1
EXECUTION COPY
EXHIBIT 10.9
U.S. $20,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of June 6, 1997,
among
STAR BANK, NATIONAL ASSOCIATION,
as Bank,
and
HMI INDUSTRIES INC.,
and
BLISS MANUFACTURING COMPANY,
as Borrowers.
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TABLE OF CONTENTS
Section Page
1. CAPITALIZED TERMS ................................................. 2
1.1 Defined Terms .............................................. 2
1.2 Accounting Terms ........................................... 18
2. LOANS AND OTHER FINANCIAL ACCOMMODATIONS .......................... 18
2.1 Total Facility ............................................. 19
2.2 Affirmation of Existing Loans .............................. 19
2.3 Revolving Loan Facility .................................... 19
2.4 Real Estate Term Loan Facility ............................. 20
2.5 (INTENTIONALLY OMITTED] .................................... 21
2.6 Bliss Equipment Term Loan Facility ......................... 21
2.7 Special Term Loan Facility ................................. 22
2.8 (INTENTIONALLY OMITTED] .................................... 23
2.9 Letter of Credit Facility .................................. 23
2.10 Disbursement of Loans ...................................... 23
2.11 Procedure for Advancing Revolving Loans
and Issuing Letters of Credit .............................. 23
2.12 No Limitation on Liens ..................................... 24
2.13 Deficiency ................................................. 24
2.14 Drawing Under Letters of Credit to
Constitute Revolving Loans ................................. 25
2.15 Nature of Reimbursement Obligations ........................ 25
2.16 Effect of Amendment and Restatement ........................ 26
3. INTEREST CHARGES; FEES ............................................ 27
3.1 Interest on Loans .......................................... 27
3.2 Increased Costs - Capital Adequacy ......................... 27
3.3 [INTENTIONALLY OMITTED] .................................... 28
3.4 Term Loan Fee .............................................. 28
3.5 Unused Facility Fee ........................................ 28
3.6 Letter of Credit Fees ...................................... 28
3.7 Interest Rate Protection ................................... 29
3.8 Calculation of Certain Charges ............................. 29
3.9 Charging Loan Account ...................................... 29
3.10 Maximum Rate ............................................... 29
4. MONTHLY ACCOUNTINGS ............................................... 29
5. SECURITY .......................................................... 30
5.1 Security Agreement ......................................... 30
5.2 Patent Assignments ......................................... 30
5.3 [INTENTIONALLY OMITTED] .................................... 30
5.4 Mortgages .................................................. 30
5.5 [INTENTIONALLY OMITTED] .................................... 31
5.6 [INTENTIONALLY OMITTED] .................................... 31
5.7 Intercreditor Agreement .................................... 31
5.8 Guarantys .................................................. 31
5.9 Pledge Agreement ........................................... 31
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6. DELIVERIES PRIOR TO DISBURSEMENT; FURTHER
ASSURANCES ...................................................... 31
7. RECEIVABLES; COLLECTION OF RECEIVABLES; DISPUTED
RECEIVABLES; PROCEEDS OF INVENTORY .............................. 32
7.1 Representations and Warranties Regarding
Receivables ............................................. 32
7.2 Disputes and Claims Regarding Receivables ............... 32
7.3 Locked Box .............................................. 33
7.4 Special Account ......................................... 33
7.5 Crediting of Remittances ................................ 35
7.6 Cost of Collection ...................................... 35
8. EXAMINATION OF COLLATERAL AND THE PREMISES;
REPORTING ....................................................... 36
8.1 Maintenance of Books and Records ........................ 36
8.2 Access and Inspection ................................... 36
8.3 Reporting Regarding Receivables ......................... 36
8.4 Reporting Regarding Inventory ........................... 37
8.5 Monthly Financial Statements ............................ 38
8.6 Annual Projections ...................................... 38
8.7 Audited Annual Financial Statements ..................... 38
8.8 Management Reports ...................................... 39
8.9 Financial Certificate ................................... 39
8.10 Public Filings .......................................... 39
8.11 Quarterly Financial Statements .......................... 39
8.12 Unaudited Annual Financial Statements ................... 40
9. WARRANTIES, REPRESENTATIONS AND COVENANTS ....................... 40
9.1 Organization, Etc ....................................... 41
9.2 Due Authorization, Validity, Etc. ....................... 41
9.3 No Violation ............................................ 41
9.4 Use of Loan Proceeds .................................... 41
9.5 Management; Ownership of Assets, Licenses,
Patents, Etc ............................................ 42
9.6 Indebtedness ............................................ 42
9.7 Title to Property; No Liens ............................. 42
9.8 Restrictions; Labor Disputes; Labor
Contracts, Etc .......................................... 42
9.9 No Violation of Law; Hazardous Materials ................ 43
9.10 Absence of Default ...................................... 44
9.11 Accuracy of Financials; No Material
Changes ................................................. 44
9.12 Pension Plans ........................................... 44
9.13 Taxes and Other Charges ................................. 45
9.14 No Litigation ........................................... 45
9.15 No Brokerage Fee ........................................ 45
9.16 Affiliates .............................................. 45
9.17 Capitalization; Warrants, Etc ........................... 46
9.18 Noncompetition Agreements ............................... 46
9.19 Deposit and Other Accounts .............................. 46
9.20 Solvency ................................................ 46
9.21 Full Disclosure ......................................... 46
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9.22 Casualties .............................................. 47
9.23 Leases .................................................. 47
9.24 Insurance Policies ...................................... 47
9.25 Consents ................................................ 47
10. COVENANTS .......................................................... 48
10.1 Payment of Certain Expenses ............................. 48
10.2 Notice of Litigation .................................... 48
10.3 Notice of ERISA Events .................................. 48
10.4 Notice of Labor Disputes ................................ 48
10.5 Compliance with Laws, Etc ............................... 49
10.6 Notice of Violations of Law, Tax
Assessments ............................................. 49
10.7 Compliance with Other Agreements ........................ 49
10.8 Notice of Violations of Certain
Agreements .............................................. 49
10.9 Notice of Customer Defaults ............................. 49
10.10 Taxes and Charges ....................................... 50
10.11 Indebtedness; Guaranties ................................ 50
10.12 Title to Property; No Liens ............................. 51
10.13 Restrictions; Labor Disputes, Etc ....................... 51
10.14 Pension Plans ........................................... 51
10.15 Solvency ................................................ 52
10.16 Property Insurance ...................................... 52
10.17 Liability Insurance ..................................... 52
10.18 Deposit Accounts ........................................ 53
10.19 Merger, Etc ............................................. 53
10.20 Investments ............................................ 53
10.21 Dividends ............................................... 53
10.22 Redemption of Stock ..................................... 54
10.23 Stock Rights ........................................... 54
10.24 Capital Structure, Etc .................................. 54
10.25 Affiliate Transactions .................................. 54
10.26 [INTENTIONALLY OMITTED] ................................ 54
10.27 Sale of Assets .......................................... 54
10.28 Consignments, Etc ....................................... 56
10.29 Change in Management or Business ........................ 56
10.30 Claims Against Collateral or Premises ................... 56
10.31 Judgments ............................................... 57
10.32 Stock Ownership ........................................ 57
10.33 Financial Covenants .................................... 57
10.34 Change of Officers; Good Standing
Certificate ............................................ 57
10.35 HRS Sale; HRS Proceeds .................................. 57
10.36 Amendments to Note Agreement ............................ 58
10.37 Amendments to Pty Indebtedness .......................... 58
10.38 Fiscal Year ............................................. 59
10.39 Payment of Outstanding Fees and Expenses ................ 59
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11. EFFECTIVE DATE; TERMINATION .................................. 59
11.1 Effective Date and Termination Date .................. 59
11.2 Recourse to Security ................................. 59
11.3 Acceleration Upon Termination ........................ 59
11.4 Borrowers Remains Liable ............................. 59
12. EVENTS OF DEFAULT ............................................ 59
13. BANK'S RIGHTS AND REMEDIES .................................. 62
13.1 Acceleration, Etc .................................... 62
13.2 Fees and Expenses .................................... 63
13.3 Actions in Respect of the Letters of
Credit ............................................... 63
13.4 Letter of Credit Collateral Account .................. 63
14. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS ................... 65
14.1 Release of Collateral and Premises ................... 65
14.2 Waivers and Amendments in Writing .................... 66
14.3 Assignment ........................................... 66
15. MISCELLANEOUS ................................................... 66
15.1 Severability ......................................... 66
15.2 Governing Law ........................................ 66
15.3 Waiver of Jurisdiction ............................... 66
15.4 Survival of Representations and
Warranties ........................................... 67
15.5 Evidence of Loans .................................... 67
15.6 Bank's Ability Regarding Collateral and
Premises ............................................. 67
15.7 Application of Payments, Etc ......................... 68
15.8 Fees and Expenses .................................... 68
15.9 Notices .............................................. 69
15.10 Indemnification ...................................... 69
15.11 Equitable Relief ..................................... 71
15.12 Entire Agreement ..................................... 71
15.13 Headings ............................................. 71
15.14 Waiver of Jury Trial ................................. 71
15.15 Revocation of Appointment of Parent as
Agent ................................................ 71
15.16 No Strict Construction ............................... 71
15.17 Confession of Judgment ............................... 71
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EXHIBITS
EXHIBIT A - Amended and Restated Security
Agreement
EXHIBIT B - Canadian Security Agreements
EXHIBIT C-1 - Contingent Patent, Trademark and
License Assignment (Parent)
EXHIBIT C-2 - Contingent Patent, Trademark and
License Assignment (Bliss)
EXHIBIT D - [INTENTIONALLY OMITTED]
EXHIBIT E-1 - Open-End Mortgage and Security
Agreement (▇▇▇▇▇▇ Falls-▇▇▇▇▇▇▇▇)
EXHIBIT E-2 - Open-End Mortgage and Security
Agreement (▇▇▇▇▇-▇▇▇▇▇▇▇▇)
EXHIBIT E-3 - Open-End Mortgage and Security
Agreement (Bliss -Mahoning)
EXHIBIT E-4 - Amendments to Open-End Mortgages
EXHIBIT F - Form of Landlord Waiver
EXHIBIT G - (INTENTIONALLY OMITTED]
EXHIBIT H - [INTENTIONALLY OMITTED]
EXHIBIT I-1 - Canadian Guaranty
EXHIBIT I-2 - Guaranty
EXHIBIT J - Pledge and Security Agreement
EXHIBIT K - Deliveries Prior to Effectiveness
EXHIBIT L - Borrowing Base Certificate
EXHIBIT M - Financial Covenants
EXHIBIT N - Chief Financial Officer's Certificate
EXHIBIT 0 - Certificate of Secretary
EXHIBIT P - Signature Authorization Letter
EXHIBIT Q - Opinion of Borrower's and Guarantor
Subsidiaries' Counsel
EXHIBIT R - Accountant's Access Letter
EXHIBIT S - Accountant's Representation Letter
EXHIBIT T - Certificate of Chief Financial
Officer
EXHIBIT U - [INTENTIONALLY OMITTED]
EXHIBIT V - Evidence of Insurance
EXHIBIT W - [INTENTIONALLY OMITTED]
EXHIBIT X - Opinion of Ontario Local Counsel
ANNEXES
ANNEX 1 - Existing Letters of Credit
ANNEX 2 - First Chicago Letter of Credit
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SCHEDULES
Schedule 1 - Incorporation and Qualification
Jurisdictions
Schedule 2 - Licenses, Patents, Trademarks, Etc.
Schedule 3 - Indebtedness
Schedule 4 - Permitted Liens
Schedule 5 - Restrictions, Orders, Labor
Contracts, Etc.
Schedule 6 - Violations of Law
Schedule 7 - Pension Plan Liability
Schedule 8 - Litigation
Schedule 9 - Affiliates
Schedule 10 - Capitalization
Schedule 11 - Deposit and Other Accounts
Schedule 12 - Leases
Schedule 13 - Insurance Policies
Schedule 14 - Material Adverse Changes
Schedule 15 - Taxes and Other Charges
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") between
STAR BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"), HMI
INDUSTRIES INC., a Delaware corporation ("Parent"), and BLISS MANUFACTURING
COMPANY, an Ohio corporation ("Bliss") (Parent and Bliss being sometimes
hereinafter collectively referred to as the "Borrowers" and individually as a
"Borrower"), covering the terms upon which Bank will make loans and/or advances
to Borrowers, is as follows:
WITNESSETH:
WHEREAS, HMI Incorporated, an Ontario corporation ("HMI Inc."), ▇▇▇▇▇▇
Falls Holding Company, a Delaware corporation ("▇▇▇▇▇▇"), Tube-Fab Ltd., an
Ontario corporation ("Tube-Fab"), Tube Form, Inc., an Ohio corporation ("The
Form"), Health-Mor International, Inc., a U.S. Virgin Islands corporation
("International"), Health-Mor Acceptance Corporation, a Delaware corporation
("Acceptance"), HMI Acceptance Corporation, an Ontario corporation ("HMI
Acceptance"), and Health-Mor Acceptance Pty. Ltd., an Australian corporation
("Pty") (HMI Inc., ▇▇▇▇▇▇, Tube-Fab, Tube Form, International, Acceptance, HMI
Acceptance, Pty and Health-Mor personal Care Corporation, a Delaware corporation
("Personal Care") being sometimes hereinafter collectively referred to as the
"Guarantor Subsidiaries" and individually as a "Guarantor Subsidiary"),
Borrowers and Bank entered into that certain Credit Agreement, dated as of
August 14, 1996, as amended by that certain First Amendment to Credit Agreement,
dated as of November 15, 1996, and as further amended by that certain Second
Amendment to Credit Agreement, dated as of December 19, 1996, that certain Third
Amendment to Credit Agreement, dated as of March 7, 1997, and that certain
Fourth Amendment to Credit Agreement, dated as of April 7, 1997 (collectively,
the "Existing Credit Agreement");
WHEREAS, as of the Effective Date (as hereinafter defined), the
aggregate (a) outstanding principal amount of all loans and advances under the
Existing Credit Agreement is Nineteen Million One Hundred Nintey-Three Thousand
Dollars ($19,193,000) (the "Existing Loans") and (b) undrawn face amount of all
letters of credit issued under the Existing Credit Agreement (the "Existing
Letters Credit"), each of which is listed on ANNEX 1 attached hereto, is Two
Hundred Thousand Dollars ($200,000);
WHEREAS, pursuant to the Existing Credit Agreement, (a) certain of the
Existing Loans were advanced
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directly to Parent by Bank and were used by Parent for Parent's working capital
needs, and (b) certain of the Existing Loans were advanced by Bank to Parent as
agent for Bliss and used by Bliss for Bliss' working capital needs;
WHEREAS, under the Existing Credit Agreement, all of the Existing
Letters of Credit were issued for the account of Parent;
WHEREAS, all of Parent's and Bliss' obligations with respect to the
Existing Loans and the Existing Letters of Credit are guaranteed, jointly and
severally, by the Borrowers and the Guarantor Subsidiaries (other than Personal
Care) pursuant to the terms of the Existing Credit Agreement and various other
agreements and documents executed in connection therewith ;
WHEREAS, Borrowers and the Guarantor Subsidiaries desire to amend and
restate the Existing Credit Agreement in its entirety to, among other things,
(a) restructure the Existing Loans into revolving loans and term loans, (b)
provide revolving loan facilities to Parent and Bliss, (c) amend the terms of
certain covenants contained in the Existing Credit Agreement, and (d) provide
for certain other matters, all as herein provided; and
WHEREAS, Bank is willing, on the terms and conditions set forth herein,
to amend and restate the Existing Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein, the Guarantor Subsidiaries, by their execution and delivery of
the Consent and Agreement attached hereto, and Borrowers agree that, from and
after the Effective Date (as hereinafter defined), the Existing Credit Agreement
be, and the same hereby is, amended and restated in its entirety to read as set
forth above and as follows:
1. CAPITALIZED TERMS. Certain capitalized terms used herein are defined in this
SECTION 1.
1.1 DEFINED TERMS. Whenever the following terms (whether or not
underscored) are used herein, they shall be defined as follows (such meanings to
be equally applicable to the singular and plural forms thereof) :
"AFFILIATE" of any Person shall mean (a) any Person who or which is a
director, manager (to the extent such Person is a limited liability company),
managing general partner or officer of such Person, or (b) any other Person who
or which, directly or indirectly, either individually or together with members
of his or her immediate family (as
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defined in Item 404 of Regulation S-K ("Item 404") promulgated pursuant to the
Securities Act of 1933, as amended), beneficially owns ten percent (10%) or more
of the voting stock of, or partnership interests, membership interests or other
similar equity interests in, such Person, or (c) any member of the immediate
family (as defined in Item 404), of such Person or of any Person described in
clause (a) or (b) above, or (d) any other Person in which any Person described
in clause (a), (b) or (c) above owns, directly or indirectly, a fifty percent
(50%) or greater equity interest. Without limiting the foregoing, for purposes
of this Agreement, (w) all of each Borrower's and each Guarantor Subsidiary's
members, officers, shareholders, directors, parent corpora- tions, subsidiary
corporations, joint venturers and partners, (x) each member of the immediate
family (as defined in Item 404) of the Persons described in clause (w), (y) each
Person as to which any of the Persons described in clause (w) or any member of
the immediate family (as defined in Item 404) of any such Persons is a director,
manager (to the extent such Person is a limited liability company), managing
general partner or officer, and (z) each Person in which any of the Persons
described in clause (w) or any member of the immediate family (as defined in
Item 404) of any such Persons owns, directly or indirectly, a ten percent (10%)
or greater equity interest, shall at all times be deemed to be an Affiliate of
each Borrower and each Guarantor Subsidiary.
"AGGREGATE BORROWING BASE" shall mean, as at any time, an amount equal
to the sum of the Individual Borrower Revolving Loan Borrowing Bases then in
effect with respect to Borrowers .
"AGGREGATE LETTER OF CREDIT AVAILABILITY" shall mean, as at any time, an
amount equal to the lesser of (a) the difference of Three Million Dollars
($3,000,000) less the aggregate Letter of Credit Face Amount for all Letters of
Credit then outstanding, or (b) the Aggregate Revolving Loan Availability .
"AGGREGATE REVOLVING LOAN AVAILABILITY" shall mean, as at any time, an
amount equal to the difference of:
(i) the lesser of (a) Thirteen Million Dollars ($13,000,000), or (b)
an amount equal to the then Aggregate Borrowing Base ;
LESS
(ii) the then aggregate outstanding principal amount of all Revolving
Loans.
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"APPLICABLE RATE" shall have the meaning ascribed thereto in SECTION
3.10 hereof.
"ATTORNEYS' FEES" shall mean the reasonable fees for services (and costs
and expenses related thereto) of all attorneys (and all paralegals and other
staff employed by such attorneys) employed by Bank from time to time in
connection with the negotiation, preparation, closing, administration,
monitoring and enforcement of this Agreement or any other Loan Document or of
any amendment, amendment and restatement, supplement or other modification of
this Agreement or any other Loan Document, any transaction contemplated by this
Agreement or any other Loan Document, any refinancing or restructuring of the
credit arrangements provided under this Agreement or any other Loan Document, or
the protection, preservation, collection, leasing, selling, taking possession,
or liquidation of any of the Collateral or the Premises.
"AVAILABILITY DEFICIENCY" shall mean the occurrence, as at any date,
of a condition in which (i) the sum of (a) the then aggregate outstanding
principal amount of the Revolving Loans PLUS (b) the then aggregate outstanding
principal amount of the Term Loans PLUS (c) the aggregate Letter of Credit Face
Amount for all Letters of Credit then outstanding PLUS (d) the Reserve Amount
then in effect for each Borrower, exceeds (ii) the difference of (a) Twenty
Million Dollars ($20,000,000) LESS (b) the greater of (A) the aggregate amount
of the amortization payments of the Term Loans (including any mandatory payments
of the Special Term Loan) required to have been made by Borrowers on or prior to
such date or (B) the aggregate principal amount of the Term Loans repaid by the
Borrowers as of such date.
"BLISS EQUIPMENT TERM LOAN" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.
"BLISS EQUIPMENT TERM LOAN FACILITY" shall have the meaning ascribed
thereto in SECTION 2.1 hereof.
"BLISS LOCKED BOX" shall have the meaning ascribed thereto in SECTION
7.3 hereof.
"BLISS SPECIAL ACCOUNT" shall have the meaning ascribed thereto in
SECTION 7.4 hereof.
"BLISS' EXISTING LOANS" shall have the meaning ascribed thereto in
SECTION 2.2 hereof.
"BORROWING BASE CERTIFICATE" shall have the meaning ascribed thereto in
SECTION 8.3(b) hereof.
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"BORROWING BASE DEFICIENCY" shall mean any failure of the Aggregate
Revolving Loan Availability to be greater than or equal to zero (0) dollars.
"BUSINESS DAY" shall mean any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed in
Cincinnati, Ohio.
"CANADIAN GUARANTY" shall have the meaning ascribed thereto in SECTION
5.8 hereof.
"CANADIAN SECURITY AGREEMENTS" shall have the meaning ascribed thereto
in SECTION 5.1 hereof.
"CASH COLLATERALIZATION NOTICE" shall have the meaning ascribed thereto
in SECTION 7.3 hereof.
"CASH EQUIVALENTS" shall mean (a) securities with maturities of six (6)
months or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit with maturities of six (6) months or less from the date of
acquisition of, or money market accounts maintained with, Bank, any Affiliate of
Bank, or any other domestic commercial bank having capital and surplus in excess
of One Hundred Million Dollars ($100,000,000) or such other domestic financial
institutions or domestic brokerage houses to the extent disclosed to, and
approved by, Bank, and (c) commercial paper of a domestic issuer rated at least
either A-1 by Standard & Poor's Corporation (or its successor) or P-1 by
▇▇▇▇▇'▇ Investors Service, Inc. (or its successor) with maturities of six (6)
months or less from the date of acquisition .
"CASUALTY LOSS" shall mean any of the following events with respect to
any item of Collateral or any portion of the Premises: (i) the actual total loss
of the item or such loss as shall render repair of the item uneconomical, (ii)
the item shall become lost, stolen, destroyed, damaged beyond repair or
permanently rendered unfit for use for any reason whatsoever, or (iii) the
condemnation or taking, by exercise of the power of eminent domain or otherwise,
of such item or confiscation of such item, or of so much of any such item as to
render impractical or unreasonable the use of such item for substantially the
same purposes for which such item was used immediately prior to such
condemnation, taking or confiscation .
"CHARGES" shall have the meaning ascribed thereto in SECTION 3.10
hereof.
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"CLEVELAND MORTGAGE" shall mean that certain Open-End Mortgage of Real
Property, Security Agreement of Personal Property and Assignment of Rents and
Profits (Commercial Real Estate), dated as of March 7, 1996, executed by the
Parent in favor of the Bank, and covering the Cleveland Premises, as amended by
that certain First Amendment to Open- End Mortgage, dated June 6, 1997 and as
the same may be further amended, amended and restated, supplemented or otherwise
modified from time to time.
"CLEVELAND PREMISES" shall mean the real property and improvements
thereon located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
"CLEVELAND REAL ESTATE NOTE" shall mean that certain Amended and
Restated Cognovit Promissory Note (Commercial Real Estate), dated as of June 6,
1997, executed by the Parent and certain other parties in favor of the Bank, in
the original principal amount of Two Million Two Hundred Seventy Thousand
Dollars ($2,270,000), as the same may be amended, amended and restated,
replaced, renewed, supplemented or otherwise modified from time to time.
"COLLATERAL", "GENERAL INTANGIBLES", "EQUIPMENT", "INVENTORY" and
"RECEIVABLES" shall have the meanings ascribed thereto in the Security Agreement
and the Canadian Security Agreements. The term "COLLATERAL" shall include all of
the collateral described in the Canadian Security Agreements.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with either Borrower or any Guarantor Subsidiary,
are treated as a single employer under Section 414 (b) or 414 (c) of the
Internal Revenue Code, as amended, or Section 4001 of ERISA, as amended.
"DEFICIENCY" shall mean (collectively and individually) an Availability
Deficiency, a Borrowing Base Deficiency, an Individual Borrower Borrowing Base
Deficiency, a Letter of Credit Deficiency and a Discretionary Base Deficiency .
"DISCRETIONARY BASE DEFICIENCY" shall mean any Borrowing Base Deficiency
or Individual Borrower Borrowing Base Deficiency directly resulting from and
occurring immediately following the exercise by Bank of its discretion in
changing its policy, criteria or methodology regarding its credit and collateral
considerations in determining whether any of either Borrower's Receivables and
Inventory will be considered by Bank to be Eligible Receivables and Eligible
Inventory (other than any such change made by Bank after
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review of the results of the collateral survey to be conducted by ▇▇▇▇▇▇ &
▇▇▇▇▇▇ promptly after the Effective Date) .
"EFFECTIVE DATE" shall mean June 6, 1997.
"ELIGIBLE INVENTORY" shall mean "Inventory" of a Borrower consisting of
raw materials (consisting of component parts with respect to Parent and steel
with respect to Bliss) and finished goods, meeting all applicable
specifications, which Bank, in its sole discretion, deems to be Eligible
Inventory, based on such credit and collateral considerations as Bank may deem
appropriate. Without limitation on the foregoing, the following shall not be
deemed Eligible Inventory: Inventory of a Borrower (i) that is not readily
saleable or usabre in such Borrower's business, or that is otherwise slow-
moving or obsolete (including without limitation Inventory for which reserves
for obsolescence have been provided for in the financial statements or for which
obsolescence reserves are anticipated), in each case as determined by Bank in
its sole discretion, (ii) that is located outside the United States, (iii) that
is not subject to the first priority security interest of Bank, (iv) that is
located on premises not owned by such Borrower unless the owner and/or operator
of such premises shall have executed and delivered to Bank a Landlord Waiver, or
a warehouseman or other similar waiver in form and substance satisfactory to
Bank, in its sole discretion, (v) that is subject to any trademark, trade name
or licensing arrangement, or any law, rule or regulation, that could limit or
impair the ability of Bank to promptly exercise any of its rights with respect
thereto, (vi) with respect to which insurance proceeds, if any, are not payable
to Bank as mortgagee or loss payee, (vii) that has been in existence for more
than one (1) year, (viii) that is in the possession of any processor other than
such Borrower unless such processor shall have executed and delivered to Bank a
processor consignment agreement or other similar agreement in form and substance
satisfactory to Bank, in its sole discretion, (ix) that is in transit, (x) with
respect to which a Casualty Loss has been incurred, (xi) that consists of
general supplies or maintenance supplies and packaging, and fuel, (xii) that is
work-in-process "Inventory", or (xiii) as to which Bank, in its sole discretion,
deems to be ineligible based on any other credit and/or collateral
considerations as Bank deems appropriate.
"ELIGIBLE RECEIVABLES" shall mean those "Receivables" of a Borrower
which (i) arise out of sales in the ordinary course of such Borrower's business
to a Person who is not an Affiliate of such Borrower or otherwise controlled by
such Borrower or by an Affiliate of such Borrower, (ii) have terms of sale which
are ordinary terms of such Borrower and require payment in full within not more
than sixty (60) days from the date of invoice, (iii) do not violate any warranty
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with respect to Eligible Receivables set forth in SECTION 7.1 of this Agreement
and (iv) are not more than ninety (90) days from the date of invoice thereof;
PROVIDED, HOWEVER, that no Receivable of a Borrower shall be an Eligible
Receivable if (a) the account debtor or any Affiliate of the account debtor has
filed or had filed against it a petition in bankruptcy or for reorganization,
made an assignment for the benefit of creditors, or failed, suspended business
operations, become insolvent or had or suffered a receiver or a trustee to be
appointed for a significant portion of its assets or affairs, (b) the account
debtor is also a supplier to or creditor of such Borrower, unless such account
debtor executes and delivers a Waiver of Rights to Counterclaim, Setoff and
Defenses, in a form acceptable to Bank in its sole discretion, in favor of Bank,
or unless the account debtor is General Motors Corporation or ▇▇▇▇ Corporation,
(c) the sale is to an account debtor outside the United States, unless the sale
is (i) on a letter of credit, which is in form and substance satisfactory to
Bank, in its sole discretion, which has been issued by a financial institution
satisfactory to Bank, in its sole discretion, and which has been confirmed by
Bank, (ii) on acceptance, and/or (iii) on other terms acceptable to Bank, in its
sole discretion, (d) twenty-five percent (25%) or more of the Receivables from
the account debtor and its Affiliates are ineligible for any reason, (e) the
account debtor is the federal or any state government or any agency or
department thereof, unless with respect to such Receivable the Assignment of
Claims Act or comparable state statute or regulation has been complied with, (f)
a Receivable to the extent it consists of finance charges, interest on
delinquent accounts, proceeds of consigned Inventory, employee or officer
Receivables, service charges, or debit memoranda, (g) the Receivable arises from
a contract which contains a prohibition of assignment of such Receivable and/or
the proceeds thereof, (h) the Receivable is evidenced by a promissory note or
chattel paper, (i) the Receivable is generated by a sale on approval, a ▇▇▇▇ and
hold sale, a sale on consignment, or other type of conditional sale, (j) the
Receivable is not subject to the first priority security interest of Bank, (k)
the account debtor is located in New Jersey, unless such Borrower shall have
properly qualified to do business in New Jersey or shall have filed a Notice of
Business Activities Report with the New Jersey Division of Taxation for the then
current year, (1) the account debtor is located in Minnesota, unless such
Borrower shall have properly qualified to do business in Minnesota shall have
filed a Notice of Business Activities Report with the Minnesota Division of
Taxation for the then current year, (m) the account debtor is located in any
other state (including, but not limited to, Indiana) which requires that such
Borrower, in order to ▇▇▇ any Person in such state's courts, either (i) qualify
to do business in such state or (ii) file a report with the taxation division of
such state for the then current year, unless such Borrower has fulfilled
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either of such requirements for the then current year, (n) the Receivable is a
progress billing, (o) the account debtor has sold or is selling substantially
all of its assets, (p) the account debtor is incompetent or has died, (q) Bank
or such Borrower has received a check for payment of such Receivable which has
been returned uncollected, (r) the Receivable arises from an invoice issued by
such Borrower prior to the delivery by such Borrower of the goods covered by
such invoice to the applicable account debtor, (s) the account debtor is
disputing any Receivable or Receivables owed by that account debtor to the
applicable Borrower, but only to the extent that the aggregate amount in dispute
for all of such account debtor's Receivables which have been in dispute for more
than thirty (30) days equals or exceeds Two Hundred Fifty Thousand Dollars
($250,000), or (t) Bank, in its sole discretion, believes that the collection of
such Receivable is insecure, or that such Receivable may not be paid by reason
of the account debtor's financial inability to pay, or deems such Receivable to
be ineligible based on such other credit and/or collateral considerations as
Bank deems appropriate. In addition, and without limitation of the foregoing, if
any Receivables owed by a particular account debtor cause the aggregate amount
of Eligible Receivables owed by that account debtor to exceed thirty-five
percent (35%) of the aggregate amount of a Borrower's Eligible Receivables, then
such Receivables shall not be Eligible Receivables to the extent of such excess.
"ENVIRONMENTAL COMPLIANCE RESERVE" shall mean all reserves which, in the
reasonable discretion of Bank, shall be established from time to time for
amounts that are required to be expended in order for a Borrower or a Guarantor
Subsidiary and each of such Borrower's or Guarantor Subsidiary's operations and
property to comply with Environmental Laws or in order to correct any violation
by such Borrower or Guarantor Subsidiary or such Borrower' 5 or Guarantor
Subsidiary's operations or property of Environmental Laws.
"ENVIRONMENTAL LAWS" shall mean any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to
the environmental or the release of any materials into the environment
(including, without limitation, Hazardous Materials) .
"EQUIPMENT LEASE GUARANTIES" shall mean, collectively, that certain (i)
Amended and Restated Business Guaranty, dated June 6, 1997, executed by Tube
Form, Tube-Fab, Bliss, ▇▇▇▇▇▇ Falls, Personal Care, HMI Inc., International,
Acceptance, HMI Acceptance, and Pty in favor of Bank, in a principal amount not
to exceed $437,652, (ii) Amended and Restated Business Guaranty, dated June 6,
1997, executed by Parent in favor of Bank, in a principal amount not to exceed
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17
$351,362, (iii) Amended and Restated Business Guaranty, dated June 6, 1997,
executed by Parent in favor of Bank, in a principal amount not to exceed
$145,000, (iv) Amended and Restated Business Guaranty, dated June 6, 1997,
executed by Parent in favor of Bank, in a principal amount not to exceed
$446,000, and (v) Amended and Restated Business Guaranty, dated June 6, 1997,
executed by Parent in favor of Bank, in a principal amount not to exceed
$815,470.
"EQUIPMENT LEASES" shall mean, collectively, that certain (i) Master
Lease Agreement, dated June 2, 1993, Lease No. 698, executed by Bliss in favor
of Bank, together with all Acceptance Supplements now existing or hereafter
executed and delivered by Bliss, as amended by that certain Amendment No. 1 to
Master Equipment Lease, dated June 6, 1997, and (ii) Master Lease Agreement,
dated December 20, 1995, Lease No. 1060, executed by Parent in favor of Bank,
together with all Acceptance Supplements now existing or hereafter executed and
delivered by Parent, as amended by that certain Amendment No. 1 to Master
Equipment Lease, dated June 6, 1997.
"ERISA" shall have the meaning ascribed thereto in SECTION 9.12 hereof.
"EVENT OF DEFAULT" shall have the meaning ascribed thereto in SECTION 12
hereof.
"EXISTING CREDIT AGREEMENT" shall have the meaning ascribed thereto in
the Recitals hereof.
"EXISTING GUARANTY OBLIGATIONS" shall have the meaning ascribed thereto
in SECTION 2.16 hereof.
"EXISTING LETTER OF CREDIT OBLIGATIONS" shall mean the sum of (i) the
aggregate Letter of Credit Face Amount for all Existing Letters of Credit then
outstanding PLUS (ii) the aggregate amount of each Borrower's unpaid obligations
under Existing Credit Agreement and the Existing Letter of Credit Related
Documents in respect of the Existing Letters of Credit.
"EXISTING LETTER OF CREDIT RELATED DOCUMENTS" shall mean any agreements
or instruments relating to an Existing Letter of Credit.
"EXISTING LETTERS OF CREDIT" shall have the meaning ascribed thereto in
the Recitals hereof.
"EXISTING LOANS" shall have the meaning ascribed thereto in the Recitals
hereof.
"FINANCIAL COVENANTS" shall have the meaning ascribed thereto in
SECTION 10.33 hereof.
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"FINANCIALS" shall mean those financial statements attached to EXHIBIT
T attached hereto and those financial statements delivered from time to time
pursuant to SECTION 8.5, SECTION 8.6, SECTION 8.7, SECTION 8.11 and SECTION 8.12
hereof.
"FIRST CHICAGO LETTER OF CREDIT" shall mean that certain Existing Letter
of Credit (and all documentation relating thereto) issued for the Account of
Parent for the benefit of First Chicago Australia Ltd. which secures certain
obligations owing by Pty to The First National Bank of Chicago, copies of which
are attached hereto as ANNEX 2.
"GUARANTY" shall have the meaning ascribed thereto in SECTION 5.8
hereof.
"HAZARDOUS MATERIAL" shall have the meaning ascribed thereto in SECTION
9.9 hereof.
"HRS PROCEEDS" shall mean the proceeds (at least $2,000,000 of which
shall be in cash) of HRS Sale.
"HRS SALE" shall mean the sale by Parent and HMI Inc. of all of the
assets of the Household Rental Systems division of HMI Inc.
"INDEBTEDNESS" shall mean all of any Borrower's or any Guarantor
Subsidiary's obligations and liabilities to any "Person" (as defined below),
including, without limitation, all debts, claims and indebtedness, contingent,
fixed or otherwise, heretofore, now and/or from time to time hereafter owing,
due or payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under written or oral agreement, operation of law or
otherwise. Indebtedness includes, without limiting the foregoing, (i) the
"Obligations" (as defined below), (ii) obligations and liabilities of any Person
secured by a lien, claim, encumbrance or security interest upon property owned
by any Borrower or any Guarantor Subsidiary, even though such Borrower or
Guarantor Subsidiary has not assumed or become liable for the payment therefor
and (iii) obligations or liabilities created or arising under any lease of real
or personal property, conditional sales contract or other title retention
agreement with respect to property used and/or acquired by any Borrower or any
Guarantor Subsidiary, even though the rights and remedies of the lessor, seller
and/or lender thereunder are limited to repossession of such property .
"INDEMNIFIED LIABILITIES" shall have the meaning ascribed thereto in
SECTION 15.10 hereof.
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"INDEMNIFIED PARTY" shall have the meaning ascribed thereto in SECTION
15.10 hereof.
"INDIVIDUAL BORROWER BORROWING BASE DEFICIENCY" shall mean, with respect
to each Borrower, any failure of the Individual Borrower Revolving Loan
Availability applicable to such Borrower to be greater than or equal to zero (0)
dollars.
"INDIVIDUAL BORROWER REVOLVING LOAN AVAILABILITY" shall mean, as at any
time, an amount equal to the difference of (i) the Individual Borrower Revolving
Loan Borrowing Base then in effect and applicable to each Borrower, less (ii)
the then aggregate outstanding principal amount of all Revolving Loans to such
Borrower.
"INDIVIDUAL BORROWER REVOLVING LOAN BORROWING BASE" shall mean, as at
any time, with respect to each Borrower, an amount equal to the sum of (i) up to
eighty percent (80%) of the amount of such Borrower's Eligible Receivables, PLUS
(ii) up to fifty percent (50%) of the value of such Borrower's Eligible
Inventory, MINUS (iii) any Reserve Amount then in effect and applicable to such
Borrower.
"INDIVIDUAL LETTER OF CREDIT AVAILABILITY" shall mean, as at any time,
with respect to a Borrower, an amount equal to the lesser of (a) the difference
of Three Million Dollars ($3,000,000) LESS the aggregate Letter of Credit Face
Amount for all Letters of Credit then outstanding, or (b) such Borrower's
Individual Borrower Revolving Loan Availability.
"INTERCREDITOR AGREEMENT" shall have the meaning ascribed thereto in
SECTION 5.7 hereof.
"▇▇▇▇ ▇▇▇▇▇ GUARANTY" shall mean that certain Amended and Restated
Business Guaranty, dated as of June 6, 1997, executed by the Parent in favor of
the Bank, guarantying, among other things, the prompt payment when due of all
amounts under the ▇▇▇▇ ▇▇▇▇▇ Note, as the same may be amended, amended and
restated, replaced, renewed, supplemented or otherwise modified from time to
time.
"▇▇▇▇ ▇▇▇▇▇ NOTE" shall mean that certain Amended and Restated
Promissory Note, dated as of June 6, 1997, executed by ▇▇▇▇ ▇▇▇▇▇ in favor of
the Bank, in the original principal amount of Five Hundred Eighteen Thousand
Seven Hundred Fifty Dollars ($518,750), as the same may be amended, amended and
restated, replaced, renewed, supplemented or otherwise modified from time to
time.
"LANDLORD WAIVER" shall mean a Landlord Waiver substantially in the form
of EXHIBIT F attached hereto.
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"LEASED PREMISES" shall mean, collectively and individually, any real
property and improvements thereon which is leased by Borrowers and/or the
Guarantor Subsidiaries.
"LETTER OF CREDIT COLLATERAL ACCOUNT" has the meaning specified in
SECTION 13.3 hereof.
"LETTER OF CREDIT DEFICIENCY" shall mean a condition whereby the
Individual Letter of Credit Availability for either Borrower or the Aggregate
Letter of Credit Availability is less than zero (0) dollars.
"LETTER OF CREDIT FACE AMOUNT" of any Letter of Credit (or Existing
Letter of Credit, as the context may require) shall mean, at any time, the face
amount of such Letter of Credit (or Existing Letter of Credit, as the context
may require), after giving effect to all drawings paid thereunder and other
reductions of such face amount and to all reinstatements of such face amount
effected, pursuant to the terms of such Letter of Credit (or Existing Letter of
Credit, as the context may require), prior to such time.
"LETTER OF CREDIT FACILITY" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.
"LETTER OF CREDIT OBLIGATIONS" shall mean, at any time, the sum of (i)
the aggregate Letter of Credit Face Amount for all Letters of Credit then
outstanding PLUS (ii) the aggregate amount of each Borrower's unpaid obligations
under this Agreement and the Letter of Credit Related Documents in respect of
the Letters of Credit.
"LETTER OF CREDIT RELATED DOCUMENTS" shall mean any agreements or
instruments relating to a Letter of Credit.
"LETTERS OF CREDIT" shall have the meaning ascribed thereto in SECTION
2.9 hereof.
"LOANS" shall have the meaning ascribed thereto in SECTION 2.1 hereof.
"LOAN DOCUMENTS" shall mean this Agreement, the Equipment Lease
Guaranties, the ▇▇▇▇ ▇▇▇▇▇ Guaranty, the Cleveland Real Estate Note, the
Cleveland Mortgage, the Equipment Leases, the First Chicago Letter of Credit,
the Canadian Security Agreements, the Canadian Guaranty and all other documents,
instruments and agreements executed in connection herewith and therewith and
previously executed in connection with the Existing Credit Agreement to the
extent not amended and restated in connection with this Agreement or otherwise
expressly superseded by any documents, instruments or agreements executed in
connection with this Agreement (including, but not limited to, the Existing
Letters of Credit
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and the Existing Letter of Credit Related Documents), all as the same may be
amended, amended and restated, replaced, renewed, supplemented or otherwise
modified from time to time.
"LOCKED BOXES" shall mean, collectively, the Bliss Locked Box and the
Parent Locked Box, and "Locked Box" shall mean either the Bliss Locked Box of
the Parent Locked Box, as the case may be.
"MATERIAL ADVERSE EFFECT" shall mean the occurrence or existence of a
material adverse effect on: (a) the business, property, assets, operations or
condition, financial or otherwise, of the Borrower and the Guarantor
Subsidiaries, taken as a whole; (b) the ability of the Borrowers or the
Guarantor Subsidiaries, taken as a whole, to perform any of their payment or
other Obligations under this Agreement or any of the other Loan Documents to
which it is a party; (c) the legality, validity or enforceability of a
Borrower's or any Guarantor Subsidiary's Obligations under this Agreement or any
of the other Loan Documents to which it is a party; or (d) the ability of Bank
to exercise its rights and remedies with respect to, or otherwise to realize
upon any of the Collateral, the Premises or any other security for the
Obligations .
"MAXIMUM RATE" shall have the meaning ascribed thereto in SECTION 3.10
hereof.
"MORTGAGES" shall have the meaning ascribed thereto in SECTION 5.4
hereof.
"MORTGAGED PREMISES" shall have the meaning ascribed thereto in SECTION
5.4 hereof.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 4001(a)
(3) of ERISA.
"NOTE AGREEMENT" shall mean that certain Note Purchase Agreement, dated
as of November 16, 1990, between the Noteholders and the Parent, as in effect on
the Effective Date.
"NOTEHOLDERS" shall mean, collectively, Reliastar Life Insurance Company
(f/k/a Northwestern National Life Insurance Company), Northern Life Insurance
Company, Reliastar Bankers Security Life Insurance Company (successor by merger
to the North Atlantic Life Insurance Company of America), Commercial Union Life
Insurance Company of New York and Texas Life Insurance Company.
"OBLIGATIONS" shall mean the Loans and all other loans, advances, debts,
liabilities, obligations, covenants and duties owing to Bank or any Affiliate of
Bank from a
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Borrower or any Guarantor Subsidiary of any kind, present or future, whether or
not evidenced by or arising out of this Agreement, any of the Loan Documents, or
any other agreement, transaction, extension of credit, letter of credit,
guaranty or indemnification or in any other manner, whether or not for the
payment of money, whether direct or indirect (including acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising
and however acquired, and including, without limitation, all interest, charges,
expenses, fees and any other sums chargeable to a Borrower or any Guarantor
Subsidiary in connection with any of the foregoing, and all Attorneys' Fees.
"PARENT LOCKED BOX" shall have the meaning ascribed thereto in SECTION
7.3 hereof.
"PARENT SPECIAL ACCOUNT" shall have the meaning ascribed thereto in
SECTION 7.4 hereof.
"PARENT'S EXISTING LOANS" shall have the meaning ascribed thereto in
SECTION 2.2 hereof.
"PATENT ASSIGNMENTS" shall have the meaning ascribed thereto in SECTION
5.2 hereof.
"PENSION PLAN" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan) and to which a Borrower, any Guarantor Subsidiary or any
corporation, trade or business that is, along with a Borrower or any Guarantor
Subsidiary, a member of a Controlled Group may have any liability, including any
liability by reason of having been a substantial employer within the meaning of
section 4063 of ERISA at any time during the preceding six (6) years, or by
reason of being deemed to be a contributing sponsor under section 4069 of ERISA.
"PERMITTED LIENS" shall mean the liens and interests in favor of Bank
granted in connection herewith or otherwise and, to the extent reflected on the
applicable Borrower's or Guarantor Subsidiary's books and records and not
impairing the operations of such Borrower or such Guarantor Subsidiary or any
performance hereunder or contemplated hereby: (i) liens arising by operation of
law for taxes not yet due and payable; (ii) statutory liens of mechanics,
materialmen, shippers and warehousemen for services or materials for which
payment is not yet due; (iii) deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; (iv) liens, if any, specifically permitted by Bank from time
to time in writing; (v) liens securing obligations under capitalized leases or
purchase money Indebtedness permitted by SECTION 10.11(iv) on the property
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subject thereto, provided that (a) such capitalized leases and purchase money
Indebtedness shall not be secured by any of the Collateral or the Premises
granted or mortgaged to Bank on the Effective Date and thereafter, (b) any liens
relating to such capitalized leases and purchase money Indebtedness shall not
extend to cover any other property of either Borrower or any Guarantor
Subsidiary other than the property so acquired, and (c) the principal amount
(i.e., exclusive of interest, fees, expenses and other charges) of such
capitalized leases and purchase money Indebtedness shall not exceed the lesser
of (A) the fair market value of the purchased or leased property at the time of
the purchase or lease or (B) the purchase price or the total lease amount
thereof (which, in the case of property purchased subject to existing liens,
shall include the amount secured by such liens) ; (vi) liens for taxes,
assessments and other similar charges to the extent payment thereof shall not at
the time be required to be made in accordance with the provisions of SECTION
10.10; (vii) the liens granted to the Noteholders to secure the obligations
under the Note Agreement; and (viii) the following if the validity or amount
thereof is being contested in good faith and by appropriate and lawful
proceedings promptly initiated and diligently conducted of which the applicable
Borrower or Guarantor Subsidiary has given prior notice to Bank and for which
appropriate reserves (in Bank's reasonable discretion) have been established and
so long as levy and execution have been and continue to be stayed: claims of
mechanics, materialmen, shippers, warehouseman, carriers and landlords.
"PERSON" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorpo- rated organization, association, corporation,
limited liability company, institution, entity, party or government or
governmental entity.
"PLAN" shall have the meaning ascribed thereto in SECTION 10.3 hereof.
"PLEDGE AGREEMENT" shall have the meaning ascribed thereto in SECTION
5.9 hereof.
"PREMISES" shall mean, collectively and individually, the Leased
Premises, the Mortgaged Premises and the Cleveland Premises.
"PRIME RATE" shall have the meaning ascribed thereto in SECTION 3.1
hereof.
"REAL ESTATE TERM LOAN" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.
"REAL ESTATE TERM LOAN FACILITY" shall have the meaning ascribed thereto
in SECTION 2.1 hereof.
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"REMITTANCES" shall have the meaning ascribed thereto in SECTION 7.3
hereof.
"REQUESTING BORROWER" shall mean any Borrower requesting a Revolving
Loan and/or a Letter of Credit.
"RESERVE AMOUNT" shall mean an amount determined by Bank, in its
reasonable discretion, as a reserve against Collateral values and potential or
anticipated obligations of either Borrower, including, without limitation, (i)
tax liabilities and other obligations owing to governmental entities including
all amounts referred to in SECTION 10.10 hereof, (ii) litigation liabilities,
(iii) the Environmental Compliance Reserve, (iv) the anticipated costs and
expenses relating to the liquidation of Collateral or the Premises, (v) unpaid
sales taxes, (vi) those reserve amounts as required to be held as reserves under
generally accepted accounting principles, (vii) liabilities and other
obligations owing by such Borrower to any lessor of real property leased by such
Borrower or to any warehouseman, (viii) with respect to the Parent, the amount
of the obligations of Parent pursuant to the terms of the ▇▇▇▇ ▇▇▇▇▇ Guaranty,
and (ix) with respect to the Parent, the amount of the obligations of Parent (or
Bliss or any Guarantor Subsidiary, as the case may be) owing to the Noteholders
pursuant to the terms of the Note Agreement, as the same may hereafter be
amended, amended and restated, supplemented or otherwise modified. The Reserve
Amount shall be reduced from time to time to the extent of each payment by the
applicable Borrower in respect of claims and liabilities upon which the Reserve
Amount is based. On the Effective Date, the Reserve Amount with respect to the
Parent equals Two Million One Hundred Eighty-Five Thousand Seven Hundred Fifty
Dollars ($2,185,750) and the Reserve Amount with respect to Bliss equals Zero
Dollars ($0) .
"REVOLVING LOAN FACILITY" shall have the meaning ascribed thereto in
SECTION 2.1 hereof.
"REVOLVING LOANS" shall have the meaning ascribed thereto in SECTION 2.3
hereof.
"SECURITY AGREEMENT" shall have the meaning ascribed thereto in SECTION
5.1 hereof.
"SOLVENT" shall mean, with respect to any Person, that (i) fair value of
the property of the Person is, on the date of determination, greater than the
total amount of liabilities (including contingent liabilities) of the Person as
of that date, (ii) as of that date, the Person is able to pay all liabilities of
the Person as those liabilities mature, and (iii) the Person does not have
unreasonably small capital for the business in which it is engaged or for any
business or transaction in which it is about to engage. In computing the
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amount of contingent liabilities at any time, it is intended that they be
computed at the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"SPECIAL ACCOUNTS" shall mean, collectively, the Bliss Special Account
and the Parent Special Account, and "Special Account" shall mean either the
Bliss Special Account of the Parent Special Account, as the case may be.
"SUBSIDIARY" shall mean any Person as to which Borrower owns, directly
or indirectly, at least fifty percent (50%) of the outstanding shares of capital
stock or other interests (including, without limitation, membership interests)
having ordinary voting power for the election of directors, officers, managers,
trustees or other controlling Persons, or an equivalent controlling interest.
"TERM LOANS" shall mean, collectively, the Bliss Equipment Term Loan,
the Real Estate Term Loan and the Special Term Loan.
"TOTAL FACILITY" shall have the meaning ascribed thereto in SECTION 2.1
hereof.
"UNUSED REVOLVING LOAN FACILITY AMOUNT" shall mean, for any period, the
average daily amount for such period by which:
(i) Thirteen Million Dollars ($13,000,000) on each day during such
period
EXCEEDS
(ii) the sum of (a) the aggregate outstanding principal amount of all
Revolving Loans on each day during such period plus (b) the
aggregate Letter of Credit Face Amount of all Letters of Credit
outstanding on each day during such period .
"WELFARE PLAN" shall mean a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement which
are not specifically defined shall have the meanings customarily given them in
accordance with generally accepted accounting principles.
2. LOANS AND OTHER FINANCIAL ACCOMMODATIONS.
-----------------------------------------
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2.1 TOTAL FACILITY. Bank will make up to a Twenty Million Dollar
($20,000,000) reducing total credit facility (the "Total Facility") available to
Borrowers, subject to the terms and conditions of this Agreement and comprised
of the following loans or other financial accommodations advanced, made or made
available under the following facilities (collectively, the "Loans") : (i)
Revolving Loans (as hereinafter defined) to be advanced under the Revolving Loan
facility (the "Revolving Loan Facility"), (ii) a term loan with respect to
certain real property (the "Real Estate Term Loan") to be advanced under the
Real Estate Term Loan facility (the "Real Estate Term Loan Facility"), (iii) a
term loan with respect to machinery and equipment owned by Bliss (the "Bliss
Equipment Term Loan") to be advanced under the Bliss Equipment Term Loan
facility (the "Bliss Equipment Term Loan Facility"), (iv) a special term loan
(the "Special Term Loan") to be advanced under the Special Term Loan facility
(the "Special Term Loan Facility"), and (v) as a portion of the Revolving Loan
Facility, a letter of credit facility (the "Letter of Credit Facility"), all as
more particularly described below.
2.2 AFFIRMATION OF EXISTING LOANS. Parent acknowledges, affirms and
agrees that, as of the Effective Date, Six Million Seven Hundred Fifty Thousand
Nine Hundred Fifty-Two Dollars ($6,750,952) of the Existing Loans is currently
due and owing directly by Parent to Bank ("Parent's Existing Loans") . Bliss
acknowledges, affirms and agrees that, as of the Effective Date, Thirteen
Million Two Hundred Forty Nine Thousand Forty-Eight Dollars ($13,249,048) of the
Existing Loans is currently due and owing directly by Bliss to Bank ("Bliss'
Existing Loans").
2.3 REVOLVING LOAN FACILITY. Until the termination of this Agreement
pursuant to SECTION 11 and/or SECTION 13 hereof, revolving loans under the
Revolving Loan Facility will be lent and relent to each Borrower from time to
time (such loans being referred to collectively as the "Revolving Loans" and
each of such loans being referred to individually as a "Revolving Loan") in an
amount not to exceed the Individual Borrower Revolving Loan Borrowing Base
applicable to such Borrower. Notwithstanding the foregoing sentence, in no event
shall Bank be obligated to make Revolving Loans if, either immediately before or
after giving effect to any such Revolving Loan, (i) a Deficiency has occurred
and is continuing or shall occur, or (ii) an Event of Default has occurred and
is continuing or shall occur by making such Revolving Loan. The Eligible
Inventory will be valued at the lower of cost or market value, determined on a
"first in first out" basis, consistently applied. Bank shall, to the extent of
Four Million Five Hundred Thousand Dollars ($4,500,000) of the Parent's Existing
Loans, satisfy all or a portion of its agreement to make Revolving Loans to
Parent on
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the Effective Date by converting such amount of the Parent's Existing
Loans into a revolving Loan, whereupon such converted amount shall be a
Revolving Loahn owing by Parent for all purposes of this Agreement and the other
Loan Documents. In addition, Bank shall, to the extent of Eight Million Five
Hundred thousand dollars ($8,500,000) of Bliss' Existing Loans, satisfy all or a
portion of its agreement to make Revolving Loans to Bliss on the Effective Date
by converting such amount of Bliss' Existing Loans into a Revolving Loan,
whereupon such converted amount shall be a Revolving Loan owing by Bliss for all
purposes of this Agreement and the other Loan documents. Each such conversion
shall be deemed to have taken place at the time the applicable Borrower executes
and delivers this Agreement. the Revolving Loan Facility hereunder represents,
in part, a renewal of certain of the Existing Loans outstanding as of the
Effective Date. The amounts of the Existing Loans referred to above originally
outstanding under the Existing Credit Agreement are continuing Indebtedness of
borrowers to Bank, and nothing contained herein or in any other Loan document
shall be construed to deem such amounts paid, or to release or terminate any
lien, guaranty or security interest given to secure such amounts. Payment in
full of and satisfaction of all Indebtedness with respect to the Revolving Loans
hereunder shall also be deemed to be payment in full and satisfaction of such
amounts of the Existing Loans. The borrowers acknowledge and agree that, after
its review of the results of the collateral survey to be performed on behalf of
Bank by ▇▇▇▇▇▇ & ▇▇▇▇▇▇ promptly after the Effective Date, Bank may, among other
things and without limiting the discretion of Bank hereunder, reduce the amount
available hereunder for Revolving Loans and increase the principal amount of the
Special Term Loan by the amount of any changes described in the immediately
preceding sentence after its receipt of such collateral survey, Bank shall
notify borrowers of such changes. Any such changes shall be deemed to be
effective as of the date Bank notifies Borrowers of such changes.
2.4 REAL ESTATE TERM LOAN FACILITY. The Real Estate Term Loan under the
Real Estate Term Loan Facility will be made to Bliss with respect to the
Mortgaged Premises in the amount of Two Million Two Hundred fifty Thousand
dollars ($2,250,00) on the Effective Date. The principal of the Real Estate Term
Loan shall be payable by Bliss in one hundred twenty (120) consecutive equal
monthly installments of Eighteen Thousand Seven Hundred fifty dollars ($18,750)
each, commencing on July 1, 1997 and thereafter on the first day of each
calendar month; PROVIDED, HOWEVER, that notwithstanding for foregoing
amortization schedule for the Real estate Term Loan, upon the effective date of
any temrination of this Agreement pursuant to SECTION 11 and/or SECTION 13
hereof, all amounts then outstanding under the Real Estate Term Loan shall
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become immediately due and payable without notice or demand. No repayment or
prepayment of the Real Estate Term Loan shall be reason for any relending or
additional lending of Real Estate Term Loan proceeds to Bliss. Bank shall, to
the extent of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000) of
Bliss' Existing Loans, satisfy all of its agreement to make the Real Estate Term
Loan to Bliss on the Effective Date by converting such amount of Bliss' Existing
Loans into the Real Estate Term Loan, whereupon such converted amount shall be
the Real Estate Term Loan owing by Bliss for all purposes of this Agreement and
the other Loan Documents. Such conversion shall be deemed to have taken place at
the time Bliss executes and delivers this Agreement. The Real Estate Term Loan
Facility hereunder represents, in part, a renewal of certain of the Existing
Loans outstanding as of the Effective Date. The amount of the Existing Loans
referred to above originally outstanding under the Existing Credit Agreement is
continuing Indebtedness of Bliss to Bank, and nothing contained herein or in any
other Loan Document shall be construed to deem such amount paid, or to release
or terminate any lien, guaranty or security interest given to secure such
amount. Payment in full of and satisfaction of all Indebtedness with respect to
the Real Estate Term Loan hereunder shall also be deemed to be payment in full
and satisfaction of such amount of the Existing Loans.
2.5 (INTENTIONALLY OMITTED]
2.6 BLISS EQUIPMENT TERM LOAN FACILITY. The Bliss Equipment Term Loan
under the Bliss Equipment Term Loan Facility will be made to Bliss with respect
to Bliss' eligible machinery and equipment in the amount of Two Million Four
Hundred Ninety-Nine Thousand Forty-Eight Dollars ($2,499,048) on the Effective
Date. The principal of the Bliss Equipment Term Loan shall be payable by Bliss
in eighty-four (84) consecutive equal monthly installments of Twenty-Nine
Thousand Seven Hundred Fifty-One Dollars ($29,751) each, commencing on July 1,
1997 and thereafter on the first day of each calendar month; PROVIDED, HOWEVER,
that notwithstanding the foregoing amortization schedule for the Bliss Equipment
Term Loan, upon the effective date of any termination of this Agreement pursuant
to SECTION 11 and/or SECTION 13 hereof, all amounts then outstanding under the
Bliss Equipment Term Loan shall become immediately due and payable without
notice or demand. No repayment or prepayment of the Bliss Equipment Term Loan
shall be reason for any relending or additional lending of Bliss Equipment Term
Loan proceeds to Bliss. Bank shall, to the extent of Two Million Eight Hundred
Seventeen Thousand Eighty-Five Dollars ($2,817,085) of Bliss' Existing Loans,
satisfy all of its agreement to make the Bliss Equipment Term Loan to Bliss on
the Effective Date by converting such amount of Bliss' Existing Loans into the
Bliss Equipment Term Loan, whereupon such converted amount shall be the Bliss
Equipment
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Term Loan owing by Bliss for all purposes of this Agreement and the other Loan
Documents. Such conversion shall be deemed to have taken place at the time Bliss
executes and delivers this Agreement. The Bliss Equipment Term Loan Facility
hereunder represents, in part, a renewal of certain of the Existing Loans
outstanding as of the Effective Date. The amount of the Existing Loans referred
to above originally outstanding under the Existing Credit Agreement is
continuing Indebtedness of Bliss to Bank, and nothing contained herein or in any
other Loan Document shall be construed to deem such amount paid, or to release
or terminate any lien, guaranty or security interest given to secure such
amount. Payment in full of and satisfaction of all Indebtedness with respect to
the Bliss Equipment Term Loan hereunder shall also be deemed to be payment in
full and satisfaction of such amount of the Existing Loans.
2.7 SPECIAL TERM LOAN FACILITY. The Special Term Loan under the Special
Term Loan Facility will be made to Parent in the amount of Two Million Two
Hundred Fifty Thousand Nine Hundred Fifty-Two Dollars ($2,250,952) on the
Effective Date. The principal of the Special Term Loan shall be due and payable
upon the effective date of any termination of this Agreement pursuant to SECTION
11 and/or SECTION 13 hereof. Prior to such time, Parent shall reduce the
outstanding principal amount of the Special Term Loan by (i) making a payment to
Bank of Two Million Dollars ($2,000,000) to Bank on or prior to August 31, 1997
(which payment may be made utilizing HRS Proceeds and which payment shall be
applied to the principal installments of the Special Term Loan set forth in
clause (ii) below in inverse order of maturity), and (ii) making consecutive
equal monthly principal payments of Fifty Thousand Dollars ($50,000) each,
commencing on July 1, 1997 and thereafter on the first day of each calendar
month. No repayment or prepayment of the Special Term Loan shall be reason for
any relending or additional lending of Special Term Loan proceeds to Parent.
Bank shall, to the extent of Two Million Two Hundred Fifty Thousand Nine Hundred
Fifty-Two Dollars ($2,250,952) of the Parent's Existing Loans, satisfy all of
its agreement to make the Special Term Loan to Parent on the Effective Date by
converting such amount of the Parent's Existing Loans into the Special Term
Loan, whereupon such converted amount shall be the Special Term Loan owing by
Parent for all purposes of this Agreement and the other Loan Documents. Such
conversion shall be deemed to have taken place at the time Parent executes and
delivers this Agreement. The Special Term Loan Facility hereunder represents, in
part, a renewal of certain of the Existing Loans outstanding as of the Effective
Date. The amount of the Existing Loans referred to above originally outstanding
under the Existing Credit Agreement is continuing Indebtedness of Parent to
Bank, and nothing contained herein or in any other Loan Document shall be
construed to deem such amount paid, or to release or
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terminate any lien, guaranty or security interest given to secure such amount.
Payment in full of and satisfaction of all Indebtedness with respect to the
Special Term Loan hereunder shall also be deemed to be payment in full and
satisfaction of such amount of the Existing Loans.
2.8 (INTENTIONALLY OMITTED]
2.9 LETTER OF CREDIT FACILITY. Until the termination of this Agreement
pursuant to SECTION 11 and/or SECTION 13 hereof, Bank may issue letters of
credit for the account of either Borrower from time to time ("Letters of
Credit") under the Letter of Credit Facility; PROVIDED, HOWEVER, that the
Individual Letter of Credit Availability for each Borrower and the Aggregate
Letter of Credit Availability shall always be greater than or equal to zero (0).
In the event Bank determines that it shall issue a Letter of Credit, such Letter
of Credit shall be for an amount and a term, and shall be subject to such other
terms and conditions, as may be acceptable to Bank, in its sole discretion. In
no event shall any commercial Letter of Credit have an expiration date which is
more than ninety (90) days from the date of issuance thereof, unless Bank shall
otherwise agree. Notwithstanding the foregoing, Bank shall not be obligated to
issue Letters of Credit if, either immediately before or after giving effect to
any such issuance, (i) a Deficiency has occurred and is continuing or shall
occur or (ii) an Event of Default has occurred and is continuing or shall occur
by issuing any such Letter of Credit. All Existing Letters of Credit, including,
but not limited to, the First Chicago Letter of Credit, shall be deemed to be
outstanding hereunder as Letters of Credit for all purposes of this Agreement
and shall be subject to the terms of this Agreement from and after the Effective
Date.
2.10 DISBURSEMENT OF LOANS. All disbursements of proceeds of the Loans
requested by Borrower pursuant to SECTION 2.11 shall be effectuated by Bank's
crediting (i) Account No. ▇▇▇▇▇▇▇ at Bank, in the case of Loans requested by
Parent, and (ii) Account No. ▇▇▇▇▇▇▇ at Bank, in the case of Loans requested by
Bliss. Each such account is structured and utilized as a non-controlled
disbursement account; PROVIDED, HOWEVER, that Bank may at any time hereafter
elect not to credit proceeds of the Loans to the aforedescribed non- controlled
disbursement accounts, but instead may establish a similar controlled
disbursement account for either Borrower at Bank and disburse proceeds of the
Loans by crediting such controlled disbursement account of such Borrower at
Bank.
2.11 PROCEDURE FOR ADVANCING REVOLVING LOANS AND ISSUING LETTERS OF
CREDIT. Subject to the terms and conditions of this Agreement, Bank will, from
time to time on any Business Day prior to the termination of this Agreement
pursuant to SECTION 11 and/or SECTION 13 hereof, upon the oral
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or written request of a Requesting Borrower therefor, advance Revolving Loans to
such Requesting Borrower's account described in SECTION 2.10 hereof or issue
Letters of Credit, as the case may be; PROVIDED, HOWEVER, that in the event Bank
elects to establish a controlled disbursement account as set forth in SECTION
2.10 for a Borrower, then such Borrower shall thereafter be deemed to have
requested a Revolving Loan each time a check drawn on such account by such
Borrower is presented to Bank for payment thereof. The Requesting Borrower shall
specify in each such request whether a Revolving Loan or a Letter of Credit is
being requested by such Requesting Borrower. In the event a Requesting Borrower
requests a Letter of Credit, such request shall be accompanied by a completed
version of Bank's customary letter of credit application form. If Bank receives
a request from a Requesting Borrower for a Revolving Loan prior to 12:00 noon,
Cincinnati, Ohio time on a Business Day, Bank will advance such Revolving Loan
on that same Business Day. If Bank receives a request from a Requesting Borrower
for a Revolving Loan after 12:00 noon, Cincinnati, Ohio time on a Business Day,
Bank will advance such requested Revolving Loan on the next Business Day. If
Bank receives a request from a Requesting Borrower for a Letter of Credit, Bank
will issue such Letter of Credit on the third (3rd) Business Day following
receipt of such request and the application form for such Letter of Credit from
such Requesting Borrower. Notwithstanding anything in this Agreement to the
contrary, Bank shall not be obligated to advance Loans or issue Letters of
Credit if, either immediately before or after giving effect to any such Loan or
issuance of a Letter of Credit, (i) a Deficiency has occurred and is continuing
or shall occur or (ii) an Event of Default has occurred and is continuing or
shall occur by making such Loan or issuing such Letter of Credit. In the event
that any of the terms of the above- referenced letter of credit application
conflict with the terms of this Agreement, the terms of this Agreement shall
control.
2.12 NO LIMITATION ON LIENS. The limits on outstanding advances against
the Individual Borrower Revolving Loan Borrowing Bases set forth in SECTION 2.3
hereof are not intended and shall not be deemed to limit in any way Bank's
security interest in or lien on the Receivables, Inventory, Equipment, the
Premises or any other collateral for the Obligations.
2.13 DEFICIENCY. If a Deficiency occurs, the Parent or Bliss, as the
case may be, shall immediately, without demand or notice, reduce the outstanding
balance of the Loans made to Parent or Bliss, as the case may be, so that such
Deficiency shall no longer exist; PROVIDED, HOWEVER, that with respect to the
occurrence of a Discretionary Base Deficiency, the applicable Borrower shall
have ten (10)
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Business Days following the occurrence thereof to eliminate such Discretionary
Base Deficiency.
2.14 DRAWING UNDER LETTERS OF CREDIT TO CONSTITUTE REVOLVING LOANS. Upon
each drawing under a Letter of Credit, Bank shall seek reimbursement from any
amounts then on deposit in the applicable Borrower's Letter of Credit Collateral
Account. In the event that (i) no amounts are then on deposit in such Letter of
Credit Collateral Account, (ii) the amount then on deposit in such Letter of
Credit Collateral Account is insufficient to pay the amount of such drawing,
(iii) Bank is legally prevented or restrained from immediately applying amounts
on deposit in such Letter of Credit Collateral Account or (iv) the applicable
Borrower is required to make a payment under SECTION 13.3 hereof and fails to
make such payment as required, then the amount of each unreimbursed drawing
under such Letter of Credit and payment required to be made under SECTION 13.3
shall automatically be converted into a Revolving Loan made to such Borrower on
the date of such drawing for all purposes of this Agreement (but without any
requirement for compliance with any conditions to the making of Revolving Loans
contained in SECTION 6 and SECTION 2.11 hereof). To the extent that Bank applies
amounts on deposit in the applicable Borrower's Letter of Credit Collateral
Account as aforesaid and, thereafter, such application (or any portion thereof)
is rescinded or any amount so applied must otherwise be returned by Bank upon
the insolvency, bankruptcy or reorganization of such Borrower or otherwise, then
the amount so rescinded or returned shall automatically be converted into a
Revolving Loan made to such Borrower on the date of such drawing for all
purposes of this Agreement (but without any requirement for compliance with any
conditions to the making of Revolving Loans contained in SECTION 6 and SECTION
2.11 hereof). Each Borrower's obligation to reimburse Bank with respect to each
drawing under a Letter of Credit shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim, or defense
to payment which such Borrower may have or have had against Bank or any
beneficiary of a Letter of Credit, including any defense based upon the
occurrence of an Event of Default, any draft, demand or certificate or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any drawing under a Letter of Credit to
conform to the terms of such Letter of Credit or any nonapplication or
misapplication by the beneficiary of the proceeds of such drawing or the
legality, validity, form, regularity or enforceability of such Letter of Credit.
2.15 NATURE OF REIMBURSEMENT OBLIGATIONS. Borrowers shall assume all
risks of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. Bank shall not be responsible for:
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(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transfer- ring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof in whole or in part, which may prove to
be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a drawing under a Letter of
Credit or of the proceeds thereof.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted the Bank hereunder. In furtherance and extension, and
not in limitation or derogation of any of the foregoing, any action taken or
omitted to be taken by the Bank in good faith shall be binding upon Borrowers
and shall not put the Bank under any resulting liability to Borrowers.
2.16 EFFECT OF AMENDMENT AND RESTATEMENT. Each Borrower and, by its
execution and delivery of the Consent and Agreement attached hereto, each
Guarantor Subsidiary acknowledges and agrees that (i) this Agreement and the
documents executed and delivered in connection herewith do not constitute a
novation, payment and reborrowing, or termination of (y) the Existing Loans or
the Existing Letter of Credit Obligations under the Existing Credit Agreement
and the Existing Letter of Credit Related Documents as in effect prior to the
Effective Date or (z) the existing guaranty obligations under the Existing
Credit Agreement (the "Existing Guaranty Obligations") as in effect prior to the
Effective Date, (ii) the Existing Loans, the Existing Guaranty Obligations and
the Existing Letter of Credit Obligations are in all respects enforceable with
only the terms thereof being modified as provided by this Agreement and the
other Loan Documents, (iii) the liens and security interests of Bank securing
payment of
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the Existing Loans, the Existing Guaranty Obligations and the Existing Letter of
Credit Obligations under the Loan Documents (as defined in the Existing
Financing Agreement) and the Existing Letter of Credit Related Documents are in
all respects continuing and in full force and effect with respect to the
Obligations hereunder, and (iv) all references to the "Credit Agreement" or
words of like import in any document, instrument or agreement executed and
delivered in connection with the Existing Credit Agreement (to the extent not
amended and restated in connection with this Agreement or expressly superseded
by any agreement, instrument or other document executed in connection with this
Agreement) shall be deemed to refer, without further amendment, to this
Agreement as this Agreement may be further amended or modified. The security
interest in, lien upon and/or conditional assignment of rights and interest of
Borrowers and each other Person granted to Bank pursuant to the Loan Documents
(as defined in the Existing Financing Agreement) are hereby ratified and shall
continue from and after the Effective Date.
3. INTEREST CHARGES; FEES.
----------------------
3.1 INTEREST ON LOANS. The applicable Borrower shall pay Bank interest
on the average daily outstanding principal amount of its (a) Revolving Loans
and all other Obligations (other than the Letter of Credit Obligations and the
Term Loans) at a per annum rate which shall vary from time to time equal to the
rate announced at Bank from time to time as its prime rate (the "Prime Rate"),
(b) Bliss Equipment Term Loan and Real Estate Term Loan at a per annum rate
which shall vary from time to time equal to the Prime Rate plus one-half
percent (.50%), and (c) Special Term Loan at a per annum rate which shall vary
from time to time equal to the Prime Rate PLUS two percent (2.00%), each such
rate to be adjusted on the effective date of any change in the Prime Rate by
Bank. Notwithstanding clause (c) above, in the event that the HRS Sale shall not
have been consummated on or before June 30, 1997, the per annum rate of interest
on the outstanding principal amount of the Special Term Loan shall be increased
to the Prime Rate PLUS two and one-quarter percent (2.25%). Such interest rate
shall be reduced to the rate referred to in clause (c) above upon the
consummation of the HRS Sale in compliance with the terms of this Agreement. The
Prime Rate is determined solely by Bank pursuant to market factors and its own
operating needs and is not necessarily Bank's best or most favorable rate for
commercial or other loans. The per annum rate of interest applicable at all
times after the occurrence of an Event of Default shall be the applicable rate
of interest set forth above plus an additional two percent (2.00%) per annum.
3.2 INCREASED COSTS - CAPITAL ADEQUACY. In case of any change in law or
governmental rules, regulations,
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guidelines or orders (or any interpretations thereof) or the introduction of new
laws, regulations or guidelines regarding capital adequacy, capital maintenance
or similar requirement or has the effect thereof (including a requirement which
affects the manner in which Bank allocates capital resources to any of its
commitments, including its commitments hereunder) and as a result of such
change or introduction, in the opinion of Bank (in its sole and absolute
discretion), the rate of return on Bank's capital as a consequence of its
lending commitments hereunder is reduced to a level below that which Bank could
have achieved but for such circumstances (taking into consideration Bank's
policies with respect to capital adequacy and capital maintenance) by an amount
deemed by Bank to be material, then and in each such case Bank may charge
Borrowers an additional fee which will compensate Bank for such reduction in the
rate of return caused by such requirements.
3.3 (INTENTIONALLY OMITTED]
3.4 TERM LOAN FEE. Borrowers shall pay Bank a closing fee of Five
Thousand Dollars ($5,000) with respect to the Bliss Equipment Term Loan and the
Real Estate Equipment Term Loan on the Effective Date.
3.5 UNUSED FACILITY FEE. Borrowers shall pay to the Bank, for the period
from and including the Effective Date and continuing until the termination of
this Agreement pursuant to SECTION 11 and/or SECTION 13 hereof, an unused
facility fee computed at the rate of one-quarter of one percent (0.25%) per
annum on the Unused Revolving Loan Facility Amount, payable for each month (or,
in the case of the first such payment, portion of the calendar month since the
Effective Date) by Borrowers monthly in arrears on the first day of the
following calendar month, commencing with the first such date following the
Effective Date, and on the date this Agreement shall have been terminated
pursuant to SECTION 11 and/or SECTION 13 hereof.
3.6 LETTER OF CREDIT FEES. The applicable Borrower shall pay Bank a
letter of credit fee equal to (a) one and one-half percent (1.50%) per annum of
the face amount of each standby Letter of Credit, computed on the basis of a
year of three hundred sixty (360) days and applied to actual days elapsed and
payable monthly in arrears on the first day of each month, and (b) Bank's
customary fees with respect to commercial Letters of Credit, payable on the date
of issuance thereof (and upon each renewal thereof, if applicable). In addition,
the applicable Borrower shall pay Bank all of Bank's standard and customary fees
and charges to issue, terminate or amend any Letter of Credit.
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3.7 INTEREST RATE PROTECTION. Each Borrower may, at such Borrower's
cost, obtain and maintain interest rate protection to protect against future
increases in the Prime Rate.
3.8 CALCULATION OF CERTAIN CHARGES. Accrued interest charges and the
fees set forth in SECTION 3.5 shall be computed on the basis of a year of three
hundred sixty (360) days and applied to actual days elapsed and shall be payable
monthly to Bank on the first day of each month hereafter. All such interest
charges and other fees hereunder shall be paid in arrears, except that the fees
set forth in SECTION 3.3 and SECTION 3.4, shall be paid in accordance with such
Sections.
3.9 CHARGING LOAN ACCOUNT. Each Borrower hereby authorizes Bank, at
Bank's option, to charge any account or charge or increase any Loan balance of
Borrower at Bank for the payment or repayment of any interest or principal of
the Loans or any fees, charges or other amounts due to Bank hereunder or
otherwise.
3.10 MAXIMUM RATE. If at any time the rate of interest computed in the
manner provided in this SECTION 3 ("Applicable Rate"), together with all fees
and charges as provided for herein or in any other Loan Document (collective-
ly, the "Charges"), which are treated as interest under applicable law exceeds
the maximum lawful rate (the "Maximum Rate") allowed under applicable law, the
rate of interest payable hereunder, together with all Charges, shall be limited
to the Maximum Rate; PROVIDED, HOWEVER, that any subsequent reduction in the
Prime Rate shall not reduce the Applicable Rate below the Maximum Rate until the
total amount of interest earned hereunder, together with all Charges, equals the
total amount of interest which would have accrued at the Applicable Rate if the
Applicable Rate had at all times been in effect. If any payment hereunder, for
any reason, results in a Borrower having paid interest in excess of that
permitted by applicable law, then all excess amounts theretofore collected by
Bank shall be credited on the principal balance owing hereunder (or, if all sums
owing hereunder have been paid in full, refunded to such Borrower), and the
amounts thereafter collectible hereunder shall immediately be deemed reduced,
without the necessity of the execution of any new document, so as to comply with
applicable law and permit the recovery of the fullest amount otherwise called
for hereunder.
4. MONTHLY ACCOUNTINGS. Bank will provide each Borrower monthly with a statement
of advances, charges and payments made pursuant to this Agreement and such
account rendered by Bank shall be presumptive evidence of the amount of the
Obligations owing and unpaid by such Borrower and shall be
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deemed binding as against such Borrower unless such statement contains manifest
errors.
5. SECURITY. The Obligations shall be secured by the documents and collateral
described in this SECTION 5 and the documents described in the Exhibits and
Schedules to this Agreement, each of which are incorporated herein by reference.
The following documents shall be in form and substance satisfactory to Bank and
its counsel, and the Collateral, the Premises, and other assets and property
covered thereby shall secure the Obligations in such order as may be determined
by Bank in its sole discretion.
5.1 SECURITY AGREEMENT. The Obligations shall be secured by a security
interest in all of the Collateral, pursuant to an Amended and Restated Security
Agreement in substantially the form of EXHIBIT A attached hereto and
incorporated herein by reference (the "Security Agreement") and accompanying
financing statements in form and substance suitable for filing under the
applicable state(s) version(s) of the Uniform Commercial Code. The Obligations
also shall be secured by a security interest in all of the Collateral of HMI
Inc., Tube-Fab and HMI Acceptance, pursuant to (i) a General Security Agreement,
dated June 6, 1997, executed by HMI Inc. in favor of Bank, (ii) a General
Security Agreement, dated June 6, 1997, executed by Tube-Fab in favor of Bank,
(iii) a General Security Agreement, dated June 6, 1997, executed by HMI
Acceptance in favor of Bank, and (iv) a Demand Debenture, dated June 6, 1997,
executed by Tube-Fab in favor of Bank, each of which is attached hereto as
EXHIBIT B and incorporated herein by reference (as the same may be further
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Canadian Security Agreements") and accompanying financing statements
in form and substance suitable for filing under Ontario's and ▇▇▇▇▇▇ ▇▇▇▇▇▇
Island's equivalent of the Uniform Commercial Code.
5.2 PATENT ASSIGNMENTS. The Obligations shall be secured by an
assignment of (a) Parents's patents, trademarks, licenses and related rights
and interests, pursuant to a Contingent Patent, Trademark and License Assignment
in substantially the form attached hereto as EXHIBIT C-1, and incorporated
herein by reference, and (b) Bliss' patents, trademarks, licenses and related
rights and interests, pursuant to a Contingent Patent, Trademark and License
Assignment in substantially the form attached hereto as EXHIBIT C-2, and
incorporated herein by reference (collectively, the "Patent Assignments").
5.3 [INTENTIONALLY OMITTED]
5.4 MORTGAGES. The Obligations shall be secured by a mortgage on and
security interest in all of Bliss' and
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▇▇▇▇▇▇'▇ owned real property and all improvements thereon and all of Bliss' and
▇▇▇▇▇▇'▇ right, title and interest in and to its leasehold interest in the real
property, as applicable, located at (i) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, (ii) ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and (iii) ▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, (collectively and individually, the
"Mortgaged Premises"), pursuant to Open-End Mortgage and Security Agreements,
and First Amendments to Open-End Mortgages, in substantially the forms attached
hereto as Exhibit E-1, Exhibit E-2, Exhibit E-3 and Exhibit E-4, respectively
(collectively, the "Mortgages"), and incorporated herein by reference.
5.5 (INTENTIONALLY OMITTED]
5.6 (INTENTIONALLY OMITTED)
5.7 INTERCREDITOR AGREEMENT. Bank, Noteholders, Borrowers and the
Guarantor Subsidiaries shall enter into an Intercreditor Agreement in form and
substance satisfactory to Bank ("Intercreditor Agreement"), and incorporated
herein by reference.
5.8 GUARANTYS. The Obligations shall be unconditionally guaranteed by
(a) HMI Inc., Tube-Fab and HMI Acceptance pursuant to the terms of a Canadian
Guaranty in substantially the form of EXHIBIT I-1 attached hereto and
incorporated herein by reference (the "Canadian Guaranty") I and (b) each
Borrower and each Guarantor Subsidiary (other than HMI Inc., Tube-Fab and HMI
Acceptance) pursuant to the terms of an Amended and Restated Guaranty in
substantially the form of EXHIBIT I-2 attached hereto and incorporated herein by
reference (the "Guaranty") .
5.9 PLEDGE AGREEMENT. The Obligations shall be secured by a pledge of
and security interest in all of the outstanding shares of capital stock of Bliss
and each Guarantor Subsidiary, pursuant to a Pledge and Security Agreement in
substantially the form of EXHIBIT J attached hereto and incorporated herein by
reference (the "Pledge Agreement") .
6. DELIVERIES PRIOR TO DISBURSEMENT; FURTHER ASSURANCES. Prior to the
effectiveness of this Agreement, Borrowers shall have delivered to Bank all of
the documents, instruments and other information and shall have satisfied all
other conditions described in EXHIBIT K attached hereto and incorporated herein
by reference. Borrowers agree to execute and deliver or cause to be executed and
delivered any and all further documents and instruments and to take any and all
further actions as may be determined by Bank to be necessary or appropriate to
the transactions contemplated herein.
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7. RECEIVABLES; COLLECTION OF RECEIVABLES; DISPUTED RECEIVABLES; PROCEEDS OF
INVENTORY.
7.1 REPRESENTATIONS AND WARRANTIES REGARDING RECEIVABLES. Each Borrower
agrees, represents and warrants that each Receivable of either Borrower or of
HMI Inc. or Tube-Fab or HMI Acceptance and each invoice representing any such
Receivable (other than proceeds of letters of credit, insurance proceeds,
contract rights, chattel paper, instruments and documents not arising directly
out of a sale or lease of goods or services) will cover a bona fide sale or
lease and delivery of merchandise usually dealt in by such Borrower, HMI Inc. or
Tube-Fab or HMI Acceptance, as the case may be, or the rendition by such
Borrower, HMI Inc. or Tube-Fab or HMI Acceptance, as the case may be, of
services to customers in the ordinary course of business, and will be for a
liquidated amount maturing as stated in the schedule thereof and in the
duplicate invoice covering said sale, and Bank's security interest therein, will
not be subject to any offset, deduction, counterclaim, lien or other condition.
None of either Borrower's, HMI Inc.'s or Tube-Fab's or HMI Acceptance's invoices
shall be backdated, postdated or redated and neither Borrower nor HMI Inc. or
Tube-Fab or HMI Acceptance shall make sales on extended dating or credit terms
beyond that customary in such Borrower's, HMI Inc.'s or Tube- Fab's or HMI
Acceptance's, as the case may be, industry. If any warranty is breached as to
any Receivable or as to the invoice representing any such Receivable, then Bank
may deem such Receivable ineligible, but Bank shall retain its security interest
in such Receivable, until all Obligations have been fully satisfied. Each
Borrower shall notify Bank promptly upon, but in no event later than one (1)
Business Day after such Borrower's learning thereof, in the event any Eligible
Receivable becomes ineligible for any reason other than the aging of such
receivable and of the reasons for such ineligibility.
7.2 DISPUTES AND CLAIMS REGARDING RECEIVABLES . On request after the
occurrence of an Event of Default, the applicable Borrower, HMI Inc., or
Tube-Fab, as the case may be, shall deliver any merchandise which has been
returned to or recovered by it to Bank at a location or locations selected by
Bank in its sole discretion. Each Borrower, HMI Inc. and Tube-Fab and HMI
Acceptance shall also notify Bank in writing, simultaneously with the delivery
of the Financials required to be delivered under SECTION 8.5, of all disputes
and claims in the event that the aggregate amount of all such disputes and
claims equal or exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time
during any calendar month. Each Borrower, HMI Inc. or Tube-Fab, as the case may
be, shall settle or adjust all disputes and claims at no expense to Bank, but,
after the occurrence of an Event of Default, no discount, credit or allowance
outside the ordinary course of
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business or adverse extension, compromise or settlement shall be granted to any
customer or account debtor and no returns of merchandise outside the ordinary
course of business shall be given, made or accepted by such Borrower, HMI Inc.,
or Tube- Fab, as the case may be, without Bank's prior written consent.
7.3 LOCKED BOXES. Bank may at any time deliver written notice to each
Borrower (such notice being referred to as a "Cash Collateralization Notice")
stating that on and after the date of such notice, all remittances of every kind
due such Borrower ("Remittances") must be forwarded to its Locked Box and/or
deposited into its Special Account. On and after the date on which Bank shall
have delivered a Cash Collateralization Notice to each Borrower, (a) Parent
shall rent and shall continue to rent a post office box at the U.S. Post Office
bearing an address to be determined at that time (the "Parent Locked Box"), and
(b) Bliss shall rent and shall continue to rent a post office box at the U.S.
Post Office bearing an address to be determined at that time (the "Bliss Locked
Box") . On and after the date on which Bank shall have delivered a Cash
Collateralization Notice to each Borrower, each Borrower shall notify all of its
customers and account debtors to forward all Remittances to its Locked Box (such
notices to be in such form and substance as Bank may require from time to time),
and immediately upon receipt thereof, such Borrower shall deposit all other
proceeds of Receivables, other Collateral or the Premises into its Locked Box
(or into its Special Account) . Bank shall have sole access to the Locked Boxes
at all times and Borrowers shall take all action necessary to grant Bank such
sole access. Once established, neither Borrower shall remove, or permit to be
removed by any Person other than Bank, any item from the Locked Boxes without
Bank's prior written consent, and neither Borrower shall notify any customer or
account debtor to pay any Remittance to any other place or address without
Bank's prior written consent. If either Borrower should neglect or refuse to
notify any customer or account debtor to pay any Remittance to its Locked Box,
Bank shall be entitled to make such notification. Each Borrower hereby grants to
Bank an irrevocable power of attorney, coupled with an interest, to take in
Borrower's name on and after delivery of a Cash Collateralization Notice all
action necessary (i) to grant Bank sole access to its Locked Box, (ii) to
contact account debtors to pay any Remittance to its Locked Box or for any other
reason, and (iii) to endorse each Remittance delivered to its Locked Box for
deposit to its Special Account.
7.4 SPECIAL ACCOUNTS. After delivery of a Cash Collateralization Notice,
upon collection of Remittances and other proceeds of Receivables, other
Collateral, the Premises and any other security for the Obligations from (a) the
Parent Locked Box, Bank shall deposit the same in an account to be established
at Bank for Remittances and other
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proceeds of Receivables, other Collateral, the Premises and any other security
for the Obligations of the Parent (the "Parent Special Account"), and (b) the
Bliss Locked Box, Bank shall deposit the same in an account to be established at
Bank for Remittances and other proceeds of Receivables, other Collateral, the
Premises and any other security for the Obligations of Bliss (the "Bliss Special
Account") . Prior to, on and after the date a Cash Collateralization Notice
shall have been delivered, any Remittance or other proceeds of Receivables,
other Collateral, the Premises or other security for the Obligations received by
either Borrower shall be deemed held by such Borrower in trust and as fiduciary
for Bank, and on and after the date a Cash Collateralization Notice shall have
been delivered, such Borrower immediately shall deposit the same, in its
original form, into its Locked Box or its Special Account. On and after the date
a Cash Collateralization Notice shall have been delivered, each Borrower agrees
that it will not commingle any such Remittance or other proceeds of Receivables,
other Collateral, the Premises or any other security for the Obligations with
any of such Borrower's other funds or property, but will hold it separate and
apart therefrom in trust and as fiduciary for Bank. All deposits to the Special
Accounts shall be Bank's property and shall be subject only to the signing
authority designated from time to time by Bank, and neither Borrower nor any
Person other than Bank shall have any interest therein or control thereover.
Bank shall have sole access to the Special Accounts, and neither Borrower nor
any Person other than Bank shall have access thereto. Bank shall have, and each
Borrower hereby grants to Bank, a security interest in all funds held in such
Borrower's Locked Box and Special Account as security for the Obligations. The
Special Accounts shall not be subject to any deduction, set-off, banker's lien
or any other right in favor of any person or entity other than Bank. Subject to
the terms of this Agreement, prior to the occurrence of an Event of Default,
deposits to the Special Accounts shall be applied FIRST to all accrued and
unpaid interest on the principal amount of the applicable Borrower's Loans,
SECOND to the outstanding principal amount of the applicable Borrower's
Revolving Loans, THIRD to the then outstanding principal amount of the Special
Term Loan, fourth to the principal installments of the Real Estate Term Loan in
the inverse order of maturity, FIFTH to the principal installments of the Bliss
Equipment Term Loan in the inverse order of maturity, and SIXTH to the other
Obligations in such order and method of application as may be elected by Bank in
its sole discretion. Subject to the terms of this Agreement, after the
occurrence and during the continuance of an Event of Default, deposits to the
Special Accounts may be applied against the Obligations in such order and method
of application as may be elected by Bank in its sole discretion. Any funds in
the Special Accounts which Bank elects not to apply to the Obligations as
provided in the preceding
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sentences may, at Bank's option, be paid over by Bank to the applicable Borrower
or retained in the Special Account as continuing security for the Obligations.
Each Borrower hereby indemnifies and holds Bank harmless from and against any
loss or damage with respect to any Remittance deposited in the Special Accounts
which is dishonored or returned for any reason. If any Remittance deposited in
the Special Accounts is dishonored or returned unpaid for any reason, Bank, in
its sole discretion, may charge the amount of such dishonored or returned
Remittance directly against the applicable Borrower and/or any account
maintained by such Borrower with Bank and such amount shall be deemed part of
the obligations hereunder. Bank shall not be liable for any loss or damage
resulting from any error, omission, failure or negligence on the part of Bank
under this Agreement, other than loss or damage which is the consequence of
Bank's gross negligence or willful misconduct. Each Borrower hereby agrees that
it will not assert any claims or set-off rights against Bank as a result of such
Borrower's maintaining its Special Account with Bank.
7.5 CREDITING OF REMITTANCES. On and after the date a Cash
Collateralization Notice shall have been delivered, for the purpose of
calculating interest, all Remittances and other proceeds of Receivables, other
Collateral, the Premises and any other security for the Obligations shall be
credited to the applicable Borrower (conditional upon final collection) two (2)
Business Days after Bank receives notice of deposit of the same into such
Borrower's Special Account; provided, however, in the event that Bank receives
notice of such deposit later than 12:00 noon on any Business Day, such
Remittance deposited shall be credited to such Borrower (conditional upon final
collection) three (3) Business Days after such deposit. On and after the date a
Cash Collateralization Notice shall have been delivered, for the purpose of
determining the aggregate loan availability hereunder, all such Remittances
shall be credited on the Business Day on which Bank receives notice of such
deposit into the applicable Borrower's Special Account. From time to time, Bank
may adopt such regulations and procedures as it may deem reasonable and
appropriate with respect to the operation of the Special Accounts, the Locked
Boxes and the services to be provided by Bank under this Agreement.
7.6 COST OF COLLECTION. All costs of collection of Borrowers'
Receivables, including Attorney's Fees, out-of-pocket expenses, administrative
and record- keeping costs, and all service charges and costs related to the
establishment and maintenance of the Locked Boxes and the Special Accounts shall
be the sole responsibility of Borrowers, whether the same are incurred by Bank
or either Borrower, and Bank, in its sole discretion, may charge the same
against Borrowers and/or any account maintained by
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Borrowers with Bank and the same shall be deemed part of the Obligations
hereunder.
8. EXAMINATION OF COLLATERAL AND THE PREMISES; REPORTING.
8.1 MAINTENANCE OF BOOKS AND RECORDS. Each Borrower shall keep and
maintain complete books of account, records and files with respect to its
business in accordance with generally accepted accounting principles
consistently applied and shall accurately and completely record all transactions
therein.
8.2 ACCESS AND INSPECTION. Bank may at all times have access to and the
right to examine and inspect all of either Borrower's or any Guarantor
Subsidiary's real and personal property, and access to and the right to inspect,
audit and make extracts from all of either Borrower's or any Guarantor
Subsidiary's records, files and books of account; additionally, each Borrower
shall execute and deliver at the request of Bank such instruments as may be
necessary for Bank to obtain such information concerning the business of such
Borrower or any Guarantor Subsidiary as Bank may require from any Person. Each
Borrower shall furnish Bank with such statements and reports regarding such
Borrower's or any Guarantor Subsidiary's financial condition and the results of
such Borrower's or Guarantor Subsidiary's operations, in addition to those
hereinafter required, and such other information as Bank may request from time
to time. Each Borrower shall permit Bank to discuss such Borrower's or any
Guarantor Subsidiary's financial matters with such Borrower's or Guarantor
Subsidiary's officers and accountants (and hereby authorizes such officers and
accountants to discuss such Borrower's or Guarantor Subsidiary's financial
matters with Bank) .
8.3 REPORTING REGARDING RECEIVABLES. (a) No later than forty (40) days
after the end of each month, or sooner if available, each Borrower shall provide
to Bank schedules in such form and substance and accompanied by such documents
as Bank may require describing all Receivables created or acquired by such
Borrower and by HMI Inc., Tube-Fab and HMI Acceptance.
(b) No later than forty (40) days after the end of each month, or sooner
if available, each Borrower shall deliver to Bank a monthly borrowing base
certificate in the form of Exhibit L attached hereto and incorporated herein by
reference (a "Borrowing Base Certificate") and monthly summary reports of such
Borrower's (and HMI Inc.'s and Tube-Fab's and HMI Acceptance's) sales, credits
to sales or credit memoranda applicable to sales, collections and non-cash
charges in such form and substance as Bank may require.
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(c) No later than forty (40) days after the end of each month, or sooner
if available, each Borrower shall deliver to Bank monthly summary reports in
such form and substance as Bank may require of agings, broken down by invoice
date, of accounts receivable, reconciled to the Borrowing Base Certificate for
the end of such month , together with such further information with respect
thereto as Bank may require. Each such monthly summary report also shall include
a summary report of HMI Inc.'s and Tube-Fab's and HMI Acceptance's agings,
broken down by invoice date, of accounts receivable for the end of such month,
together with such further information with respect thereto as Bank may require.
No later than forty (40) days after the end of each month, or sooner if
available, each Borrower also shall deliver to Bank monthly summary reports in
such form and substance as Bank may require of agings of accounts payable listed
by invoice date, together with such further information with respect thereto as
Bank may require. Each such monthly summary report shall include a report of HMI
Inc.'s and Tube-Fab's and HMI Acceptance's agings of accounts payable listed by
invoice date, together with such further information with respect thereto as
Bank may require.
8.4 REPORTING REGARDING INVENTORY. (a) Each Borrower shall conduct a
full and complete physical count of its Inventory (and the Inventory of HMI Inc.
and Tube-Fab and HMI Acceptance) at least quarterly or more frequently if Bank
shall require, in a manner and in accordance with procedures approved by such
Borrower's independent certified public accountants and Bank, and shall promptly
extend, price and summarize such physical counts and submit a written report
thereof to Bank no later than forty (40) days after the end of each calendar
quarter.
(b) Values shown on reports of Inventory shall be at the lower of cost
or market value determined on a "first in first out" basis, consistently
applied.
(c) No later than forty (40) days after the end of each month, or more
frequently, if Bank shall so request, each Borrower shall submit to Bank a
summary inventory report in such form and substance as Bank may require
reconciled to the Borrowing Base Certificate for the end of such month, broken
down into such detail and with such categories as Bank shall require. Each such
monthly summary report shall include an inventory report of HMI Inc. and
Tube-Fab and HMI Acceptance, broken down into such detail and with such
categories as Bank shall require
(d) No later than forty (40) days after the end of each month, or sooner
if available, each Borrower shall deliver to Bank a monthly Borrowing Base
Certificate reporting the value of such Borrower's Inventory as of the end of
the
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period for which such Borrower has provided Bank information in accordance with
SECTION 8.4(c).
8.5 MONTHLY FINANCIAL STATEMENTS. Promptly when available and in any
event not later than forty (40) days after the end of each month, Borrowers
shall furnish to Bank monthly statements, on a consolidated and consolidating
basis, showing each Borrower's and Guarantor Subsidiary's financial condition
and the results of each Borrower's and Guarantor Subsidiary' 5 operations for
the periods covered by such statements in such detail as Bank may from time to
time require, prepared in accordance with generally accepted accounting
principles consistently applied (subject to normal year-end adjustments and
excluding footnotes) and containing all disclosures (other than footnotes)
required to fully and accurately present the financial position and results of
operations of each Borrower, each Guarantor Subsidiary and each of their
respective divisions and to make such statements not misleading under the
circumstances. Said statements shall include: (i) a comparison prepared by
Borrowers of the consolidated projected financial position and results of
operations of each of the Manufactured Product Segment and the Consumer Goods
Segment of the Borrowers' and the Guarantor Subsidiaries' businesses provided
for in Section 8.6 hereof with the consolidated actual financial position and
results of operations of each of the Manufactured Product Segment and the
Consumer Goods Segment of the Borrowers' and the Guarantor Subsidiaries'
businesses and an explanation of any variations between them; and (ii) a
comparison between consolidated actual calculated results and consolidated
covenanted results for each of the Financial Covenants contained in Exhibit M
attached hereto and incorporated herein by reference.
8.6 ANNUAL PROJECTIONS. No later than thirty (30) days after the end of
each of each Borrower's fiscal years, Borrowers shall furnish to Bank detailed
consolidated projections for the next twelve (12) months setting forth
consolidated projected income and cash flow for each month and the consolidated
projected balance sheet as of the end of each month for each of the Manufactured
Product Segment and the Consumer Goods Segment of the Borrowers' and the
Guarantor Subsidiaries' businesses. Such consolidated projections shall be
prepared in a manner fully and accurately presenting the consolidated projected
financial condition and results of operations of each of the Manufactured
product Segment and the Consumer Goods Segment of the Borrowers' and the
Guarantor Subsidiaries' businesses and making such projections not misleading
under the circumstances.
8.7 AUDITED ANNUAL FINANCIAL STATEMENTS. Promptly when available and in
any event not later than ninety (90) days after the end of each of Borrowers'
fiscal years, Borrowers shall submit to Bank statements (prepared on a
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consolidated basis), showing the financial condition of the Borrowers and the
Guarantor Subsidiaries, the results of operations of the Borrowers and the
Guarantor Subsidiaries, a balance sheet and related statements of income,
shareholder's equity, and changes in cash flows of the Borrowers and the
Guarantor Subsidiaries for the year then ended. Such statements shall be
audited in accordance with generally accepted auditing standards by an
independent certified public accountant acceptable to Bank and shall be
prepared and presented in accordance with generally accepted accounting
principles consistently applied. Such statements shall be delivered to Bank
together with an audit report of such independent certified public accountant
addressed to Bank.
8.8 MANAGEMENT REPORTS. Borrowers shall furnish to Bank promptly upon
receipt copies of all management letters and any other material reports provided
by Borrowers' and the Guarantor Subsidiaries' independent accountants. Borrowers
hereby authorize Bank to communicate directly with Borrowers' and Guarantor
Subsidiaries' independent accountants to discuss Borrowers' and Guarantor
Subsidiaries' affairs, finances, accounts and such other matters as Bank deems
necessary .
8.9 FINANCIAL CERTIFICATE. Borrowers shall furnish Bank together with
all materials required pursuant to Section 8.5, Section 8.6, Section 8.7,
Section 8.11 and Section 8.12 hereof, a certificate signed by the Chief
Financial Officer of each Borrower in the form of Exhibit N attached hereto.
8.10 PUBLIC FILINGS. Borrowers shall furnish to Bank promptly upon any
filing thereof by either Borrower or any Guarantor Subsidiary with the
Securities and Exchange Commission, any annual, periodic or special report or
registration statement (without exhibits) generally available to the public and
all proxies. Borrowers also shall furnish to Bank upon release thereof any press
releases regarding Borrowers or the Guarantor Subsidiaries.
8.11 QUARTERLY FINANCIAL STATEMENTS. Promptly when available and in any
event not later than forty-five (45) days after the end of each quarter,
Borrowers shall furnish to Bank quarterly statements, on a consolidated and
consolidating basis, showing each Borrower's and Guarantor Subsidiary's
financial condition and the results of each Borrower's and Guarantor
Subsidiary's operations for the periods covered by such statements in such
detail as Bank may from time to time require, prepared in accordance with
generally accepted accounting principles consistently applied (subject to normal
year-end adjustments and excluding footnotes) and containing all disclosures
(other than footnotes) required to fully and accurately present the financial
position and results of
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operations of each Borrower, each Guarantor Subsidiary and each of their
respective divisions and to make such statements not misleading under the
circumstances. Said statements shall include: (i) a comparison prepared by
Borrowers of the consolidated projected financial position and results of
operations of each of the Manufactured Product Segment and the Consumer Goods
Segment of the Borrowers' and the Guarantor Subsidiaries' businesses provided
for in Section 8.6 hereof with the consolidated actual financial position and
results of operations of each of the Manufactured Product Segment and the
Consumer Goods Segment of the Borrowers' and the Guarantor Subsidiaries'
businesses and an explanation of any variations between them; and (ii) a
comparison between consolidated actual calculated results and consolidated
covenanted results for each of the Financial Covenants contained in Exhibit M
attached hereto and incorporated herein by reference.
8.12 UNAUDITED ANNUAL FINANCIAL STATEMENTS. Promptly when available and
in any event not later than ninety (90) days after the end of each of Borrowers'
fiscal years, Borrowers shall submit to Bank statements (prepared on a
consolidated and consolidating basis), showing the financial condition of each
Borrower and each Guarantor Subsidiary, the results of operations of each
Borrower and each Guarantor Subsidiary, a balance sheet (which balance sheet
shall be a consolidated balance sheet, if applicable) and related statements of
income, and shareholder's equity of each Borrower and each Guarantor Subsidiary
for the year then ended. Such statements shall be prepared and presented by
Borrowers in accordance with generally accepted accounting principles
consistently applied. Said statements shall include: (i) a comparison prepared
by Borrowers of the consolidated projected financial position and results of
operations of each of the Manufactured Product Segment and the Consumer Goods
Segment of the Borrowers' and the Guarantor Subsidiaries' businesses provided
for in SECTION 8.6 hereof with the consolidated actual financial position and
results of operations of each of the Manufactured Product Segment and the
Consumer Goods Segment of the Borrowers' and the Guarantor Subsidiaries'
businesses and an explanation of any variations between them; and (ii) a
comparison between consolidated actual calculated results and consolidated
covenanted results for each of the Financial Covenants contained in Exhibit M
attached hereto and incorporated herein by reference.
9. WARRANTIES, REPRESENTATIONS AND COVENANTS. In order to induce Bank to enter
into this Agreement and to make Loans hereunder, each Borrower warrants,
represents and covenants that, on the Effective Date, on each date upon which a
Loan is made hereunder, and until the Obligations are fully paid, per- formed
and satisfied, the representations, warranties and covenants set forth below are
and shall remain true.
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9.1 ORGANIZATION, ETC. Each Borrower and each Guarantor Subsidiary is
and shall remain duly organized, validly existing and in good standing under the
laws of the states and other jurisdictions set forth on SCHEDULE 1 attached
hereto and incorporated herein by reference, and is and shall remain qualified
to do business and is and shall remain in good standing as a foreign corporation
under the laws of the states and other jurisdictions set forth on SCHEDULE 1
attached hereto and incorporated herein by reference and in each other
jurisdiction in which the failure to be so qualified and in good standing could
have a Material Adverse Effect. Each Borrower and each Guarantor Subsidiary has
and shall maintain all requisite power and authority, corporate or otherwise, to
conduct its business, to own its property and to execute, deliver and perform
all of its obligations under this Agreement and each of the other Loan Documents
to which it is a party.
9.2 DUE AUTHORIZATION. VALIDITY, ETC. This Agreement and each of the
other Loan Documents have been duly executed and delivered and authorized by all
requisite corporate, organizational or other action of each Borrower and each
Guarantor Subsidiary, and each will constitute, upon the due execution and
delivery thereof, the legal, valid, and binding obligation of each Borrower and
each Guarantor Subsidiary, enforceable in accordance with its respective terms.
9.3 NO VIOLATION. The execution, delivery and/or performance by either
Borrower or any Guarantor Subsidiary of this Agreement and the other Loan
Documents does not and will not (i) constitute a violation of any applicable law
or a breach of any provision contained in such Borrower's or such Guarantor
Subsidiary's Articles or Certificate of Incorporation or Code of Regulations or
By-Laws or contained in any order of any court or other governmental agency or
in any agreement, instrument or document to which such Borrower or such
Guarantor Subsidiary is a party or by which such Borrower or such Guarantor
Subsidiary or any of such Borrower's or such Guarantor Subsidiary's properties
is bound or (ii) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of such Borrower's or such
Guarantor Subsidiary's properties (other than in favor of Bank hereunder) .
9.4 USE OF LOAN PROCEEDS. Each Borrower's uses of the proceeds of the
Loans made by Bank to such Borrower pursuant to this Agreement are, and will
continue to be, legal and proper corporate uses (duly authorized by such
Borrower' s Board of Directors), such uses do not and shall not violate any
applicable laws or statutes as in effect as of the date hereof or hereafter, and
the Loans are not and shall not be secured, directly or indirectly, by any stock
For the
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purpose of purchasing or carrying any margin stock or for any
purpose which would violate either Regulation U, 12 C.F.R.
Part 221, or Regulation X, 12 C.F.R. Part 224, promulgated by
the Board of Governors of the Federal Reserve System.
9.5 MANAGEMENT: OWNERSHIP OF ASSETS, LICENSES, PATENTS. ETC. Each
Borrower and each Guarantor Subsidiary possesses and shall continue to possess
active, full-time, professional management adequate to handle its affairs and
adequate employees, assets, governmental approvals, permits, licenses, patents,
copyrights, trademarks and trade names to continue to conduct its business as
heretofore and hereafter conducted by it, and all such governmental approvals,
permits, licenses, patents, copyrights, trademarks and trade names are described
in Schedule 2 attached hereto and incorporated herein by reference.
9.6 INDEBTEDNESS. Except for (i) Indebtedness disclosed in either the
Financials delivered on or before the Effective Date or in SCHEDULE 3 attached
hereto and incorporated herein by reference, (ii) the Obligations, (iii)
Indebtedness (a) which is unsecured, (b) which is not for borrowed money, (c)
which has been incurred in the ordinary course of business, (d) which is not
otherwise prohibited under any provision of this Agreement or any other Loan
Document, and (e) the nonpayment or other default under which would not have a
Material Adverse Effect, and (iv) other Indebtedness permitted to be incurred or
paid by such Borrower or such Guarantor Subsidiary pursuant to Section 10.11,
neither Borrower nor any Guarantor Subsidiary has Indebtedness, and, except as
otherwise set forth in Schedule 3 attached hereto, has not guaranteed the
obligations of any other Person.
9.7 TITLE TO PROPERTY; NO LIENS. Each Borrower and each Guarantor
Subsidiary has good, indefeasible and merchantable title to and ownership of, or
leasehold interest in, all of its real and personal property, including, without
limitation, its Collateral, the Premises, and other security for the
Obligations, free and clear of all liens, claims, security interests,
assignments, mortgages, pledges and encumbrances, except Permitted Liens and
except as described in SCHEDULE 4 attached hereto and incorporated herein by
reference.
9.8 RESTRICTIONS; LABOR DISPUTES; LABOR CONTRACTS, ETC. Except as
described in Schedule 5 attached hereto and incorporated herein by reference,
neither Borrower nor any Guarantor Subsidiary is a party or subject to any
charge, restriction, judgment, decree or order, adversely affecting its
business, property, assets, operations or condition, financial or otherwise, or
any labor dispute which could have a Material Adverse Effect; and there are not
any
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strikes or walkouts relating to any labor contracts and, except as described in
SCHEDULE 5 attached hereto, no such contract is scheduled to expire within three
(3) years of the date hereof. Except as described in Schedule 5 attached hereto
and incorporated herein by reference, neither Borrower nor any Guarantor
Subsidiary is a party to any or labor contract .
9.9 NO VIOLATION OF LAW; HAZARDOUS MATERIALS. Except as described in
Schedule 6 attached hereto and incorporated herein by reference, Borrower is
not in violation of any applicable statute, regulation or ordinance of any
governmental entity (including, but not limited to, any Environmental Law) ,
the violation of which could have a Material Adverse Effect. Without limiting
the generality of the foregoing sentence, no Hazardous Material (i) is located
on any real property owned or leased by either Borrower or any Guarantor
Subsidiary except to the extent that such presence is maintained in compliance
with all applicable laws, the noncompliance with which could have a Material
Adverse Effect, or (ii) has been discharged or is penetrating into any real
property or surface or subsurface rivers or streams crossing or adjoining any
real property owned or leased by either Borrower or any Guarantor Subsidiary or
the aquifer underlying any real property owned or leased by either Borrower or
any Guarantor Subsidiary except to the extent that such discharge or penetration
does not violate any applicable law, the violation of which could have a
Material Adverse Effect, or give rise to any claim against such Borrower or such
Guarantor Subsidiary under any applicable law to the extent such claim could
have a Material Adverse Effect. "Hazardous Material" as used herein means any
existing or future asbestos, polychlorinated byphenyls and petroleum products,
solid wastes, ureaformaldehyde, discharges of sewer or effluent, paint
containing lead and any other hazardous or toxic material, substance or waste
which is defined, determined or identified by those or similar terms or is
regulated as such under any such statute, law, ordinance, rule or regulation
(whether now existing or hereafter promulgated) or any local, state or federal
authority, or any judicial or administrative interpretation of any such
statute, law, ordinance, rule or regulation, including but not limited to any
material, substance or waste which is a hazardous substance within the meaning
of 33 U.S.C. +SC 1251 et seq., as amended, or 42 U.S.C. 9601 et seq., as
amended, or a hazardous waste within the meaning of 42 U.S.C. 6901 et seq., as
amended) . All inventory manufactured and produced by each Borrower has been and
shall continue to be manufactured and produced in compliance with all applicable
requirements of Sections 6, 7 and 12 of the Fair Labor Standards Act, as
amended, and all regulations and orders of the United States Department of
Labor.
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9.10 ABSENCE OF DEFAULT. Neither Borrower nor any Guarantor Subsidiary
is in default under any note, indenture, loan agreement, mortgage, lease, or
other similar agreement relating to the borrowing of monies or the incurring of
indebtedness to which such Borrower or such Guarantor Subsidiary is a party or
by which such Borrower or such Guarantor Subsidiary or any of such Borrower's or
such Guarantor Subsidiary's assets are bound, which default could have a
Material Adverse Effect.
9.11 ACCURACY OF FINANCIALS; NO MATERIAL CHANGES. The Financials have
been prepared in accordance with generally accepted accounting principles
consistently applied (except that, in the case of unaudited internally prepared
Financials (other than unaudited annual Financials), such Financials lack
footnotes and are subject to normal recurring year-end adjustments) and are
true, correct and complete in all material respects; all Financials fairly
present each Borrower's and each Guarantor Subsidiary's assets, liabilities and
financial condition and results of operations and those of such other Persons
described therein as of the date thereof (subject to the lack of footnotes and
normal recurring year- end adjustments, in the case of unaudited internally
prepared Financials (other than unaudited annual Financials)); there are no
omissions from the Financials or other facts or circumstances not reflected in
the Financials which are or may be material; except as set forth in SCHEDULE 14
attached hereto, there has been no material and adverse change in either
Borrower's or any Guarantor Subsidiary's assets, liabilities or financial
condition since the date of the Financials attached to EXHIBIT T to this
Agreement and delivered on the Effective Date nor has there been any material
damage to or loss of any of either Borrower's or any Guarantor Subsidiary's
assets or properties since such date.
9.12 PENSION PLANS. No "reportable event" or "prohibited transaction,"
as defined by the Employee Retirement Income Security Act of 1974 ("ERISA"),
has occurred or is continuing as to any plan of either Borrower, any Guarantor
Subsidiary or any Controlled Group member, which poses a threat of termination
of such plans (or trusts related thereto) or the imposition of taxes or
penalties against such plans (or trusts related thereto); neither Borrower nor
any Guarantor Subsidiary or Controlled Group member has violated the
requirements of any "qualified pension benefit plan," as defined in ERISA and
the Internal Revenue Code of 1986 or done anything to create liability under the
Multi-Employer Pension Plan Amendments Act; and except as set forth in Schedule
7 attached hereto and incorporated herein by reference, neither Borrower nor any
Guarantor Subsidiary or Controlled Group member has incurred any liability to
the Pension Benefit Guaranty Corporation in connection with such plans.
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9.13 TAXES AND OTHER CHARGES. Except as set forth on Schedule 15
attached hereto, each Borrower and each Guarantor Subsidiary has (a) filed and
shall file all federal, state and local tax returns and other reports which it
is required by law to file, (b) paid all taxes, assessments and other similar
charges that are due and payable, except for any such taxes, assessments or
charges which are being contested in good faith by appropriate proceedings
promptly commenced and diligently prosecuted, for which adequate reserves in
accordance with generally accepted accounting principles have been set aside on
its books, and the continuance of which will neither result in any part of the
Collateral or the Premises or any other property of the Borrower being made the
subject of any proceeding in foreclosure, or of any levy or execution, which
cannot be stayed or dismissed, or the subject of any seizure or other loss, nor
prevent Bank from acquiring and/or maintaining a perfected first priority
security interest in the Collateral or a first priority mortgage of the
Mortgaged Premises after the Effective Date or with respect to future advances
hereunder, (c) withheld all employee and similar taxes which it is required by
law to withhold, and (d) maintained adequate reserves for the payment of all
taxes and similar charges. No tax liens have been filed with respect to either
Borrower or any Guarantor Subsidiary and no claims are being asserted with
respect to any such taxes, assessments or charges (and, to the best knowledge of
Borrowers (after due inquiry), no basis exists for any such claims) .
9.14 NO LITIGATION. There is not any litigation, action or proceeding
pending or, to the best of Borrowers' knowledge (after due inquiry), threatened,
against either Borrower or any Guarantor Subsidiary, which, if adversely
determined, is could have a Material Adverse Effect. Schedule 8 attached hereto
and incorporated herein by reference correctly sets forth all litigation,
actions and proceedings pending or, to the best of Borrowers' knowledge (after
due inquiry), threatened, against either Borrower or any Guarantor subsidiary as
of the Effective Date (none of which could have a Material Adverse Effect) .
9.15 NO BROKERAGE FEE. No brokerage, finder's or similar fee or
commission is due to any party by reason of either Borrower entering into this
Agreement or by reason of any of the transactions contemplated hereby or
thereby, and each Borrower shall indemnify and hold Bank harmless from all such
fees and commissions.
9.16 AFFILIATES. All Persons who are Borrowers' and Guarantor
Subsidiaries' Affiliates (other than members of the immediate family of each
shareholder, officer, and director of the Borrowers and Guarantor Subsidiaries)
are identified in SCHEDULE 9 attached hereto and incorporated herein by
reference. Parent has no Subsidiaries. other than
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Bliss, the Guarantor Subsidiaries, Health-Mor Mexicana S.A. de C.V., Home
Impressions, Inc. and Experimental Distributing, Inc. None of the Guarantor
Subsidiaries, Health-Mor Mexicana S.A. de C.V., Home Impressions, Inc. or
Experimental Distributing, Inc. has any Subsidiaries.
9.17 CAPITALIZATION; WARRANTS, ETC. The authorized capital stock of each
Borrower and each Guarantor Subsidiary and the number of shares of such
authorized stock outstanding as of the Effective Date is set forth on Schedule
10 attached hereto and incorporated herein by reference; each outstanding share
of capital stock is duly authorized, validly issued, fully paid and
nonassessable. All warrants, puts, subscriptions, options, instruments and
agreements under which any shares of capital stock of either Borrower or any
Guarantor Subsidiary are or may be redeemed, retired, encumbered, bought, sold
or issued are described in Schedule 10 attached hereto.
9.18 NONCOMPETITION AGREEMENTS. Neither Borrower nor any Guarantor
Subsidiary is subject to any contract or agreement containing a covenant not to
compete in any line of business with any Person.
9.19 DEPOSIT AND OTHER ACCOUNTS. All of the accounts maintained by each
Borrower and each Guarantor Subsidiary with any bank, brokerage house or other
financial institution are set forth in SCHEDULE 11 attached hereto and
incorporated herein by reference, and, after the delivery by Bank of a Cash
Collateralization Notice (except as may be agreed upon by Bank in writing), none
of such other accounts (other than accounts designated as "Payroll Accounts") is
subject to withdrawal other than by transfers of amounts therein to one (1) of
the Locked Boxes or the Special Accounts .
9.20 SOLVENCY. Each Borrower and each Guarantor Subsidiary is Solvent as
of the Effective Date and will be Solvent after receipt and application of the
Loans in accordance with the terms of this Agreement.
9.21 FULL DISCLOSURE. No representation or warranty made by either
Borrower, any Guarantor Subsidiary or any of their respective Affiliates, as the
case may be, in this Agreement or any Loan Document or other document furnished
from time to time in connection herewith or therewith contains or will contain
at the time such representation is made or such document furnished, any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to either Borrower, any Guarantor Subsidiary or any of their
respective Affiliates which adversely affects, or which, in Borrowers'
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reasonable judgment, could in the future adversely affect (i) the business,
property, assets, operations, prospects or condition, financial or otherwise, of
either Borrower, any Guarantor Subsidiary or any of their respective Affiliates,
(ii) the ability of either Borrower, any Guarantor Subsidiary or any of their
respective Affiliates to perform any of their respective payment or other
Obligations under this Agreement any of the other Loan Documents, or (iii) the
ability of Bank to exercise its rights and remedies with respect to or otherwise
realize upon any of the Collateral or the Premises.
9.22 CASUALTIES. Neither the business nor the properties of either
Borrower or any Subsidiary Guarantor are affected by any fire, explosion,
accident, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other Casualty Loss (whether or not covered by insurance) which could
have a Material Adverse Effect.
9.23 LEASES. Except as described in Schedule 12 attached hereto and
incorporated herein by reference, neither Borrower nor any Guarantor Subsidiary
is a party to any lease, assignment, sublease, or other agreement relating to
any real property or leasehold, or any equipment or other personal property.
9.24 INSURANCE POLICIES. Schedule 13 attached hereto and incorporated
herein by reference correctly sets forth all of the insurance policies
maintained by each Borrower and each Guarantor Subsidiary, including, without
limitation, the carriers thereof, and the types of coverage (which coverage
shall include environmental liability insurance) and insured amounts covered
thereby. Each Borrower and each Guarantor Subsidiary is in compliance with all
requirements of such insurance and is in compliance with all insurance
requirements set forth in any purchase orders or other agreements with its
customers.
9.25 CONSENTS. No authorization or approval or other action by, and no
notice to or filing with, any govern- mental authority or regulatory body or
other Person is required for (i) the due execution, delivery and performance by
either Borrower or any Guarantor Subsidiary of any Loan Document to which it is
or will be a party, (ii) the conduct of either Borrower' s or any Guarantor
Subsidiary' s business or (iii) the ownership or the lease of any of either
Borrower's or any Guarantor Subsidiary's properties.
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10. COVENANTS. Until the Obligations are fully paid, performed and
satisfied and this Agreement is terminated, each Borrower will comply, and will
cause each Guarantor Subsidiary to comply, with each of the covenants set forth
below in this SECTION 10, unless Bank shall have given Borrower its prior
written consent.
10.1 PAYMENT OF CERTAIN EXPENSES. Each Borrower will pay to Bank
immediately any and all fees, costs and expenses which Bank pays to a bank or
other similar institution arising out of or in connection with (i) the
forwarding to either Borrower, or any other Person on either Borrower's behalf,
by Bank of proceeds of Loans made by Bank to either Borrower pursuant to this
Agreement, and (ii) the depositing for collection by Bank of any check or item
of payment received and/or delivered to Bank on account of the Obligations and
reimburse Bank, immediately, for any claims asserted by any bank at which a
blocked account is established for the deposit of proceeds of the Collateral and
the Premises in connection with such blocked account or any returned or
uncollected checks received by such bank as proceeds of the Collateral or the
Premises.
10.2 NOTICE OF LITIGATION. Each Borrower will notify Bank in writing,
promptly upon such Borrower's learning thereof, of any litigation, suit or
administrative proceeding which may materially and adversely affect either
Borrower's or any Guarantor Subsidiary's (a) operations, financial condition or
business, (b) the ability of either Borrower or any Guarantor Subsidiary to
perform any of its payment or other Obligations under this Agreement or any of
the other Loan Documents or (c) Bank's lien on or security interest in the
Collateral, the Premises or other security for the Obliga- tions, whether or not
the claim is considered by either Borrower to be covered by insurance.
10.3 NOTICE OF ERISA EVENTS. Each Borrower will notify Bank in writing
(i) promptly upon the occurrence of any event described in Section 4043 of ERISA
relating to either Borrower or any Guarantor Subsidiary, other than a
termination, partial termination or merger of a "Plan" (as defined in ERISA) or
a transfer of a Plan's assets, and (ii) prior to any termination, partial
termination or merger of a Plan or a transfer of a Plan's assets relating to
either Borrower or any Guarantor Subsidiary.
10.4 NOTICE OF LABOR DISPUTES. Each Borrower will notify Bank in
writing, promptly upon either Borrower's learning thereof, of any material labor
dispute to which either Borrower or any Guarantor Subsidiary may become a party,
any strikes or walkouts relating to any of either Borrower's or any Guarantor
Subsidiary's plants or other facilities, and the expiration of any labor contra
.ct to which
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either Borrower or any Guarantor Subsidiary is a party or by which either
Borrower or any Guarantor Subsidiary is bound.
10.5 COMPLIANCE WITH LAWS, ETC. Each Borrower will comply, and each
Borrower will cause each Guarantor Subsidiary to comply, with the requirements
of all applicable laws, statutes, regulations, rules or ordinances of any
governmental entity, or of any agency thereof (including, but not limited to,
any Environmental Laws), the noncompliance with which could have a Material
Adverse Effect.
10.6 NOTICE OF VIOLATIONS OF LAW, TAX ASSESSMENTS. Each Borrower will
notify Bank in writing, promptly upon either Borrower's learning thereof, of (i)
any violation by either Borrower or any Guarantor Subsidiary of any law,
statute, regulation, rule or ordinance of any govern- mental entity, or of any
agency thereof, which violation could have a Material Adverse Effect, (ii) the
nonpayment of any federal, state or local withholding tax applicable to either
Borrower or any Guarantor Subsidiary to the extent the amount involved equals or
exceeds One Hundred Thousand Dollars ($100,000), and (iii) any federal, state or
local tax assessment applicable to either Borrower or any Guarantor Subsidiary
to the extent such assessment equals or exceeds One Hundred Thousand Dollars
($100,000).
10.7 COMPLIANCE WITH OTHER AGREEMENTS. Each Borrower will comply, and
each Borrower will cause each Guarantor Subsidiary to comply, with the
provisions of each note, indenture, loan agreement, mortgage, lease, deed or
other similar agreement to which either Borrower or any Guarantor Subsidiary is
a party or by which either Borrower or any Guarantor Subsidiary is bound, the
noncompliance with which could have a Material Adverse Effect. 10.8 Notice of
Violations of Certain Agreements. Each Borrower will notify Bank in writing,
promptly upon the occurrence thereof, of either Borrower's or any Guarantor
Subsidiary's default under any note, indenture, loan agreement, mortgage, lease,
deed or other similar agreement to which either Borrower or any Guarantor
Subsidiary is a party or by which either Borrower or any Guarantor Subsidiary is
bound.
10.9 NOTICE OF CUSTOMER DEFAULTS. Each Borrower will notify Bank in
writing, promptly upon the occurrence thereof, of (a) any default by any obligor
under any note or other evidence of debt payable to either Borrower or any
Guarantor Subsidiary having outstanding indebtedness thereunder or relating
thereto (or face amount in the case of any letter of credit) of One Hundred
Thousand Dollars ($100,000) or more, or (b) anything which might have a
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material adverse effect on the credit of a customer of either Borrower or any
Guarantor Subsidiary.
10.10 TAXES AND CHARGES. Each Borrower will (i) file, and will cause
each Guarantor Subsidiary to file, all federal, state and local tax returns and
other reports which either Borrower or any Guarantor Subsidiary is required by
law to file, (ii) pay, and will cause each Guarantor Subsidiary to pay, all
taxes, assessments and other sirnilar charges that are due and payable;
PROVIDED, HOWEVER, that no such taxes, assessments or charges need be paid
during such period as they are being contested in good faith by the applicable
Borrower or applicable Guarantor Subsidiary, in appropriate proceedings promptly
commenced and diligently prosecuted, if adequate reserves in accordance with
generally accepted accounting principles have been set aside on the applicable
Borrower's or applicable Guarantor Subsidiary's books, and the continuance of
such contest shall neither result in any part of the Collateral or the Premises
or any other property of either Borrower or any Guarantor Subsidiary being made
the subject of any proceeding in foreclosure, or of any levy or execution, which
shall not have been stayed or dismissed, or the subject of any seizure or other
loss, nor prevent Bank from acquiring a perfected first priority security
interest in the Collateral after the Effective Date or with respect to future
advances hereunder; and PROVIDED, FURTHER, that the applicable Borrower or
applicable Guarantor Subsidiary will promptly pay such tax when the dispute is
finally settled, (iii) withhold, and will cause each Guarantor Subsidiary to
withhold, all employee and similar taxes which the applicable Borrower or
applicable Guarantor Subsidiary is required by law to withhold, and (iv)
maintain adequate reserves for the payment of all taxes and similar charges.
10.11 INDEBTEDNESS; GUARANTIES. Neither Borrower will, and each Borrower
will cause each Guarantor Subsidiary not to, incur or pay any Indebtedness other
than (i) the Obligations, (ii) Indebtedness reflected in the Financials
delivered on or before the Effective Date or described in SCHEDULE 3 attached
hereto, (iii) Indebtedness (a) which is unsecured, (b) which is not for borrowed
money, (c) which has been incurred in the ordinary course of business, (d) which
is not otherwise prohibited under any provision of this Agreement or any other
Loan Document, and (e) the nonpayment or other default under which would not
have a Material Adverse Effect, (iv) Indebtedness in respect of capitalized
leases and purchase money Indebtedness so long as the aggregate amount of such
Indebtedness does not exceed Five Hundred Thousand Dollars ($500,000) at any one
time outstanding, (v) Indebtedness in respect of taxes, assessments or
governmental charges to the extent that payment thereof shall not at the time be
required to be made in accordance with the provisions of SECTION 10.10, (vi)
with respect to
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Pty, Indebtedness secured by the First Chicago Letter of Credit, (vii) with
respect to Parent, Indebtedness under the Note Agreement, and (viii)
Indebtedness in respect of operating leases so long as the aggregate amount of
such Indebtedness incurred by Borrowers and Guarantor Subsidiaries in any fiscal
year does not exceed Three Hundred Thousand Dollars ($300,000); PROVIDED that no
Indebtedness (y) for borrowed money permitted under this SECTION 10.11 (other
than the Indebtedness described in clauses (vi) and (vii) above), shall contain
any provisions making a default under or in respect of some other Indebtedness
for money borrowed, a default thereunder, and (z) otherwise permitted to be
incurred shall be permitted to be incurred if, after giving effect to the
incurrence thereof, any Event of Default shall have occurred. Neither Borrower
will, and each Borrower will cause each Guarantor Subsidiary not to, guarantee
the obligations of any other Person except as set forth on SCHEDULE 3 attached
hereto; PROVIDED, HOWEVER, that the Borrowers and the Guarantor Subsidiaries may
guarantee the obligations of each other to the extent that the obligations
guaranteed are permitted to be incurred under the terms of this Agreement.
10.12 TITLE TO PROPERTY; NO LIENS. Each Borrower will, and each Borrower
will cause each Guarantor Subsidiary, Home Impressions, Inc. and Experimental
Distributing, Inc. to, continue to maintain good, indefeasible and merchantable
title to and ownership of, or interest (leasehold or otherwise) in, all of its
real and personal property, including, without limitation, the Collateral, the
Premises, and other security for the Obligations, free and clear of all liens,
claims, security interests, assignments, mortgages, pledges and encumbrances,
except Permitted Liens and except as described on Schedule 4 attached hereto and
incorporated herein by reference.
10.13 RESTRICTIONS; LABOR DISPUTES, ETC. Neither Borrower will, and each
Borrower will cause each Guarantor subsidiary not to, become a party or subject
to any (a) charge, restriction, judgment, decree or order, which could have a
Material Adverse Effect, or (b) any labor dispute, strike or walkout which could
have a Material Adverse Effect.
10.14 PENSION PLANS. Neither Borrower will permit any "reportable event"
or "prohibited transaction," as defined by ERISA, to occur or to continue as to
any plan of either Borrower, any Guarantor Subsidiary or any Controlled Group
member, which poses a threat of (i) termination of such plans (or trusts related
thereto) or (ii) the imposition of taxes or penalties against such plans (or
trusts related thereto) ; neither Borrower will, and each Borrower will cause
each Guarantor Subsidiary and each Controlled Group member not to, violate the
requirements of any "qualified pension benefit
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plan," as defined in ERISA and the Internal Revenue Code of 1986 or do anything
to create liability under the Multi- Employer Pension Plan Amendments Act; and
except as set forth on SCHEDULE 6 attached hereto and incorporated herein by
reference, neither Borrower will, and each Borrower will cause each Guarantor
Subsidiary and each Controlled Group member not to, incur, any liability to the
Pension Benefit Guaranty Corporation in connection with such plans.
10.15 SOLVENCY. Each Borrower and each Guarantor Subsidiary will
continue to be Solvent.
10.16 PROPERTY INSURANCE. (a) Each Borrower and each Guarantor
Subsidiary will insure all of its real and personal property, including, without
limitation, the Collateral, the Premises and other security for the Obligations,
in Bank's name against loss or damage by fire, theft, burglary, pilferage, loss
in transit and such other hazards as Bank shall specify in amounts and under
policies by insurers acceptable to Bank; if applicable, each policy with respect
to such insurance shall name Bank (and no other party) as mortgagee under a New
York Standard Mortgage clause or other similar clause acceptable to Bank; each
such policy shall contain a lender's loss payable clause acceptable to Bank
naming Bank (and no other party) as loss payee thereunder and shall provide that
such policy may not be amended or cancelled without thirty (30) days prior
written notice to Bank. Bank acknowledges that the insurance coverage set forth
on Schedule 13 attached hereto as of the Effective Date meets the foregoing
requirements and is acceptable to Bank as of the Effective Date.
(b) The policies or a certificate thereof signed by the insurer
evidencing that such insurance coverage is in effect for periods of not less
than one (1) year shall be delivered to Bank within five (5) Business Days after
the issuance of the policies and after each renewal thereof.
(c) All premiums thereon shall be paid by the applicable Borrower or
applicable Guarantor Subsidiary monthly in advance; and if any Borrower or any
Guarantor Subsidiary fails to do so, Bank may (but shall not be required to)
procure such insurance and charge the cost to either Borrower's account as part
of the Obligations payable on demand and secured by the Collateral, the Premises
and other security for the Obligations.
10.17 LIABILITY INSURANCE. Each Borrower and each Guarantor Subsidiary
will, at all times, maintain in full force and effect such liability insurance
with respect to its activities and business interruption, product liability and
other insurance as may be required by Bank, such insurance to be provided by
insurer(s) acceptable to Bank, and if requested
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by Bank such insurance shall name Bank (and no other party) as an additional
insured as its interest may appear.
10.18 DEPOSIT ACCOUNTS. Each Borrower and each Guarantor Subsidiary
(other than HMI Inc. and Tube-Fab and HMI Acceptance) will consider maintaining
throughout the term of this Agreement all of such Borrower's or such Guarantor
Subsidiary's depository, disbursement, trust, payroll and other account
relationships with Bank and not alter existing account relationships which bear
on the creditworthiness of Borrower and/or the pricing of the Loans or this
credit arrangement or such other account relationships. Each Borrower hereby
agrees that it will not, and each Borrower will cause each Guarantor subsidiary
not to, assert any claims or set off rights against Bank as a result of its
maintaining any account relationship with Bank or any Affiliate of Bank.
10.19 MERGER, ETC. Neither Borrower will, and each Borrower will cause
each Guarantor subsidiary not to, merge or consolidate or form a joint venture
or partnership with or acquire any other Person; provided, however, that,
notwithstanding the foregoing, (a) any Guarantor Subsidiary may merge or
consolidate with another Guarantor subsidiary but only so long as (i) both
immediately before and after giving effect thereto, no Event of Default exists
or shall exist and (ii) the Parent shall own, either directly or indirectly, one
hundred percent (100%) of the equity interests of the surviving or resulting
entity, and (b) the Parent may merge or consolidate with Bliss or a Subsidiary
Guarantor but only so long as (i) both immediately before and after giving
effect thereto, no Event of Default exists or shall exist and (ii) the Parent
shall be the surviving or resulting entity.
10.20 INVESTMENTS. Neither Borrower will, and each Borrower will cause
each Guarantor Subsidiary not to, make any investment in the securities of any
Person other than investments in Cash Equivalents which are pledged to Bank as
collateral and security for the Obligations.
10.21 DIVIDENDS. Neither Borrower will, and each Borrower will cause
each Guarantor Subsidiary not to, declare or pay cash or stock dividends upon
any of its stock (including, without limitation, any preferred stock now or
hereafter issued) or make any distributions of its assets, or make any loans,
advances and/or extensions of credit, to any Persons, including, without
limitation, any of either Borrower' s or any Guarantor Subsidiary's Affiliates,
officers or employees; PROVIDED, HOWEVER, that Borrowers may make loans and
advances to employees for (i) entertainment, travel and other similar expenses
in the ordinary course of business not to exceed Fifty Thousand Dollars
($50,000) in the aggregate at any time outstanding and (ii) moving and other
relocation expenses in the ordinary course of business not to exceed
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Three Hundred Thousand Dollars ($300,000) in the aggregate at any time
outstanding; and PROVIDED, FURTHER, that intercompany loans, advances and/or
extensions of credit may be made by (i) Parent to Bliss or any Guarantor
Subsidiary, or (ii) Bliss to Parent or any Guarantor Subsidiary, but only so
long as, in each case, either immediately before or after giving effect thereto,
no Event of Default exists or shall exist. In no event shall either Borrower or
any Guarantor Subsidiary make any distributions of its assets to, or make any
loans, advances and/or extensions of credit to, or engage in any other
transaction with, Home Impressions, Inc. or Experimental Distributing, Inc.
10.22 REDEMPTION OF STOCK. Neither Borrower will, and each Borrower will
cause each Guarantor Subsidiary not to, voluntarily or pursuant to any
contractual or other obligations redeem, retire, purchase, repurchase or
otherwise acquire, directly or indirectly, or exercise any call rights relating
to, any of its capital stock or any other securities now or hereafter issued by
either Borrower or any Guarantor Subsidiary (including, without limitation, any
warrants).
10.23 STOCK RIGHTS. Neither Borrower will, and each Borrower will cause
each Guarantor Subsidiary not to, change the rights or obligations associated
with, or the terms of any class of its stock or issue any new class of stock, or
its Articles or Certificate of Incorporation or its Code of Regulations or
By-laws to the extent any such action could have a Material Adverse Effect.
10.24 CAPITAL STRUCTURE, Etc. Neither Borrower will, and each Borrower
will cause each Guarantor Subsidiary not to, make any change in its capital
structure or in any of its business objectives, purposes and operations which
might in any way materially and adversely affect the repayment of the
Obligations.
10.25 AFFILIATE TRANSACTIONS. Neither Borrower will, and each Borrower
will cause each Guarantor Subsidiary not to, enter into, or be a party to, any
transaction with any of its Affiliates, except in the ordinary course of
business, pursuant to the reasonable requirements of its business, and upon fair
and reasonable terms which are fully disclosed in any filings with the
Securities and Exchange Commission and are no less favorable to it than it could
obtain in a comparable arm's length transaction with a Person not its Affiliate.
10.26 [INTENTIONALLY OMITTED]
10.27 SALE OF ASSETS. Neither Borrower will, and each Borrower will
cause each Guarantor Subsidiary, Home Impressions, Inc. and Experimental
Distributing, Inc. not to,
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sell, lease or otherwise dispose of or transfer, whether by sale, merger,
consolidation, liquidation, dissolution, or otherwise, any of its assets,
including, without limitation, the Collateral, the Premises and other security
for the Obligations, except for (i) the sale of Inventory in the ordinary course
of business, (ii) the sale of individual tangible assets consisting of personal
property (as opposed to the sale of all or substantially all of the tangible
assets of either Borrower, any Guarantor Subsidiary, Home Impressions, Inc.,
Experimental Distributing, Inc. or any division or business thereof) having a
purchase price not in excess of One Hundred Thousand Dollars ($100,000), and in
any fiscal year, having aggregate purchase prices in excess of Two Hundred Fifty
Thousand Dollars ($250,000), and (iii) subject to the other terms of this
Agreement, the HRS Sale; PROVIDED, HOWEVER, that the proceeds of the sale of any
assets permitted pursuant to this SECTION 10.27 shall be immediately paid over
to Bank and
(a) in the case of sales of any of the Parent's or Bliss'
Equipment, (1) first, applied to all accrued and unpaid interest on the
principal of all of the Loans, and (2) SECOND, one hundred percent
(100%) of the remainder of such proceeds equal to the appraised value
(as of the Effective Date) of the Equipment sold (i.e., after the
applications set forth in clause (a) (1) above) applied up to the amount
of the principal installments of the Bliss Equipment Term Loan, as
applicable, in the inverse order of maturity;
(b) in the case of (A) any remaining proceeds after the
applications set forth in clauses (a) (1) an (a) (2) above, (B) sales of
any of the Parent's or Bliss' Equipment where the Bliss Equipment Term
Loan has been paid in full or (C) sales of any other assets permitted to
be sold under this SECTION 10.27 (other than Inventory in the ordinary
course of business and other than the assets sold in connection with the
HRS Sale), applied (1) FIRST, to all accrued and unpaid interest on the
principal of all of the Loans to the extent not previously applied in
clause (a) above, (2) SECOND, fifty percent (50%) of the remainder of
such proceeds (i.e., after the applications set forth in clause (b) (1)
above) to the outstanding principal amount of the applicable Revolving
Loans, (3) THIRD, twenty-five percent (25%) of the remainder of such
proceeds (i.e., after the applications set forth in clause (b) (1)
above) to the principal installments of the Special Term Loan in the
order of maturity, (4) FOURTH, twenty-five percent (25%) of the
remainder of such proceeds (i.e., after the applications set forth in
clause (b) (1) above) to the principal installments of the Special Term
Loan in the inverse order of maturity, and (5) FIFTH, to the payment
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of the other Obligations, in a manner satisfactory to Bank, in its sole
discretion; and
(c) in the case of the HRS Sale, Two Million Dollars
($2,000,000) of the HRS Proceeds shall be applied to the principal
installments of the Special Term Loans in the inverse order of maturity
and the remainder of the HRS Proceeds shall be applied to the
outstanding principal amount of the Revolving Loans,
The proceeds of the sales of Inventory in the ordinary course of business shall
be applied to the principal of and interest on the Revolving Loans. The purchase
price in connection with the sale of any assets permitted pursuant to this
SECTION 10.27 (other than, subject to the terms of this Agreement, the HRS Sale)
shall be payable solely in cash. With respect to the sales of assets referred to
in clause (ii) above, the applicable Borrower or applicable Guarantor Subsidiary
shall give Bank prior written notice of any such sale of assets in the event the
sale price of the assets proposed to be sold exceeds Seventy-Five Thousand
Dollars ($75,000). In the event Bank shall have given its prior written consent
to any sale of assets not otherwise permitted under this Section 10.27, the
proceeds of such permitted sale shall be immediately paid over to Bank and
applied in a manner similar to the manner of application set forth in clauses
(a) and (b) above.
10.28 CONSIGNMENTS. Etc. Neither Borrower will, and each Borrower will
cause each Guarantor Subsidiary not to, make a sale to any customer on a
▇▇▇▇-and-hold, guaranteed sale, sale and return, sale on approval, consignment
or any other repurchase or return basis.
10.29 CHANGE IN MANAGEMENT OR BUSINESS. Neither Borrower will, and each
Borrower will cause each Guarantor Subsidiary not to, permit to occur any
seizure, vesting or intervention by or under the authority of any government by
which its management is displaced or its authority in the conduct of its
business is curtailed.
10.30 CLAIMS AGAINST COLLATERAL OR PREMISES. Neither Borrower will, and
each Borrower will cause each Guarantor Subsidiary not to, (a) permit to occur
any attachment or distraint of any material portion of the Collateral, the
Premises or other security for the Obligations or (b) permit any material
portion of the Collateral or other security for the Obligations to become
subject, at any time, to any mandatory court order or other legal process.
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10.31 JUDGMENTS. Neither Borrower will, and
each Borrower will cause each Guarantor Subsidiary not to,
permit any judgment in excess of Two Hundred Thousand Dollars
($200,000) or any number of judgments in excess of Three
Hundred Thousand Dollars ($300,000), in the aggregate, to be
rendered against it; PROVIDED, HOWEVER, that this SECTION
10.31 shall not be breached to the extent that (a) any such
judgment(s) is discharged or satisfied within thirty (30) days
after the date of the order, decree or process under which or
pursuant to which such judgment(s) was entered, or (b) a stay
of execution is secured pending appeal of such judgment, and
during the appeal of such judgment, a bond is posted in the
full amount of the judgment (plus interest) and the full
amount of the judgment (plus interest) is adequately reserved
for on the applicable Borrower's or Subsidiary Guarantor's
books.
10.32 STOCK OWNERSHIP. Parent will at all times own one hundred percent
(100%) of the stock (voting or otherwise) of Bliss and each Guarantor Subsidiary
(other than Personal Care which shall be owned as set forth in Schedule 10
attached hereto).
10.33 FINANCIAL COVENANTS. Each Borrower will comply with all of the
financial covenants contained in Exhibit M (the "Financial Covenants") attached
hereto and incorporated herein by reference.
10.34 CHANGE OF OFFICERS; Good Standing Certificates. (a) Each Borrower
will, and each Borrower will cause each Guarantor Subsidiary to, notify Bank in
writing of (i) any removal, resignation, or replacement of any of either
Borrower's officers holding office on the Effective Date, prior to any such
removal, resignation or replacement, and (ii) the creation of any category of
officer not in place on the Effective Date and the name of the Person who will
act in such capacity, prior to such creation.
(b) Upon Bank's request therefor, each Borrower will furnish to Bank a
certificate from the Secretary of State of the state or other jurisdiction of
formation of each Borrower and each Guarantor Subsidiary indicating that each
Borrower and each Guarantor Subsidiary is in good standing under the laws of
such state or jurisdiction and certificates indicating that each Borrower and
each Guarantor Subsidiary is qualified to do business under the laws of all
states and jurisdictions where the failure to be so qualified could have a
Material Adverse Effect.
10.35 HRS SALE; HRS PROCEEDS. The cash consideration for the HRS Sale
shall be at least Two Million Dollars ($2,000,000) and such sale shall be
consummated on or before August 31, 1997. Any non-cash consideration for such
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sale shall be pledged to Bank as security for the Obligations. Any cash
consideration for the HRS Sale in excess of Two Million Dollars ($2,000,000)
shall be applied as set forth in clause (c) of Section 10.27 hereof.
10.36 AMENDMENTS TO NOTE AGREEMENT. Parent will not, and will not permit
any other Person to (i) replace any of the promissory notes issued under the
Note Agreement which are in place as of the Effective Date, (ii) waive
compliance with any of the terms of the Note Agreement or any of the agreements,
instruments or other documents executed in connection therewith to the extent
such waiver could materially and adversely affect the Bank or otherwise could
have a Material Adverse Effect, or (iii) replace, amend, supplement or otherwise
modify any of the terms or provisions of the Note Agreement or any of the
agreements, instruments or other documents executed in connection therewith as
in effect on the Effective Date to the extent any such action (u) changes the
maturity date of such Indebtedness, (v) increases the principal amount of such
Indebtedness, (w) changes the amortization schedule for such Indebtedness, (x)
increases the interest charged on the principal amount of such Indebtedness, (y)
grants the holder(s) of such Indebtedness rights with respect thereto greater
than those in effect on the Effective Date, or (z) otherwise could materially
and adversely affect Bank or could have a Material Adverse Effect.
10.37 AMENDMENTS TO PTY INDEBTEDNESS. Parent and/or Pty will not, and
will not permit any other Person to (i) replace any of the promissory notes
issued under the Indebtedness secured by the First Chicago Letter of Credit
which are in place as of the Effective Date, (ii) waive compliance with any of
the terms or provision of or relating to such Indebtedness to the extent such
waiver could materially and adversely affect the Bank or otherwise could have a
Material Adverse Effect, or (iii) replace, amend, supplement or otherwise modify
any of the terms or provisions of or relating to such Indebtedness as in effect
on the Effective Date to the extent any such action (u) changes the maturity
date of such Indebtedness, (v) increases the principal amount of such
Indebtedness, (w) changes the amortization schedule for such Indebtedness, (x)
increases the interest charged on the principal amount of such Indebtedness, (y)
grants the holder(s) of such Indebtedness rights with respect thereto greater
than those in effect on the Effective Date, or (z) otherwise could materially
and adversely affect Bank or could have a Material Adverse Effect. Parent and/or
Pty will not permit the Indebtedness secured by the First Chicago Letter of
Credit to be secured by any rights, liens, mortgages or security interests in
any assets of either Borrower or any Guarantor Subsidiary (other than the First
Chicago Letter of Credit) .
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10.38 FISCAL YEAR. Neither Borrower will, and each Borrower will cause
each Guarantor Subsidiary not to, change its fiscal year from a year ending
September 30.
10.39 PAYMENT OF OUTSTANDING FEES AND EXPENSES. On or before the
Effective Date, Borrowers shall pay or reimburse to Bank all (a) legal fees and
expenses, (b) fees and expenses of any appraisers and environmental consultants,
(c) UCC search fees and filing fees, and (d) other similar fees, which, in each
case, have been incurred and/or paid by Bank prior to the Effective Date and
which remain unpaid or unreimbursed as of the Effective Date. Bank shall provide
Borrowers with the amount of the foregoing fees and expenses on or prior to the
Effective Date, together with copies of any invoices therefor which the Bank may
have in its possession.
11. EFFECTIVE DATE; TERMINATION.
11.1 EFFECTIVE DATE AND TERMINATION DATE. This Agreement shall be
effective on the date upon which all of the conditions set forth herein and in
Exhibit K attached hereto have been fully satisfied in a manner satisfactory to
Bank and upon which the initial Loans have been made by Bank to Borrowers.
Unless otherwise terminated in accordance with the provisions of this Agreement,
this Agreement shall terminate on October 1, 1998.
11.2 RECOURSE TO SECURITY. Recourse to security will not be required at
any time. Each Borrower waives presentment and protest of any instrument and
notice thereof, notice of default and all other notices to which such Borrower
might otherwise be entitled.
11.3 ACCELERATION UPON TERMINATION. Upon the effective date of any
termination of this Agreement, all of each Borrower' s and each Guarantor
Subsidiary' 5 Obligations to Bank shall become immediately due and payable
without notice or demand.
11.4 BORROWERS REMAINS LIABLE. Notwithstanding any termination, until
all of the Obligations have been fully performed, paid and satisfied, each
Borrower and each Guarantor Subsidiary shall remain liable for the full and
prompt performance and payment of the Obligations and the indemnification set
forth in Section 15.10, and Bank shall retain all of its rights and privileges
hereunder, including, without limitation, the retention of its interest in and
to all of the Collateral, the Premises and other security for the Obligations .
12. EVENTS OF DEFAULT. Each of the following shall consti- tute an "Event of
Default" hereunder:
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(a) either Borrower shall fail to pay, when due (whether by demand,
at maturity or otherwise) , any portion of the principal amount
of any of the Loans;
(b) either Borrower shall fail to pay, when due (whether by demand,
at maturity or otherwise), any portion of any interest on or
with respect to any of the Loans and such failure shall continue
for three (3) consecutive Business Days;
(c) either Borrower shall fail to pay, when due (whether by demand,
at maturity or otherwise), any portion of any of the other
Obligations owing from such Borrower to Bank and such failure
shall continue for five (5) consecutive Business Days after Bank
shall have delivered notice to such Borrower of such failure;
(d) either Borrower shall commit any breach of Section 8.1, Section
10.10, Section 10.14, Section 10.16(b) or Section 10.34(a) of
this Agreement and such Borrower shall not have cured such
breach within ten (10) days after the occurrence of such breach;
(e) either Borrower shall commit any breach of this Agreement (other
than under Section 8.1, Section 10.10, Section 10.14, Section
10.16(b) or Section 10.34(a) hereof), as amended or
supplemented;
(f) any representation or warranty made by either Borrower herein,
in connection with this Agreement, in connection with any
transaction relating to this Agreement, or in any of the other
Loan Documents is, or becomes, untrue or misleading in any
respect when made or deemed made;
(g) any representation or warranty made by any Guarantor Subsidiary
or any other guarantor of the Obligations herein or in any other
Loan Document to which it is a party is, or becomes, untrue or
misleading in any respect when made or deemed made;
(h) either Borrower, any Guarantor Subsidiary or any other guarantor
of the Obligations, as the case may be, shall: (i) fail to be
Solvent, (ii) become generally unable to pay its debts as they
become due, (iii) make an assignment for the benefit of
creditors, (iv) call a meeting of creditors for the composition
of debts, (v) make any misrepresentation to Bank in connection
with this Agreement or any transaction relating hereto, (vi)
make any misrepresentation to any Affiliate of Bank, or
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(vii) fail to make any payment due to any Affiliate of Bank
(subject to any applicable grace periods);
(i) (i) there shall be filed by or against either Borrower, any
Guarantor subsidiary or any other guarantor of the obligations,
as the case may be, a petition in bankruptcy or for
reorganization, or (ii) a custodian, receiver or agent shall be
appointed or authorized to take charge of any of their
respective properties;
(j) there shall occur any material and adverse change in the
business operations or condition, financial or otherwise, of the
Borrowers and the Guarantor Subsidiaries, taken as a whole;
(k) either Borrower or any Guarantor Subsidiary or any other
guarantor of the obligations shall be in default under its
guaranty of the obligations;
(1) any Guarantor subsidiary or any other guarantor of the
obligations shall be in default under any other agreement to
which it is a party and such default could have a Material
Adverse Effect;
(m) either Borrower or any Guarantor Subsidiary or any other
guarantor of the obligations dies, denies its obligation to
guarantee any then existing obligations or attempts to limit
or terminate its obligation to guarantee any future
obligations (including, without limitation, any future advance
by Bank to Borrowers);
(n) there shall occur a casualty Loss in excess of One Hundred
Thousand Dollars ($100,000) with respect to the Collateral, the
Premises or other security for the Obligations which is not
covered by insurance;
(o) the audit report required pursuant to Section 8.7 is not an
unqualified audit report, unless the reason for qualification is
not material to either Borrower's or any subsidiary Guarantor's
financial condition in Bank's reasonable opinion;
(p) a Discretionary Base Deficiency shall occur and shall not have
been eliminated by the applicable Borrower within ten (10)
Business Days following the occurrence thereof;
(q) a Deficiency, other than a Discretionary Base Deficiency, shall
occur;
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(r) t:he Collateral, or other security for the obliga- tions shall
decline in value with the result that Bank's security for the
Obligations is materially diminished;
(s) any default shall occur under the terms applicable to any
Indebtedness owing (i) to Bank or any Affiliate of Bank (other
than Indebtedness incurred in connection with this Agreement) by
either Borrower or any Guarantor subsidiary (subject to any
applicable grace periods), or (ii) to any other Person by either
Borrower or any Guarantor Subsidiary in an aggregate amount
exceeding Two Hundred Fifty Thousand Dollars ($250,000) which
represents any borrowing or financing or arises under any other
agreement from, by or with any such Person (subject to any
applicable grace periods);
(t) a contribution failure occurs with respect to any Pension Plan,
Multiemployer Plan or Welfare Plan sufficient to give rise to a
lien under Section 302(f) of ERISA;
(u) there shall have been instituted against either Borrower or any
Guarantor subsidiary any criminal proceedings for which
forfeiture of any assets having an aggregate value of One
Hundred Thousand Dollars ($100,000) is a potential penalty; or
(v) either Borrower or any Guarantor subsidiary shall default in the
due performance and observance of any covenant or agreement
contained in, or otherwise commit any breach of, any Loan
Document to which it is a party (other than this Agreement) or
any other agreement between Bank and such Borrower (other than
this Agreement) or between such Borrower and any Affiliate of
Bank (subject, in each case, to any applicable grace periods) .
13. BANK'S RIGHTS AND REMEDIES.
13.1 ACCELERATION, ETC. Upon the occurrence of any Event of Default, in
addition to all other rights and remedies provided herein or available at law or
in equity, Bank may, without further notice or demand, declare the Loans and all
other Obligations to be immediately due and payable (except that with respect to
any Event of Default under SECTION 12(h) or(i), such acceleration of the Loans
shall be automatic), and, to the extent that the maximum amount of the Total
Facility has not yet been used or fully drawn on by Borrowers, terminate the
undrawn balance of same, and Bank shall have all rights to realize upon the
Collateral, the premises and other security for the Obligations set forth in the
documents
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providing for such security as described in SECTION 5 hereof, the terms of which
are incorporated herein by reference as if set forth herein in full, and as
otherwise provided by applicable law. Bank's rights and remedies under this
Agreement shall be cumulative and not exclusive of any other right or remedy
which Bank may have.
13.2 FEES AND EXPENSES. Each Borrower shall pay to Bank, immediately and
as part of the Obligations, all costs and expenses, including court costs,
Attorneys' Fees and costs of sale, incurred by Bank in exercising any of its
rights or remedies hereunder .
13.3 ACTIONS IN RESPECT OF THE LETTERS OF CREDIT. If any Event of
Default shall have occurred and be continuing, Bank may, whether in addition to
taking any of the actions described in Section 13.1 above or otherwise, if any
Letters of Credit shall have been issued and be outstanding for the account of a
Borrower, make demand upon such Borrower to, and forthwith upon such demand such
Borrower will, pay to Bank in same day funds at Bank's office designated in such
demand, for deposit in a special non-interest bearing cash collateral account
for such Borrower (each such account maintained for each Borrower being referred
to as the "Letter of Credit Collateral Account") to be maintained at such office
of Bank, an amount equal to the aggregate Letter of Credit Face Amount for such
Borrower. Each Letter of Credit Collateral Account shall be in the name of the
applicable Borrower (as a cash collateral account), but under the sole dominion
and control of Bank and subject to the terms of this Agreement.
13.4 LETTER OF CREDIT COLLATERAL ACCOUNT.
(a) Each Borrower hereby pledges, and grants to Bank a lien and
security interest in, all funds held in its Letter of Credit Collateral
Account from time to time and all proceeds thereof, as security for the
payment of all amounts due and to become due from such Borrower to Bank
under the Loan Documents.
(b) Bank may, at any time or from time to time after funds are
deposited in a Letter of Credit Collateral Account, apply funds then
held in such Letter of Credit Collateral Account to the payment of any
amounts, in such order as Bank may elect, as shall have become or shall
become due and payable by the applicable Borrower to Bank under the Loan
Documents first, in respect of the Letters of Credit of such Borrower
and second, in respect of all other Obligations.
(c) Neither Borrower nor any person claiming on behalf of or
through either Borrower shall have any right to withdraw any of the
funds held in a Letter of Credit
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Collateral Account, except as otherwise provided in subsection (d)
below.
(d) So long as no Event of Default shall be continuing, Bank
will apply to the Obligations, at the written request of the applicable
Borrower, funds held in such Borrower' 5 Letter of Credit Collateral
Account in an amount up to but not exceeding the excess, if any
(immediately prior to the release of any such funds), of (i) the total
amount of funds held in such Letter of Credit Collateral Account over
(ii) the Letter of Credit Obligations of such Borrower. If at any time
the Letter of Credit Obligations of such Borrower shall have been
indefeasibly paid or otherwise satisfied in full and no Event of Default
shall then exist, Bank will apply any remaining amount on deposit in
such Letter of Credit Collateral Account to the other Obligations of
Borrower to Bank in such order and method of application as may be
elected by Bank in its sole discretion and/or retain such amount as
continuing security for the Obligations.
(e) Each Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in its Letter of Credit Collateral Account or
any funds held therein, or (ii) create or permit to exist any lien,
security interest or other charge or encumbrances upon or with respect
to its Letter of Credit Collateral Account or any funds held therein
other than in favor of Bank.
(f) Bank shall exercise reasonable care in the custody and
preservation of any funds held in each Letter of Credit Collateral
Account and shall be deemed to have exercised such care if such funds
are accorded treatment substantially equivalent to that which Bank
accords its own property, it being understood that Bank shall not have
any responsibility for taking any necessary steps to preserve rights
against any parties with respect to any such funds.
(g) If any Event of Default shall have occurred and be
continuing:
(i) Bank may, without notice to the applicable Borrower
at any time or from time to time, charge, set-off and otherwise
apply all or any part of the obligations of such Borrower now or
hereafter existing under any of the Loan Documents against its
Letter of Credit Collateral Account or any part thereof.
(ii) Bank may also exercise in respect of a Letter of
Credit Collateral Account, in addition to other rights and
remedies provided for herein or
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otherwise available to it, all the rights and remedies of a
secured party upon default under the Uniform Commercial Code in
effect in the State of Ohio at that time, and Bank may, without
notice except as specified below, sell such Letter of Credit
Collateral Account or any part thereof in one or more parcels at
public or private sale, at any of Bank's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other
terms as Bank may deem commercially reasonable. Each Borrower
agrees that, to the extent notice of sale shall be required by
law, at least five (5) days' notice to such Borrower of the time
and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification.
Bank shall not be obligated to make any sale of a Letter of
Credit Collateral Account, regardless of notice of sale having
been given. Bank may adjourn any public or private sale from
time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(iii) Any cash held by Bank in a Letter of Credit
Collateral Account, and all cash proceeds received by Bank in
respect of any sale of, collection from or other realization
upon all or any part of such Letter of Credit Collateral Account
shall, then be applied (after payment of any amounts payable
pursuant to Section 13.2) in whole by Bank against the
Obligations in such order as Bank shall elect. Any surplus of
such cash or cash proceeds held by Bank and remaining after
payment in full of all the Obligations shall be paid over to the
applicable Borrower or to whomsoever may be lawfully entitled to
receive such surplus.
14. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS.
14.1 RELEASE OF COLLATERAL AND PREMISES. Bank's rights with respect to
the Collateral, the premises and other security for the Obligations and its
liens thereon and security interest therein shall continue unimpaired, and each
Borrower shall remain obligated in accordance with the terms hereof,
notwithstanding the release or substitution of any Collateral, the Premises or
other security for the Obligations at any time(s), or any rights or interests
therein, or any delay, extension of time, renewal, compromise or other
indulgence granted by Bank in reference to any Obligations, and each Borrower
hereby waives all notice of the same. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
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14.2 WAIVERS AND AMENDMENTS IN WRITING. Failure by Bank to exercise any
right, remedy or option under this Agreement or any supplement hereto or in any
other agreement between either Borrower or any Guarantor Subsidiary and Bank or
delay by Bank in exercising the same shall not operate as a waiver by Bank of
its right to exercise any such right, remedy or option. No waiver by Bank shall
be effective unless it is in writing and then only to the extent specifically
stated. This Agreement cannot be changed or terminated orally .
14.3 ASSIGNMENT. Bank shall have the right to assign all or any part of
this Agreement and/or the other Loan Documents. Neither Borrower may assign,
transfer or otherwise dispose of any of its rights or obligations hereunder or
under any of the other Loan Documents to which it is a party, by operation of
law or otherwise, and any such assignment, transfer or other disposition without
Bank's written consent shall be void. All of the rights, privileges, remedies
and options given to Bank hereunder shall inure to the benefit of Bank's
successors and assigns, and all the terms, conditions, covenants, provisions and
warranties herein shall inure to the benefit of and bind the representatives,
successors and assigns of each Borrower and Bank, respectively.
15. MISCELLANEOUS.
15.1 SEVERABILITY. Each provision of this Agreement shall be interpreted
in such manner as to be valid under applicable law, but if any provision hereof
shall be invalid under applicable law, such provision shall be ineffective to
the extent of such invalidity, without invalidating the remainder of such
provision or the remaining provisions hereof .
15.2 GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED AND ACCEPTED AT
AND SHALL BE DEEMED TO HAVE BEEN MADE AT CLEVELAND, OHIO. THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF OHIO. For purposes of any action or proceeding involving this
Agreement, each Borrower hereby expressly submits to the nonexclusive
jurisdiction of all federal and state courts located in the State of Ohio and
consents that it may be served with any process or paper by registered mail or
by personal service within or without the State of Ohio in accordance with
applicable law, provided a reasonable time for appearance is allowed.
15.3 WAIVER OF JURISDICTION. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
BANK TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO BORROWERS, EACH BORROWER
AGREES THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS
AGREEMENT, ITS VALIDITY OR PERFORMANCE, AT THE SOLE
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OPTION OF BANK, ITS SUCCESSORS AND ASSIGNS, AND WITHOUT LIMITATION ON THE
ABILITY OF BANK, ITS SUCCESSORS AND ASSIGNS, TO EXERCISE ALL RIGHTS AS TO THE
COLLATERAL, THE PREMISES AND OTHER SECURITY FOR THE OBLIGATIONS OR INITIATE AND
PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO REPAYMENT OF THE
OBLIGATIONS, SHALL BE INITIATED AND PROSECUTED AS TO ALL PARTIES AND THEIR
SUCCESSORS AND ASSIGNS AT CLEVELAND, OHIO. BANK AND EACH BORROWER EACH CONSENTS
TO AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT
SITUATED AT CLEVELAND, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO THE APPLICABLE BORROWER
AND BANK AT THEIR RESPECTIVE ADDRESSES SET FORTH IN SECTION 15.9 BELOW OR AS
OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. EACH BORROWER WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT .
15.4 SURVIVAL OF REPRESENTATIONS ▇▇▇ WARRANTIES. Each Borrower
covenants, warrants and represents that all of its representations and
warranties contained in this Agreement are true at this time, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, and shall remain true
until the Obligations are fully performed, paid and satisfied, subject to such
changes as may not be prohibited hereby, do not constitute Events of Default
hereunder, and have been consented to by Bank in writing.
15.5 EVIDENCE OF LOANS. Each loan or advance made by Bank to either
Borrower pursuant to this Agreement may or may not (at Bank's sole discretion)
be evidenced by notes or other instruments issued or made by such Borrower to
Bank. Where such loans or advances are not so evidenced, such loans and advances
shall be evidenced solely by entries upon Bank's books and records. The
Replacement Revolving Note, dated as of February 28, 1997, executed by Borrowers
and the Guarantor Subsidiaries in favor of Bank in the principal amount of up to
$20,000,000 shall be deemed to be replaced by the terms and provisions of this
Agreement and the Guaranty at the time the Borrowers and the Guarantor
Subsidiaries execute and deliver this Agreement and the Guaranty.
15.6 BANK'S ABILITY REGARDING COLLATERAL AND PREMISES. All of the
Obligations shall constitute one loan secured by all security as described in
Section 5 above and by all other security now and from time to time hereafter
granted by either Borrower and any Subsidiary Guarantor to Bank. Bank may, in
its sole discretion, (i) exchange, enforce, waive or release any such security
or portion thereof, (ii) apply such
- 67 -
75
security and direct the order or manner of sale thereof as Bank may, from time
to time, determine and (iii) settle, compromise, collect or otherwise liquidate
any such security in any manner without affecting or impairing its right to take
any other further action with respect to any security or any part thereof.
15.7 APPLICATION OF PAYMENTS, ETC. Bank shall have the continuing right
to apply or reverse and reapply any payments to any portion of the Obligations,
subject to the terms of this Agreement. To the extent either Borrower or any
Guarantor Subsidiary makes a payment or payments to Bank or Bank receives any
payment or proceeds of the Collateral, the Premises or any other security for
either Borrower's or any Guarantor Subsidiary's benefit, which payment(s) or
proceeds or any part thereof are subsequently voided, invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy act, state or federal
law, common law or equitable cause, then, to the extent of such payment or
proceeds received, the Obligations or part thereof intended to be satisfied
shall be revived and shall continue in full force and effect, as if such payment
or proceeds had not been received by Bank.
15.8 FEES AND EXPENSES. Borrowers shall reimburse Bank for all costs,
fees, expenses and liabilities incurred by Bank or for which Bank becomes
obligated in connection with or arising out of: (i) the negotiation,
preparation, closing and enforcement of this Agreement, any amendment hereof and
any agreements, documents and instruments in any way relating hereto and any of
Bank's rights hereunder; (ii) any loans or advances made by Bank hereunder;
(iii) any transaction contem- plated by this Agreement; (iv) any inspection
and/or audit and/or verification of the Collateral, the Premises and/or other
security for the Obligations and/or either Borrower or any Guarantor Subsidiary;
(v) any liability under Section 3505 of the Internal Revenue Code and all other
local, state and federal statutes of similar import; and (vi) costs of settle-
ment incurred by Bank after the occurrence of an Event of Default (a) in
enforcing any Obligation or in foreclosing against the Collateral or the
Premises or exercising or enforcing any other right or remedy available by
reason of such Event of Default, (b) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding, (c) in
commencing, defending or intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleadings in any legal proceeding relating to
either Borrower or any Guarantor Subsidiary and related to or arising out of the
transactions contemplated hereby or by any of the Loan Documents, (d) in taking
any other action in or with respect to any suit or
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76
proceeding (whether in bankruptcy or otherwise), (e) in protecting, preserving,
collecting, leasing, selling, taking possession of, or liquidating any of the
Collateral or the Premises, (f) attempting to enforce or enforcing any lien on
or security interest in any of the Collateral or the Premises or any other
rights under the Loan Documents or (g) in meeting with either Borrower or any
Guarantor Subsidiary to discuss such Event of Default and the course of action
to be taken in connection therewith. The foregoing costs, fees, expenses and
liabilities shall include, without limitation, Attorneys' Fees and fees of other
professionals all lien search and title search fees, all title insurance
premiums, all filing and recording fees and all travel expenses. All of the
foregoing shall be part of the Obligations, payable upon demand, and secured by
the Collateral and other security for the Obligations described in Section 5
above. The Obligations described under this Section 15.8 shall survive any
termination of this Agreement.
15.9 NOTICES. Any notice required, permitted or contemplated hereunder
shall be in writing and addressed to the party to be notified at the address set
forth below or at such other address as each party may designate for itself from
time to time by notice hereunder, and shall be deemed validly given (i) three
(3) days following deposit in the U.S. mails, with proper postage prepaid, or
(ii) the next business day after such notice was delivered to a regularly
scheduled overnight delivery carrier with delivery fees either prepaid or an
arrangement, satisfactory with such carrier, made for the payment thereof, or
(iii) upon receipt of notice given by telecopy, mailgram, telegram, telex or
personal delivery:
To Bank: Star Bank, National Association
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Large Corporate Lending Department
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
To Either
Borrower or any
Guarantor
Subsidiary: c/o HMI Industries Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
15.10 INDEMNIFICATION. In consideration of the execution and delivery of
this Agreement by Bank and the extension of the commitments hereunder, each
Borrower hereby indemnifies, exonerates and holds Bank and each of its officers,
directors, employees and agents (collectively the "Indemnified Parties" and,
individually, an "Indem-
-69-
77
nified Party") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities, damages, and expenses actually
incurred in connection therewith (irrespective of whether such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by the Indemnified Parties or any of them as a result of, or arising
out of, or relating to, or as a direct or indirect result of:
(a) any transaction financed or to be financed in whole or in
part or directly or indirectly with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and the
other Loan Documents by any of the Indemnified Parties;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by either Borrower or any Guarantor
Subsidiary of all or any portion of the stock or all or substantially
all the assets of any Person, whether or not Bank is party thereto; and
(d) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by either Borrower or any Guarantor
Subsidiary of any Hazardous Material (including, without limitation, any
losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or "Superlien"
law, or any other federal, state, local or other statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating
to or imposing liability or standards on conduct concerning, any
Hazardous Material), regardless of whether or not caused by, or within
the control of, either Borrower or any Guarantor Subsidiary;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of Indemnified Party's gross negligence
or willful misconduct or breach by such Indemnified Party of its obligations
under the Loan Documents, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, each Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law, except as
aforesaid to the extent not payable by reason of the Indemnified Party's gross
negligence or willful misconduct or breach of such
-70-
78
obligations. The Obligations described under this SECTION 15.10 shall survive
any termination of this Agreement.
15.11 EQUITABLE RELIEF. Each Borrower recognizes that, in the event such
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement or any of the other Loan Documents, any remedy
of law may prove to be inadequate relief to Bank; therefore, each Borrower
agrees that Bank, if Bank so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
15.12 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties with respect to its subject matter and supersedes all previous
understandings, written or oral, in respect thereof. 15.13 Headings. Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
15.14 WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
BANK TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO EACH BORROWER, EACH
BORROWER AND BANK EACH WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM,
SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT AND/OR THE
CONDUCT OF THE RELATIONSHIP BETWEEN BANK AND BORROWERS.
15.15 REVOCATION OF APPOINTMENT OF PARENT AS AGENT. Each Borrower and,
by its execution and delivery of the Consent and Agreement attached hereto, each
Guarantor Subsidiary hereby agrees that the appointment of Parent as agent for
the Borrowing Group (as defined in the Existing Credit Agreement) is hereby
revoked. Bank hereby acknowledges and consents to such revocation.
15.16 NO STRICT CONSTRUCTION. Notwithstanding the fact that this
Agreement has been initially drafted and prepared by one of the parties, all of
the parties hereto confirm that they and their respective counsel have reviewed,
negotiated and adopted this Agreement as the joint agreement and understanding
of the parties, and the language used in this Agreement shall be deemed to be
the language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any person.
15.17 CONFESSION OF JUDGMENT. Each Borrower hereby irrevocably
authorizes and empowers any attorney-at-law to appear for such Borrower in any
action upon or in connection with this Agreement at any time after the Loans
and/cr other obligations become due, as herein provided, in any court in or of
the State of Ohio or elsewhere, and waives with and
-71-
79
irrevocably authorizes and empowers any such attorney-at-law to confess judgment
in favor of Bank against such Borrower, the amount due thereon or hereon, plus
interest as herein provided, and all costs of collection, and waives and
releases all errors in said proceedings and judgments and all rights of appeal
from the judgment rendered. Each Borrower agrees and consents that the attorney
confessing judgment on behalf of such Borrower may also be counsel to the Bank
or any of Bank's Affiliates, waives any conflict of interest which might
otherwise arise, and consents to Bank paying such confessing attorney a
reasonable legal fee or allowing such attorney's reasonable fees to be paid from
the proceeds of collection of the Loans and/or Obligations or proceeds of
Collateral, the Premises or any other security for the Loans and the other
Obligations.
-72-
80
IN WITNESS WHEREOF, this Agreement has been duly executed by each
Borrower as of the ____ day of June, 1997.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
Signed and acknowledged
in the presence of: HMI INDUSTRIES INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ III By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- -------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇ III Its: Vice President
---------------------------- ------------------------------
---------------------------------
Name:
-----------------------------
WARNING- -BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE
AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART
TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
Signed and acknowledged
in the presence of: BLISS MANUFACTURING COMPANY
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇ III By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------- -------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇ III Its: Vice President
---------------------------- ------------------------------
---------------------------------
Name:
-----------------------------
81
STATE OF OHIO )
) ss:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before me this 6th day of
June, 1997, by ▇▇▇▇ ▇. ▇▇▇▇, Vice President of HMI Industries Inc., a Delaware
corporation, on behalf of the company.
c /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires Jan. 28, 2001
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before, this 6th day of June,
1997, by ▇▇▇▇ ▇. ▇▇▇▇, Vice President of Bliss Manufacturing Company, an Ohio
corporation, on behalf of the company.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires Jan. 28, 2001
Accepted at Cleveland, Ohio,
as of June 6, 1997
STAR BANK, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
82
Schedule 1
INCORPORATION AND QUALIFICATION JURISDICTION
--------------------------------------------
BORROWERS STATE/PROVINCE OF INCORPORATION
--------- --------------------------------
HMI Industries Inc. Delaware
Bliss Manufacturing Company Ohio
GUARANTOR SUBSIDIARIES
-----------------------
Tube Form, Inc. Ohio
Health-Mor Acceptance Corporation Delaware
▇▇▇▇▇▇ Falls Holding Company Delaware
Tube-Fab Ltd. Ontario
Health-Mor International Inc. US Virgin Islands
HMI Acceptance Corporation Ontario
Health-Mor Acceptance PTY LTD Australia
HMI Incorporated Ontario
Health-Mor Personal Care Corp. Delaware
Home Impressions, Inc.
Experimental Distributing, Inc. Ohio
83
SCHEDULE 2
LICENSES, PATENTS, ETC.
-----------------------
Set forth below is a list of each Borrower's and Guarantor Subsidiary's
governmental approvals, permits, licenses, patents, copyrights, trademarks and
trade names.
U.S. TRADEMARKS REGISTRATION NUMBERS
--------------- ---------------------
Ascension Plus 1,727,261
Ascension 1,720,029
Miscellaneous Design "Bird Logo" 2,033,003
Captiva 2,034,466
Captiva 1,980,046
Comfort Lounger 1,944,528
Defender 2,050,553
ElektraPure 2,010,472
Empress 1,973,733
Enviropure 1,810,559
Filter Queen 378,297
Filter Queen & Crown Design 663,742
Filter Queen & Crown Design 663,256
Filter Queen Pow-R-Nozzle & Crown Design 1,070,550
Filter Queen Pow-R Clean-Up Team & Design 1,111,650
Miscellaneous Filter Design "Cone Dude" 1,815,375
GentleJet 2,021,467
Groomex 1,754,460
Health-Mor 1,753,732
Home Impressions 1,949,110
Majestic 1,866,813
Mini Pow-R-Nozzle 1,838,584
Optima 1,954,079
Optima 1,959,113
Optima Plus 2,000,968
Preci-Jet 1,438,533
Princess 1,941,266
Seal Guard 1,287,898
Triangle in a Circle 1,593,851
Triple Crown 1,996,371
True Colors 2,051,602
Vacu-Queen T33286
Vacuum Cleaner Design 1,976,252
Vista 1,790,181
5-in-1 2,024,542
84
U.S. PATENTS PATENT NUMBERS
------------ --------------
Suction Cleaner Power Nozzle 4,199,839
Multi-motor suction cleaner (upright) 4,225,999
Top cover for tank type suction cleaner D260, 151
Design for hand suction cleaner D268,057
Seal Guard 1,287,898
Power nozzle sudser for a cannister vac 4,507,819
Medicine vial adaptor for injector 4,662,878
Needless hypodermic injector 4,722,728
Central Vac housing design D294,187
Vacuum cleaner and filter thereof 5,248,323
Elbow design D345,413
Vacuum cleaner canister base connector 5,515,573
Filter bag for a vacuum cleaner 5,522,908
Telescoping Flagpole 5,572,835
Filter System 5,593,479
Vacuum cleaner and filter bag with
air management 5,603,741
85
SCHEDULE 3
PERMITTED INDEBTEDNESS
HMI Industries Inc. 3/31/97
STAR Bank revolving line of credit and term facility $20,000,000
- actual usage at 3/31/97 was $17,880,000.
Private Placement Notes $1,666,667
- 7 year, 9.86% promissory notes
-due Nov. '97
Distributor deposits (normal course of business) $446,555
Capitalized lease obligations
- Computer hardware and software $212,176
- Filter Cone machine lease $331,214
- Computer lease $25,075
STAR Bank building mortgage/loan $2,214,923
Hollandsche-Unit Bank loan (Rotterdam) $542,741
-actual loan total is 1,000,000 Netherland Guilders
Industrial Revenue ▇▇▇▇ - ▇▇▇▇▇▇▇ property $911,715
Bliss Manufacturing Company
STAR BANK leases
-#410 $119,416
-#411 $164,434
-#412 $75,362
-#413 $495,775
86
SCHEDULE 3 (continued)
PERMITTED INDEBTEDNESS
Health-Mor Acceptance Pty Ltd.
NBD Bank line of credit $727,050
- actual loan availability is 840,000 Australian $
Health-Mor Personal Care Corp.
Mortgage on land and building $316,537
- details to be arranged
HMI Incorporated
Distributor deposits (normal course of business) $202,590
Tube-Fab Ltd.
DIPP Government grant (MPD Div.) $99,447
Various other indebtedness not exceeding $100,000 which does not have a
material adverse effect on the Borrowers' and Guarantors' financial condition.
87
SCHEDULE 4
PERMlTTED LIENS
HMI Industries Inc.
STAR Bank revolving line of credit and term facility
Private Placement Notes
- 7 year, 9.86% promissory notes
-due Nov. '97
Capitalized lease obligations
- Computer hardware and software
- Filter Cone machine lease
- Computer lease
STAR Bank building mortgage/loan
Surety Bond Indemnifications
The practise since HMI Industries Inc. acquired HMI Incorporated in 1987
has been to continue to have HMI Incorporated guarantee the surety bonds of
distributors so that the distributors can be bonded to carry on business in
Canada.
As of 1997, the bonding company (London Guarantee) is requiring that
those bonds requiring a corporate guarantee of HMI be done under the name of HMI
Industries Inc.
As of May 1997, the status of these bonds are as follows:
Active Bonds $162,000
Lapsed bonds (within discovery period) $702,000
The amount of lapsed bonds represents a) the proactive move to have the
Regional Distributor indemnify the bonds, b) the proactive nature of having
distributors stand on their own (or under their Regional Distributor) and c) the
elimination of distributors whose bond the company had previously indemnified
(clean up).
88
SCHEDULE 4 (continued)
PERMITTED LIENS
Bliss Manufacturing Company
STAR BANK leases
-#410, #411, #412, #413
Health-Mor Acceptance Pty Ltd.
NBD Bank line of credit
Health-Mor Personal Care Corp.
Mortgage on land and building
89
SCHEDULE 5
RESTRICTIONS, LABOR ISSUES
--------------------------
1. Except as set forth herein, neither Borrower nor Guarantor Subsidiary is
a party or subject to any charge, restriction, judgment, decree or
order.
None
2. Except as set forth herein, neither Borrower's nor any Guarantor
Subsidiary's labor contracts are scheduled to expire within three years
of the date of the Agreement.
None
3. Except as set forth herein, neither Borrower nor any Guarantor
Subsidiary is a party to any employment contract or labor contract.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ Manufacturing Employees Association - expires 8/31/2001
90
SCHEDULE 6
VIOLATION OF LAW
-----------------
No violations
91
SCHEDULE 7
PENSION PLAN LIABILITY
----------------------
None
92
SCHEDULE 8
LITIGATION
----------
See Litigation Status Report attached hereto.
93
LITIGATION STATUS REPORT
------------------------
May 1997
MULTIPLE ALABAMA CUSTOMER LAWSUITS
-----------------------------------
HMI Industries is a principal defendant, with its distributor ▇▇▇
▇▇▇▇▇▇, d/b/a Filter Queen Center, and his distributor, ▇▇▇▇▇ ▇▇▇▇▇, d/b/a
▇▇▇▇▇ Modern Air, in 11 lawsuits filed in as many separate counties in Alabama
by lawyers representing Alabama purchasers of the Majestic Filter Queen during
the last six years. At the outset of litigation, there were 206 plaintiffs.
Insurance
---------
Chubb Insurance, the company's present insurance carrier, is providing
the defense and has set aside reserves per claimant.
Unlike Chubb, the company's prior insurance carrier Cigna has refused to
either defend or indemnify the company on the claims. While Cigna's policy was
in effect when certain of the purchases were made, Cigna has maintained that
because the claim arose in the fall of 1995 when the plaintiffs knew or should
have known of the misrepresentations, the Cigna policy is not applicable. We are
exploring on behalf of HMI potential claims against Cigna for "bad faith"
refusal to defend.
Status
------
The litigation has been resolved as a result of a mediation conference
held February 17, 1997 in Birmingham, Alabama. Settlement documents are being
completed. Costs of settlement for plaintiffs approximate $250,000, with a
similar amount being paid by Chubb.
Hatch v. Health-Mor, Inc. et al.
---------------------------------
Suit by consumer against distributor and HMI for fraud and
misrepresentation that Filter Queen sold as a black lung machine.
ACTION SINCE LAST REPORT: Matter settled as part of overall settlement
of Alabama litigation.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, D/B/A A-1 VACUUM & SUPPLY
------------------------------------------------------------------
Negligent hiring/supervision claim alleged against HMI by an employee of
a distributor. Claim against HMI is that it "forced" distributor to hire
assailant.
ACTION SINCE LAST REPORT: Summary judgment grant HML
94
HMI ▇. ▇▇▇▇▇▇. FEDERAL DISTRICT COURT
-------------------------------------
ACTION SINCE LAST REPORT: Matter settled. Apology, noncompete and
promissory note calling for payment of $63,000 by Norton.
HMI V. UNIVERSAL VACUUM CORPORATION AND ▇▇▇▇▇▇ ▇▇▇▇▇▇, GRAND RAPIDS, MICHIGAN
-----------------------------------------------------------------------------
Suit filed by HMI to secure materials purchased from UVC in an asset
purchase agreement. UVC unable to produce machines due to lack of funds and
inept management. Trial court has granted HMI's request for product and
materials to be sent to HMI for production. Universal has counterclaimed.
Mediation in August 1996 resulted in a positive award to HMI. Mediation rejected
by Universal, which seeks sums in excess of $200,000. Matter set for trial May
28, 1997.
HMI ▇. ▇▇▇▇▇▇, FEDERAL DISTRICT COURT, NORTHERN DISTRICT OF OHIO
-----------------------------------------------------------------
HMI has sued former distributor ▇▇▇▇▇ ▇▇▇▇▇▇ for violation of HMI's
Filter Queen trademark and in an action on an account. HMI terminated its
relationship with ▇▇▇▇▇▇ in August 1995 due to customer complaints and bad
business practices. ▇▇▇▇▇▇ never filed a responsive pleading or motion and HMI
won a default. On December 4, 1995, the day before a scheduled default judgment
hearing which would have ended the case, ▇▇▇▇▇▇ filed a petition for Chapter 7
bankruptcy, staying HMI's action against him. HMI's Complaint was filed
September 8, 1995.
▇▇▇▇▇▇ V. HMI. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
------------------------------------------------------------------
On June 19, 1996, ▇▇▇▇▇ ▇▇▇▇▇▇ filed an action against HMI seeking in
excess of $50,000 in damages for tortious interference with business
relationships and breach of contract. HMI agreed to waive service of summons and
a responsive pleading or motion is due on August 19, 1996 We have sought
dismissal or transfer of venue as compulsory counterclaim to HMI's action in
Ohio.
BEAGLE V. HMI, ET AL., JEFFERSON COUNTY, TEXAS
----------------------------------------------
The Beagles brought an action in Texas state court stemming from their
purchase of a Filter Queen from ▇▇▇▇▇ ▇▇▇▇▇▇. According to the Beagels, ▇▇▇▇▇▇
and HMI engaged in deceptive sales practices and breached the purchase contract,
among other things. Through local counsel, HMI has answered the Complaint,
denying liability as to HMI. No written agreement exists between HMI and ▇▇▇▇▇
▇▇▇▇▇▇. There has been no other action in the case.
95
R&D DISTRIBUTING AND ▇▇▇▇▇▇ ▇▇▇▇▇ V. HMI INDUSTRIES INC.
--------------------------------------------------------
In December 1996, after negotiations with distributor ▇▇▇▇▇▇ ▇▇▇▇▇
failed to produce any resolution, Stead commenced legal action in state court in
Michigan. HMI has removed the action to federal court and counterclaimed for
sums in excess of $150,000. Stead had announced to HMI his desire to retire and
wished to provide for himself a "retirement package" that was neither justified
nor warranted by past actions. The counterclaim of HMI is based on nonpayment by
Stead for various items purchased. Stead is now working for a competitor of HMI.
Discovery to commence.
96
SCHEDULE 9
Affiliates
----------
Set forth below is a list of all persons who own 10% or more of the
outstanding common stock of HMI Industries, Inc.
NAME OWNERSHIP PERCENTAGE
---- --------------------
▇▇▇▇ ▇. ▇▇▇▇▇ 14.31%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 37.97%
Affiliates also include those officers and directors of Borrowers and
Guarantor Subsidiaries and such additional Persons as are included in the
definition of Affiliate.
97
Schedule 10
CAPITALIZATION
--------------
HMI INDUSTRIES INC.
Preferred stock, $5 par value
300,000 authorized, none issued
Common Stock, $1 par value
10,000,000 authorized, 5,295,556 issued $5,295,556
Capital Paid in Excess of Par Value $7,634,886
Common Stock Held in Treasury $1,790,202
(see Proxy Statement for Shareholdings)
BLISS MANUFACTURING COMPANY
Outstanding shares 100% owned by HMI Industries Inc.
TUBE FORM, INC.
Outstanding shares 100% owned by HMI Industries Inc.
HEALTH-MOR ACCEPTANCE CORPORATION
Outstanding shares 100% owned by HMI Industries Inc.
▇▇▇▇▇▇ FALLS HOLDING COMPANY
Outstanding shares 100% owned by Bliss Manufacturing Company
TUBE-FAB LTD.
Outstanding shares 100% owned by HMI Industries Inc.
HEALTH-MOR INTERNATIONAL, INC.
Outstanding shares 100% owned by HMI Industries Inc.
HMI ACCEPTANCE CORPORATION
Outstanding shares 100% owned by HMI Industries Inc.
98
HEALTH-MOR ACCEPTANCE PTY LTD
Outstanding shares 100% owned by HMI Industries Inc.
HMI INCORPORATED
Outstanding shares 100% owned by HMI Industries Inc.
EXPERIMENTAL DISTRIBUTING, INC.
Outstanding shares 100% owned by HMI Industries Inc.
HEALTH-MOR PERSONAL CARE CORP.
Common Stock, $1 par value
10,000 shares authorized and issued
Shareholder # shares % $
HMI Industries Inc. 8,500 85% $ 8,500
▇▇▇▇ ▇▇▇▇▇/MIl Investment Corp. 1,000 10% $ 1,000
Four other investors 500 5% $ 500
-------
$10,000
=======
Capital Paid in Excess of Par Value $ 6,000
=======
99
SCHEDULE 11
DEPOSIT AND OTHER ACCOUNTS
Attached is a list of all bank accounts for the Borrowers and the
Guarantor Subsidiaries.
100
Bank Accounts for HMI Industries Inc. & Subsidiaries
HMI Industries Inc.
Federal ID #▇▇-▇▇▇▇▇▇▇
805-8828 48573-9981
Control led Disbursements-Payroll ▇▇▇▇▇▇▇'▇ Compensation Checking
Star Bank Star Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇
48039-0012 48573-9791
Guaranteed Loans - Checking Supernaturals Acct
Star Bank Star Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇
805-5238 805-5204
Business Checking - Payables Checking - Concentration Account
Star Bank Star Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇
HMAC
Federal ID #▇▇-▇▇▇▇▇▇▇
805-5702
HMAC Business Checking
Star Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇
101
BANK ACCOUNTS FOR AMT INDUSTRIES INC. & SUBSIDIARIES
BLISS MANUFACTURING
FEDERAL ID# ▇▇-▇▇▇▇▇▇▇
805-5253 GT-09337-49
Business Checking Business Checking
Star Bank Painewebber Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Contact: ▇▇▇ ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
ACCT CLOSED AS OF 5/27/97
10383 147303
Business Checking Business Checking
Bank One Bank One
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Contact: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Contact: ▇▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
102
BANK ACCOUNTS FOR HMI INDUSTRIES INC. & SUBSIDIARIES
HMI INC.
37-02618 02-06016
HMI Inc. - $CDN HMI Inc. - $US
CIBC CIBC
2866 Dufferin St. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
43-05914 35-05219
Household Rental Systems - $CDN FQ Home Shoppe-Burlington - $CDN
CIBC CIBC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
36-03717 36-03512
FQ H S-Burlington - Defender $CDN FQ Home Shoppe - Vancouver $CDN
CIBC CIBC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ Contact: ▇▇▇▇ ▇▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
36-03415 43-03814
FQ H S -Vancouver-Defender $CDN HMI Acceptance Corp $CDN
CIBC CIBC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇▇ Contact: ▇▇▇▇▇ ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
1040-624 1029-591
HMI Inc. - MASTERCARD - $ CDN FQ H S-Burlington-Mastercard-$CDN Bank of
MONTREAL Bank of Montreal
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Contact: Mastercard a/c rep.
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
103
BANK ACCOUNTS FOR HMI INDUSTRIES INC. & SUBSIDIARIES
TUBE FAB LTD & MANUFACTURED PRODUCTS DIVISION
91-02116 02-03416
Business Checking -CDN $ Business Checking -US $
CIBC CIBC
Markborough Place ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 671 1 Mississauga Road
Mississauga, Ontario L5N 2W3 ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Contact: ▇▇▇▇▇ ▇▇▇▇▇ Contact: ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
HEALTH-MOR INTERNATIONAL, INC.
▇▇▇-▇-▇▇▇▇▇▇
Business CHECKING
Chase Manhattan
▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Contact: ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
HEALTH-MOR PERSONAL CARE CORP.
▇▇-▇▇▇▇▇▇▇-▇ ▇▇-▇▇▇▇▇▇▇-▇
Business Checking Payroll Account
First Bank of America-Kankakee First Bank of America-Kankakee
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
No individual assigned as contact No individual assigned as contact
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
104
BANK ACCOUNTS FOR HMI INDUSTRIES INC. & SUBSIDIARIES
HEALTH-MOR ACCEPTANCE PTY. LTD.
10620801 10620800
Distributor Acct - Checking Business Checking
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Contact: the Manager Contact: the Manager
0011 1612 9412 2811 0011 1612 9412 2811
Loan Acct
First Chicago Australia
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Contact: ▇▇▇▇ ▇▇▇▇▇▇
Oll 1612 9954 3677
HMI INDUSTRIES - INC. ROTTERDAM
61 9907 819 62 8161 999
HBU Bank HBU Bank
▇▇ ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ Rotterdam
Contact: ▇. ▇▇ ▇▇▇▇ Contact: ▇. ▇▇ ▇▇▇▇
011 31 10 2820282 Oll 31 10 2820282
105
JULY 17, 1996
TO: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ FROM ▇▇▇▇▇ ▇▇▇▇▇▇
CANADIAN BANK ACCOUNT LISTING
------------------------------
============================================================================================================
BANK NAME Canadian Imperial Bank of Canadian Imperial Bank of Canadian Imperial Bank of
Commerce Commerce Commerce
------------------------------------------------------------------------------------------------------------
BANK ADDRESS ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ North York, Ontario North York, Ontario
M6B 3S6 M6B 3S6 M6B 3S6
------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER 37-02618 02-06016 43-05914
------------------------------------------------------------------------------------------------------------
ACCOUNT NAME HMI Incorporated HMI Incorporated Household Rental Systems
------------------------------------------------------------------------------------------------------------
TYPE OF ACCOUNT Current - Canadian Funds U.S. Funds Current - Canadian Funds
------------------------------------------------------------------------------------------------------------
SIGNING AUTHORITIES ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇ ▇▇▇▇▇ - Unlimited
AND LIMITS ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited
▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited
▇▇▇▇▇ Solloh - Unlimited
------------------------------------------------------------------------------------------------------------
NUMBER OF SIGNATURES Any two of the above Any two of the above Any two of the above
REQUIRED
=============================================================================================================
=========================================================================================
BANK NAME Canadian Imperial Bank of Canadian Imperial Bank of
Commerce Commerce
------------------------------------------------------------------------------------------
BANK ADDRESS ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ North York, Ontario
M6B 3S6 M6B 3S6
------------------------------------------------------------------------------------------
ACCOUNT NUMBER 35-05219 36-03717
------------------------------------------------------------------------------------------
ACCOUNT NAME Filter Queen Home Shoppe- Filter Queen Home Shoppe-
Burlington Burlington "Defender"
------------------------------------------------------------------------------------------
TYPE OF ACCOUNT Current - Canadian Funds Current - Canadian Funds
------------------------------------------------------------------------------------------
SIGNING AUTHORITIES ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇ ▇▇▇▇▇ - Unlimited
AND LIMITS ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited
▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited (*) ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited
▇▇▇ ▇▇▇▇▇ - Unlimited (*) ▇▇▇ ▇▇▇▇▇ - Unlimited
------------------------------------------------------------------------------------------
NUMBER OF SIGNATURES (*) One sign, up to $2000 Any two of the above
REQUIRED or any two of the above
==========================================================================================
==============================================================================================================
BANK NAME Canadian Imperial Bank of Canadian Imperial Bank of Canadian Imperial Bank of
Commerce Commerce Commerce
--------------------------------------------------------------------------------------------------------------
BANK ADDRESS ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ North York, Ontario Rexdale, Ontario
M6B 3S6 M6B 3S6 ▇▇▇ ▇▇▇
--------------------------------------------------------------------------------------------------------------
ACCOUNT NUMBER 36-03512 36-03415 43-03814
--------------------------------------------------------------------------------------------------------------
ACCOUNT NAME Filter Queen Home Shoppe- Filter Queen Home Shoppe- HMI Acceptance Corporation
Vancouver Vancouver "Defender"
--------------------------------------------------------------------------------------------------------------
TYPE OF ACCOUNT Current - Canadian Funds Current - Canadian Funds Current - Canadian Funds
--------------------------------------------------------------------------------------------------------------
SIGNING AUTHORITIES ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited
AND LIMITS ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇-Unlimited
▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited (*) ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Unlimited (*) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Unlimited
--------------------------------------------------------------------------------------------------------------
NUMBER OF SIGNATURES (*) One sign, up to $2000 Any two of the above Any two of the above
REQUIRED or any two of the above
==============================================================================================================
======================================================================================
BANK NAME Bank of Montreal Bank of Montreal
-------------------------------------------------------------------------------------
BANK ADDRESS ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 777 Guelph Line
Rexdale, Ontario ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇
-------------------------------------------------------------------------------------
ACCOUNT NUMBER 1040-624 1029-591
-------------------------------------------------------------------------------------
ACCOUNT NAME HMI Incorporated Filter Queen Home Shoppe-
Burlington
-------------------------------------------------------------------------------------
TYPE OF ACCOUNT Mastercard - Cdn. Funds Mastercard - Cdn. Funds
-------------------------------------------------------------------------------------
SIGNING AUTHORITIES ▇▇▇▇ ▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited
AND LIMITS ▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited (*)
▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇ ▇▇▇▇▇ - Unlimited (*)
-------------------------------------------------------------------------------------
NUMBER OF SIGNATURES Any one of the above (*) One sign up to $2000
REQUIRED or any two of the above
====================================================================================
106
TO: ▇▇▇▇▇ ▇▇▇
FROM: ▇▇▇▇▇▇▇ ▇▇▇▇
TUBE-FAB LTD. - CANADIAN BANK ACCOUNT LISTING
---------------------------------------------------------------------------------------------------------------------
Bank Name: Canadian Imperial Bank of Commerce Bank Name: Canadian Imperial Bank of Commerce
Bank Address: Markborough Place Bank Address: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 6711 Mississauga Road
Mississauga Mississauga
Ontario. L5N 2W3 ▇▇▇▇▇▇▇. ▇▇▇ ▇▇▇
Account Number: 91-02116 Account Number: 02-03416
Account Name: Tube-Fab Ltd. Account Name: Tube-Fab Ltd.
Type of Account: Current - Canadian Funds Type of Account: US $ Operating
Signing Authorities ▇▇▇▇ ▇▇▇▇▇▇▇ - Unlimited Signing Authorities ▇▇▇▇ ▇▇▇▇▇▇▇ - Unlimited
and Limits: ▇▇▇▇ ▇▇▇▇ - Unlimited and Limits: ▇▇▇▇ ▇▇▇▇ - Unlimited
▇▇▇▇▇ ▇▇▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇▇ - Unlimited
▇▇▇▇▇ ▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇ - Unlimited
▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇▇▇ ▇▇▇▇▇▇ - Unlimited
▇▇▇▇ ▇▇▇▇▇▇ - Unlimited ▇▇▇▇ ▇▇▇▇▇▇ - Unlimited
▇▇▇▇▇▇▇ ▇▇▇▇ - $2,500.00 ▇▇▇▇▇▇▇ ▇▇▇▇ - $2,500.00
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - $2,500.00 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - $2,500.00
Number of Signatures Number of Signatures
Required: Any two of the above Required: Any two of the above
----------------------------------------------------------------------------------------------------------------------
107
SCHEDULE 12
LEASES
------
Attached is a schedule of propety lease for various locations.
VARIOUS OTHER LEASES NONE OF WHICH IN THE AGREGATE EXCEEDS $100,000
WHICH DO OT HAVE A MATERIAL ADVERSE EFFECT ON THE BORROWERS' FINANCIAL
CONDITION.
108
HMI MEMORANDUM
--------------
May 27, 1997
To: ▇▇▇▇▇ ▇▇▇
From: ▇▇▇▇▇ ▇▇▇▇▇▇
Re: Canadian Property Leases
=================================================================================================================================
MONTHLY RENT
LOCATION CHARACTER SQUARE FOOTAGE PAYEE [NET] EXPIRY DATE
---------------------------------------------------------------------------------------------------------------------------------
#▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ [HRS] Office & Warehouse 4,100 Properties $2,135.42 March 31, 1999
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ [HRS] Office & Warehouse 3,513 Ltd. $663.00 March 1996
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ [HRS] Office & Warehouse 4,762 La Prudent $1,488.00 March 1997 ***
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ [HRS] Office & Warehouse 10,372 Ulmar Holdings $3,457.33 Month to Month
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ [FQHS] Office & Retail Store 1,100 Inc. $870.83 June 30, 1997
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ [FQHS] Office & Retail Store 2,292 Carpet $3,200.00 April 30, 1999
---------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ Office, Warehouse and 38,400 Director Industrial
[HMI, HRS, TFL] Manufacturing Properties, Inc. $11,830.00 September 30, 2006
==================================================================================================================================
Note: Monthly Rent [Net] - Does not include property taxes, management fees,
insurance by Landlord, or any other fees from Landlord [GST Extra]
109
SCHEDULE 13
INSURANCE POLICIES
------------------
The purpose of this schedule is the summarize the commercial liability
and property insurance in effect together with confirmation of the naming of
STAR Bank, N.A. as a loss payee. These coverages renewed on May 31, 1997 and
accordingly, I have included confirmation by way of two Certificates of
Insurance with STAR Bank N.A. as loss payee (one for STAR Bank N.A. and one for
STAR's Equipment Division).
110
=============================================================================================================
▇▇▇▇▇(TM) DATE (MM/DD/YY)
5/30/97
---------------------------------------------------------------------------------------------------
PRODUCER | THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ | ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇ | HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ | ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
|------------------------------------------------------------
| COMPANIES AFFORDING COVERAGE
----------------------------------------------------------
| COMPANY
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇ | A FEDERAL INS CO
----------------------------------------------------------------------------------------------------------
INSURED | COMPANY
BLISS MFG. | B
HMI INDUSTRIES, INC. ------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | Company
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ | C
-------------------------------------------------------------
| Company
| D
--------------------------------------------------------------------------------------------------------------
COVERAGES
--------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED
TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY
THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
----------------------------------------------------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY POLICY EFFECTIVE POLICY EXPIRATION
LTR NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
----------------------------------------------------------------------------------------------------------------------------------
A | GENERAL LIABILITY 35326461 5/31/97 5/31/98 GENERAL AGGRETAGE $2,000,000
| -------------------------------------
| [X ] COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $2,000,000
| -------------------------------------
| [ ] [ ] CLAIMS MADE [X] OCCUR PERSONAL & ADV INJURY $1,000,000
| -------------------------------------
| [ ] OWNERS & CONTRACTOR'S PROT EACH OCCURRENCE $1,000,000
| -------------------------------------
| [ ] ___________________________ FIRE DAMAGE $1,000,000
| (Any one fire)
| -------------------------------------
| [ ] ___________________________ MED EXP (Any one person) $ 10,000
----------------------------------------------------------------------------------------------------------------------------------
A | AUTOMOBILE LIABILITY 73203691 5/31/97 5/31/98 COMBINED SINGLE LIMIT $1,000,000
| -------------------------------------
| [X ] ANY AUTO BODILY INJURY
| (Per Person) $
| [ ] ALL OWNED AUTOS -------------------------------------
|
| [ ] SCHEDULED AUTOS -------------------------------------
|
| [X ] HIRED AUTOS BODILY INJURY $
| (Per Accident)
| [X ] NON-OWNED AUTOS
| ------------------------------------
| [ ] ____________________ PROPERTY DAMAGE $
| [ ]
----------------------------------------------------------------------------------------------------------------------------------
| GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
| ------------------------------------
| [ ] AUTO AUTO OTHER THAN AUTO ONLY:
| ------------------------------------
| [ ] ___________________________ EACH ACCIDENT $
| ------------------------------------
| [ ] AGGREGATE $
| ------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
A | EXCESS LIABILITY 79747037 5/31/97 5/31/98 EACH OCCURRENCE $8,000,000
| ------------------------------------
| [X ] UMBRELLA FORM AGGREGATE $8,000,000
| ------------------------------------
| [ ] OTHER THAN UMBRELLA FORM $
| ------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
A | WORKER'S COMPENSATION AND 71634449 5/31/97 5/31/98 |X| WC STATU- | | OTH- |
| EMPLOYERS' LIABILITY TORY LIMITS | | ER |
| ------------------------------------
| THE PROPRIETOR/ [ ] INCL EL EACH ACCIDENT $1,000,000
| ------------------------------------
| PARTNERS/EXECUTIVE EL DISEASE-POLICY LIMIT $1,000,000
| ------------------------------------
| OFFICERS ARE: [ ] EXCL EL DISEASE-EA EMPLOYEE $1,000,000
| ------------------------------------
-------------------------------------------------------------------------------------------------------------------
A | OTHER 35326461 5/31/97 5/31/98 BLANKET LIMIT
| REAL & PERSONAL $10,000 DEDUCTIBLE
| PROPERTY, SPECIAL
| FORM INCL THEFT
-----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS (LIMITS MAY BE SUBJECT TO DEDUCTIBLES OR RETENTIONS).
-----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
-----------------------------------------------------------------------------------------------------------------------------------
STAR BANK SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
NATIONAL ASSOCIATION EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. 8135 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR
REPRESENTATIVES.
------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------------------------------------------------------------------------------------------------
Certificate No. 002001-00059
111
===================================================================================================
▇▇▇▇▇ (TM) Date (MM/DD/YY)
5/30/97
---------------------------------------------------------------------------------------------------
PRODUCER | THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ | ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇ | HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ | ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
|---------------------------------------------------------
| COMPANIES AFFORDING COVERAGE
----------------------------------------------------------
| COMPANY
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇ | A FEDERAL INS CO
----------------------------------------------------------------------------------------------------------
INSURED | COMPANY
HMI INDUSTRIES, INC. AND | B
ITS SUBSIDIARIES ------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ | Company
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ | C
-------------------------------------------------------------
| Company
| D
--------------------------------------------------------------------------------------------------------------
COVERAGES
--------------------------------------------------------------------------------------------------------------
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED
TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY
THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND
CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
----------------------------------------------------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY POLICY EFFECTIVE POLICY EXPIRATION
LTR NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
----------------------------------------------------------------------------------------------------------------------------------
A | GENERAL LIABILITY 35326461 5/31/97 5/31/98 GENERAL AGGRETAGE $2,000,000
| -------------------------------------
| [X ] COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $2,000,000
| -------------------------------------
| [ ] [ ] CLAIMS MADE [X] OCCUR PERSONAL & ADV INJURY $1,000,000
| -------------------------------------
| [ ] OWNERS & CONTRACTOR'S PROT EACH OCCURRENCE $1,000,000
| -------------------------------------
| [ ] ___________________________ FIRE DAMAGE $1,000,000
| (Any one fire)
| -------------------------------------
| [ ] ___________________________ MED EXP (Any one person) $ 10,000
----------------------------------------------------------------------------------------------------------------------------------
A | AUTOMOBILE LIABILITY 73203691 5/31/97 5/31/98 COMBINED SINGLE LIMIT $1,000,000
| -------------------------------------
| [X ] ANY AUTO BODILY INJURY
| (Per Person) $
| [ ] ALL OWNED AUTOS -------------------------------------
|
| [ ] SCHEDULED AUTOS -----------------------------------
|
| [X ] HIRED AUTOS BODILY INJURY $
| (Per Accident)
| [X ] NON-OWNED AUTOS
| ------------------------------------
| [ ] ____________________ PROPERTY DAMAGE $
| [ ]
----------------------------------------------------------------------------------------------------------------------------------
| GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
| ------------------------------------
| [ ] AUTO AUTO OTHER THAN AUTO ONLY:
| ------------------------------------
| [ ] ___________________________ EACH ACCIDENT $
| ------------------------------------
| [ ] AGGREGATE $
| ------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
A | EXCESS LIABILITY 79747037 5/31/97 5/31/98 EACH OCCURRENCE $8,000,000
| ------------------------------------
| [X ] UMBRELLA FORM AGGREGATE $8,000,000
| ------------------------------------
| [ ] OTHER THAN UMBRELLA FORM $
| ------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
A | WORKER'S COMPENSATION AND 71634449 5/31/97 5/31/98 |X| WC STATU- | | OTH- |
| EMPLOYERS' LIABILITY TORY LIMITS | | ER |
| ------------------------------------
| THE PROPRIETOR/ [ ] INCL EL EACH ACCIDENT $1,000,000
| ------------------------------------
| PARTNERS/EXECUTIVE EL DISEASE-POLICY LIMIT $1,000,000
| ------------------------------------
| OFFICERS ARE: [ ] EXCL EL DISEASE-EA EMPLOYEE $1,000,000
| ------------------------------------
-------------------------------------------------------------------------------------------------------------------
A | OTHER 35326461 5/31/97 5/31/98 BLANKET LIMIT
| REAL & PERSONAL $10,000 DEDUCTIBLE
| PROPERTY, SPECIAL
| FORM INCL THEFT
-----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS (LIMITS MAY BE SUBJECT TO DEDUCTIBLES OR RETENTIONS).
IT IS AGREED THAT CERTIFICATE HOLDER IS ADDED AS ADDITIONAL INSURED/LOSS PAYEE AS RESPECT LEASED FORKLIFTS AND A TURRET PRESS
PUNCH.
-----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
-----------------------------------------------------------------------------------------------------------------------------------
STAR BANK NA SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
EQUIPMENT FINANCE DIVISION EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. #▇▇▇▇ BUT FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR
REPRESENTATIVES.
--------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------------------------------------------------------------------------------------------------
Certificate No. 001001-00026
112
SCHEDULE 14
SEVERANCE/LOSS ON SALE OF ASSETS
Severance charge related to ▇▇▇▇ ▇▇▇▇▇'▇ retirement on May 14, 1997, and
the Company-wide layoffs of May 28, 1997.
Loss, if any, on disposal of non-core assets.
113
SCHEDULE 15
TAX LIABILITIES
Health-Mor International, Inc. FSC has a tax liability currently due but
unpaid to the Internal Revenue Service for the fiscal year 1996 tax year. This
liability will be offset by a refund to be received by HMI Industries Inc. upon
filing an amended return for the same tax period.