EXHIBIT 10.01
EXTENSION AND MODIFICATION AGREEMENT
This Extension and Modification Agreement (the "Agreement") is entered
into as of December 30, 2004 by and among U.S. Bank National Association,
formerly known as Firstar Bank, N.A., a national banking association with an
office located at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000 (the "Bank") and
HMI Industries, Inc., a Delaware corporation with its principal place of
business located at 00000 Xxxxxx Xxxxxxx, Xxxx X, Xxxxxxxxxxxx, Xxxx 00000 (the
"Borrower").
BACKGROUND RECITALS
A. On or about June 8, 2001 the Borrower and the Bank entered into a
Revolving Credit Agreement along with an Addendum to Revolving Credit Agreement
and a Financial Definitions Supplement (the "Loan Agreement") by the terms of
which the Bank agreed to make available to the Borrower from time to time prior
to December 1, 2003, the maximum principal amount of $2,000,000.00 for working
capital purposes (the "Revolving Loan"). The Loan Agreement further provided
that the loan proceeds would be made available to the Borrower, pursuant to a
Borrowing Base calculation, in an amount equal to the sum of eighty percent
(80%) of the face amount of Eligible Accounts and fifty percent (50%) of the
Borrower's cost of Eligible Inventory (as such terms are specifically defined
and described in the Loan Agreement). The Loan Agreement further provides that
the Borrower will provide financial statements to the Bank on a quarterly basis
within forty-five (45) days of the end of each quarter which shall be
management-prepared and an annual audited financial statement prepared by an
accounting firm acceptable to the Bank within one hundred twenty (120) days of
the end of each fiscal year. The Loan Agreement further provides that the
Revolving Loan will be secured by a security interest covering all of the
Business Assets (as hereinafter defined) of the Borrower as evidenced by a
Security Agreement and Financing Statements. The Loan Agreement also contains
other covenants and conditions including financial covenants relating to
tangible net worth, EBITDA calculations, indebtedness and restrictions, maximum
capital expenditures, dividend restrictions, employee advances, capital
expenditures restrictions, cash flow coverage ratios, current ratios and debt to
worth ratios.
B. On or about June 8, 2001, in accordance with the terms of the Loan
Agreement, the Borrower executed and delivered to the Bank its Revolving Credit
Note (the "Note") in the principal amount of $2,000,000.00. The Note provides
that the principal amount outstanding will bear interest at an annual rate equal
to the prime rate of the Bank as announced from time to time which will be
adjusted each time the prime rate changes. The Note further provides that the
interest will be payable monthly beginning July 1, 2001 and continuing on the
same day of each month thereafter until December 1, 2003 at which time the
principal, plus any accrued and unpaid interest, will be paid in full.
C. On or about June 8, 2001, in order to secure the Revolving Loan and the
Note, the Borrower executed and delivered to the Bank its Business Security
Agreement by
the terms of which it granted to the Bank a security interest in all of its
accounts, instruments, documents, chattel paper, general intangibles, contract
rights, investment property, securities and certificates of deposit, deposit
accounts, letter of credit rights, inventory, equipment, and fixtures, as more
specifically described therein (the "Business Assets"). The security interest
was perfected by the filing of financing statements with the Recorder of
Cuyahoga County, Ohio and with the Secretary of State of Ohio.
D. On or about March 1, 2002, in order to further secure the Revolving Loan
and the Note, the Borrower executed and delivered to the Bank another Business
Security Agreement covering its Business Assets.
E. On or about January 17, 2003 the Borrower and the Bank entered into an
Amendment to Loan Agreement and Note (the "First Amendment") by the terms of
which the Maturity Date was extended to January 31, 2004 and the maximum amount
available under the terms of the Revolving Loan was increased to $3,000,000.00.
The First Amendment further provided that the interest would continue to be paid
on the first day of each and every month which payments would continue until
January 31, 2004, at which time the principal and any accrued and unpaid
interest would be paid in full. This Amendment also deleted the financial
covenant related to employee advances.
F. On or about October 30, 2003 the Borrower and the Bank entered into an
Amendment to Loan Agreement and Note (the "Second Amendment") by the terms of
which the financial covenant related to interest coverage was amended.
G. On or about December 15, 2003 the Borrower and the Bank entered into an
Amendment to Loan Agreement and Note (the "Third Amendment") by the terms of
which the Maturity Date of the Revolving Loan was extended until October 15,
2004. This Third Amendment also amended the financial covenants related to
Tangible Net Worth and Capital Expenditures. The Third Amendment also modified
the financial covenant related to interest coverage and also provided that
interest was to continue to be paid monthly on the first day of each month with
such payments continuing until October 15, 2004, at which time the principal and
any accrued and unpaid interest was to be paid in full.
H. On or about February 20, 2004, the Borrower and the Bank entered into a
letter amendment by the terms of which the Bank waived the Borrower's violations
of the tangible net worth covenant and the EBITDA/interest coverage covenants of
the Loan Agreement.
I. On or about October 15, 2004, by means of a letter to the Borrower, the
Bank waived the Borrower's default of the tangible net worth and financial
reporting covenants of the Loan Agreement by eliminating the tangible net worth
covenant through December 31, 2004, and amending the financial reporting
covenants.
J. On or about October 15, 2004 the Borrower and the Bank entered into an
Amendment to Loan Agreement and Note (the "Fourth Amendment") by the terms of
which the Maturity Date of the Revolving Loan was extended to December 31, 2004
in the
maximum amount of $3,000,000.00. In addition, the Fourth Amendment modified the
financial covenant related to indebtedness outstanding and further provided that
the unpaid principal amount of the Revolving Loan would bear interest at an
annual rate equal to the prime rate of interest as announced by the Bank, as
adjusted from time to time, plus 100 basis points. This Fourth Amendment also
acknowledged that certain defaults had occurred under Section 2.12 of the Loan
Agreement related to the Borrower's financial reporting requirements for the
periods ending December 31, 2003, March 31, 2004 and June 30, 2004.
K. On or about April 2, 2003 the Borrower and the Bank entered into a
Consolidated U.S. Bank Treasury Management Service Agreement which governs the
treasury management services provided to Borrower and the other listed "Account
Holders" which include Health-Mor, Inc. and Health-Mor at Home, and any
commercial deposit accounts that have been, or will be established with U.S.
Bank by any of these Account Holders (the "Treasury Management Agreement").
L. There is a principal amount outstanding on the Revolving Loan, as
evidenced by the Note, of $ 596,000.00, and accrued and unpaid interest of
$3,134.10, as of December 27, 2004.
M. The Bank has requested that the Borrower secure financing elsewhere in
an amount sufficient to pay the Revolving Loan in full. The Borrower has agreed
to this request but has requested additional time in which to find another
lender. The Bank has agreed to that request contingent upon the execution of
this Agreement by the Borrower and the Bank.
NOW THEREFORE, based on the foregoing Background Recitals, which are
incorporated herein as agreements, representations, warranties and covenants of
the respective parties, as the case may be, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties agree as
follows:
1. The Maturity Date of the Revolving Loan is hereby extended to March 31,
2005. During this extended term, the Revolving Loan, in the reduced maximum
amount of $2,000,000.00, will be available to the Borrower in accordance with
the terms of the Loan Agreement, as amended. The amount outstanding under the
Revolving Loan will continue to be evidenced by the Note. The principal amount
outstanding will continue to bear interest at a rate equal to one percent (1%)
plus the prime rate of interest announced by the Bank, as adjusted from time to
time with each change in the prime rate. The funds available to the Borrower
under the terms of the Revolving Loan will continue to be based on the Borrowing
Base calculation described in the Loan Agreement, and as amended. A Borrowing
Base Certificate, in the form of "Exhibit A" which is attached hereto and made a
part hereof, will be furnished by the Borrower to the Bank within twenty (20)
days of each month-end. In the event that the Borrower fails to submit the
required Borrowing Base Certificate within the required time, Borrower will pay
a $100.00 per day fee so long as the certificate remains outstanding.
2. The Borrower will make payments of interest only on the Note on the
first day of each and every month with the first payment being due on January 1,
2005, and with such payments continuing on the same day of each month thereafter
until March 31, 2005, at which time the principal and any accrued and unpaid
interest shall be paid in full.
3. The Borrower covenants and agrees to provide to the Bank
management-prepared financial statements on a quarterly basis, within forty-five
(45) days of the end of each fiscal quarter-end. In addition, the Borrower will
provide audited financial statements, prepared by a certified public accounting
firm acceptable to Bank, within ninety (90) days of fiscal year-end. In the
event that financial statements are not provided as required, the Borrower will
pay to the Bank a $100.00 per day fee for each day each statement remains
outstanding.
4. Effective upon the date of the execution of this Agreement by all
parties, the Loan Agreement is amended by deleting the tangible net worth
covenant.
5. The Treasury Management Agreement is hereby amended to provide that the
Bank reserves the right to return any check drawn on the Borrower's depository
accounts if the account does not have collected funds in the account to pay the
check when presented. This decision by the Bank will be made in its sole and
unfettered discretion and the Bank will not be obligated to pay any overdrafts
on the account despite having done so on prior occasions.
6. The Revolving Loan and the Note will continue to be secured by the
security interest in all of the Business Assets of the Borrower. The Borrower
covenants and agrees to enter into any and all additional security agreements as
counsel for the Bank may require in order to properly document the Bank's
security interest in the Borrower's Business Assets. In addition, the Borrower
hereby authorizes the Bank and its counsel to file any and all financing
statements as may be necessary to perfect the security interest in favor of the
Bank.
7. Except as set forth herein, all of the terms and conditions of the Loan
Agreement, the Note, the Business Security Agreements, the financing statements
and all of the other loan documents entered into between the Borrower and the
Bank, as amended, (collectively the "Loan Documents") shall remain in full force
and effect. In addition, the Borrower will execute and deliver such additional
documents as counsel for the Bank may require in order to document the Revolving
Loan and this extension of the Maturity Date, as intended by the parties.
8. The Bank may, at any time, in its sole discretion, retain an accounting
firm to conduct an audit of the Borrower's books and records, the scope of which
shall be determined by the Bank, and the cost of which shall be paid by the
Borrower.
9. The Bank may, at any time, in its sole discretion, retain an appraiser
to appraise its collateral, the scope of which shall be determined by the Bank,
and the cost of which shall be paid by the Borrower.
10. The Bank has the right, at any time, in its sole discretion, to sell,
assign and transfer to a third party all of its right, title and interest in and
to the loans and the Loan Documents related thereto.
11. Borrower acknowledges and agrees that the obligations under the Loan
Documents, and all other obligations of any one or more of said parties to the
Bank, are owing without setoff, recoupment, defense or counterclaim, in law or
in equity, of any nature or kind; and that the obligations are secured by valid,
perfected, indefeasible, enforceable, priority liens and security interests in
all of the collateral, as more specifically described in the Loan Documents,
including the ones executed and delivered in conjunction with this Agreement.
12. Borrower reaffirms, ratifies, confirms and approves its obligations and
duties under the Loan Documents as modified by this Agreement. All of the Bank's
rights and remedies against Borrower, and the collateral, are expressly
reserved, including all rights and remedies resulting from or arising in
connection with existing defaults. Nothing herein is a consent to further
worsening of existing defaults, or new events of default, or in any way
prejudices the Bank's rights and remedies under the Loan Documents, this
Agreement, or applicable law.
13. An event of default under this Agreement shall constitute an event of
default under the Loan Documents, and an event of default under the Loan
Documents shall constitute an event of default under the terms of this
Agreement. Upon the occurrence of any such event of default, and without notice
or demand, the Bank shall have the right to exercise any remedies provided in
the Loan Documents or this Agreement, or under applicable law, and the Note will
be immediately due and payable in full.
14. The Borrower represents and warrants that it is not aware of, and
possesses no, claims or causes of action against the Bank. Notwithstanding this
representation, and as further consideration for the agreements and
understandings herein, Borrower, in every capacity, including without
limitation, shareholders, officers, partners, directors, investors or creditors,
or any one or more of such, and each of their employees, agents, executors,
successors and assigns, hereby release the Bank and its officers, directors,
employees, agents, attorneys, affiliates, subsidiaries, successors and assigns
from any liability, claim, right or cause of action which now exists, or
hereafter arises, whether known or unknown, arising from or in any way related
to the facts in existence as of the date hereof.
15. No failure or delay on the part of the Bank in the exercise of any
power or right, and no course of dealing between Borrower operates as a waiver
of such power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise of any other
power or right. The remedies provided for in the Loan Documents are cumulative
and not exclusive of any remedies which may be available to the Bank at law or
in equity.
16. Borrower represents and warrants that the execution, delivery and
performance of this Agreement and all agreements and documents delivered in
conjunction
herewith have been duly authorized by all necessary corporate and probate law
and action and do not and will not require any further consent or approval, or
violate any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, termination or award presently in effect having
applicability to Borrower or result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which Borrower is a party or by which its properties may be bound
or affected.
17. This Agreement represents the final agreement between the parties and
may not be contradicted by evidence of prior contemporaneous or subsequent oral
agreements by the parties. All prior and contemporaneous oral agreements, if
any, between the Bank on the one hand, and any of the other parties on the other
hand, are merged into this Agreement and do not survive the execution of this
Agreement. Modifications or amendments to this Agreement must be in writing and
signed by all parties in order to be effective. This Agreement may be executed
in any number of counterparts which, when taken together, shall constitute but
one agreement.
18. At the time of the execution of this Agreement the Borrower will pay to
the Bank an extension fee of $3,000.00. In addition, Borrower agrees that, when
billed, it shall pay the costs and expenses, including attorney fees, incurred
by the Bank arising from or relating in any way to this Agreement and any
subsequent negotiations, agreements and disputes. Furthermore, the costs and
expenses shall constitute a part of the obligations under the Loan Documents and
shall be secured by the collateral.
19. This Agreement is governed by the laws of the State of Ohio and is
binding on each party and their respective successors, assigns, heirs and
personal representatives, and shall inure to the benefit of the Bank and its
successors and assigns. If any provision of this Agreement conflicts with any
applicable statute or law, or is otherwise unenforceable, such offending
provision is null and void only to the extent of such conflict or
unenforceability, and is deemed separate from and does not invalidate any other
provision of this Agreement.
20. The undersigned Borrower authorizes any attorney at law to appear in
any court of record in any county in the State of Ohio, or elsewhere, where the
Borrower signed the Note or this Agreement, or can be found, after the
obligation evidenced thereby, or any part thereof becomes due and is unpaid, and
to waive the issuance and service of process and confess judgment against the
undersigned in favor of the holder of the Note for the amount then appearing
due, together with the costs of suit, and thereupon to release all errors and
waive all right to appeal and stay of execution. The insolvency of the Borrower
shall not impair the authority herein granted. Such authority shall not be
exhausted by one exercise, but judgment may be confessed from time to time as
any sums and/or costs, expenses or reasonable counsel fees shall be due, by
filing an original or a photostatic copy of the Note.
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
on the date indicated on the first page.
WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM
YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE. (SECTION 2323.13, OHIO REVISED CODE)
BANK: BORROWER:
U.S. Bank National Association HMI Industries, Inc.,
fka Firstar Bank, N.A. a Delaware corporation
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxx X. XxXxxx
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Xxxx X. Xxxxxx Xxxxx X. XxXxxx
Senior Vice President Chief Financial Officer
Exhibit A
U.S. BANK
BORROWING BASE CERTIFICATE
Pursuant to our loan Agreement dated June 8, 2001, (the Agreement, between HMI
Industries Inc., (the "Borrower"), and Firstar, N.A., (the "Bank"), the
undersigned hereby certifies that he/she is an authorized signer for the
Borrower that the Borrowing Base (as defined in the Agreement) that is required
once a minimum of $500,000 is outstanding as of ______ is calculated as follows:
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1. Eligible Accounts
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All Accounts Receivable $________
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Less Accounts over 90 days from invoice ________
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Less Accounts of debtor who are also creditors to the extend of credit (contra accounts) ________
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Less Accounts to affiliate and employees ________
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Less non insured foreign Accounts ________
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Plus non insured foreign Account of 90 days (already accounted for in "Less Accounts over 90 days ________
from invoice")
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Less 10% insured foreign Accounts ________
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Less Accounts subject to adjustment or in dispute ________
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Less Accounts of any customer balance that 25% of the balance due is over 90 days then entire Account ________
is ineligible.
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Total Eligible Accounts ________
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Less 20% ________
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TOTAL ELIGIBLE ACCOUNTS $________
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2. Eligible Inventory (Cost Basis)
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-excludes WIP and consigned inventory
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Inventory at Cost: $________
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Less 50% ________
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Net Inventory $________
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TOTAL ELIGIBLE INVENTORY
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3. Borrowing Base
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A. Total Eligible Accounts $________
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B. Total Eligible Inventory ________
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Difference if B is greater than A ________
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C. Borrowing Base (A+B) (B cannot be greater than A) ________
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D. Less Outstanding as of Report Date ________
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E. AVAILABILITY AS OF REPORT DATE $________
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Are accounts receivable from customers located in MN, NJ or WV greater than 5% of any one debtor or Yes/No
25% in total?
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The undersigned further certifies that, to the best of his/her knowledge and
belief as of the date hereof, no even of default of any clause of the Agreement
nor any event which, with notice or lapse of time or both, would constitute such
an Event of Default has occurred and is continuing unremedied under this
Agreement.
Dated __________________________. 200_
By:________________________________
Its:________________________________
