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Exhibit 10.00
[FINOVA LOGO]
FINANCIAL INNOVATORS
LOAN AND SECURITY AGREEMENT
HMI INDUSTRIES INC.
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Borrower
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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Address
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Borrower Fed ID Tax No.
$3,500,000
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Credit Limit
May 12, 1999
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Date
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FINOVA BUSINESS CREDIT
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LOAN AND SECURITY AGREEMENT dated May 12, 1999, between HMI INDUSTRIES INC., a
corporation organized and existing under the laws of the State of Delaware,
having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ("BORROWER"), and FINOVA CAPITAL CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, qualified to do business in
the state of New York, having its principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereinafter called "FINOVA").
1. DEFINITIONS. All capitalized terms used in this Agreement are defined either
in this Agreement, in the attached Loan Schedule, or in the attached Definition
Schedule. The Loan Schedule and Definition Schedule are integral parts of this
Agreement and all references to "herein", "herewith" and words of similar import
shall for all purposes be deemed to include the Schedules.
2. LOANS; INTEREST RATE AND OTHER CHARGES.
(a), LOANS. Whenever the Borrower makes a request, FINOVA shall make loans or
extend credit to or for the Borrower; but FINOVA shall not be obligated to make
loans or extend credit beyond the Total Facility set forth in the Loan Schedule
("TOTAL FACILITY"), and subject to deduction of any loan reserves ("LOAN
RESERVES"), FINOVA deems proper from time to time in its Permitted Discretion,
and less amounts FINOVA may be obligated to pay in the future on behalf of
Borrower. Advances under the Total Facility ("LOANS" and individually, a "LOAN")
shall be comprised of the amounts shown on the Loan Schedule.
(b) INTEREST AND FEES; PRINCIPAL PAYMENTS. The Borrower shall pay FINOVA the
interest and fees set forth on the Loan Schedule, but only to the maximum extent
permitted by applicable law. Except where evidenced by notes or other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions which are in conflict with this Section (in which event the
conflicting provisions of such notes or other instruments shall govern and
control), that portion of the Obligations consisting of principal payable on
account of Loans shall be payable by Borrower to FINOVA immediately upon the
earliest of (i) the receipt by FINOVA or Borrower of any proceeds of any of the
Collateral, to the extent of said proceeds, (ii) the occurrence of an Event of
Default in consequence of which FINOVA elects to accelerate the maturity and
payment of such loans, or (iii) any termination of this Agreement; PROVIDED,
HOWEVER, that any Overadvance or Overline shall be payable on demand. Borrower
shall pay principal, interest, and all other amounts payable hereunder, or under
any other Loan Document, without any deduction whatsoever, including, but not
limited to, any deduction for any setoff or counterclaim.
(c) OVERLINES; OVERADVANCES. If at any time or for any reason the outstanding
amount of advances extended or issued pursuant hereto exceeds any of the dollar
limitations ("OVERLINE") or percentage limitations ("OVERADVANCE") in the Loan
Schedule, then Borrower shall, upon FINOVA's demand, immediately pay to FINOVA,
in cash, the full amount of such Overline or Overadvance which, at FINOVA's
option, may be applied to reduce the outstanding principal balance of the Loans
or any other Obligations. Without limiting Borrower's obligation to repay to
FINOVA on demand the amount of any Overline or Overadvance, Borrower agrees to
pay FINOVA interest on the outstanding principal amount of any Overline or
Overadvance, on demand, at the rate set forth on the Loan Schedule and
applicable to the Revolving Credit Loans.
(d) COLLECTIONS. Until FINOVA notifies Borrower to the contrary, Borrower may
make collection of all Receivables for FINOVA and shall receive all such
payments or sums as trustee of FINOVA and immediately deliver all such payments
or sums to FINOVA in their original form, duly endorsed in blank or cause the
same to be deposited into a Blocked Account or Dominion Account. FINOVA or its
designee may, at any time, notify account debtors that the Receivables have been
assigned to FINOVA and of FINOVA's security interest therein, and may collect
the Receivables directly and charge the collection costs and expenses to
Borrower's loan account. Borrower agrees that in computing the charges under
this Agreement, all items of payment shall be deemed applied by FINOVA on
account of the Obligations two (2), business days after receipt by FINOVA of
good funds which have been finally credited to FINOVA's account, whether such
funds are received directly from Borrower or from the Blocked Account bank or
the Dominion Account bank, pursuant to this Agreement, and this provision shall
apply regardless of the amount of the Obligations outstanding or whether any
Obligations are outstanding; provided, that if any such good funds are received
after 12:00 p.m. noon New York time on any business day or at any time on any
day not constituting a business day, such funds shall be deemed received on the
immediately following business day. (The two (2) day time period referenced to
in the preceding sentence shall be reduced by one half day if FINOVA determines
that Borrower's after tax net income for the fiscal year ending September 30
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is at least $1,239,000. FINOVA is not, however, required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to FINOVA
in its Permitted Discretion and FINOVA may charge Borrower's loan account for
the amount of any item of payment which is returned to FINOVA unpaid.
(e) ESTABLISHMENT OF A LOCKBOX ACCOUNT OR DOMINION ACCOUNT. Unless Borrower
shall be otherwise directed by FINOVA in writing, Borrower shall cause all
proceeds of Collateral to be deposited into a lockbox account, or such other
"blocked account" as FINOVA may require (each, a "BLOCKED ACCOUNT") pursuant to
an arrangement with such bank as may be selected by Borrower and be acceptable
to FINOVA which proceeds, unless otherwise provided herein, shall be applied in
payment of the Obligations in such order as FINOVA determines in its sole
discretion. Borrower shall issue to any such bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to FINOVA,
either to any account maintained by FINOVA at said bank or by wire transfer to
appropriate account(s) of FINOVA. All funds deposited in a Blocked Account shall
immediately become the sole property of FINOVA and Borrower shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. FINOVA assumes no responsibility for any Blocked Account arrangement,
including without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Alternatively, FINOVA
may establish depository accounts in the name of FINOVA at a bank or banks for
the deposit of such funds (each, a "DOMINION ACCOUNT") and Borrower shall
deposit all proceeds of Receivables and all cash proceeds of any sale of
Inventory or, to the extent permitted herein, Equipment or cause same to be
deposited, in kind, in such Dominion Accounts of FINOVA in lieu of depositing
same to Blocked Accounts, and, unless otherwise provided herein, all such funds
shall be applied by FINOVA to the Obligations in such order as FINOVA determines
in its sole discretion. FINOVA shall instruct the depository at which any
Dominion Account is located to sweep the Dominion Account daily to the extent it
is legally permitted to do so.
(f) MONTHLY ACCOUNTINGS. FINOVA shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by FINOVA), unless Borrower
notifies FINOVA in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or admissions.
(g) APPLICATION OF COLLATERAL AND PAYMENTS. Except as otherwise provided
herein, FINOVA shall have the continuing and exclusive right to apply or reverse
and re-apply any and all payments to any portion of the Obligations in such
order and manner as FINOVA shall determine in its Permitted Discretion. The
amount of all payments or amounts received by FINOVA with respect to the Loan
shall be applied to the extent applicable under this Agreement: (i) first, to
accrued interest through the date of such payment, including any Default
Interest; (ii) then, to any late fees, overdue risk assessments, Examination Fee
and expenses, collection fees and expenses and any other fees and expenses due
to FINOVA hereunder; and (iii) last, the remaining balance, if any, to the
unpaid principal balance of the Loan; provided however, while an Event of
Default exists under this Agreement, or under any other Loan Document, each
payment hereunder shall be (x) held as cash collateral to secure Obligations
relating to any other contingent obligations arising under the Loan Documents
and/or (y) applied to amounts owed to FINOVA by Borrower as FINOVA in its
Permitted Discretion may determine. In calculating interest and applying
payments as set forth above: (a) interest shall be calculated and collected
through the date a payment is actually applied by FINOVA under the terms of this
Agreement; (b) interest on the outstanding balance shall be charged during any
grace period permitted hereunder; or (c) at the end of each month, all accrued
and unpaid interest and other charges provided for hereunder shall be added to
the principal balance of the Loan. To the extent that Borrower makes a payment
or FINOVA receives any payment or proceeds of the Collateral for Borrower's
benefit that is subsequently invalidated, set aside or required to be repaid to
any other Person, then, to such extent, the Obligations intended to be satisfied
shall be revived and continue as if such payment or proceeds had not been
received by FINOVA and FINOVA may adjust the Loan balances as FINOVA, in its
Permitted Discretion.
3. SECURITY. To secure the payment and performance of the Obligations when
due, Borrower hereby grants to FINOVA a first priority security interest
(subject only to Permitted Encumbrances) in all of Borrower's now owned or
hereafter acquired or arising Inventory, Equipment, Receivables, and the
proceeds thereof, trademarks, copyrights, licenses and patents, investment
property, and general intangibles, including, without limitation, all of
Borrower's deposit accounts, money, any and all property now or at any time
hereafter in FINOVA's possession (including
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claims and credit balances), and all proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties), all
products and all books and records and computer data related to any of the
foregoing [and assigns, transfers and sets over to FINOVA all of its right,
title and interest, powers, privileges and other benefits of all leases, rental
agreements and related documents entered into by Borrower with respect to any
Equipment leased by Borrower together with all income, proceeds and other
benefits thereof] (all of the foregoing, together with all other property in
which FINOVA may be granted a lien or security interest, is referred to herein,
collectively, as the "COLLATERAL").
4. CONDITIONS OF CLOSING.
(a) INITIAL ADVANCE. The obligation of FINOVA to make the initial advance
hereunder [or to issue or arrange for the issuance of the initial Letter of
Credit hereunder] is subject to the fulfillment, to the satisfaction of FINOVA
and its counsel, of each of the following conditions on or prior to the date set
forth herein or on the Loan Schedule:
(1) All the loan and related documents listed on the Document Checklist
provided by FINOVA to Borrower.
(2) Borrower shall have complied with all additional closing conditions
set forth in the Loan Schedule.
(b) SUBSEQUENT ADVANCES. The obligation of FINOVA to make any advance
(including the initial advance), shall be subject to the further preconditions
that, on and as of the date of such advance: (a) the representations and
warranties of Borrower set forth in this Agreement shall be accurate, before and
after giving effect to such advance or issuance and to the application of any
proceeds thereof; (b) no Event of Default and no event which, with notice or
passage of time or both, would constitute an Event of Default has occurred and
is continuing, or would result from such advance or issuance or from the
application of any proceeds thereof; (c) no material adverse change has occurred
in the Borrower's business, operations, financial condition, in the condition of
the Collateral or other assets of Borrower or in the prospect of repayment of
the Obligations; and (d) FINOVA shall have received such other approvals,
opinions or documents as FINOVA shall reasonably request.
5. BORROWER REPRESENTATIONS AND COVENANTS.
(a) The Borrower is a corporation, limited liability company or partnership
duly organized and in good standing under the laws of the state appearing at the
beginning of this Agreement as the state of its organization; it is and shall be
duly qualified and in good standing in every other state in which, if accounts
are Collateral hereunder, it enters into contracts giving rise to accounts, and,
if goods of any nature are Collateral hereunder, it maintains such goods; it
keeps and shall keep its books of account and goods of any nature which are
purported to be Collateral at its address appearing at the beginning of this
Agreement; the execution, delivery and performance hereof are within the
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of the Borrower's charter or by-laws or of any
undertaking by which it is bound; except for the security interest granted
hereby, the Borrower is and shall be the owner of all property located on its
premises (except as noted on a separate list signed and delivered to FINOVA on
behalf of the Borrower concurrently herewith); it owns all property purported to
be included in the Collateral free from any lien, security interest or
encumbrance; it does have and shall have the absolute right to subject the same
to a security in FINOVA; after the security interest of FINOVA shall have
attached to any such property, the Borrower's properties of any type shall not
be further subject to any security interest, lien or encumbrance of any other
person, except pursuant to FINOVA's written consent, which shall not be
unreasonably withheld to permit the Borrower to obtain further purchase money
financing from others on terms which, in FINOVA's discretion, shall not
adversely affect the interests of FINOVA; subject to any limitations stated
therein or in connection therewith, all balance sheets, earnings statements and
other financial data which have been or may hereafter be furnished to FINOVA, do
or shall fairly present the financial condition of the person reported upon as
of the dates and the results of his, her or its operations for the periods for
which the same are furnished; and all other information heretofore furnished to
FINOVA is, and all information hereafter furnished to FINOVA shall be accurate
and correct in all material respects and not fail to disclose any fact necessary
to make the information furnished not misleading.
(b) The Borrower shall at all reasonable times give FINOVA access to all
places where any part of the Collateral or records pertaining thereto may be
maintained, and shall from time to time allow FINOVA by or through any of its
officers, agents, attorneys or
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accountants, to make extracts from such records; and it shall at all times keep
FINOVA informed of the name and location of each of its bank accounts.
(c) Any loan at any time received by the Borrower from FINOVA shall not be
used directly or indirectly other than in the Borrower's business; it shall not,
directly or indirectly, pay any dividend on its stock other than a dividend
payable in shares of its own stock; it shall not, directly or indirectly, make
any loan to, or pay any claim other than for current remuneration or current
reimbursable expense payable to any person controlling, controlled by or under
common control with the Borrower, and it shall, on demand, obtain and deliver to
FINOVA subordinations in form and substance satisfactory to FINOVA of all claims
of controlling and controlled persons consistent with the foregoing.
(d) The Borrower shall keep all its properties, whether included in the
Collateral or not, in good order and repair, and shall not waste or destroy them
or any part thereof or use them or any part thereof in violation of any
applicable law; it shall not dispose of any of its properties except in the
ordinary course of business and it shall not dispose of any equipment included
in the Collateral without the prior written consent of FINOVA; it shall pay
promptly, when due, any justly owing account payable of the Borrower in which
FINOVA holds a security interest, all rents or similar charges payable with
respect to any premises where any part of the Collateral may at any time be
located and all taxes payable by it, including withholding taxes; it shall
procure and maintain theft, burglary and fire insurance containing so-called
extended coverage insurance, covering all goods included in the Collateral, all
of which insurance shall be in such reasonable amounts and written by insurers
and with lender's loss payee, additional insured, and other endorsements
satisfactory to FINOVA, and shall be, if adjustable, adjustable by FINOVA, and
payable to and for the benefit of the Borrower and FINOVA as their interests may
appear; and the Borrower shall, upon FINOVA's request, furnish FINOVA with
evidence satisfactory to FINOVA of its payment of such rent or similar charges
and taxes and with policies or certificates evidencing its compliance with such
insurance requirements. If Borrower fails to comply with this Section, FINOVA
may (but shall not be required to) procure such insurance and endorsements at
Borrower's expense and charge the cost thereof to Borrower's loan account as an
Obligation.
(e) Upon its receipt or creation of any property of the type in which FINOVA
has a security interest, the Borrower shall furnish FINOVA with information
adequate to identify such property, which information shall be in such form as
FINOVA may request, accompanying such information with specific pledges,
assignments and designations in form and substance satisfactory to FINOVA and
copies of relevant invoices and vouchers; and if accounts are included in the
Collateral, promptly after the end of each month it shall furnish FINOVA with an
aging of its receivables as of the last day of such month, showing for each of
its account debtors, identified by name and address, the amount owed by such
debtor with respect to invoices of the Borrower generated within the then past
month, each of the prior three months and at any time prior to the fourth
preceding month; and if so requested by FINOVA, it shall furnish FINOVA with
statements for each account debtor for mailing to them, reflecting the
indebtedness of such account debtor and the derivation by invoice of such
indebtedness.
(f) At the time the Borrower notifies FINOVA of the existence of any account,
such account shall be good and valid, representing an undisputed bona fide
indebtedness incurred by the debtor named therein for merchandise theretofore
delivered pursuant to a contract of sale or lease or for services theretofore
performed by the Borrower for said debtor pursuant to a contract therefor; no
agreement under which any deduction or discount may be acquired shall have been
made with such debtor except as indicated in the written schedule and invoice
furnished to FINOVA concurrently with the Borrower's notifying FINOVA of the
existence of the account; the net amount so derived of each account shall be
paid in full at its maturity as expressed in the invoice evidencing such account
and the schedule pertaining thereto; and such payment shall be delivered to
FINOVA as provided in Subsection 5(h) below.
(g) The Borrower shall immediately notify FINOVA, if accounts are included in
the Collateral, of all cases involving the return, rejection, repossession, loss
of or damage to merchandise covered by an account and of any dispute arising or
credit or adjustment granted or discount or offset taken with respect to an
account, and if goods are included in the Collateral, of any event causing loss
or depreciation in the value of such goods and the amount of such loss or
depreciation; and the Borrower shall forthwith pay FINOVA the invoice amount of
the merchandise involved or the amount of the dispute, credit, adjustment,
discount, offset, loss, damage or depreciation, as the case may be.
(h) The Borrower shall do all things necessary and usual in the ordinary
course of
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business, to sell in the ordinary course of business inventory included in the
Collateral to responsible purchasers and to collect on accounts included in the
Collateral, and shall receive IN TRUST for FINOVA, without commingling with its
other funds and assets, all cash, checks, notes, chattel paper and other
proceeds received by it with respect to any of the Collateral, and shall deliver
the same, other than merchandise returns, to FINOVA in the form received,
promptly upon the receipt thereof.
(i) If certificates of title are or shall be issued with respect to any
equipment included in the Collateral, the Borrower shall, on demand, cause the
interest of FINOVA to be properly noted thereon; if any equipment included in
the Collateral is or shall be deemed a fixture under applicable law, the
Borrower shall, on demand, furnish FINOVA with disclaimers signed by all persons
having an interest in the affected real estate, insofar as the security interest
of FINOVA is concerned; and FINOVA is authorized to destroy from time to time
papers theretofore delivered to it in connection with invoices which have become
paid.
(j) The Borrower shall, at its own expense, do all acts and execute and
deliver all writings FINOVA may at any time require to protect or enforce
FINOVA's interests, rights and remedies created by, provided in or emanating
from this Agreement.
(k) Borrower shall take all action necessary to assure that there will be no
material adverse change to Borrower's business by reason of the advent of the
year 2000, including without limitation that all computer-based systems,
embedded microchips and other processing capabilities effectively recognize and
process dates after April 1, 1999. At FINOVA's request, Borrower shall provide
to FINOVA assurance reasonably acceptable to FINOVA that Borrower's
computer-based systems, embedded microchips and other processing capabilities
are year 2000 compatible.
6. INTENTIONALLY LEFT BLANK.
7. DEFAULTS AND REMEDIES.
(a), The following constitute Events of Default:
(1) The breach by the Borrower of any representation or covenant made by
it, which, provided it shall not constitute any other Event of Default, shall
remain uncured for more than 10 days after notice thereof to the Borrower; or
(2) The failure of the Borrower to pay any Obligation to FINOVA calling
for the payment of money pursuant to this or any other agreement, as and when
the same should be paid, including failure to pay such Obligation on a date set
by the Borrower for such payment and the lapse of five (5) days after such
failure of payment in the case of amounts other than principal and interest on
the Loans; the Borrower's becoming insolvent; its suspending its business; its
petitioning for or a petition against it being filed for a receivership of its
business or property or a bankruptcy or arrangement or any other legal
proceeding or action relating to the relief of debtors or the readjustment of
debts; its making an assignment for the benefit of creditors, seeking a
composition of creditors or suffering a lien against or the attachment of any of
its property; its disposing of any property included in the Collateral otherwise
than in accordance with this Agreement; its committing or suffering, by any of
its agents or employees, a fraudulent conversion of any part of the Collateral;
or, insofar as property of the type included in the Collateral is involved, its
breaching a representation or covenant contained in Section 5(f), (g) or (h)
above.
(3) Any material adverse change occurs in Borrower's business, assets,
operations, prospects or condition, financial or otherwise, or the prospect of
repayment of any portion of the Obligations or the value or priority of FINOVA's
security interest in the Collateral is materially impaired;
(4) Any default shall occur under any material agreement between Borrower
and any third party including, without limitation, any default which would
result in a right by such third party to accelerate the maturity of any
indebtedness of Borrower to such third party.
(5) Any representation or warranty made or deemed to be made by Borrower,
any affiliate or any other Loan Party in any Loan Document or any other
statement, document or report made or delivered to FINOVA in connection
therewith shall prove to have been misleading in any material respect;
(6) More than 40% of the voting stock of Borrower is acquired in one or
more transactions by any Person or any Persons controlling, controlled by, under
common control with, or acting in concert with, such Person.
(7) Any of the persons serving as Chairman and Chief Executive Officer,
President and General Counsel, and Vice President, Treasurer and Chief Financial
Officer of the Borrower on the date hereof shall cease to serve in such capacity
and a
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successor acceptable to FINOVA does not accept appointment to serve in such
capacity within sixty (60) days.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE RIGHT TO
CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND THEREAFTER IF AN
EVENT OF DEFAULT HAS OCCURRED.
(b) REMEDIES. Upon the occurrence of an Event of Default, FINOVA may, at its
option and in its sole discretion and in addition to all of its other rights
under the Loan Documents, cease making Loans, terminate this Agreement and/or
declare all of the Obligations to be immediately payable in full. Borrower
agrees that FINOVA shall also have all of its rights and remedies under
applicable law, including without limitation, the default rights and remedies of
a secured party under the Arizona Uniform Commercial Code (which includes the
right to notify account debtors of the Borrower to make payment directly to
FINOVA), and upon the occurrence of an Event of Default Borrower hereby consents
to the appointment of a receiver by FINOVA in any action initiated by FINOVA
pursuant to this Agreement and to the jurisdiction and venue set forth in this
Agreement, and Borrower waives notice and posting of a bond in connection
therewith. Further, FINOVA may, at any time, take possession of the Collateral
and keep it on Borrower's premises, at no cost to FINOVA, or remove any part of
it to such other place(s), as FINOVA may desire, or Borrower shall, upon
FINOVA's demand, at Borrower's sole cost, assemble the Collateral and make it
available to FINOVA at a place reasonably convenient to FINOVA. FINOVA may sell
and deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as FINOVA deems advisable, at
FINOVA's discretion, and may, if FINOVA deems it reasonable postpone or adjourn
any sale of the Collateral by an announcement at the time and place of sale or
of such postponed or adjourned sale without giving a new notice of sale.
Borrower agrees that FINOVA has no obligation to preserve rights to the
Collateral or ▇▇▇▇▇▇▇▇ any Collateral for the benefit of any Person. FINOVA is
hereby granted a license or other right to use, without charge, Borrower's
labels, patents, copyrights, name, trade secrets, trade names, trademarks and
advertising matter, or any similar property, in completing production,
advertising or selling any Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to FINOVA's benefit. Any requirement of
reasonable notice shall be met if such notice is mailed postage prepaid to
Borrower at its address set forth in the heading to this Agreement at least five
(5) days before sale or other disposition. The proceeds of sale shall be
applied, first, to all attorneys fees and other expenses of sale, and second, to
the Obligations in such order as FINOVA shall elect, in its sole discretion.
FINOVA shall return any excess to Borrower and Borrower shall remain liable for
any deficiency to the fullest extent permitted by law.
(c) STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and FINOVA
agree that the following conduct by FINOVA with respect to any disposition of
Collateral shall conclusively be deemed commercially reasonable (but other
conduct by FINOVA, including, but not limited to, FINOVA's use in its sole
discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition: (i) as to which on no later than the fifth
calendar day prior thereto written notice thereof is mailed or personally
delivered to Borrower and, with respect to any public disposition, on no later
than the fifth calendar day prior thereto notice thereof describing in general
nonspecific terms, the Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private disposition need be given to
the Borrower or published if the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market); (ii) which is conducted at any place designated by FINOVA, with or
without the Collateral being present; and (iii) which commences at any time
between 8:00 a.m. and 5:00 p.m. Without limiting the generality of the
foregoing, Borrower expressly agrees that, with respect to any disposition of
accounts, instruments and general intangibles, it shall be commercially
reasonable for FINOVA to direct any prospective purchaser thereof to ascertain
directly from Borrower any and all information concerning the same, including,
but not limited to, the terms of payment, aging and delinquency, if any, the
financial condition of any obligor or account debtor thereon or guarantor
thereof, and any collateral therefor.
8. EXPENSES AND INDEMNITIES.
(a) EXPENSES. Borrower covenants that, so long as any Obligation remains
outstanding and this Agreement remains in effect, it shall promptly reimburse
FINOVA for all costs, fees and expenses incurred by FINOVA in connection with
the negotiation, preparation, execution, delivery, administration and
enforcement of each of the Loan Documents, including, but not limited to, the
attorneys' and
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paralegals' fees of counsel.
(b) ENVIRONMENTAL MATTERS. The Environmental Certificate dated on or about
the date of this Agreement is incorporated herein for all purposes as if fully
stated in this Agreement.
9. MISCELLANEOUS.
(a) EXAMINATION OF RECORDS; FINANCIAL REPORTING. FINOVA shall at all
reasonable times have full access to and the right to examine, audit, make
abstracts and copies from and inspect Borrower's records, files, books of
account and all other documents, instruments and agreements relating to the
Collateral and the right to check, test and appraise the Collateral. Borrower
shall furnish FINOVA, upon request and at the times specified by FINOVA, such
information and statements as FINOVA shall request from time to time regarding
Borrower's business affairs, financial condition and the results of its
operations. Failure to provide any of the requested information and statements
to FINOVA at the time specified by FINOVA shall be an Event of Default.
(b) TERM; TERMINATION; TERMINATION FEE. The Initial Term of the Revolving
Credit Loans facility and the obligation of FINOVA to make advances with respect
thereto in accordance with this Agreement shall be as set forth on the Loan
Schedule, and the Revolving Credit Loans facility and this Agreement shall be
automatically renewed for one or more Renewal Term(s) as set forth in the Loan
Schedule, unless earlier terminated as provided herein. Each party shall have
the right to terminate this Agreement effective at the end of the Initial Term
or at the end of any Renewal Term by giving the other party written notice not
less than sixty (60) days prior to the effective date of such termination, by
registered or certified mail. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash. In
addition to the procedure set forth above, Borrower may terminate this Agreement
at any time but only upon sixty (60) days' prior written notice and prepayment
of the Obligations. Upon any such early termination (or any voluntary prepayment
of any Term Loan) by Borrower or any termination of this Agreement by FINOVA
upon the occurrence of an Event of Default, then, and in any such event,
Borrower shall pay to FINOVA upon the effective date of such termination a fee
(the "TERMINATION FEE") in an amount equal to the amount shown on the Loan
Schedule.
(c) RECOURSE TO SECURITY; CERTAIN WAIVERS; NO WAIVER BY FINOVA. All
Obligations shall be payable by Borrower as provided for herein and, in full, at
the termination of this Agreement; recourse to security shall not be required at
any time. Borrower waives presentment and protest of any instrument and notice
thereof, notice of default and, to the extent permitted by applicable law, all
other notices to which Borrower might otherwise be entitled. Neither FINOVA's
failure to exercise any right, remedy or option under this Agreement, any
supplement, the Loan Documents or other agreement between FINOVA and Borrower
nor any delay by FINOVA in exercising the same shall operate as a waiver. An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in writing by FINOVA as herein provided. No waiver by FINOVA
shall be effective unless in writing and then only to the extent stated. No
waiver by FINOVA shall affect its right to require strict performance of this
Agreement. FINOVA's rights and remedies shall be cumulative and not exclusive.
(d) BINDING ON SUCCESSOR AND ASSIGNS; SEVERABILITY. All terms, conditions,
promises, covenants, provisions and warranties shall inure to the benefit of and
bind FINOVA's and Borrower's respective representatives, successors and assigns.
If any provision of this Agreement shall be prohibited or invalid under
applicable law, it shall be ineffective only to such extent, without
invalidating the remainder of this Agreement.
(e) AMENDMENTS; ASSIGNMENTS. This Agreement may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and FINOVA.
Borrower may not sell, assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including, without limitation, any
of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to FINOVA's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, FINOVA's rights, title, interests,
remedies, powers and duties hereunder or thereunder. In connection therewith,
FINOVA may disclose all documents and information which FINOVA now or hereafter
may have relating to Borrower or Borrower's business. To the extent that FINOVA
assigns its rights and obligations hereunder to a third party, FINOVA shall
thereafter be released from such assigned obligations to Borrower and such
assignment shall effect a novation between Borrower and such third party.
-8-
9
(f) INTEGRATION; SURVIVAL. This Agreement, together with the Loan Schedule
(which is a part hereof) and the other Loan Documents, reflect the entire
understanding of the parties with respect to the transactions contemplated
hereby. All of the representations and warranties of Borrower contained in this
Agreement shall survive the execution, delivery and acceptance of this Agreement
by the parties. No termination of this Agreement or of any guaranty of the
Obligations shall affect or impair the powers, obligations, duties, rights,
representations, warranties or liabilities of the parties hereto and all shall
survive such termination.
(g) EVIDENCE OF OBLIGATIONS. Each Obligation may, in FINOVA's discretion, be
evidenced by notes or other instruments issued or made by Borrower to FINOVA. If
not so evidenced, such Obligation shall be evidenced solely by entries upon
FINOVA's books and records.
(h) LOAN REQUESTS. Each oral or written request for a loan by any Person who
purports to be any employee, officer or authorized agent of Borrower shall be
made to FINOVA on or prior to 11:00 a.m., New York time, on the business day on
which the proceeds thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the crediting of a loan to Borrower's operating account shall conclusively
establish Borrower's obligation to repay such loan. Unless and until Borrower
otherwise directs FINOVA in writing, all loans shall be wired to Borrower's
operating account set forth on the Loan Schedule.
(i) NOTICES. Any written notice, consent or other communication provided for
in this Agreement shall be delivered personally (effective upon delivery), via
facsimile (effective upon confirmation of transmission), via overnight courier
(effective the next business day after dispatch if instructed to deliver on next
business day) or via U.S. Mail (effective 3 days after ailing, postage prepaid,
first class) to each party at its address(es) and/or facsimile number(s) set
forth below its signature, or to such other address as either party shall
specify to the other in writing from time to time.
(j) BROKERAGE FEES. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated, no Person is entitled
to any brokerage fee or other commission and Borrower agrees to indemnify and
hold FINOVA harmless against any and all such claims.
(k) COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be executed in one
or more counterparts, each of which taken together shall constitute one and the
same instrument, admissible into evidence.
(l) APPLICATION OF INSURANCE PROCEEDS. The net proceeds of any casualty
insurance insuring the Collateral, after deducting all costs and expenses
(including attorneys' fees) of collection, shall be applied, at FINOVA's option,
either toward replacing or restoring the Collateral, in a manner and on terms
satisfactory to FINOVA, or toward payment of the Obligations. Any proceeds
applied to the payment of Obligations shall be applied in such manner as FINOVA
may elect. In no event shall such application relieve Borrower from payment in
full of all installments of principal and interest which thereafter become due
in the order of maturity thereof.
(m) POWER OF ATTORNEY. Borrower appoints FINOVA and its designees as
Borrower's attorney, with the power to endorse Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into FINOVA's possession; to sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Receivable, on drafts against customers, on assignments
of Receivables, on notices of assignment, financing statements and other public
records, on verifications of accounts and on notices to customers or account
debtors; to send requests for verification of Receivables to customers or
account debtors; after the occurrence of any Event of Default, to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail addressed to
Borrower; and to do all other things FINOVA deems necessary or desirable to
carry out the terms of this Agreement. Borrower hereby ratifies and approves all
acts of such attorney. Neither FINOVA nor any of its designees shall be liable
for any acts or omissions nor for any error of judgment or mistake of fact or
law while acting as Borrower's attorney other than wilful misconduct or illegal
acts and in any such event FINOVA shall not be responsible for consequential
damages. This power, being coupled with an interest, is irrevocable until the
Obligations have been fully satisfied and FINOVA's obligation to provide loans
hereunder shall have terminated.
(n) GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE CONFLICT OF
LAWS RULES) OF THE STATE OF ARIZONA GOVERNING CONTRACTS TO BE PERFORMED
-9-
10
ENTIRELY WITHIN SUCH STATE. BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MARICOPA
IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF FINOVA, IN ANY OTHER COURT IN
WHICH FINOVA SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. FINOVA and Borrower each
hereby waives the right to trial by jury in any action or proceeding based upon,
arising out of, or in any way relating to this Agreement.
(o) LIEN TERMINATION. In recognition of FINOVA's right to have all of its
attorneys' fees and other expenses incurred in connection with this Agreement
secured by the Collateral, notwithstanding the payment in full of the
Obligations, FINOVA shall not be required to execute or record any terminations
or satisfactions of any of its liens on the Collateral unless and until Borrower
and all Guarantors have executed and delivered to FINOVA general releases of all
claims, in form and substance satisfactory to FINOVA in its sole discretion.
--------------------------------------------------------------------------------
Borrower: FINOVA:
HMI INDUSTRIES INC. FINOVA CAPITAL CORPORATION
Fed. Tax ID# 1202810
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇. Title VP
----------------------- -----------------
▇.▇. ▇▇▇▇▇▇▇▇, ▇▇.
EXECUTIVE VICE PRESIDENT FINOVA'S ADDRESS FOR NOTICES;
FINOVA CAPITAL CORPORATION
BORROWER'S ADDRESS FOR NOTICES: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇
HMI INDUSTRIES INC. FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ WITH A COPY TO:
ATTN: FINOVA CAPITAL CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FACSIMILE: ATTN: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
AND
FINOVA CAPITAL CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇ FACILLO
FACSIMILE: (▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
-▇▇-
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇)
)▇▇:
COUNTY OF New York)
BEFORE ME, a Notary Public, in and for said county and state,
personally appeared the above-named HMI INDUSTRIES INC., a Delaware corporation,
by ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇. its Executive Vice President, who acknowledged that he/she
did sign the foregoing agreement and that the same is he/her free act and deed
and the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
NY, NY, this 7th day of May, 1999.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Notary Public
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Notary Public, State of New York
No. 01EA5088810
Qualified in New York County
Commission Expires Nov. 24, ▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ }
} ss:
COUNTY OF NEW YORK }
----------
On the 9TH day of JUNE 1999, before me personally came ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ to me known, who, being by me duly sworn, did depose and say that she
resides at No. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ that she is the VICE
PRESIDENT of FINOVA Capital Corporation, the corporation described in and which
executed the foregoing instrument.
(SEAL) /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------
Notary Public
My commission expires:
▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------- NOTARY PUBLIC, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
TERM EXPIRES MARCH 17 2001
13
LOAN SCHEDULE
Borrower: HMI INDUSTRIES INC.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Date: May 12, 1999
This Loan Schedule forms an integral part of the Loan and Security Agreement
between the above Borrower and FINOVA Capital Corporation dated the above date,
and all references herein and therein to "this Agreement" shall be deemed to
refer to said Agreement, this Loan Schedule and the attached Definition
Schedule.
================================================================================
TOTAL FACILITY:
$3,500,000
----------
================================================================================
LOANS:
REVOLVING CREDIT LOANS: A revolving line of credit consisting of loans
against Borrower's Eligible Receivables ("RECEIVABLE LOANS") and against
Borrower's Eligible Inventory ("INVENTORY LOANS"), (the Receivable Loans
and the Inventory Loans shall be collectively referred to as the
"REVOLVING CREDIT LOANS") in an aggregate outstanding principal amount
not to exceed the LESSER of (a) or (b) below:
(a), Three Million Five Hundred Thousand Dollars ($3,500,000) (the
"REVOLVING CREDIT LIMIT"), LESS any Loan Reserves, or
(b) the sum of
(i) an amount equal to (A) 80% of the net amount of Eligible
Receivables which are domestic Eligible Receivables and 60% of
Eligible Receivables which are foreign Eligible Receivables, PLUS
(ii) an amount not to exceed the lesser of (A) the lesser of (i) 40%
of the value of Borrower's Eligible Inventory, calculated at cost or
(ii) 80% of the value of Borrower's Eligible Inventory calculated at
auction sale value, determined on a first-in, first-out basis, or (B)
$1,750,000; LESS
(iii) any Loan Reserves.
================================================================================
INTEREST AND FEES:
REVOLVING INTEREST RATE. Borrower shall pay FINOVA interest on the daily
outstanding balance of Borrower's Revolving Credit Loans at a per annum
rate of 2% in excess of the rate of interest announced publicly by
Citibank, N.A., (or any successor thereto), from time to time as its
"prime rate" (the " PRIME RATE") which may not be such institution's
lowest rate. The interest rate chargeable hereunder in respect of the
Revolving Credit Loans (herein, the "REVOLVING INTEREST RATE") shall be
increased or decreased, as the case may be, without notice or demand of
any kind, upon the announcement of any change in the Prime Rate. Each
change in the Prime Rate shall be effective hereunder on the first day
following the announcement of such change. Interest charges and all other
fees and charges herein shall be computed on the basis of a year of 360
days and actual days elapsed and shall be payable to FINOVA in arrears on
the first day of each month.
DEFAULT INTEREST RATE. Upon the occurrence and during the continuation of
an Event of Default, Borrower shall pay FINOVA interest on the daily
outstanding balance of the Obligations and any L/C Fee at a rate per
annum which is four percent (4%) in excess of the rate which would
otherwise be applicable thereto pursuant to this Loan Schedule.
14
COLLATERAL MONITORING FEE. At the closing of this transaction and on the
first day of each calendar month thereafter, Borrower shall pay FINOVA a
collateral monitoring fee of $500 ("COLLATERAL MONITORING FEE") provided
however, that Borrower agrees and acknowledges that each Loan Year a full
year's fee shall be deemed earned at the beginning of the respective Loan
Year, with the Borrower entitled to a refund of that portion of the
Collateral Monitoring Fee attributable to any period after the Revolving
Loans Facility has been terminated.
FACILITY FEE. Borrower shall pay to FINOVA a facility fee equal to 1/2 of
1% per annum of the amount of the Total Facility ("FACILITY FEE"). The
Facility Fee shall be deemed fully earned at the time when due and is
otherwise due and payable annually, commencing with the date of closing
of this transaction and continuing on each subsequent anniversary
thereof.
EXAMINATION FEE. Borrower agrees to pay to FINOVA an examination fee in
the amount of $650 per person per day in connection with each audit or
examination of Borrower performed by FINOVA prior to or after the date
hereof, plus all costs and expenses incurred in connection therewith (the
"EXAMINATION FEE"). Without limiting the generality of the foregoing,
Borrower shall pay to FINOVA an initial Examination Fee in an amount
equal to $650 per person per day, plus all costs and expenses incurred in
connection therewith. Such initial Examination Fee shall be deemed fully
earned at the time of payment and due and payable upon the closing of
this transaction, and shall be deducted from any good faith deposit paid
by Borrower to FINOVA prior to the date of this Agreement.
================================================================================
CLOSING CONDITIONS:
(l) FEES. Borrower shall have paid all fees payable by it on the Closing Date
pursuant to this Agreement.
(2) NO MATERIAL ADVERSE CHANGES. Prior to the Closing Date, there shall have
occurred no material adverse change in the financial condition of Borrower, or
in the condition of the assets of Borrower, from that shown on the draft
financial statements for Borrower dated _____________. At the closing, Borrower
shall deliver to FINOVA an officer's certification confirming that Borrower is
unaware of the existence of any such material adverse change in Borrower's
financial condition.
(3) MATERIAL AGREEMENTS. FINOVA shall have received, reviewed and approved all
material agreements to which Borrower shall be a party.
(4) FINOVA shall have received a satisfactory inventory appraisal.
(5) FINOVA shall have received a satisfactory search of the Trademark Office
records relating to all trade names used by Borrower.
(6), FINOVA shall have received in form and substance satisfactory to it a
Trademark Security Agreement.
(7), FINOVA shall have received Guarantees from HMI Incorporated, an Ontario,
Canada corporation, HealthMor International, Inc., a US Virgin Islands
corporation, HMI Acceptance Corporation, an Ontario, Canada corporation,
Health-Mor Acceptance PTY Ltd., an Australian corporation and Health-Mor
Acceptance Corporation, a Delaware corporation, together with such documents and
showings as FINOVA may require regarding the existence and good standing of each
and the due authorization, execution, delivery and enforceability of each
Guaranty.
(8) OTHER MATTERS. All other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed
and recorded and shall be in form and substance satisfactory to FINOVA and its
counsel.
-2-
15
================================================================================
BORROWER INFORMATION:
Borrower's State of Incorporation: DELAWARE
Borrower's copyrights, patents trademarks, and licenses: [BORROWER TO
SUPPLY ON SEPARATE EXHIBIT].
Fictitious Names/Prior Corporate Names:
Prior Corporate Names: HEALTH-MOR, INC.
Fictitious Names: NONE
Borrower Locations
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------------
Borrower's Federal Tax Identification Number:________________
Permitted Encumbrances: [TO BE PROVIDED ON SEPARATE EXHIBIT]
================================================================================
FINANCIAL COVENANTS:
Borrower shall comply with all of the following covenants. Compliance shall be
determined as of the end of each month, except as otherwise specifically
provided below:
Net Worth. Borrower shall maintain tangible Net Worth of not less
than, for the period from the closing of this transaction
through September 29, 1999, $2,000,000; for the period
from September 30, 1999 through September 29, 2000,
$2,500,000; for the period from September 30, 2000 through
September 29, 2001, $3,500,000; and $ 3,500,000
thereafter.
================================================================================
NEGATIVE COVENANTS:
EMPLOYEE ADVANCES: Borrower shall not make any loans or advances to Employees
except in the ordinary course of business and consistent with past practices of
Borrower in an aggregate amount not exceeding at any time $5,000.
EXISTING GUARANTIES: [Borrower to describe on separate Exhibit.]
CAPITAL EXPENDITURES: Borrower shall not make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures by Borrower in any fiscal year (beginning with the fiscal year
ending September 30, 1999) would exceed $350,000.
COMPENSATION: Borrower shall not pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year to
all of Borrower's executives, officers and directors (or any relative thereof)
in an amount in excess of 115% of such total compensation paid in the
immediately preceding fiscal year.
INDEBTEDNESS: Borrower shall not create, incur, assume or permit to exist any
Indebtedness for Borrowed Money in excess of $350,000 other than (i) the
Obligations, (ii) other Indebtedness existing on the date of this Agreement and
reflected in EXHIBIT attached hereto (other than Indebtedness paid on the date
of this Agreement from proceeds of the initial advances hereunder).
-3-
16
================================================================================
REPORTING REQUIREMENTS:
Borrower shall provide FINOVA with:
1. Monthly agings aged by invoice date and reconciliations of Receivables
within 10 days after the end of each month.
2. Monthly accounts payable agings aged by invoice date, outstanding or
held check registers and inventory certificates within 10 days after
the end of each month.
3. Monthly perpetual inventory reports for the Inventory valued on a
first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are
reasonably requested by FINOVA, all within 10 days after the end of
each month.
4. Monthly unaudited financial statements within 30 days after the end of
each month.
5. Quarterly compilation financial statement within 45 days after the end
of each fiscal quarter.
6. Audited consolidated and consolidating fiscal financial statements
within 120 days after the end of each fiscal year, and with an opinion
issued by a Certified Public Accountant which is acceptable to FINOVA.
7. Annual operating budgets (including income statements, balance sheets
and cash flow statements, by month) for the upcoming fiscal year of
Borrower within 30 days prior to the end of each fiscal year of
Borrower.
8. As soon as available copies of all financial statements and reports
that the Borrower is required to file with the Security and Exchange
Commission or any successor or analogous entity.
================================================================================
TERM:
The initial term of this Agreement shall be three (3) years from the date
hereof (the "INITIAL TERM") and shall be automatically renewed for
successive periods of one (l) year each (each, a "RENEWAL TERM"), unless
earlier terminated as provided elsewhere in this Agreement.
================================================================================
TERMINATION FEE:
(A) REVOLVING CREDIT LOANS FACILITY. The Termination Fee applicable to
the Revolving Credit Loans facility shall be an amount equal to the
following percentage of the Revolving Credit Limit:
(i) three percent (3%), if such early termination occurs on or prior
to the first anniversary of the date of this Agreement;
(ii) two percent (2%), if such early termination occurs after the
first anniversary of the date of this Agreement but prior to the
second anniversary date of this Agreement; and
(iii) one percent (1%), if such early termination occurs after the
second anniversary date of this Agreement.
================================================================================
DISBURSEMENT:
Unless and until Borrower otherwise directs FINOVA in writing, all
loans shall be wired to Borrower's following operating account:
Firstar Bank, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ABA#
▇▇▇▇▇▇▇▇▇, Account #▇▇▇▇▇▇▇.
Payee: HMI Industries Inc.
-4-
17
================================================================================
Borrower: HMI INDUSTRIES INC. FINOVA:
FINOVA CAPITAL
CORPORATION
By /s/ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇.
---------------------- By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇▇, ▇▇. --------------------
EXECUTIVE VICE PRESIDENT Title VP
-----------------
-5-
18
STATE OF New York )
)ss:
COUNTY OF New York)
BEFORE ME, a Notary Public, in and for said county and state,
personally appeared the above-named HMI Industries Inc, a Delaware corporation,
by ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇. its Executive Vice President, who acknowledged that he/she
did sign the foregoing agreement and that the same is he/her free act and deed
and the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
NY, NY, this 7th day of May, 1999.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
Notary Public
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Notary Public, State of New York
No. 01EA5088810
Qualified in New York County
Commission Expires Nov. 24, ▇▇▇▇
-▇-
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ }
} ss:
COUNTY OF NEW YORK }
On the 9TH day of JUNE , 1999, before me personally came ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ to me known, who, being by me duly sworn, did depose and say that she
resides at No. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ , ▇▇▇ ▇▇▇▇ , ▇▇▇ ▇▇▇▇ that she is the VICE
PRESIDENT of FINOVA Capital Corporation, the corporation described in and which
executed the foregoing instrument.
(SEAL) /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------
Notary Public
My commission expires:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
MARCH 17, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇
-------------- No. 01MA5074495 Queens County
Term Expires March 17 2001
20
DEFINITION SCHEDULE
This Definition Schedule forms an integral part of the Loan and Security
Agreement between the above Borrower and FINOVA Capital Corporation dated the
above date, and all references herein and therein to "this Agreement" shall be
deemed to refer to said Agreement, this Definition Schedule, and the Loan
Schedule.
"CAPITAL EXPENDITURES" means all expenditures made and liabilities
incurred in accordance with GAAP for the acquisition of any fixed asset or
improvement, replacement, substitution or addition thereto which has a useful
life of more than one year and including, without limitation, those arising in
connection with Capital Leases.
"CAPITAL LEASE" means any lease of property by Borrower that, in
accordance with GAAP, should be capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of Borrower.
"CLOSING DATE" means the date of the initial advance made by FINOVA
pursuant to this Agreement.
"ELIGIBLE INVENTORY" means Inventory which FINOVA, in its Permitted
Discretion, deems Eligible Inventory, based on such considerations as FINOVA may
from time to time deem appropriate. Without limiting the generality of the
foregoing, no Inventory shall be Eligible Inventory unless, in FINOVA's
Permitted Discretion, such Inventory (i) consists of raw materials and finished
goods, in good, new and salable condition which are not obsolete,
unmerchantable, slow moving, returned, damaged and/or defective, (ii) are not
comprised of work in process, packaging materials or supplies; (iii) meets all
standards imposed by any governmental agency or authority; (iv) conforms in all
respects to the warranties and representations set forth herein; (v) is at all
times subject to FINOVA's duly perfected, first priority security interest; and
(vi) is situated at a location in compliance with this Agreement.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
FINOVA, in its Permitted Discretion, shall deem eligible based on such
considerations as FINOVA may from time to time deem appropriate. Without
limiting the foregoing, a Receivable shall not be deemed to be an Eligible
Receivable if (i) the account debtor has failed to pay the Receivable within a
period of ninety (90) days after invoice date, to the extent of any amount
remaining unpaid after such period; (ii) the account debtor has failed to pay
more than 25% of all outstanding Receivables owed by it to Borrower within
ninety (90), days after invoice date; (iii) the account debtor is an Affiliate
of Borrower; (iv) the goods relating thereto are placed on consignment,
guaranteed sale, "▇▇▇▇ and hold," or other terms pursuant to which payment by
the account debtor may be conditional, provided, however, that Receivables
otherwise Eligible which are invoiced with COD terms may be considered Eligible
Receivables for thirty (30) days after the date of the relevant invoice; (y) the
account debtor is not approved by FINOVA or the account debtor is not located in
the United States or Canada unless in each case the Receivable is supported by a
letter of credit or other form of guaranty or security, in each case in form and
substance satisfactory to FINOVA or the relevant invoice is payable COD; (vi),
the account debtor is the United States or any department, agency or
instrumentality thereof or any State, city or municipality of the United States,
except as otherwise agreed to in writing by FINOVA; (vii) Borrower is or may
become liable to the account debtor for goods sold or services rendered by the
account debtor to Borrower; (viii) the account debtor's total obligations to
Borrower exceed 15% of all Eligible Receivables, to the extent of such excess;
(ix) the account debtor disputes liability or makes any claim with respect
thereto (up to the amount of such liability or claim), or is subject to any
insolvency or bankruptcy proceeding, or becomes insolvent, fails or goes out of
a material portion of its business; (x) the amount thereof consists of late
charges or finance charges; (xi) the amount thereof consists of a credit balance
more than ninety (90) days past due; (xii) the face amount thereof exceeds
$10,000, unless accompanied by the invoice and evidence of shipment of the goods
relating thereto in each case satisfactory to FINOVA in its Permitted
Discretion; (xiii) the invoice constitutes a progress billing on a project not
yet completed, except that the final billing at such time as the matter has been
completed and delivered to the customer may be deemed an Eligible Receivable;
(xiv) the amount thereof is not yet represented by an invoice or ▇▇▇▇ issued in
the name of the applicable account debtor; (xv) the amount thereof is
denominated in or payable with any currency other than U.S. Dollars; or (xvi)
such Receivable is not at all times subject to FINOVA's duly perfected first
priority security interest.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's
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operations or owned by Borrower and any interest in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions, additions
or improvements to any of the foregoing, wherever located.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to FINOVA
prior to the date hereof.
"GUARANTOR" means each of the entities from which Guaranties are
required pursuant to the Schedule.
"INDEBTEDNESS" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether under
written or oral agreement, operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations, (ii) obligations and liabilities of
any Person secured by a lien, claim, encumbrance or security interest upon
property owned by Borrower, even though Borrower has not assumed or become
liable therefor, (iii) obligations and liabilities created or arising under any
lease (including Capital Leases), or conditional sales contract or other title
retention agreement with respect to property used or acquired by Borrower, even
though the rights and remedies of the lessor, seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred tax liabilities.
"INDEBTEDNESS FOR BORROWED MONEY" means without duplication, all
Indebtedness: (i) in respect of borrowed money (including, without limitation,
pursuant to the Loan Documents or any Capital Leases), (ii) evidenced by a note,
debenture, or other like written obligation to pay money (including, without
limitation, all interest on the Obligations), (iii) for the deferred purchase
price of property (other than trade payables arising in the ordinary course of
business), or (iv) in respect of obligations under conditional sales or other
title retention agreements, and all guaranties of any or all of the foregoing.
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials, work
in process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in Borrower's business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
documents of title or other documents representing them.
"LIEN" means any mortgage pledge, assignment, lien, charge, encumbrance
or security interest of any kind, or the interest of a vendor or lessor under
any conditional sale agreement, Capitalized Lease or title retention agreement.
"LOAN DOCUMENTS" means, collectively, this Agreement, any note or notes
executed by Borrower and payable to FINOVA, and any other present or future
agreement entered into in connection with this Agreement, together with all
alterations, amendments, changes, extensions, modifications, refinancings,
refundings, renewals, replacements, restatements, or supplements, of or to any
of the foregoing.
"LOAN PARTY" means Borrower, each Guarantor and each other party (other
than FINOVA), to any Loan Document.
"LOAN RESERVES" has the meaning assigned in Section 2(a) of the
Agreement.
"LOAN YEAR" means each twelve month period commencing on the Closing
Date.
"NET WORTH" at any date means the Borrower's net worth as determined in
accordance with GAAP.
"OBLIGATIONS" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time owing
by Borrower to FINOVA, whether evidenced by this Agreement, any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, Examination Fees, Collateral Monitoring Fees, Facility Fees,
Termination Fees, and any other sums chargeable to Borrower hereunder or under
any other agreement with FINOVA.
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"PERMITTED DISCRETION" means FINOVA's judgment exercised in good faith
based upon its consideration of any factor which FINOVA believes in good faith:
(i) will or could adversely affect the value of any Collateral, the
enforceability or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral; (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf of the Borrower is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower, any Loan
Party or any of the Collateral, or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment, FINOVA may consider
such factors already included in or tested by the definition of Eligible
Receivables or Eligible Inventory, as well as any of the following: (i) the
financial and business climate of the Borrower's industry and general
macroeconomic conditions, (ii) changes in collection history and dilution with
respect to the Receivables, (iii) changes in demand for, and pricing of,
Inventory, (iv) changes in any concentration of risk with respect to Receivables
and/or Inventory, and (v) any other factors that change the credit risk of
lending to the Borrower on the security of the Receivables and Inventory. The
burden of establishing lack of good faith hereunder shall be on the Borrower.
"PERMITTED ENCUMBRANCE" means each of the liens, mortgages and other
security interests set forth on the Loan Schedule.
"PERMITTED LIENS" means any of the following Liens: (i) Liens in the
Collateral granted to FINOVA; (ii) Liens for taxes or assessments and similar
charges, which either are (a) not delinquent or (b) being contested diligently
and in good faith by appropriate proceedings, and as to which Borrower has set
aside reserves on its books in accordance with GAAP; (iii) statutory Liens, such
as mechanic's, materialman's, warehouseman's, carrier's or other like Liens,
incurred in good faith in the ordinary course of business, provided that the
underlying obligations relating to such Liens are paid in the ordinary course of
business, or are being contested diligently and in good faith by appropriate
proceedings and as to which Borrower has set aside reserves on its books in
accordance with GAAP, or the payment of which obligations are otherwise secured
in a manner satisfactory to FINOVA; (iv) zoning ordinances, easements, licenses,
reservations, provisions, covenants, conditions, waivers or restrictions on the
use of Property and other title exceptions, in each case, that are acceptable to
FINOVA; (v) Liens to secure payment of insurance premiums (a) to be paid in
accordance with applicable laws in the ordinary course of business relating to
payment of worker's compensation, or (b) that are required for the participation
in any fund in connection with worker's compensation, unemployment insurance,
old-age pensions or other social security programs; and (vi) Permitted
Encumbrances.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, government, or any agency or political division thereof, or
any other entity.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters of
credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, whether secured or
unsecured, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
OTHER TERMS. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
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TABLE OF CONTENTS
1. DEFINITIONS ..................................2
-----------
2. LOANS; INTEREST RATE AND OTHER CHARGES .......2
--------------------------------------
3. SECURITY .....................................4
--------
4. CONDITIONS OF CLOSING ........................4
---------------------
5. BORROWER REPRESENTATIONS AND COVENANTS .......5
--------------------------------------
6. INTENTIONALLY LEFT BLANK. ....................8
-------------------------
8. EXPENSES AND INDEMNITIES ....................10
------------------------
9. MISCELLANEOUS. . ............................10
----------------
LOAN SCHEDULE ....................................1
DEFINITION SCHEDULE .............................10
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SCHEDULE A
----------
HMI INDUSTRIES, INC. PATENTS
----------------------------
U.S. Patent No. Date Issued Related Foreign Patents or Patent
--------------- ----------- ---------------------------------
Applications
------------
4,199,839 April 29, 1980 Canada, Australia, Belgium, Spain,
France, Great Britain, Japan
4,225,999 October 7, 1980 Canada, Belgium, France, Great
Britain, Australia, Spain, Japan
Des. 345,413 March 22, ▇▇▇▇ ▇▇▇▇▇▇
5,658,362 ▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇
5,593,479 January 14, 1997 None
5,651,811 July 29, 1997 None
5,641,343 June 24, 1997 None
5,248,323 September 28, 1993 None
5,515,573 May 14, 1996 None
5,522,908 June 4, 1996 None
5,603,741 February 18, 1997 None
HMI INDUSTRIES, INC. PATENT APPLICATIONS
----------------------------------------
U.S. Patent Application No. Status Date Applied
--------------------------- ------ ------------
879/883 Allowed/Not yet issued June 20, 1997
670,548 Abandoned June 27, 1996
387,475 Abandoned February 13, 1995
820,151 Abandoned March 19, 1997
000,536 Abandoned October 16, 1992
239,583 Abandoned May 9, 1994
09/032,589 Pending/Not yet issued February 27, 1998
6
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SCHEDULE B
----------
HMI INDUSTRIES, INC. COPYRIGHT REGISTRATIONS
--------------------------------------------
Registration No. Date
---------------- ----
N/A N/A
HMI INDUSTRIES, INC. COPYRIGHT APPLICATIONS
-------------------------------------------
Copyright Description Copyright Application No. Date Applied
--------------------- ------------------------- ------------
N/A N/A N/A
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SCHEDULE C
----------
HMI INDUSTRIES, INC. TRADEMARK REGISTRATIONS
--------------------------------------------
▇▇▇▇ Registration No. Date
---- ---------------- ----
5-in-1 2,024,542 December 17, 1996
Captiva 2,034,466 January 28, 1997
Captiva 1,980,046 June 11, 1996
Comfort Lounger 1,944,528 December 26, 1995
Defender 2,050,553 April 8, 1997
Easy-Way 2,070,754 ▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ 2,010,472 October 22, 1996
Empress 1,973,733 May 14, 1996
Enviropure 1,810,559 December 14, 1993
Filter Queen 378,297 June 4, 1940
Filter Queen & Crown Design 663,742 July 1, 1958
Filter Queen & Crown Design 666,268 August 26, 1958
Filter Queen & Crown Design 663,256 June 17, 1958
Filter Queen Pow-R Clean-Up & 1,111,650 January 23, 1979
Team Design
Groomex 1,754,460 February 23, 1993
Health-Mor 1,753,732 February 23, 1993
Home Impressions 1,949,110 January 16, 1996
Majestic 1,866,813 December 13, 1994
Medi-Filter 2,062,855 May 20, 1997
Mini Pow-R-Nozzle 1,838,584 June 7, 1994
Miscellaneous Design "Bird Logo" 2,033,003 January 21, 1997
Miscellaneous Design "Cone Dude" 1,815,375 January 4, 1994
Optima 1,959,113 February 27, 1996
Optima 1,954,029 February 6, 1996
Optima Plus 2,000,968 September 17, 1996
Princess 1,941,266 December 12, 1995
Seal-Guard 1,287,898 July 31, 1984
Triangle in a Circle 1,593,851 May 1, 1990
Triple Crown 1,996,371 August 27, 1996
Vacuum Cleaner Design 1,976,252 May 28, 1996
Vacu-Queen 1,452,976 August 18, 1987
Vista 1,790,181 August 31, 1993
HMI INDUSTRIES, INC. TRADEMARK APPLICATIONS
-------------------------------------------
▇▇▇▇ Trademark Application No. Date Applied
---- ------------------------- ------------
MediPure 75/446032 March 9, 1998
8