteen percent (15%) of its
net income during the fiscal year ending December 31, 2003 and thereafter. Joint
Ventures. Invest or participate in or become a joint venturer in any new joint
venture or partnership. Default on Other Contracts or Obligations. Default on
any material contract with or obligation when due to a third party or default in
the performance of any obligation to a third party incurred for money borrowed
in an amount in excess of $50,000.00. Government Intervention. Permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any governmental entity, as a result of which the management of
Borrower or any guarantor is displaced of its authority in the conduct of its
respective business or such business is curtailed or materially impaired.
Judgment Entered. Permit the entry of any monetary judgment or the assessment
against, the filing of any tax lien against, or the issuance of any writ of
garnishment or attachment against any property of or debts due Borrower in an
amount in excess of $25,000.00 which is not discharged or execution is not
stayed within 30 days of entry. Prepayment of Other Debt. Retire any long-term
debt entered into prior to the date of this Agreement at a date in advance of
its legal obligation to do so; provided, however, that (a) at any time without
penalty or fee, Borrower may prepay indebtedness to Bank, subject to the
provisions set forth in the Notes, (b) at any time, Borrower may prepay
indebtedness to former shareholders of Ermanco Incorporated (the "Subordinated
Debt") so long as the outstanding principal amount of the Subordinated Debt is
not less than $2,000,000.00, (c) beginning with the quarter ending June 30,
2003, and thereafter, Borrower may make cash payments of
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interest only on the Subordinated Debt provided that (i) Borrower is in full
compliance with all Financial Covenants as set forth herein, including without
limitation, the Funds Flow Coverage Ratio set forth herein, and (ii) said
payments do not cause to exist any condition or event which constitutes a
Default (as defined in the Loan Documents) or any event which, upon the giving
of notice or lapse of time or both, may become a Default, and (d) at any time
after payment in full of the obligations under that Promissory Note (Term Loan
B) executed contemporaneously herewith, Borrower may prepay all amounts of
Subordinated Debt then or thereafter outstanding. Retire or Repurchase Capital
Stock. Retire or otherwise acquire any of its capital stock.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, using the financial information for Borrower, its
subsidiaries, affiliates and its holding or parent company, as applicable: Funds
Flow Coverage Ratio. Borrower shall, for the quarter ending June 30, 2003, and
thereafter maintain a Funds Flow Coverage Ratio of not less than 1.25 to 1.00,
measured quarterly. "Funds Flow Coverage Ratio" shall mean the sum of quarterly
earnings (excluding 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.
Total Liabilities to Net Worth Ratio. Borrower shall, from closing until fiscal
year-end December 31, 2003, maintain a ratio of Total Liabilities to Net Worth
of not more than 1.75 to 1.00, to be measured quarterly at each quarter's end.
"Total Liabilities" shall mean all liabilities of Borrower, excluding debt fully
subordinated to Bank on terms and conditions acceptable to Bank, and including
capitalized leases and all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet, all in accordance with
generally accepted accounting principles applied on a consistent basis. "Net
Worth" shall mean total assets (including the investment in SI/Xxxxx) minus
Total Liabilities. Current Ratio. Borrower shall maintain a Current Ratio of not
less than 1.20 to 1.00, measured quarterly at each quarter's end. "Current
Ratio" shall mean the ratio of Current Assets to Current Liabilities. "Current
Assets" shall mean all assets which are so classified in accordance with
generally accepted accounting principles. "Current Liabilities" shall mean all
liabilities which are so classified in accordance with generally accepted
accounting principles. Deposit Relationship. Borrower shall maintain its primary
depository account with Bank. Limitation on Debt. Borrower shall not, directly
or indirectly, create, incur, assume or become liable for any additional
indebtedness, whether contingent or direct, if, giving effect to such additional
debt on a pro forma basis causes the aggregate amount of Borrower's debt to
exceed $400,000.00, excluding (a) obligations to Bank; and (b) Subordinated Debt
payable to the former shareholders of Ermanco Incorporated, which shall not
exceed $3,000,000.00 in the aggregate. Minimum Liquidity. Borrower shall, at all
times, maintain not less than $2,000,000.00 in cash, measured at quarters end,
excluding any cash of Borrower held as collateral by Bank for Term Loan A under
the Security Agreement of even date.
Upon payment in full of the obligations under that Promissory Note (Term Loan B)
executed contemporaneously herewith, all of the Financial Covenants as set forth
herein (with the exception of the "Deposit Relationship" requirement) shall
terminate.
CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request. 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.
[text continued on next page]
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This Loan Agreement amends, restates and supersedes in its entirety that certain
Loan Agreement (Term Loan) dated September 30, 1999, between Borrower and Bank,
as heretofore amended.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
PARAGON TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx (SEAL)
-------------------------------------
Xxxxxxx X. Xxxxxxx, President
ERMANCO INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxxx (SEAL)
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx, Treasurer
Title: Treasurer
WACHOVIA BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxx X. Xxxx (SEAL)
-------------------------------------
Xxxxx Xxxx, Vice President
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Exhibit A
Quarterly Compliance Certificate
Borrowers: Paragon Technologies, Inc. and Ermanco Incorporated
Account#______________
Wachovia Bank, National Association No. ________________
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000 Date________________
I hereby certify that as of ___________ (the "effective date"), the Borrowers
are in full and complete compliance with all terms, conditions and covenants
contained in that certain Loan Agreement dated June ___, 2003 between Wachovia
Bank, National Association and the Borrowers 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:
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 . . . . . . . . . . . . . . . . . $ ______________
(a) Total . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ______________
Current maturity of long-term debt due and payable for subject quarter . . . . . . . $ ______________
Quarterly interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ______________
(b) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ______________
(a) Divided by (b) = ________ to 1.00 [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 be not 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]
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5. Minimum Liquidity is $_________________ [must not be less than
$2,000,000.00, excluding cash collateral maintained for Term Loan A]
I hereby certify to the best of the undersigned's knowledge, information, and
belief, this above financial information, as derived from each Borrowers'
accounting records, as true and correct in all material respects, and that no
material adverse change in the financial condition of either Borrower has
occurred since the effective date of this certification.
PARAGON TECHNOLOGIES, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
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