Exhibit 10.17
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FIRST AMENDMENT TO TERM NOTE AND LOAN AGREEMENT
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(TERM LOAN)
Paragon Technologies, Inc. (formerly, "SI Handling Systems, Inc.")
600 Kuebler Road
Easton, Pennsylvania 18040
Ermanco Incorporated
6870 Grand Haven Road
Spring Lake, Michigan 49456
(Individually and collectively, "Borrower")
First Union National Bank
702 Hamilton Street
Allentown, Pennsylvania 18101
(Hereinafter referred to as "Bank")
THIS FIRST AMENDMENT TO TERM NOTE AND LOAN AGREEMENT ("First
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
$14,000,000.00 (the "Note"); and certain other loan documents, including,
without limitation, a Loan Agreement dated September 30, 1999 (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 $6,000,000.00 Line of Credit with the Bank 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 First 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
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the 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 Baker and Egemin) before interest,
taxes, depreciation and amortization, 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 Add 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
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to 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 Baker
and Egemin) 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. Interest Rate. The Note is hereby modified and amended from
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and after the date hereof to provide that commencing on March 30, 2000, the
unpaid principal balance shall bear interest at a rate equal to 3-months LIBOR
plus 3.00%.
6. Subordinated Debt. Commencing on April 1, 2000, Borrower
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shall not make any 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 First Amendment.
Simultaneously with the execution of this First 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 First
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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
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most recent Commercial Loan Invoice sent to Borrower with respect to the
Obligations under the Note is correct.
10. Acknowledgments and Representations. Borrower acknowledges
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and 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 First 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 First 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 First 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 First 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 First 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 First 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 First Amendment shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this First
Amendment or the other Loan Documents. This First Amendment and the other Loan
Documents are intended to be consistent. However, in the event of any
inconsistencies among this First Amendment and any of the Loan Documents, the
terms of this First Amendment, and then the Note, shall control. This First
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 First
Amendment the day and year first above written.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this
First 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: 22-1643428
CORPORATE By: /s/ William R. Johnson, President & CEO
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SEAL William R. Johnson, President & CEO
By: /s/ William F. Moffitt, Vice President - Finance
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William F. Moffitt, Vice President - Finance
First Union National Bank
By: /s/ William M. Hogan, Vice President
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William M. Hogan, Vice President