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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 175 South Third Street, Columbus, Ohio 43215
(the "Bank") and
HMI Industries, Inc., a Delaware corporation with its principal
place of
business located at 13325 Darice Parkway, Unit A, Strongsville,
Ohio 44149 (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
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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
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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.
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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.
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