Exhibit 10.19
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SECOND AMENDMENT TO LINE OF CREDIT
NOTE AND LOAN AGREEMENT
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(LINE OF CREDIT)
Paragon Technologies, Inc. (formerly, "SI Handling Systems, Inc.")
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Ermanco Incorporated
0000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
(Individually and collectively, "Borrower")
First Union National Bank
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(Hereinafter referred to as "Bank")
THIS SECOND AMENDMENT TO LINE OF CREDIT NOTE AND LOAN
AGREEMENT ("Second Amendment") is entered into as of March 30, 2000, by and
between the Bank and Borrower.
BACKGROUND
A. Bank is the holder of a Promissory Note executed and delivered by
Borrower, dated September 30, 1999, in the original principal amount of
$6,000,000.00 (the "Note"); and certain other loan documents, including, without
limitation, a Loan Agreement dated September 30, 1999 as amended by that certain
Modification Number One to Loan Agreement dated January 31, 2000 (collectively,
the "Loan Agreement").
B. The term "Loan Documents", as used in this Agreement, is
defined in the Note. All capitalized terms used but not defined herein shall
have the meanings assigned in the Loan Documents.
C. Borrower has requested Bank to waive the following Defaults
(collectively, the "Existing Defaults") under the Loan Documents:
(i) Borrower failed to maintain the requisite Funds Flow
Coverage Ratio for the period ending December 31, 1999;
(ii) Borrower's aggregate outstanding Obligations exceeded the
amount permitted under the Borrowing Base determined pursuant to the terms of
the Loan Agreement for the period ending December 31, 1999; and
(iii) Borrower defaulted under the terms of that certain
Subordination Agreement dated September 30, 1999 (the "Subordination
Agreement"), executed by Borrower, Bank and the Creditors identified therein, in
that Borrower made payments of interest on the Subordinated Debt for the
quarterly periods ending December 31, 1999 and March 31, 2000, at a time when
Borrower was in default under the Loan Documents.
D. Bank is willing to waive the Existing Defaults in consideration
of Borrower's execution and delivery of this Agreement together with the receipt
by Bank of the Waiver Fee (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of Bank's continued extension of
credit, the payment of the Waiver Fee and the agreements contained herein, the
parties agree as follows:
1. Incorporation of Background. The background provisions set forth
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above (including, without limitation, any defined terms set forth therein) are
hereby incorporated by reference into this Second Amendment and made a part
hereof as though set forth in their entirety herein.
2. Funds Flow Coverage Ratio. The Funds Flow Coverage Ratio of the
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Loan Agreement is hereby amended from and after the date hereof and shall read
in its entirety as follows:
Funds Flow Coverage Ratio. Borrower shall maintain a Funds
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Flow Coverage Ratio of not less than 1.25 to 1.00, to be
measured quarterly on a rolling four quarters basis at each
quarter's end. "Funds Flow Coverage Ratio" shall mean the sum
of earnings (excluding SI Xxxxx and Egemen) before interest,
taxes, depreciation and amortization (including the historical
operations of Ermanco Incorporated prior to the September 30,
1999 acquisition of said entity by Paragon Technologies, Inc.,
(formerly, "SI Handling Systems, Inc." ), divided by the sum
of all current maturities of long term debt and capital lease
obligations plus interest expense. For purposes of calculating
the Funds Flow Coverage Ratio, the amounts indicated below
will be added on a non-cumulative basis to the earnings for
the periods indicated:
Period Ending Ad Back Amount
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March 31, 2000 $1,800,000.00
June 30, 2000 $2,400,000.00
September 30, 2000 $1,900,000.00
3. Total Liabilities to Net Worth Ratio. The Total Liabilities to
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Net Worth Ratio of the Loan Agreement is hereby amended from and after the date
hereof and shall read in its entirety as follows:
Total Liabilities to Net Worth Ratio. Borrower shall, from
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closing until fiscal year-end December 31, 2000, maintain a
ratio of Total Liabilities to Net Worth of not more than 1.80
to 1.00, and thereafter, Borrower shall 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. "Net Worth"
shall mean total assets (including the investment in SI Xxxxx
and Egemen) minus Total Liabilities. "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, in accordance with
generally accepted accounting principles applied on a
consistent basis.
4. Current Ratio. The Current Ratio of the Loan Agreement is
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hereby modified and amended from and after the date hereof and shall read in its
entirety as follows:
Current Ratio. Borrower shall maintain a Current Ratio of not
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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.
5. Borrowing Base. The first paragraph of the Loan Agreement
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concerning the Borrowing Base is hereby amended from and after the date hereof
and shall read in its entirety as follows:
Borrowing Base. "Borrowing Base" means (a) 80% of the net
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amount of Eligible Accounts, plus (b) 40% of the value of
Eligible Inventory, plus (c) 80% of the current fair market
value of the Property (as hereinafter defined) as determined
by appraisal satisfactory to Bank, plus (d) 100% of the
Orderly Liquidation Value of Equipment, unencumbered by any
liens other than in favor of Bank, plus (e) an amount equal to
$2,500,000.00, which amount shall be reduced by $625,000.00
every 6 months during the first 2 years of this Loan, until
such amount reaches zero (0) on the second anniversary of the
date of this Agreement, minus (f) the unpaid principal balance
of the Term Loan. If the foregoing calculation of the
Borrowing Base results in a negative number, Bank shall notify
Borrower in writing, and within five (5) days after receiving
such written notice, Borrower shall either (i) make a
principal payment under the Term Loan sufficient to eliminate
such deficiency, or (ii) deposit with Bank cash in an amount
sufficient to eliminate such deficiency, which cash amount
shall be held in a separate escrow account by Bank until such
time as the cash escrow account is no longer required in order
to achieve compliance with the foregoing Borrowing Base
calculation.
6. Subordinated Debt. Commencing on April 1, 2000, Borrower shall
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not make any cash payments of Subordinated Debt until Borrower is in full
compliance with all Financial Covenants as originally set forth in the Loan
Agreement prior to the addition of the amounts to be added to the calculation of
the Funds Flow Coverage Ratio as set forth in this Second Amendment.
Simultaneously with the execution of this Second Amendment or immediately
thereafter, Borrower and Bank shall execute and deliver to the Creditors a
letter notifying the Creditors that no further payments will be made on the
Subordinated Debt except as provided herein.
7. Waiver Fee. Simultaneously with the execution of this Second
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Amendment by Borrower, Borrower shall deliver to Bank a modification/waiver fee
(the "Waiver Fee") in the amount of $5,000.00.
8. Waiver of Existing Defaults. Bank hereby waives the Existing
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Defaults. This waiver is limited to the Existing Defaults and shall not be
construed as a waiver of any subsequent Default under the referenced Financial
Covenants or Subordination Agreement, or of any existing or future Defaults
under any other provisions of any Loan Documents.
9. Acknowledgment of Balance. Borrower acknowledges that the most
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recent Commercial Loan Invoice sent to Borrower with respect to the Obligations
under the Note is correct.
10. Acknowledgments and Representations. Borrower acknowledges and
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represents that the Note, Loan Agreement 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 Second Amendment, 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 Second Amendment is a modification of an
existing obligation and is not a novation. Effective the date hereof, all
references in the Loan Documents to the Note or the Loan Agreement shall mean
the Note and the Loan Agreement as amended by this Second Amendment.
11. Collateral. Borrower acknowledges and confirms that there have
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been no changes in the ownership of any collateral pledged to secure the
Obligations (the "Collateral") since the Collateral was originally pledged;
Borrower acknowledges and confirms that the Bank has existing, valid first
priority security interests and liens in the Collateral; and that such security
interests and liens shall secure Borrower's Obligations to Bank, including any
modification of the Note or Loan Agreement, if any, and all future
modifications, extensions, renewals and/or replacements of the Loan Documents.
12. Miscellaneous. This Second Amendment shall be construed in
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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 Second Amendment 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 Second Amendment, 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 Second Amendment shall not in any way
affect or impair the legality, enforceability or consistency of the remaining
provisions of this Second Amendment or the other Loan Documents. This Second
Amendment and the other Loan Documents are intended to be consistent. However,
in the event of any inconsistencies among this Second Amendment and any of the
Loan Documents, the terms of this Second Amendment, and then the Note, shall
control. This Second Amendment 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.
IN WITNESS WHEREOF, the undersigned have signed and sealed this Second
Amendment the day and year first above written.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this
Second Amendment and the Loan Documents were executed in the Commonwealth of
Pennsylvania and delivered to Bank in the Commonwealth of Pennsylvania.
Paragon Technologies, Inc. (formerly, "SI Handling Systems, Inc.")
Taxpayer Identification Number: 00-0000000
CORPORATE By: /s/ Xxxxxxx X. Xxxxxxx, President & CEO
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SEAL Xxxxxxx X. Xxxxxxx, President & CEO
By: /s/ Xxxxxxx X. Xxxxxxx, Vice President - Finance and CFO
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Xxxxxxx X. Xxxxxxx, Vice President - Finance and CFO
First Union National Bank
By: /s/ Xxxxxxx X. Xxxxx, Vice President
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Xxxxxxx X. Xxxxx, Vice President
