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HMI INDUSTRIES INC.
EXHIBIT 10.01
MATERIAL CONTRACTS
LOAN AND SECURITY AGREEMENT
WITH ▇▇▇▇▇▇ FINANCIAL
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LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of April 23, 1998 and
entered into among HMI INDUSTRIES, INC., a Delaware corporation with its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
("Borrower") and ▇▇▇▇▇▇ FINANCIAL, INC. a Delaware corporation, with offices at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
The parties agree as follows:
SECTION 1. DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings:
"ACCEPTABLE ACCOUNTS REPORTING DATE" means the date by which the
Borrower has implemented acceptable reporting for Accounts in form and substance
satisfactory to Lender and confirmed by an audit of the Accounts performed by
Lender or its designee.
"ACCOUNTS" means all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services, whether or not
earned by performance.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under common control with Borrower or which has an officer who
is also an officer of Borrower.
"AGREEMENT" means this Loan and Security Agreement as it may be amended,
restated, supplemented or otherwise modified from time to time.
"AUSTRALIAN LINE OF CREDIT" means that certain line of credit with First
National Bank of Chicago/First Chicago Australia LTD in an approximate amount of
$200,000.
"BASE RATE" means a variable rate of interest per annum equal to the
higher of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H. 15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent, or (b) the Federal Funds Effective Rate. In the
event the Board of Governors of the Federal Reserve System ceases to publish a
Bank Prime Loan rate or its equivalent, the term "Base Rate" shall mean a
variable rate of interest per annum equal to the highest of the "prime rate",
"reference rate", "base rate", or other similar rate announced from time to time
by any of the three largest banks located in New York City, New York (with the
understanding that any such rate may merely be a reference rate and may not
necessarily represent the lowest or best rate actually charged to any customer
by any such bank).
"BLISS" means Bliss Manufacturing Company, an Ohio corporation.
"BLISS ACQUISITION" means the sale by Borrower of all of the stock of
Bliss to an investor group for not less than $31,500,000.
"BORROWER'S ACCOUNTANTS" means the independent certified public
accountants selected by Borrower and reasonably acceptable to Lender. which
selection shall not be modified during the term of this Agreement without
Lender's prior written consent.
"BUSINESS DAY" means any day excluding Saturday. Sunday and any day
which is a legal holiday under the laws of the States of Ohio, Illinois or
Pennsylvania, or is a day on which banking institutions located in any such
state are closed.
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"DEFAULT" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition, act or
event were not cured or removed within any applicable grace or cure period.
"DOMESTIC ACCOUNTS" means Accounts due from an account debtor whose
principal place of business is located in the United States of America or Canada
and owing in U.S. dollars.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of SECTION 3(3) of ERISA which (a) is maintained for employees of any
Loan Party or any ERISA Affiliate or (b) has at any time within the preceding
six (6) years been maintained for the employees of any Loan Party or any current
or former ERISA Affiliate.
"ENVIRONMENTAL CLAIMS" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"ENVIRONMENTAL LAWS" means any present or future federal, state or
local law, rule, regulation or order relating to pollution, waste, disposal or
the protection of human health or safety, plant life or animal life, natural
resources or the environment.
"EQUIPMENT" means all "equipment" (as defmed in the UCC), including,
without limitation, all furniture, furnishings, fixtures, machinery, motor
vehicles, trucks, trailers, vessels, aircraft and rolling stock and all parts
thereof and all additions and accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA AFFILIATE", as applied to any Loan Party, means any Person who is
a member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as a single employer within the meaning
of SECTION 414(b) and (c) of the IRC.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Board of Governors of the Federal
Reserve System as the Federal Funds Rate in Federal Reserve Statistical Release
H. 15(519) entitled "Selected Interest Rates" or any successor publication of
the Federal Reserve System reporting the Federal Funds Effective Rate or its
equivalent or, if such rate is not published for any Business Day, the average
of the quotations for the day of the requested Loan received by Lender from
three Federal funds brokers of recognized standing selected by Lender.
"FOREIGN ACCOUNTS" means Accounts due from an account debtor whose
principal place of business is located outside the United States of America and
Canada (a) owing in U.S. dollars, and (b)(i) supported by an irrevocable letter
of credit satisfactory to Lender (as to form, substance, and issuer) that has
been delivered to Lender and is directly drawable by Lender, or (ii) covered bv
credit insurance in form and amount and by an issuer, satisfactory, to Lender.
"HAZARDOUS MATERIAL" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.
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"HMAC" means Health Mor Acceptance Corp., a Delaware corporation.
"HMAC Reserve" means, at any time, the aggregate amount determined by
Lender to be owed by Borrower to Travelers in connection with Travelers'
purchase of the HMAC financing portfolio.
"HMPC" means Health-Mor Personal Care Corporation, a Delaware
corporation.
"HRS" means Household Rental Systems, a Canada corporation.
"INTELLECTUAL PROPERTY" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"INVENTORY" means all "inventory" (as defined in the UCC), "including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"LOAN" or "Loans" means an advance or advances under the Revolving Loan
or under any Note.
"LOAN DOCUMENTS" means this Agreement, all Notes, all guaranties, the
Mortgage and all other mortgages and deeds of trust, all subordination
agreements or intercreditor agreements, and all other instruments, documents,
notes and agreements executed by or on behalf of Borrower or any guarantor and
delivered concurrently herewith or at any time hereafter to or for Lender in
connection with the Loans and other transactions contemplated by this Agreement,
all as amended, restated, supplemented or modified from time to time.
"LOAN PARTY" means Borrower and any other Person (other than Lender)
which is or becomes a Party to any Loan Document.
"LOAN YEAR" means each period of twelve (12) consecutive months
commencing on the closing date and on each anniversary thereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party or (b) the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party or of Lender to
enforce its security interests or collect any of the Obligations.
"MORTGAGE" means that certain Mortgage, Security Agreement, Assignment
of Rents and Financing Statement dated as of the date hereof by and between
Borrower and Lender, as amended, restated, supplemented or otherwise modified
from time to time.
"NETHERLANDS LINE OF CREDIT" means that certain line of credit with
Hollandsche Bank-Unie N.V. in an approximate amount of $400,000.
"NOTES" mean all Promissory Notes made by Borrower to the order of
Lender concurrently herewith or at any time hereafter.
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"OBLIGATIONS" means all obligations, liabilities and indebtedness of
every nature of Borrower from time to time owed to Lender whether under the Loan
Documents or otherwise, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable including, without limitation, all interest, fees, cost and expenses
accrued or incurred after the filing of any petition under any bankruptcy or
insolvency law.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"PROCESSOR" means an independent third party that receives from Borrower
Inventory from time to time, for value-added processing, which can be
accomplished through their specialized capabilities or at a lower cost than
Borrower.
"REVOLVING LOAN" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"STAR BANK" means Star Bank, N.A.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TRAVELERS" means Travelers Investment Corporation, a California
corporation.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of Illinois, as amended from time to time, and any successor
statute.
"UPS Shipped COD Accounts" means those Accounts owed by UPS and
generated upon the delivery by UPS of Inventory, with cash on delivery terms
("COD"), to Borrower's customers and UPS's receipt of the COD funds.
1.2 ACCOUNTING TERMS. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with generally accepted accounting principles ("GAAP"). When
used herein, the term "financial statements" shall include the notes and
schedules thereto. Financial statements furnished to Lender shall be prepared in
accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis.
SECTION 2. REVOLVING LOAN AND COLLATERAL
2.1 REVOLVING LOAN. Upon Borrower's request made at any time during the
term of this Agreement, Lender may, in its sole and absolute discretion, make
advances to Borrower ("Revolving Advances") in an aggregate amount up to the
lesser of (A)(i) after the Acceptable Accounts Reporting Date (x) 80% of the
aggregate outstanding amount of Eligible Accounts, MINUS, (y) the HMAC Reserve.
plus (ii) the lesser of (x) 50% of the aggregate value of Borrower's Eligible
Inventory or (y) $2,500,000.00, or (B) $4,250,000.00 (the "Maximum Revolving
Loan Amount").
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(A) ELIGIBLE COLLATERAL.
"Eligible Accounts" means, as at any date of determination, the
aggregate of all Accounts that Lender, in its sole judgment, deems to be
eligible for borrowing purposes. Without limiting the generality of the
foregoing, unless otherwise agreed by Lender, the following Accounts are not
Eligible Accounts:
(1) Accounts which, at the date of issuance, were payable more than 60
days after the date of issuance;
(2) Accounts which remain unpaid for more than (a) 60 days for Domestic
Accounts after the due date specified in the original invoice or for more than
90 days after invoice date if no due date was specified; (b) 120 days after due
date or invoice date if no due date was specified for Foreign Accounts; and (c)
14 days for UPS Shipped COD Accounts;
(3) Accounts due from any account debtor if more than 50% of the
aggregate amount of Accounts of such account debtor have at the time remained
unpaid for more than (a) 60 days after due date or 90 days after invoice date if
no due date was specified for Domestic Accounts; and (b) 120 days after due date
or invoice date if no due date was specified for Foreign Accounts;
(4) Accounts with respect to which Borrower is or may become liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower and Accounts which are otherwise eligible with respect to which the
account debtor is owed a credit by Borrower, but only to the extent of such
credit;
(5) Accounts due from an account debtor whose principal place of
business is located outside the United States of America, unless such Account is
a Foreign Account;
(6) Accounts due from an account debtor which Lender has determined does
not have a satisfactory credit standing;
(7) Accounts with respect to which the account debtor is the United
States of America, unless Borrower has, with respect to such accounts, complied
with the Federal Assignment of Claims Act of 1940 as amended (31 U.S.C. Section
3727 et seq.), any state or any municipality, or any department, agency or
instrumentality thereof;
(8) Accounts with respect to which the account debtor is an Affiliate of
Borrower or a director, officer, agent, stockholder or employee of Borrower or
any of its affiliates;
(9) Accounts with respect to which there is any unresolved dispute with
the respective account debtor;
(10) Accounts with respect to which Lender does not have a valid first
priority and fully perfected security interest or Accounts that are subject to
any claim, lien, security interest or encumbrance, except those in favor
of Lender;
(11) Accounts with respect to which the account debtor is the subject of
any bankruptcy or other insolvency proceeding;
(12) Accounts due from an account debtor to the extent that such
Accounts exceed in the aggregate an amount equal to 15% of the aggregate of all
Accounts at said date;
(13) Accounts with respect to which the account debtor's obligation to
pay is conditional or subject to a repurchase obligation or right to return or
with respect to which the goods or services giving rise to such Account have not
been delivered (or performed, as applicable) and accepted by such account
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debtor, including progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold sales, guarantied sales, sale
or return transactions, sales on approval or consignment sales; and
(14) Accounts with respect to which the account debtor is located in New
Jersey or Minnesota, or any other state denying creditor& access to its courts
in the absence of a Notice of Business Activities Report or other similar
filing, unless Borrower has either qualified as a foreign corporation authorized
to transact business in such state or has filed a Notice of Business Activities
Report or similar filing with the applicable state agency for the then current
year.
"Eligible Inventory" means, as at any date of determination, the value
(determined at the lower of cost or market) of all Inventory owned by and in the
possession of Borrower and located in the United States of America that Lender,
in its sole credit judgment, deems to be eligible for borrowing purposes.
Without limiting the generality of the foregoing, unless otherwise agreed by
Lender, the following is not Eligible Inventory: (a) work-in-process, components
which are not part of finished goods, spare parts, packaging and shipping
materials, literature, boxes, supplies and material used or consumed in
Borrower's business; (b) reporting discrepancies for raw materials on the
perpetual inventory system; (c) finished goods which do not meet the
specifications of the purchase order for such goods; (d) Inventory which Lender
determines, is unacceptable for borrowing purposes due to age, quality, type,
category and/or quantity; (e) Inventory which Lender determines is obsolete or
slow-moving; (f) Inventory with respect to which Lender does not have a valid,
first priority and fully perfected security interest, ▇▇▇▇-and-hold Inventory,
and Inventory subject to any claim, lien, security interest or encumbrance
except for those in favor of Lender; (g) Inventory produced in violation of the
Fair Labor Standards Act and subject to the so-called "hot goods" provisions
contained in Title 29 U.S.C. 215 (a)(i); (h) Inventory returned to, repossessed
by, or stopped in transit by Borrower; and (i) Inventory located (1) at any
location other than those identified pursuant to subsection 4.4, (2) outside
the United States of America, or (3) on property not owned by Borrower in which
a bailee, landlord or processor's waiver in form and substance satisfactory to
Lender has not been obtained, for a list of approved processors see Schedule
2.1(A) attached hereto.
(B) BORROWING MECHANICS. On any day when Borrower desires a Revolving
Advance, Borrower shall give Lender telephonic notice of the proposed borrowing
by 11:00 a.m. Central time. Any such telephonic notice shall be confirmed in
writing on the same day. Lender shall not incur any liability to Borrower for
acting upon any telephonic notice Lender believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Borrower or for otherwise acting in good faith. Lender will not make
any Revolving Advance pursuant to any telephonic notice unless Lender has also
received the most recent Borrowing Base Certificate and all other documents
required pursuant to the Reporting Addendum by 11:00 a.m. Central time. Each
Revolving Advance shall be deposited by wire transfer in immediately available
funds in such account as Borrower may from time to time designate to Lender in
writing.
(C) NOTE[S]. Borrower shall execute and deliver to Lender such Notes as
Lender may request in its sole discretion to evidence the Obligations.
2.2 INTEREST.
(A) RATE OF INTEREST. Except where specified to the contrary in any Note
or in any other Loan Document, the Loans and all other Obligations shall bear
interest from the date such Loans are made or such other Obligations become due
to the date paid at a rate per annum equal to the Base Rate plus 1.25% (the
"INTEREST RATE"). After the occurrence and during the continuance of an Event of
Default, the Loans and all other Obligations shall, at the option of Lender,
bear interest at a rate per annum equal to 3.0%. plus the Interest Rate (the
"DEFAULT RATE").
(B) COMPUTATION AND PAYMENT OF INTEREST. Interest on the Loans and all
other Obligations shall be computed on the daily principal balance on the basis
of a 360 day year for the actual number of days elapsed in the period during
which it accrues and shall be payable to Lender monthly in arrears on the first
day of each month. on the date of any prepayment of Loans, and at maturity,
whether by acceleration or otherwise.
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(C) INTEREST LAWS. Notwithstanding any provision to the contrary
contained in this Agreement or any other Loan Document, Borrower shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by applicable law
("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a
court of competent jurisdiction to have been provided for in this Agreement or
in any other Loan Document, then in such event: (1) the provisions of this
subsection shall govern and control; (2) neither Borrower nor any other Loan
Party shall be obligated to pay any Excess Interest; (3) any Excess Interest
that Lender may have received hereunder shall be, at Lender's option, (a)
applied as a credit against the outstanding principal balance of the Obligations
or accrued and unpaid interest (not to exceed the maximum amount permitted by
law), (b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be automatically
reduced to the maximum lawful rate allowed from time to time under applicable
law (the "MAXIMUM RATE"), and this Agreement and the other Loan Documents shall
be deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) neither Borrower nor any Loan Party shall have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.
2.3 FEES.
(A) CLOSING FEE. Borrower shall pay to Lender on the closing date, a
closing fee in the amount of $25,000 which fee shall be fully earned, due and
payable upon the execution and delivery of this Agreement.
(B) COMMITMENT FEE. Borrower shall have paid and Lender shall have
earned a non-refundable Commitment Fee of $50,000. On or after the closing
date, the Commitment Fee shall be applied to the Closing Fee, and the excess
credited to the opening outstanding balance under the Revolving Loan.
(C) UNUSED LINE FEE. Borrower shall pay to Lender, a fee in an amount
equal to 0.375% per annum on the average daily balance of the unused portion of
the Revolving Loan during the preceding month, such fee to be calculated on the
basis of a 360 day year for the actual number of days elapsed and to be payable
monthly in arrears on the first day of each month following the closing date
during the term of this Agreement, including all Renewal Terms.
(D) EXAMINATION FEE. Borrower shall pay to Lender an examination fee for
each examination equal to $750.00 per examiner per day or any portion thereof
together with out-of-pocket expenses. Exams will be conducted on a quarterly
basis.
(E) LATE REPORTING FEE. Borrower shall pay to Lender a late reporting
fee in an amount equal to $50.00 per document per day for each Business Day, any
report, financial statement, schedule or other document required by this
Agreement, to be delivered to Lender, as more fully set forth on the Reporting
Addendum, is past due. The collection of such late reporting fee shall not
constitute a waiver by Lender of any Default or Event of Default resulting from
Borrower's failure to deliver such items on a timely basis, or in any way affect
or impair Lender's right to impose the Default Rate as a result thereof.
(F) OTHER FEES AND EXPENSES. Borrower shall pay to Lender, all charges
for returned items and all other bank charges incurred by Lender, as well as
Lender's standard wire transfer charges for each wire transfer made under this
Agreement.
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2.4 PAYMENTS AND PREPAYMENTS.
(A) MANNER AND TIME OF PAYMENT. Borrower hereby authorizes Lender, in
its sole discretion, to charge interest and other amounts payable hereunder to
the Revolving Loan, all as set forth on Lender's books and records. If Lender
elects to ▇▇▇▇ Borrower for any amount due hereunder, such amount shall be
immediately due and payable with interest thereon as provided herein. All
payments made by Borrower with respect to the Obligations shall be made without
deduction, defense, setoff or counterclaim. All payments to Lender hereunder
shall, unless otherwise directed by Lender, be made by wire transfer to Lender's
account, ABA No.▇▇▇▇-▇▇▇▇-▇, Account No. ▇▇▇▇▇▇▇ at The First National Bank of
Chicago, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Reference: ▇▇▇▇▇▇
Commercial Funding for the benefit of HMI Industries, Inc.. Proceeds remitted to
Lender shall be credited to the Obligations on the same Business Day such
proceeds were received; PROVIDED HOWEVER, for the purpose of calculating
interest on the Obligations, such funds shall be deemed received on the second
Business Day thereafter.
(B) MANDATORY PREPAYMENTS. At any time that the Revolving Loan exceeds
the Maximum Revolving Loan Amount, Borrower shall, immediately repay the
Revolving Loan to the extent necessary to reduce the principal balance to an
amount equal to or less than the Maximum Revolving Loan Amount.
(C) VOLUNTARY PREPAYMENTS AND REPAYMENTS. The Obligations may only be
prepaid or repaid in full and not in part (other than prepayments of the
Revolving Loan which do not terminate this Agreement or prepayments permitted
under any Note). Borrower may, at any time upon not less than three Business
Days' prior notice to Lender, prepay the Obligations and terminate this
Agreement. If Borrower voluntarily prepays the Obligations in full (other than
prepayments of the Revolving Loan which do not terminate this Agreement),
Borrower, at the time of prepayment, shall pay to Lender, as compensation for
the costs of being prepared to make funds available to Borrower under this
Agreement, and not as a penalty, an amount determined by multiplying the
applicable percentage set forth below by $4,250,000.00, 3.0% upon a prepayment
during the first Loan Year; 2.0% upon a prepayment during the second Loan Year;
and 1.0% upon a prepayment during the third Loan Year, and during any Renewal
Term (as defmed below).
(D) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.
2.5 TERM OF THIS AGREEMENT. This Agreement shall be effective until
April ___,2001 (the "ORIGINAL TERM") and shall automatically renew from year to
year thereafter (each such year a "RENEWAL TERM") unless terminated by Borrower
giving to Lender or Lender giving to Borrower not less than 60 days prior
written notice of its intention to terminate at the end of the Original Term or
at the end of any Renewal Term (the "TERMINATION DATE"). Upon termination
(whether on the Termination Date or otherwise) all Obligations shall become
immediately due and payable without notice or demand. Notwithstanding any
termination, until all Obligations have been fully paid and satisfied, Lender
shall be entitled to retain security interests in and liens upon all Collateral,
and even after payment of all Obligations hereunder, certain of Lender's and
Borrower's agreements and obligations shall survive such terminations as set
forth in SUBSECTION 8.6.
2.6 STATEMENTS. Lender shall render a monthly statement of account to
Borrower within twenty' (20) days after the end of each month. Such statement of
account shall constitute an account stated and Borrower shall have fully and
irrevocably waived all objections to such statements and the contents thereof
unless Borrower makes written objection thereto within thirty (30) days from the
date such statement is mailed to Borrower.
2.7 GRANT OF SECURITY INTEREST. To secure the payment and performance of
the Obligations, Borrower hereby grants to Lender a continuing security'
interest. lien and mortgage in and to all right. title and interest of Borrower
in all personal and real property' of Borrower whether now owned or existing or
hereafter acquired or arising and regardless of where located (all being
collectively referred to as the "Collateral") including, without limitation: (A)
Accounts. and all guaranties and security therefor, and all goods and rights
represented thereby or arising therefrom including the rights of stoppage in
transit. replevin and reclamation; (B) Inventory; (C)
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general intangibles (as defined in the UCC); (D) documents (as defined in the
UCC) or other receipts covering, evidencing or representing goods; (E)
instruments (as defined in the UCC); (F) chattel paper (as defined in the UCC);
(G) Equipment; (H) investment property (as defined in the UCC) including,
without limitation, all securities (certificated and uncertificated), security
accounts, securities entitlements, commodity contracts and commodity accounts;
(I) Intellectual Property; (J) all deposit accounts of Borrower maintained with
any bank or financial institution; (K) all cash and other monies and property of
Borrower in the possession or under the control of Lender or any lender
participant in any of the Loans; (L) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of
the property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and (M) proceeds of all or any of the
property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.
SECTION 3. CONDITIONS TO LOANS
The making of Loans by Lender on the closing date and on each funding date of a
Revolving Advance are each subject to satisfaction of all of the conditions,
agreements and covenants set forth in this Agreement and all of the conditions
set forth in the Conditions Rider, attached hereto.
SECTION 4. BORROWER'S REPRESENTATIONS, WARRANTIES
AND CERTAIN COVENANTS
To induce Lender to enter into the Loan Documents, and to make and to
continue to make Loans and/or provide other financial accommodations to or on
behalf of Borrower, Borrower represents, warrants and covenants (as applicable)
to Lender that the following statements are and will be true, correct and
complete and shall remain so for so long as this Agreement shall be in effect
and until payment in full of all Obligations.
4.1 DUE INCORPORATION, QUALIFICATION AND AUTHORIZATION. Borrower is duly
organized and existing and in good standing under the laws of the State of
Delaware and qualified and licensed to conduct business in all States where such
qualifications or licensing is required; the execution, delivery and performance
of this Agreement and the Loan Documents have been duly authorized and are not
in contravention of any applicable law, Borrower's corporate charter or by-laws
or any other formation document or any agreement or order by which Borrower is
bound: Borrower is not, to the best of Borrower's knowledge, in violation of any
law, ordinance, rule, regulation, order or other requirement of any government
or any instrumentality or agency thereof.
4.2 DUE FINANCIAL CONDITION. All financial statements concerning
Borrower and its Subsidiaries which have been or may hereafter be furnished by
Borrower and its Subsidiaries to Lender have been or will be prepared in
accordance with GAAP consistently applied throughout the periods involved and do
or will present fairly Borrower's financial condition as at the dates thereof
and the results of its operations for the periods then ended.
4.3 ACCOUNT WARRANTIES AND COVENANTS. As to each Account that, at the
time of its creation, the Account is a valid, bona fide account, representing an
undisputed indebtedness incurred by the named account debtor for goods actually
sold and delivered or for services completely rendered: there are no rights of
cancellation. setoffs, offsets or counterclaims, genuine or otherwise, against
the Account: the Account does not represent a sale to an Affiliate or a
consignment, sale or return or a ▇▇▇▇ and hold transaction; no agreement exists
permitting any return, deduction or discount (other than the discount stated on
the invoice); Borrower is the lawful owner of the Account and has the right to
assign the same to Lender; the Account is free of all security interests. liens,
claims and encumbrances other than those in favor of Lender, and the Account is
due and payable in accordance with its terms. Borrower shall, at its own
expense: (a) cause all invoices evidencing Accounts and all copies thereof to
bear a notice that such invoices are payable to the lockboxes established in
accordance with subsection 4.4 and (b) use its best efforts to assure prompt
payment of all amounts due or to become due under the Accounts. No credits or
allowances will be issued, granted or allowed by Borrower to account debtors and
no returns will be accepted without Lender's prior written consent: PROVIDED
HOWEVER, until the earlier of (i) the occurrence of a Default or Event of
Default or (ii) such time as Lender notifies Borrower to the contrary. Borrower
may presume consent. Borrower will immediately
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notify Lender in the event that an account debtor alleges any dispute or claim
in excess of $5,000 or in the aggregate amount in excess of $25,000 with respect
to an Account except for Accounts with balances over 90 days as of March 31,
1998, or of any other circumstances known to Borrower that may impair the
validity or collectibility of an Account. Lender shall have the right, at any
time or times hereafter, to verify the validity, amount or any other matter
relating to an Account, by mail, telephone or in person. After the occurrence of
a Default or an Event of Default, Borrower shall not, without the prior consent
of Lender, adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
4.4 COLLECTION OF ACCOUNTS AND PAYMENTS. Borrower and Lender shall
establish lockboxes and depository accounts ("LENDER'S DEPOSITORY ACCOUNTS")
with such banks as are acceptable to Lender to which all account debtors shall
directly remit all payments on Accounts and in which Borrower will immediately
deposit all payments made for Inventory or other payments constituting proceeds
of Collateral in the identical form in which such payment was made, whether by
cash or check. Borrower hereby agrees that all payments received by Lender,
whether by cash, check, wire transfer or any other instrument, made to such
Lender Depository Accounts or otherwise received by Lender and whether on the
Accounts or as proceeds of other Collateral or otherwise will be the sole and
exclusive property of Lender. Borrower, and any of its Affiliates, employees,
agents, or other Persons acting for or in concert with Borrower shall, acting as
trustee for Lender, receive, as the sole and exclusive property of Lender, any
monies, checks, notes, drafts or any other payments relating to and/or proceeds
of Accounts or other Collateral which come into the possession or under the
control of Borrower or any of Borrower's Affiliates, employees, agents or other
Persons acting for or in concert with Borrower, and immediately upon receipt
thereof, Borrower or such Persons shall remit the same or cause the same to be
remitted, in kind, to the Lender Depository Account or to Lender at its address
set forth in subsection 8.5 below.
4.5 NAMES AND LOCATIONS. Borrower currently conducts business or during
the past five years conducted business under the following names, trade names,
fictitious names and business names. The location of Borrower's principal place
of business, the location of Borrower's books and records, the location of all
other offices of Borrower and all collateral locations are as set forth below:
LOCATIONS
Principal Place of Business: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Books and Records: Same as principal place of business.
Other: See Schedule 4.5 attached hereto.
FORMER NAMES
------------
Health-Mor, Inc.
TRADENAMES
----------
Home Impressions
Such locations are Borrower's sole locations for its business and the
Collateral. Borrower and each of its Subsidiaries will give Lender at least 30
days advance written notice of: (a) any change of name or of any new trade name
or fictitious business name, (b) any change of principal place of business. (c)
any change in the location of such party s books and records or the Collateral.
or (d) any new location for such Person's books and records or the Collateral.
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4.6 TITLE; LIENS; OPERATION OF BUSINESS. Borrower has and will continue
to have good, marketable and legal title to the Collateral, free and clear of
all liens, claims, security interests or encumbrances, except for the security
interests granted to Lender by Borrower, those disclosed in writing by Borrower
to Lender as of the closing date and any security interest which Bortower has
disclosed in writing to Lender and to which Lender has given its written consent
prior to being granted by Borrower. Borrower maintains and shall continue to
maintain complete and accurate records with respect to all of its assets.
Borrower maintains and shall continue to maintain all licenses, permits,
franchises, approvals and consents as are required in the conduct of its
business and the ownership and operation of its properties.
4.7 LITIGATION; ADVERSE FACTS. There are no judgments outstanding
against or affecting Borrower, its officers, directors or affiliates or any of
Borrower's property and there are no actions, charges, claims, demands, suits,
proceedings, or governmental investigations now pending or threatened against
Borrower or any of Borrower's property, except as set forth in Schedule 4.7
attached hereto.
4.8 PAYMENT OF TAXES. All material tax returns and reports of Borrower
and each of its Subsidiaries required to be filed by any of them have been
timely filed and are complete and accurate in all material respects. All taxes,
assessments, fees and other governmental charges which are due and payable by
Borrower and each of its Subsidiaries have been paid when due. Borrower will
make timely payment or deposit of all F.I.C.A. payments and withholding taxes
and will, upon request, furnish Lender with proof satisfactory to Lender that
Borrower has made such required payments or deposits. As of the closing date,
none of the income tax returns of Borrower or any of its Subsidiaries are under
audit. No tax liens have been filed against Borrower or any of its Subsidiaries,
except as set forth in Schedule 4.8 attached hereto. The charges, accruals and
reserves on the books of Borrower and each of its Subsidiaries in respect of any
taxes or other governmental charges are in accordance with GAAP. Borrower's
federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
4.9 EMPLOYEE BENEFIT PLANS. Borrower, each of its Subsidiaries and each
ERISA Affiliate is in compliance, and will continue to remain in compliance, in
all material respects with all applicable provisions of ERISA, the IRC and all
other applicable laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. No material liability has been incurred
by Borrower, any Subsidiaries or any ERISA Affiliate which remains unsatisfied
for any funding obligation, taxes or penalties with respect to any Employee
Benefit Plan. Neither Borrower nor any of its Subsidiaries shall establish any
new Employee Benefit Plan or amend any existing Employee Benefit Plan if the
liability or increased liability resulting from such establishment or amendment
shall have a Material Adverse Effect.
4.10 ENVIRONMENTAL COMPLIANCE. Each Loan Party has been, is currently,
and will continue to remain in compliance with all applicable Environmental
Laws. There are no claims, liabilities, liens, investigations, litigation,
administrative proceedings, whether pending or threatened, or judgments or
orders relating to any Hazardous Materials asserted or threatened against any
Loan Parry or relating to any real property currently or formerly owned, leased
or operated by any Loan Party.
4.11 ABILITY TO PAY DEBTS. Borrower is now and shall be at all times
hereafter able to pay its debts as they become due and shall have sufficient
capital to enable it to operate its businesses.
4.12 DISCLOSURE. There is no event that has occurred nor any fact known
by Borrower but not furnished to Lender, which will have or reasonably be
expected to have a Material Adverse Effect.
4.13 INSURANCE. Borrower maintains, and will continue to maintain
adequate insurance policies for public liability, property damage for its
business and properties, product liability, including, without limitation,
special product liability coverage for HMPC's needle-free injection products,
and business interruption with respect to its business and properties against
loss or damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Lender. Borrower shall cause Lender to be named as loss payee on all
insurance policies relating to any Collateral and shall cause Lender to be ATL
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named as additional insured under all liability policies, in each case pursuant
to appropriate endorsements in form and substance satisfactory to Lender and
shall collaterally assign to Lender as security for the payment of the
Obligations all business interruption insurance of Borrower. No notice of
cancellation has been received with respect to such policies and Borrower is in
compliance with all conditions contained in such policies. Borrower shall apply
any proceeds received from any policies of insurance relating to any Collateral
to the Obligations. In the event Borrower fails to provide Lender with evidence
of the insurance coverage required by or this Agreement, Lender may, but is not
required to, purchase insurance at Borrower's expense to protect Lender's
interests in the Collateral. This insurance may, but need not, protect
Borrower's interests. The coverage purchased by Lender may not pay any claim
made by Borrower or any claim that is made against Borrower in connection with
the Collateral. Borrower may later cancel any insurance purchased by Lender, but
only after providing Lender with evidence that Borrower has obtained insurance
as required by this Agreement. If Lender purchases insurance for the Collateral,
Borrower will be responsible for the costs of that insurance, including interest
and other charges imposed by Lender in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs
of the insurance may be more than the cost of insurance Borrower is able to
obtain on its own.
4.14 ACCOUNTING METHODS; ACCESS TO ACCOUNTANTS. Borrower shall maintain
its current method of accounting, as of the closing date, without modification.
Borrower authorizes Lender to discuss the financial condition and financial
statements of Borrower with Borrower's Accountants, and authorizes Borrower's
Accountants to respond to all of Lender's inquiries and Borrower hereby waives
the right to assert a confidential relationship, if any, it may have with
Borrower's Accountants in connection with any information requested by Lender
pursuant to or in accordance with this Agreement.
4.15 INSPECTION. Lender shall have the right at any time during normal
business hours to visit and inspect any of the properties of Borrower or any of
its Subsidiaries, and, in conjunction with such inspection, to make copies and
take extracts from any of their books and records therefrom.
4.16 COLLECTION OF ACCOUNTS. Upon the occurrence of a Default or an
Event of Default, Lender may, at any time, with or without notice to Borrower,
notify all account debtors of Borrower that the Accounts have been assigned to
Lender, and that Lender has a security interest in same; collect the Accounts
directly, and add the collection costs and expenses to Borrower's loan account.
4.17 SUBSIDIARIES. As of the closing date, all Subsidiaries of Borrower
are listed on Schedule 4.17 attached hereto. None of Borrower's Subsidiaries
have assets in a greater amount than listed on Schedule 4.17. Borrower shall not
transfer or advance any funds or property to, or make contributions to the
capital of any of its Subsidiaries, or create any new Subsidiary.
4.18 YEAR 2000 COMPLIANCE. The Borrower has implemented a comprehensive
program to address the "year 2000 problem" (that is. the risk that computer
applications may not be able to properly perform datesensitive functions after
December 31, 1999) and expect to resolve on a timely basis and, in any event,
no later than January 31, 1999, any material "year 2000 problem".
SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, during the term of this Agreement
and until payment in full of all Obligations, Borrower shall perform all of the
following:
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will deliver to
Lender the financial statements and other reports listed on the Reporting
Addendum attached hereto on the dates and in the manner set forth in such
Reporting Addendum.
5.2 APPRAISALS. From time to time. upon the request of Lender. Borrower
will obtain and deliver to Lender. at Borrower's expense. appraisal reports in
form and substance and from appraisers satisfactory to Lender,
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stating the then current fair market and forced liquidation values of all or any
portion of the Collateral; PROVIDED HOWEVER, so long as no Default or Event of
Default is continuing, Lender shall not request an appraisal as to any
particular category of Collateral to be performed more than once every Loan Year
at Borrower's expense, except as required in paragraph (J)(3) of the Conditions
Rider.
5.3 GOVERNMENT NOTICES. Borrower will deliver to Lender promptly after
receipt copies of all notices, requests, subpoenas, inquiries or other writings
received from any governmental agency concerning any Employee Benefit Plan, the
violation or alleged violation of any Environmental Laws, the storage, use or
disposal of any Hazardous Material, the violation or alleged violation of the
Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
5.4 MAINTENANCE OF PROPERTIES. Borrower will maintain or cause to be
maintained in good repair, working order and condition all material properties
used in the business of Borrower and its Subsidiaries and will make or cause to
be made all appropriate repairs, renewals and replacements thereof.
5.5 COMPLIANCE WITH LAWS. Borrower will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business.
5.6 FURTHER ASSURANCES. Borrower shall, and shall cause each of its
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title,
mortgages, deeds of trust, or other documents as Lender at any time may
reasonably request to evidence, perfect or otherwise implement the guaranties
and security for repayment of the Obligations provided for in the Loan
Documents.
5.7 USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use the proceeds
of all Loans for proper business purposes consistent with all applicable laws,
statutes, rules and regulations. No portion of the proceeds of any Loan, except
for an aggregate amount not to exceed $25,000 during the term of this Agreement,
shall be used by Borrower or any of its Subsidiaries for the purpose of
purchasing or carrying margin stock within the meaning of Regulation G or
Regulation U, or in any manner that might cause the borrowing or the application
of such proceeds to violate Regulation T or Regulation X or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Exchange Act.
SECTION 6. NEGATIVE COVENANTS
Borrower covenants and agrees that, during the term of this Agreement
and until payment in full of all Obligations, Borrower shall not:
6.1 BOOK NET WORTH. Permit Borrower's book net worth, at any time, to be
less than $17,500,000.00.
6.2 CAPITAL EXPENDITURE LIMITS. Make or incur any plant or fixed capital
expenditure, or any commitment therefor, or purchase or lease any real or
personal property or replacement equipment in excess of $750,000.00 in the
aggregate for any fiscal year.
6.3 COMPENSATION. Pay total compensation, including salaries,
withdrawals, fees, bonuses, commissions, drawing accounts, management fees or
other payments, whether directly or indirectly, in money or otherwise, during
any fiscal year to all of Borrower's executives, officers. shareholders,
affiliates. and directors (or any relatives of each of the foregoing) in an
aggregate amount in excess of 120% of those paid in the prior fiscal year,
except for bonuses gene rated by the Bliss Acquisition and previously approved
by the Borrower's Board of Directors in fiscal year end 1997.
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6.4 INDEBTEDNESS AND LIABILITIES. Directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any indebtedness outside of the
ordinary course of Borrower's business as presently conducted, except for
renewals or extension of existing indebtedness (previously disclosed to
Lender); PROVIDED HOWEVER, in no event shall Borrower prepay any indebtedness
owing to any third party, other than the Obligations pursuant to SUBSECTION
2.4(C).
6.5 TRANSFERS, NEGATIVE PLEDGES AND RELATED MATTERS.
(A) TRANSFERS. Sell, lease, consign, assign or otherwise dispose of, or
grant any option with respect to any of the assets of Borrower, except that
Borrower may sell (i) inventory in the ordinary course of business as presently
conducted, and (ii) assets, as set forth in Schedule 6.5 (A) attached hereto,
associated with discontinued operations as of May I, 1998.
(B) NO-NEGATIVE PLEDGES. Enter into or assume any agreement (other
than the Loan Documents) prohibiting the creation or assumption of any lien,
claim, security interest or encumbrance upon its properties or assets, whether
now owned or hereafter acquired.
6.6 INVESTMENTS AND LOANS. Make or permit to exist investments in or
loans to any other Person, except loans to employees for moving, entertainment,
travel and other similar expenses in the ordinary course of business in an
aggregate outstanding amount not in excess of $ 50,000 at any time.
6.7 DISTRIBUTIONS. Make any distribution or declare or pay any dividends
(in cash or in stock) on, or purchase, acquire, redeem or retire any of
Borrower's capital stock, of any class, whether now or hereafter outstanding.
6.8 RESTRICTION ON FUNDAMENTAL CHANGES. (a) Enter into any transaction
of merger or consolidation; (b) liquidate, wind-up, dissolve itself, or cease or
suspend its business; (c) make any change in Borrower's financial structure or
in any of its business operations; (d) acquire by purchase or otherwise all or
any substantial part of the business or assets of, or stock or other beneficial
ownership of, any Person; (e) establish, create or acquire any new Subsidiary;
or (f) change its fiscal year or change its tax entity designation under the
IRC.
6.9 TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for (a) transactions in
the ordinary course of Borrower's business, as presently conducted, upon fair
and reasonable terms which are fully disclosed to Lender, and which are no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with an unaffiliated Person, and (b) those agreements as set forth
in Schedule 6.9 attached hereto.
6.10 BANK ACCOUNTS. Establish any new bank accounts, or amend or
terminate any blocked account or lockbox agreement without Lender's prior
written consent.
SECTION 7. DEFAULT, RIGHTS AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence or existence of any one or more
of the following events (each, an "Event of Default"):
(A) PAYMENT. Failure to make payment of any of the Obligations when due
or declared due; or
(B) FAILURE TO PERFORM. Failure of Borrower or any Loan Party to perform
or comply with any term, condition, provision, covenant or agreement contained
in the Loan Documents; or
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(C) DEFAULT IN OTHER AGREEMENTS. The existence of a default in any
material agreement to which Borrower is a party or by which Borrower or
Borrower's property or assets are bound; or
(D) BREACH OF WARRANTY. Any representation, warranty, certification,
report or other statement made by any Loan Party in any Loan Document or in any
statement, certificate or report at any time given by such Person in writing
pursuant or in connection with any Loan Document is false in any material
respect on the date made; or
(E) CHANGE IN CONTROL. Any change, direct or indirect in Borrower's
capital ownership in excess of 15%; or
(F) MATERIAL ADVERSE EFFECT Any event which creates a Material Adverse
Effect; or
(G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER. ETC. (I) A court
enters a decree or order for relief with respect to any guarantor of the
Obligations, Borrower or any of its Subsidiaries in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (2) a receiver, liquidator, sequestrator, trustee, custodian or other
fiduciary having similar powers over any guarantor of the Obligations, Borrower
or any of its Subsidiaries, or over all or a substantial part of their
respective property, is appointed; or
(H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. Borrower or any
of its Subsidiaries, or any guarantor of the Obligations, commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; consents to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or makes any assignment for the benefit of creditors; or
(I) LEVY. Any lien, levy or assessment is filed or recorded with respect
to or otherwise imposed upon all or any part of Borrower's assets by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency; or
(J) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of
attachment, levy, or similar process is entered or filed against Borrower or any
of its assets in an amount in any individual case in excess of$10,000 or an
amount in the aggregate at any time in excess of $50,000; or
(K) DISSOLUTION; INJUNCTION. Any order, judgment or decree is entered
against Borrower decreeing the dissolution or split up of Borrower, or
enjoining, restraining or in any way preventing Borrower from conducting all or
any material part of its business; or
(L) LOSS OF GUARANTOR. Any guarantor of the Obligations dies or
terminates its guaranty or gives notice of termination of its guaranty; or
(M) FAILURE OF SECURITY. Lender does not have or ceases to have a valid
and perfected first priority security interest in the Collateral. or any of the
Loan Documents ceases to be in full force and effect or is declared to be null
and void; or
(N) SUBORDINATED DEBT PAYMENTS. Borrower makes any payment on account of
indebtedness which has been subordinated to the Obligations, except to the
extent such payment is allowed under any subordination agreement entered into
with Lender.
Notwithstanding anything contained in this SECTION 7 to the contrary.
Lender shall refrain from exercising its rights and remedies and an Event of
Default shall not be deemed to have occurred by reason of the occurrence of any
of the events set forth in SUBSECTIONS 7.1(G), 7.1(I), AND 7.1(J) of this
Agreement if, within 10 days from the date thereof, the same is released,
discharged, dismissed, bonded against or satisfied.
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7.2 SUSPENSION OF LOANS. Upon the occurrence of any Default or Event of
Default. notwithstanding any grace period or right to cure, Lender without
notice or demand, may immediately cease making additional Loans or advances
under this Agreement or any other agreement between Borrower and Lender. The
foregoing shall in no way affect, limit, or waive Lender's sole and absolute
discretion to make advances under this Agreement.
7.3 ACCELERATION. Upon the occurrence of any Event of Default described
in the foregoing SUBSECTIONS 7.1(G) OR 7.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower, and this Agreement shall thereupon terminate; PROVIDED
HOWEVER, such termination shall not affect Lender's rights and security interest
in the Collateral or the Obligations. Upon the occurrence and during the
continuance of any other Event of Default, Lender may, by written notice to
Borrower, declare all or any portion of the Obligations to be, and the same
shall forthwith become, immediately due and payable and Lender may terminate
this Agreement; PROVIDED HOWEVER, such termination shall not affect Lender's
rights and security interest in the Collateral or the Obligations.
7.4 REMEDIES. Upon the occurrence of an Event of Default, in addition to
and not in limitation of any other rights or remedies available to Lender at law
or in equity, Lender may exercise in respect of the Collateral, all the rights
and remedies of a secured party on default under the UCC and may also (a)
require Borrower to, and Borrower hereby agrees that it will, at its expense and
upon request of Lender forthwith, assemble all or part of the Collateral as
directed by Lender and make it available to Lender at a place to be designated
by Lender; (b) require Borrower to hold all returned Inventory in trust for
Lender, segregate all returned Inventory from all other Inventory of Borrower or
in Borrower's possession and conspicuously label said returned Inventory as
Lender's property; (c) withdraw all cash in any blocked account and apply such
monies in payment of the Obligations; and (d) without notice or demand or legal
process, enter upon any premises of Borrower and take possession of the
Collateral. Borrower agrees that, to the extent notice of sale of the Collateral
or any part thereof shall be required by law, ten days notice to 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. At any sale of the Collateral
(whether public or private), if permitted by law, Lender may bid (which bid may
be, in whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account of Lender.
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Borrower shall remain liable for any
deficiency. Lender 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. To
the extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted. Lender shall not be required to proceed against
any Collateral but may proceed against Borrower directly.
7.5 APPOINTMENT OF ATTORNEY-IN-FACT. Borrower hereby constitutes and
appoints Lender as Borrower's attorney-in-fact with full authority, in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion to take any action and to execute any
instrument that Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including: (a) to ask, demand, collect, ▇▇▇ for,
recover, compound. receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (b) upon the
occurrence of a Default or an Event of Default, to adjust, settle or compromise
the amount or payment of any Account. or release wholly or partly any account
debtor or obligor thereunder or allow any credit or discount thereon; (c) to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper. in connection with clause (a) above: (d) to file any claims or
take any action or institute any proceedings that Lender may deem necessary or
desirable for the collection of or to preserve the value of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral; (e) to sign and endorse any invoices, freight or express bills,
bills of lading. storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral; (f) to notify the postal authorities to change the address for
delivery' of Borrower's mail to an address designated by Lender to receive and
open all mail addressed to Borrower and to retain all mail relating to the
Collateral and forward all other mail to Borrower; (g) to make, settle and
adjust all claims and make all
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determinations and decisions with respect to Borrower's insurance policies. The
appointment of Lender as Borrowers attorney-in-fact and Lender's rights and
powers are coupled with an interest and are irrevocable until indefeasible
payment in full and complete performance of all of the Obligations.
7.6 LIMITATION ON DUTY OF LENDER WITH RESPECT TO COLLATERAL. Beyond the
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee, broker or other agent or
bailee selected by Borrower or selected by Lender in good faith.
7.7 LICENSE OF INTELLECTUAL PROPERTY. Borrower hereby assigns, transfers
and conveys to Lender, effective upon the occurrence of any Event of Default
hereunder, the non-exclusive right and license to use all Intellectual Property
owned or used by Borrower together with any goodwill associated therewith, all
to the extent necessary to enable Lender to realize on the Collateral and any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Lender and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Borrower by
Lender.
7.8 WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of Lender to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement or the other Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and shall in no way limit
any other remedies provided by law.
7.9 DEMAND; PROTEST. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, and notice of nonpayment at maturity, and agrees that Lender may
compromise, settle or release without notice to Borrower any accounts,
documents, instruments, chattel paper and/or guaranties at any time held by
Lender on which Borrower may in any way be liable. Borrower agrees to any
extensions of time of payment or partial payment at, before or after termination
of this Agreement.
7.10 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
obligation to marshal any assets in favor of any Loan Party or any other party
or against or in payment of any or all of the Obligations. To the extent that
any Loan Party makes a payment or payments to Lender or Lender enforces its
security interests or exercise its rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently 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 law, state or federal law, common law or equitable cause, then to
the extent of such recovery, the Obligations or part thereof originally intended
to be satisfied, and all liens, security interests, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 8 MISCELLANEOUS
8.1 SET OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default. Lender, each assignee of Lender's interest.
and each participant is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
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and all balances held by it at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries) and any other property at any time held or owing
by that Lender or assignee to or for the credit or for the account of Borrower
against and on account of any of the Obligations then outstanding; PROVIDED
HOWEVER, no participant shall exercise such right without the prior written
consent of Lender.
8.2 EXPENSES AND ATTORNEYS' FEES. Borrower shall promptly pay all fees,
costs and expenses incurred by Lender in connection with any matters
contemplated by or arising out of this Agreement or the other Loan Documents
including the following, and all such fees, costs and expenses shall be part of
the Obligations, payable on demand and secured by the Collateral: (a) fees,
costs and expenses (including attorneys' fees, allocated costs of internal
counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with (i) the
examination, review, due diligence investigation, documentation and closing of
the financing arrangements evidenced by the Loan Documents, and (ii) the review,
negotiation, preparation, documentation, execution and administration of the
Loan Documents, the Loans, and any amendments, waivers, consents, forbearances
and other modifications relating thereto or any subordination or intercreditor
agreements; (b) fees, costs and expenses incurred in creating, perfecting and
maintaining perfection of Lender's rights in and to the Collateral; (c) fees,
costs and expenses incurred in connection with forwarding to Borrower the
proceeds of Loans including Lender's standard wire transfer fee; (d) fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by Lender in establishing, maintaining and handling lock box accounts,
blocked accounts or other accounts for collection of the Collateral; (e) fees,
costs, expenses (including attorneys' fees and allocated costs of internal
counsel) and costs of settlement incurred in collecting upon or enforcing rights
against the Collateral or incurred in any action to enforce this Agreement or
the other Loan Documents or to collect any payments due from Borrower or any
other Loan Party under this Agreement or any other Loan Document or incurred in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement, whether in the nature of a "workout" or in
connection with any insolvency or bankruptcy proceedings or otherwise.
8.3 INDEMNITY. In addition to the payment of expenses pursuant to
SUBSECTION 8.2, Borrower shall indemnify, pay and hold Lender and the officers,
directors, employees, agents, consultants, auditors, persons engaged by Lender
to evaluate or monitor the Collateral, affiliates and attorneys of Lender and
such holders (collectively called the "Indemnitees") harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or the other Loan Documents, the consummation of the transactions
contemplated by this Agreement, the statements contained in the commitment
letters, if any, delivered by Lender, Lender's agreement to make the Loans
hereunder, the use or intended use of the proceeds of any of the Loans or the
exercise of any right or remedy hereunder or under the other Loan Documents (the
"Indemnified Liabilities"); PROVIDED HOWEVER, Borrower shall have no obligation
to an Indemnitee hereunder with respect to Indemnified Liabilities arising from
the gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction.
8.4 AMENDMENTS AND WAIVERS. No amendment, modification, termination or
waiver of any provision of this Agreement or of the other Loan Documents. or
consent to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by Lender. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given.
8.5 NOTICES. Unless otherwise specifically provided herein. all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person.
when delivered: (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two (2)
days after delivery to such
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courier properly addressed; or (d) if by U.S. Mail, four (4) Business Days after
depositing in the United States mail, with postage prepaid and properly
addressed.
If to Borrower: HMI INDUSTRIES, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇)▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: ▇▇▇▇▇▇ FINANCIAL, INC.
Attn: Portfolio Manager,
▇▇▇▇▇▇ Commercial Funding
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇)▇▇▇-▇▇▇▇
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this SUBSECTION
8.5.
8.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND CERTAIN AGREEMENTS.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower and Lender set forth in SUBSECTIONS 8.2, 8.3, 8.11,
8.14 and 8.15 (including, without limitation, Borrower's agreement to pay fees,
agreement to indemnify Lender, agreement as to choice of law and jurisdiction
and Borrower's and Lender's waiver of a jury trial) shall survive the payment of
the Loans and the termination of this Agreement.
8.7 INDULGENCE NOT WAIVER. No failure or delay on the part of Lender in
the exercise of any power, right or privilege shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
8.8 ENTIRE AGREEMENT. This Agreement and the other Loan Documents embody
the entire agreement among the parties hereto and supersede all prior
commitments, agreements, representations, and understandings, whether written or
oral, relating to the subject matter hereof, and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.
8.9 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
8.10 HEADINGS. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
8.11 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that Borrower may not assign its rights or obligations hereunder
without the prior written consent of Lender. Lender may assign its rights and
delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Loans, or any
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other interest herein to an affiliate or to another Person. Lender shall be
relieved of its obligations hereunder with respect to the assigned portion
thereof. Borrower hereby acknowledges and agrees that any assignment will give
rise to a direct obligation of Borrower to the assignee and that the assignee
shall be considered to be a "Lender". Lender may furnish any information
concerning Borrower and its Subsidiaries in its possession from time to time to
assignees and participants (including prospective assignees and participants).
8.13 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES.
(A) No provision in this Agreement or in any of the other Loan Documents
and no course of dealing between the parties shall be deemed to create any
fiduciary duty by Lender to Borrower.
(B) Neither Lender, nor any affiliate, officer, director, shareholder,
employee, attorney, or agent of Lender shall have any liability with respect to,
and Borrower hereby waives, releases, and agrees not to ▇▇▇ any of them upon,
any claim for any special, indirect, incidental, or consequential damages
suffered or incurred by Borrower in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Borrower hereby waives, releases, and agrees not to ▇▇▇ Lender or any of
Lender's affiliates, officers, directors, employees, attorneys, or agent for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
8.14 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF ▇▇▇▇,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. BORROWER HEREBY WAIVERS PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
8.15 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. BORROWER AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
8.16 CONSTRUCTION. Borrower and Lender each acknowledge that it has had
the benefit of legal counsel of it own choice and has been afforded an
opportunity to review this Agreement and the other Loan Documents with it legal
counsel and that this Agreement and the other Loan Document shall be construed
as if jointly drafted by Borrower and Lender.
8.17 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments.
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto. Delivery of an executed counterpart of a signature
page to this
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Agreement, any amendments, waivers, consents or supplements, or to any other
Loan Document by telecopier shall be as effective as delivery of a manually
executed counterpart thereof
8.18 CONFIDENTIALITY. Lender shall hold all nonpublic information
obtained pursuant to the requirements hereof and identified as such by Borrower
in accordance with such its customary procedures for handling confidential
information of this nature and in accordance with safe and sound business
practices and in any event may make disclosure to such of its respective
affiliates, officers, directors, employees, agents and representatives as need
to know such information in connection with the Loans. if Lender or any of its
affiliates is otherwise a creditor of Borrower; Lender or such affiliate may
use the information in connection with its other credits. Lender may also make
disclosure reasonably required by a bona fide offeree or assignee (or
participation), or as required or requested by any Governmental Authority or
representative thereof, or pursuant to legal process, or to its accountants,
lawyers and other advisors, and shall require any such offeree or assignee (or
participant) to agree (and require any of its offerees, assignees or
participants to agree) to comply with this subsection 8.18. In no event shall
Lender be obligated or required to return any materials furnished by Borrower.
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
▇▇▇▇▇▇ FINANCIAL, INC. HMI INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------- ---------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇
---------------------------- -------------------------
Title: Vice President Title: Vice President
--------------------------- ------------------------
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CONDITIONS RIDER
This Conditions Rider is attached to and made a part of that certain
Loan and Security Agreement dated as of April 23, 1998 and entered into among
HMI Industries, Inc. and ▇▇▇▇▇▇ Financial, Inc.
(A) CLOSING DELIVERIES. Lender shall have received on or before the closing
date, in form and substance satisfactory to Lender, all documents, instruments
and information and all other agreements, notes, certificates, orders,
authorizations, financing statements, mortgages and other documents which Lender
may at any time request, including, without limitation, the following:
(1) this duly executed Agreement (including Conditions Rider, Reporting
Addendum and all Schedules);
(2) duly executed UCC-l Financing Statements listing Borrower as debtor
and Lender as secured party to be filed in all appropriate
jurisdictions;
(3) receipt of clear UCC, tax lien and pending suit and judgment
searches in all requisite jurisdictions for Borrower (under both its
current name of HMI Industries, Inc. and its former name of Health-Mor,
Inc.) or appropriate termination statements and/or releases for Borrower
and all Subsidiaries;
(4) evidence of Borrower's property/liability insurance and Lender's
loss payable endorsements;
(5) a duly executed Mortgage;
(6) a duly executed Lockbox/Blocked Account Agreement with Star Bank;
(7) evidence that the Borrower is a corporation in good standing with
the State of Delaware;
(8) evidence that, on or before the closing date, (a) Borrower has
consummated all the transactions contemplated by the Bliss Acquisition;
(b) the Bliss Acquisition net proceeds of at least $30 million have been
advanced to Borrower; and (c) all indebtedness and obligations of
Borrower to Star Bank, under the Australian Line of Credit, under the
Netherlands Line of Credit and under the 7 year private placement term
notes, shall have been paid in full with the proceeds of the Bliss
Acquisition and all liens associated therewith terminated;
(9) receipt of a business plan, including, without limitation, financial
projections and a takeover audit acceptable to Lender;
(10) duly executed Assignment for Security of Patent, Trademark and
Copyrights;
(11) Opinion of Borrower's outside Counsel;
(12) Opinion of Borrower's General Counsel;
(13) duly executed Side Letter; and
(14) duly executed Borrower's Officers Affirmation Letter.
(B) SECURITY INTERESTS. Lender shall have received satisfactory evidence
that all security interests and liens granted to Lender pursuant to this
Agreement or the other Loan Documents have been duly perfected and constitute
first priority liens on the Collateral.
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(C) CLOSING DATE AVAILABILITY. After giving effect to the consummation
of the transactions contemplated hereunder on the closing date and the payment
by Borrower of all costs, fees and expenses relating thereto, the Maximum
Revolving Loan Amount on the closing date shall exceed the requests for
Revolving Advances on such date by at least $2,000,000.00 including cash on
hand, after giving effect to the payment of all fees, costs, and expenses
associated with the closing of this transaction and the sale of Bliss and HRS.
(D) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in this Conditions Rider and in the Loan Documents shall be true,
correct and complete in all material respects on and as of each funding date of
the Loans to the same extent as though made on and as of that date, except for
any representation or warranty limited by its terms to a specific date and
taking into account any disclosures made by Borrower to Lender after the closing
date and approved by Lender.
(E) FEES. On the closing date or any funding date of a Revolving
Advance, Borrower shall have paid to Lender all fees due on or prior to such
dates.
(F) NO DEFAULT. No event shall have occurred and be continuing or would
result from the consummation of the requested borrowing that would constitute an
Event of Default or a Default.
(G) PERFORMANCE OF AGREEMENTS. Each Loan Parry shall have performed in
all material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that funding date of any
Loan.
(H) NO PROHIBITION. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans.
(I) NO LITIGATION. There shall not be pending or, to the knowledge of
Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed to Lender by Borrower in
writing, and there shall have occurred no development in any such action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration that, in the opinion of Lender, would reasonably be expected to have
a Material Adverse Effect.
(J) POST-CLOSING CONDITIONS. Borrower covenants and agrees to satisfy
the following post-closing conditions within the time periods specified:
(1) PERPETUAL INVENTORY SYSTEM. Within 90 days after the closing
date, Borrower will update and reorganize its perpetual Inventory reporting
system in a manner acceptable to Lender, which shall be verified by an
acceptable Inventory test count conducted by Lender.
(2) FULL ON-SITE AUDIT. Within 6 months, if not sooner, after
the closing date, prior to advancing on Accounts, Borrower will allow Lender to
conduct a full, on-site audit to confirm that the Borrower's books and records
are accurate and reliable.
(3) REAL ESTATE AND MACHINERY AND EQUIPMENT APPRAISALS. Within
180 days after the closing date, Borrower shall provide Lender with real estate
and machinery and equipment appraisals in form and substance acceptable to
Lender.
(4) EPA PHASE I REPORT. Within 180 days after the closing date,
Borrower shall provide Lender with an EPA Phase I Report from a
nationally-recognized environmental engineering firm in form and substance
acceptable to Lender.
(5) TITLE INSURANCE COMMITMENT POLICY. Within 180 days after the
closing date, Borrower shall provide Lender with an ALTA Loan Policy Commitment
in form and substance satisfactory to Lender.
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(6) SURVEY. Within 180 days after the closing date, Borrower
shall provide Lender with a survey of the real property from an acceptable
surveyor in form and substance acceptable to Lender.
(7) SALE OF SUBSIDIARIES. Evidence that by May 15, 1998,
Borrower has sold the assets of or dissolved HRS and HMPC, with any proceeds
being applied for the working capital needs of the Borrower.
(8) PROCESSOR AGREEMENTS. Within 30 days after the closing date,
Borrower shall provide Lender with duly executed Processor Agreements from
Design Molded Plastics, Inc., MJM Industries, Inc., Spenco Manufacturing, Inc.,
Bebco, and ▇▇▇▇▇ ▇▇▇▇▇▇ Company, Inc.
(9) PROCESSOR UCCS. Within 30 days after the closing date,
Borrower shall provide Lender with duly executed UCC-1 Financing Statements for
all Processors listing Borrower as secured party and Lender as assignee to be
filed in all appropriate jurisdictions.
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REPORTING ADDENDUM
This Reporting Addendum is attached and made a part of that certain Loan
and Security Agreement, dated as of April 23, 1998 and entered into among HMI
Industries, Inc. and ▇▇▇▇▇▇ Financial, Inc.
(A) COLLATERAL REPORTS. Borrower shall execute and deliver to Lender, no
later than the 15th day of each month, or more frequently if requested by
Lender, a detailed aging of the Accounts, a reconciliation statement, and a
summary aging by vendor, of all accounts payable and any book overdraft.
Borrower shall deliver to Lender not less than twice per week, or more
frequently if requested by Lender, collection reports, sales journals and
invoices. Borrower shall also deliver to Lender at Lender's request, original
delivery receipts, account debtors' purchase orders, shipping instructions,
bills of lading and other documentation respecting shipment arrangements. Absent
such a request by Lender, copies of all such documentation shall be held by
Borrower as custodian for Lender.
(B) RETURNS. Returns and allowances, if any, as between Borrower and its
account debtors, shall be permitted by Borrower on the same basis and in
accordance with the usual customary practices of Borrower as they exist at the
time of the execution and delivery of this Agreement. If at any time prior to
the occurrence of an Event of Default any account debtor returns any inventory
to Borrower, Borrower shall promptly determine the reason for such return and,
if Borrower accepts such return, issue a credit memorandum (with a copy to be
sent to Lender) in the appropriate amount to such account debtor. Borrower shall
promptly notify Lender of all returns and recoveries and of all disputes and
claims in excess of $5,000 or in an aggregate amount in excess of $25,000 for
all Accounts except for those Accounts which had balances over 90 days as of
March 31, 1998.
(C) DESIGNATION OF INVENTORY. Borrower shall now and from time to time
hereafter, but not less frequently than weekly, execute and deliver to Lender a
designation of Inventory specifying Borrower's cost and the wholesale market
value of Borrower's raw materials, work in process, finished goods, supplies,
outside contractors, obsolete and after the sale items and further specifying
such other information as Lender may reasonably request.
(D) FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower agrees to
deliver to Lender: (a) as soon as available, but in any event within 45 days
after the end of each month during each of Borrower's fiscal years, a company
prepared balance sheet and profit and loss statement covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal period, certified by independent
certified public accountants acceptable to Lender. Such financial statements
shall include a balance sheet and profit and loss statement and the accountants'
letter to management. Together with the above, Borrower shall also deliver
Borrower's Form 10-Qs, 10-Ks or 8-Ks, if any, as soon as the same become
available, and any other report reasonably requested by Lender relating to the
Collateral and the financial condition of Borrower and a certificate signed by
the chief financial officer of Borrower to the effect that all reports,
statements or computer prepared information of any kind or nature delivered or
caused to be delivered to Lender fairly present the financial condition of
Borrower and that there exists on the date of delivery of such certificate to
Lender no condition or event which constitutes an Event of Default.
(E) TAX RETURNS, RECEIPTS. Borrower agrees to deliver to Lender copies
of each of Borrower's future federal income tax returns, and any amendments
thereto, within 30 days of the filing thereof with the Internal Revenue Service.
Borrower further agrees to promptly deliver to Lender, upon request,
satisfactory evidence of Borrower's payment of all federal withholding taxes
required to be paid by Borrower.
(F) TITLE TO EQUIPMENT. Upon Lender's request, Borrower shall
immediately deliver to Lender, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.
(G) BORROWING BASE CERTIFICATES, REGISTERS AND JOURNALS. On each
Business Day upon which Borrower requests a Revolving Advance, but in no event
less than twice during any week, Borrower shall
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deliver to Lender for such Business Day: (1) a Borrowing Base Certificate in the
form prescribed by Lender; (2) an invoice register or sales journal describing
all sales of Borrower, in form and substance satisfactory to Lender, and, if
Lender so requests, copies of invoices evidencing such sales and proofs of
delivery relating thereto; (3) a cash receipts journal; (4) a credit memo
journal; and (5) an adjustment journal, setting forth all adjustments to
Borrower's accounts receivable.
(H) APPRAISALS. Borrower agrees to deliver to Lender appraisals as set
forth in subsection 5.2.
(I) PROJECTIONS. As soon as available and in any event no later than 30
days prior to the end of each fiscal year of Borrower, Borrower will deliver
consolidated and consolidating projections of Borrower and its Subsidiaries for
the forthcoming three fiscal years, year by year.
(J) ACCOUNTS DESIGNATION. All Accounts reports should be broken down
into the following categories: UPS Shipped COD Accounts, Domestic Accounts, and
Foreign Accounts.
(K) OTHER INFORMATION. With reasonable promptness, Borrower will deliver
such other information and data as Lender may reasonably request from time to
time.
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