Exhibit 10.12
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LOAN AGREEMENT
(Line of Credit)
First Union National Bank
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
(Hereinafter referred to as the "Bank")
SI Handling Systems, 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 September 30, 1999, 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 September 30, 1999 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:
AVAILABILITY. Notwithstanding anything to the contrary contained herein, the
aggregate outstanding principal balance of Advances (as defined in the Note)
(the "Total Outstandings") at any one time shall not exceed the lesser of
$6,000,000.00 or the Borrowing Base (as hereinafter defined). In the event that
the Total Outstandings at any time exceeds the Borrowing Base, Borrower shall
pay to Bank the amount of such excess immediately upon receipt by Borrower of
written notice that the Borrowing Base has been exceeded.
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. 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 or adversely
since the date(s) of such documents. 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 corporate 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 corporate 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. 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 and has previously been conducted, with the
exception of the acquisition of Ermanco Incorporated as a subsidiary and the
operation of its facility in Michigan. 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 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 at or 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
guarantees made in favor of Bank for SI Xxxxx Joint Venture obligations.
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 twenty percent (20%) of its net income
during the fiscal years ending December 31, 1999 and December 31, 2000, or
declare or pay dividends in an amount in excess of fifteen percent (15%) of its
net income during the fiscal year ending December 31, 2001 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 government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective business or its
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. Retire or
Repurchase Capital Stock. Retire or otherwise acquire any of its capital stock.
FINANCIAL STATEMENTS. Borrower shall deliver to Bank within five (5) days after
filing with the appropriate governmental authority, each 10K and 10Q prepared in
conformity with generally accepted accounting principles consistently applied
and otherwise in form and substance satisfactory to Bank.
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, and all financial covenants shall be calculated on
a consolidated basis, using the financial information for Borrower, its
subsidiaries and affiliates, including without limitation, Ermanco Incorporated,
but excluding SI Xxxxx and Egimen: Funds Flow Coverage Ratio. Borrower shall, at
all times, maintain a Funds Flow Coverage Ratio of not less than 1.25 to 1.00,
measured quarterly on a rolling four quarters basis. "Funds Flow Coverage Ratio"
shall mean the sum of earnings 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. Total Liabilities to Net Worth
Ratio.
Borrower shall, from 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 at
all times thereafter, Borrower shall maintain a ratio of Total Liabilities to
Net Worth of not more than 1.75 to 1.00. "Net Worth" shall mean total assets
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. Current Ratio. Borrower shall, at all times,
maintain a Current Ratio of not less than 1.20 to 1.00. "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.
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 $50,000.00, excluding (a)
obligations to Bank; (b) $250,000.00 to be invested in Egimen; and (c) amounts
payable to the former shareholders of Ermanco Incorporated in connection with
the acquisition for which the Loan was, in part, obtained, which amounts shall
not exceed $3,000,000.00 in the aggregate. Depository Relationship.
Borrower shall maintain its primary depository account with Bank.
BORROWING BASE. "Borrowing Base" means (a) 80% of the net 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.
"Eligible Account" means an account receivable not more than 90 days from the
date of the original invoice that arises in the ordinary course of Borrower's
business and meets the following eligibility requirements: (a) the sale of goods
or services reflected in such account is final and such goods and services have
been delivered or provided and accepted by the account debtor and payment for
such is owing; (b) the invoices comprising an account are not subject to any
claims, returns or disputes of any kind; (c) the account debtor is not
insolvent; (d) the account debtor has its principal place of business in the
United States; (e) with the exception of SI Xxxxx and Egimen (to the extent of
$350,000.00 each), the account debtor is not an Affiliate of Borrower and is not
a supplier to Borrower and the account is not otherwise exposed to risk of
set-off; (f) not more than thirty percent of the original invoices owing
Borrower by the account debtor are more than 90 days from the date of the
original invoice; (g) the account is not subject to any lien prior to the lien
of Bank; and (h) the account does not arise from any contract or agreement with
the United States of America or any agencies or representatives thereof unless
Bank has obtained full compliance to its complete satisfaction with all
provisions necessary to protect Bank's interests under The Assignment of Claims
Act of 1940, as amended, or any successor statute and all regulations
promulgated thereunder and all other federal procurement laws and regulations.
"Eligible Account" may include an account secured by a letter of credit issued
by a financial institution acceptable to Bank.
"Eligible Inventory" means inventory of raw material and finished goods in
Borrower's possession that is held for use or sale in the ordinary course of
Borrower's business and is not unmerchantable or obsolete and is subject to a
first priority perfected security interest in favor of Bank. The value of the
inventory will be determined by Bank and will be valued at the lower of cost or
market on a first-in, first-out basis.
"Orderly Liquidation Value" means the amount determined by Bank that might be
realized from a piecemeal disposition of the Equipment, assuming a reasonable
period of time in which to complete the transaction and assuming the Equipment
will be offered for sale on an "AS IS, WHERE IS" basis, with the buyer paying
the cost to dismantle and remove.
"Equipment" means equipment in Borrower's possession that is not unmerchantable
or obsolete and is subject to a first priority perfected security interest in
favor of Bank. The value of the equipment will be determined by Bank and will be
valued at the lower of cost or market.
"Property" means all real estate, including fixtures, located at (a) 000 Xxxxxxx
Xxxx, Xxxxxx, Xxxxxxxxxxxx 00000, and (b) 0000 Xxxxxx Xxxx, Xxxxxx Xxxxxx,
Xxxxxxxx.
"Affiliate" shall have the meaning as defined in 11 U.S.C. ss.101, except that
the term "Borrower" shall be substituted for the term "Debtor" therein.
"Term Loan" means that certain loan in the original principal amount of
$14,000,000.00 made by Bank to Borrower on the date hereof.
Required Reports. Borrower shall deliver to Bank, by the 15th day of each month,
a detailed report certified by Borrower on the aging of Eligible Accounts, the
value of Eligible Inventory, and other collateral, on the form attached hereto
as Exhibit "B" and made a part hereof, together with all details and supporting
documents requested by Bank. Bank may at any time and from time to time, during
Borrower's normal business hours, enter upon any business premises of Borrower
and audit Borrower's accounts, inventory, and other collateral. Bank's
determination of the amount of Eligible Accounts, the value of Eligible
Inventory, and the agreed value of other collateral shall at all times be
rebuttably presumed correct. Borrower, at all times, shall cooperate with Bank
by providing Bank information and access to Borrower's premises and business
records and shall be courteous to Bank's agents.
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. Opinion of Counsel. On or prior to
the date of any extension of credit hereunder, Bank shall have received a
written opinion of the counsel of Borrower acceptable to Bank that includes
confirmation of the following: (a) The accuracy of the representations set forth
in this Agreement in the Representations Subparagraphs entitled "Authorization;
Non-Contravention"; "Compliance with Laws", and "Organization and Authority".
(b) This Agreement and other Loan Documents have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms, subject to bankruptcy,
insolvency or other laws relating to enforcement of creditors' rights. (c) No
registration with, consent of, approval of, or other action by, any federal,
state or other governmental authority or regulatory body is required by law in
connection with the execution and delivery of this Agreement and the other Loan
Documents, or the extension of credit under this Agreement or the other Loan
Documents, or, if so required, such registration has been made, and such consent
or approval given or such other appropriate action taken. (d) The Loan Documents
create a first priority security interest in the Collateral (as defined in the
Loan Documents) consisting of personal property.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
SI Handling Systems, Inc.
CORPORATE By: /s/ Xxxxxxx X. Xxxxxxx
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SEAL Xxxxxxx X. Xxxxxxx, President
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, Secretary
Ermanco Incorporated
CORPORATE By: /s/ Xxxx X. Xxxxxxxxx
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SEAL Xxxx X. Xxxxxxxxx, President
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx, Witness
First Union National Bank
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx, Vice President
Exhibit "B"
Certification of Borrowing Base
Borrowers: SI Handling Systems, Inc. and Ermanco Incorporated
Account#______________
First Union National Bank No. ________________
000 Xxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000 Date ________________
We hereby certify that as of __________________________ the following accounts
receivable, inventory and equipment were pledged as collateral for our loan:
1) Total Accounts Receivable . . . . . . . . . . . . . . . $_______________
Less: Unqualified Accounts Receivable (List)
Agings over 90 days _______________
Accounts with 30% or more of balance
over 90 days past due _______________
Foreign Debtor (excluding those secured by
Letter of Credit) _______________
Affiliates (excluding SI Xxxxx and Egimen
[not to exceed $350,000.00 each] _______________
Government Contracts (excepting compliance
with Assignment of Claims Act) _______________
Other _______________
1) Total Unqualified Receivables . . . . . . . . .(_______________)
2) Qualified Accounts Receivable. . . . . . . . .$ _______________
Advance Rate X 80.00 %=
1) Loan Available on Accounts Receivable.. . . . . . . . $_______________
2) Total Raw Material Inventory . . . . . . . $ _______________
Total Finished Goods Inventory . . . . . . $ _______________
Less: Unqualified Inventory (List) _______________
Unmerchantable/Obsolete _______________
Other _______________
1) Total Unqualified Inventory . . . . . . . ..(______________)
2) Qualified Inventory . . . . . . . . . . . .$ ______________
Advance Rate X 40.00 %=
1) Loan Available on Inventory . . . . . . . . . . . . . $_______________
2) 80% of Current Fair Market Value of Property . . . . .$_______________
3) Total Equipment Inventory . . . . . . . . $ ______________
Less: Unqualified Equipment (List) ________________
1) Qualified Equipment . . . . . . . . . . . .$ ________________
2) 100% of Orderly Liquidation Value of Equipment . . . .$_______________
3) Loan Available on $2,500,000.00 . . . . . . . . . . . $_______________
[to be reduced by $625,000.00 every six months
until such amount reaches 0]
1) Total Loan Available as per Collateral . . . . . . . .$_______________
2) Total Line of Credit Outstanding . . . . . . . . . . .$_______________
3) Total Term Loan Outstanding . . . . . . . . . . . . . $_______________
4) Increase Available (14 less 15 and 16)
(or Increase Requested $_______________)
Payment Due and Enclosed . . . . . . . . . . . . . . .$_______________
** The total of items 15 and 17 is not to exceed the $6,000,000.00 line
of credit.
I hereby certify to the best of the undersigned's knowledge, information, and
belief, this above financial information, as derived from each Borrower's
accounting records, as true and correct, and that no material adverse change in
the financial condition of either Borrower has occurred since the date of this
certification.
SI Handling Systems, Inc. Ermanco Incorporated
By: _________________________ By: _____________________________________
Name:____________________ Name:________________________________
Title:___________________ Title:_______________________________
