<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to ____________
Commission file number 1-7081
CUSTOMEDIX CORPORATION
(Exact name of registrants specified in its charter)
Delaware #22-1844840
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. Box 724, 53 North Plains Industrial Road, Wallingford, CT 06492
(Address of principal executive offices)
(Zip Code)
203-284-9079
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this report.
<TABLE>
<CAPTION>
Class Outstanding at December 31, 1995
----- --------------------------------
<S> <C>
Common stock $.01 par value 3,295,986
</TABLE>
<PAGE> 2
Item 1. PART I
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
(Unaudited) (a)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 210,553 $ 166,670
Accounts receivable, less allowance
for possible losses of $302,800 and $283,000 6,281,527 6,862,206
Inventory (Note 3) 8,189,212 7,411,332
Other 672,409 581,698
------------ ------------
TOTAL CURRENT ASSETS 15,353,701 15,021,906
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization of $3,902,922
and $3,714,656 (Note 6) 3,095,577 3,148,573
EXCESS OF COST OVER NET ASSETS OF BUSINESSES
ACQUIRED, less accumulated amortization of
$2,473,827 and $2,331,371 4,667,208 4,809,664
OTHER ASSETS 395,588 416,159
------------ ------------
TOTAL ASSETS $ 23,512,074 $ 23,396,302
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and
obligations under capital leases (Note 5) $ 717,669 $ 1,050,600
Accounts payable and accrued expenses 3,943,575 3,330,687
------------ ------------
TOTAL CURRENT LIABILITIES 4,661,244 4,381,287
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL
LEASES, less current portion (Note 5) 6,514,607 6,823,926
LONG-TERM PENSION OBLIGATION AND OTHER 1,877,703 1,788,894
------------ ------------
TOTAL LIABILITIES 13,053,554 12,994,107
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value - 100,000
shares authorized; none issued -- --
Common stock, $.01 par - 3,900,000 shares
authorized; 3,295,986 and 3,296,286 outstanding 32,960 32,963
Additional paid-in capital 26,833,581 26,834,399
Accumulated deficit (16,408,021) (16,465,167)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,458,520 10,402,195
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 23,512,074 $ 23,396,302
============ ============
</TABLE>
- ----------------
(a) Derived from the audited financial statements
See accompanying "Notes to Condensed Consolidated Financial Statements".
2
<PAGE> 3
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Sales $ 24,951,918 $ 24,214,678
Other income 265,538 243,201
------------ ------------
Total revenues 25,217,456 24,457,879
------------ ------------
COSTS, EXPENSES AND OTHER:
Cost of sales 18,418,278 17,684,987
Selling, general and administrative
expenses 6,251,144 5,870,804
Interest expense 460,888 442,380
------------ ------------
25,130,310 23,998,171
------------ ------------
Income before provision for income taxes 87,146 459,708
PROVISION FOR INCOME TAXES (Note 4) (30,000) (185,000)
------------ ------------
NET INCOME $ 57,146 $ 274,708
============ ============
INCOME PER SHARE (Note 2) $ .02 $ .07
============ ============
</TABLE>
See accompanying "Notes to Condensed Consolidated Financial Statements".
3
<PAGE> 4
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Sales $ 12,974,419 $ 12,830,389
Other income 143,479 131,278
------------ ------------
Total revenues 13,117,898 12,961,667
------------ ------------
COSTS, EXPENSES AND OTHER:
Cost of sales 9,696,427 9,356,756
Selling, general and administrative
expenses 3,146,549 3,063,910
Interest expense 232,579 218,702
------------ ------------
13,075,555 12,639,368
------------ ------------
Income before provision for income taxes 42,343 322,299
PROVISION FOR INCOME TAXES (Note 4) (10,000) (125,000)
------------ ------------
NET INCOME $ 32,343 $ 197,299
============ ============
INCOME PER SHARE (Note 2) $ .01 $ .05
============ ============
</TABLE>
See accompanying "Notes to Condensed Consolidated Financial Statements".
4
<PAGE> 5
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
December 31,
----------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities: $ 57,146 $ 274,708
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 311,579 289,284
Amortization 158,422 217,235
(Gain) Loss on disposal of property and equipment (17,953) 788
Provision for loss on accounts receivable 46,613 55,998
Change in assets and liabilities:
Accounts receivable 534,066 395,228
Inventory (691,644) (667,260)
Other assets (86,106) 588,881
Accounts payable and accrued expenses 612,888 (600,760)
Other liabilities 88,809 146,415
----------- ---------
Net cash provided by operating
activities 1,013,820 700,517
----------- ---------
Cash flows from investing activities:
Purchase of property and equipment (289,406) (218,498)
----------- ---------
Cash flows from financing activities:
Repayments to banks and others (679,706) (670,307)
Repurchase and retirement of common stock (825) (21,217)
----------- ---------
Net cash used in financing activities (680,531) (691,524)
----------- ---------
Net increase (decrease) in cash and
cash equivalents 43,883 (209,505)
Cash and cash equivalents, beginning
of period 166,670 477,983
----------- ---------
Cash and cash equivalents, end of period $ 210,553 $ 268,478
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 457,300 $ 441,900
Income taxes 291,100 217,700
Non-cash transaction -
Note payable for purchase of inventory 86,236 --
Retirement of capital lease obligation on
trade-in 48,780 --
Residual value of equipment traded in on
lease retirement 30,827 --
</TABLE>
See accompanying "Notes to Condensed Consolidated Financial Statements".
5
<PAGE> 6
CUSTOMEDIX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
================================================================================
Note 1 - Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements
have been prepared by the Company in accordance with generally accepted
accounting principles for interim financial information, and pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the
financial statements have been condensed or omitted pursuant to such
rules and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of
the results for the interim periods presented. The results for the
interim periods are not necessarily indicative of the results to be
expected for the full year. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's
Annual Report to Stockholders.
Note 2 - Earnings Per Share
Income per share was computed based on the weighted average number of
common stock and common stock equivalent shares outstanding during each
period. There were 3,333,600 and 3,695,700 weighted average shares
outstanding for the six months ended December 31, 1995 and 1994,
respectively, and 3,333,500 and 3,693,300 for the three months ended
December 31, 1995, and 1994, respectively.
Note 3 - Inventory
Inventory is summarized as follows:
<TABLE>
<CAPTION>
December 31, 1995 June 30,1995
----------------- ------------
<S> <C> <C>
Finished Products $5,308,223 $4,592,441
Work-In-Process 675,978 694,073
Raw Material & Supplies 2,205,011 2,124,818
---------- ----------
Total $8,189,212 $7,411,332
========== ==========
</TABLE>
Note 4 - Income Taxes
The provision for income taxes represents minimum federal and state
income taxes. The Company has recognized a deferred tax asset to the
extent existing deductible temporary differences are expected to
reverse and enable the Company to recapture alternative minimum taxes
previously paid. The deferred tax assets totaling $225,000 and $170,000
in fiscal 1996 and 1995, respectively, are included in other current
assets.
6
<PAGE> 7
CUSTOMEDIX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
(UNAUDITED)
================================================================================
Note 5 - Long-Term Debt and Obligations Under Capital Leases
Long-term debt and obligations under capital leases are summarized as
follows:
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1995
----------------- -------------
<S> <C> <C>
Term Loan $6,016,336 $6,279,002
Revolving credit facility -- 300,000
Obligations under capital
leases 487,325 656,292
Note payable to officer 591,500 591,500
Other 137,115 47,732
---------- ----------
7,232,276 7,874,526
Less current portion 717,669 1,050,600
---------- ----------
Total $6,514,607 $6,823,926
========== ==========
</TABLE>
Note 6 - Property and Equipment
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1995
----------------- -------------
<S> <C> <C>
Machinery and equipment $3,327,612 $3,411,694
Leasehold improvements 2,136,522 2,081,034
Furniture and fixtures 1,501,824 1,337,960
Transportation equipment 32,541 32,541
---------- ----------
Total 6,998,499 6,863,229
Less accumulated depreciation
and amortization 3,902,922 3,714,656
---------- ----------
$3,095,577 $3,148,573
========== ==========
</TABLE>
Note 7 - Reclassifications
Certain reclassifications have been made to the fiscal 1995
consolidated financial statements in order for them to be presented in
conformity with the fiscal 1996 consolidated financial statements.
Note 8 - Subsequent Event
The Company's Board of Directors received a proposal from the Company's
Chief Executive Officer and Chairman offering to acquire the Company
through a negotiated merger in which the Company's shareholders, other
than the Chairman and certain members of his family, would receive
$1-15/16 cash per share. The Company's Board of Directors announced the
formation of a Special Committee of the Board in response to this
proposal comprised of two outside directors. The Special Committee
plans to retain independent legal and financial advisors to advise and
assist the Committee in the performance of its functions, including its
evaluation of this offer.
7
<PAGE> 8
Item 2.
CUSTOMEDIX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
================================================================================
Operations
Sales for the six months ended December 31,1995 were $24,951,900
compared to $24,214,700 for the six months ended December 31, 1994, an increase
of $737,200 or 3.0%. Sales for the quarter ended December 31, 1995 were
$12,974,400 compared to $12,830,400 for the quarter ended December 31, 1994, an
increase of $144,000 or 1.1%. The increases were attributable to higher sales,
both domestic and foreign, of many of the Company's products. However, the
impact on sales from the increase in unit sales was offset by reductions in
fiscal 1996 in the average cost of certain precious metals found in a
significant percentage of the Company's products which decreased the selling
prices of such products. These decreases reduced sales by approximately $400,000
for the six months ended December 31, 1995 and $400,000 for the quarter ended
December 31, 1995. These increases were also offset by decreases in medical
sales by the Company's subsidiary, Transidyne General Corporation ("Transidyne")
by approximately $173,800 and $44,600 for the six and three months ended
December 31, 1995 compared to the same periods of the prior year.
Gross profit as a percentage of sales was 26.2% for the six months
ended December 31, 1995 compared to 27.0% for the six months ended December 31,
1994. Gross profit as a percentage of sales was 25.3% for the quarter ended
December 31, 1995 compared to 27.1% for the quarter ended December 31, 1994.
These decreases of .8% and 1.8%, respectively, were partially attributable to an
increase in the reserve for possibly unsaleable inventory in fiscal 1996 and the
write-off of obsolete inventory. These decreases were partially offset by the
decrease in the cost of certain precious metals compared to the prior year,
which increased gross profit as a percentage of sales. Gross profit as a
percentage of sales was 26.5% for the fiscal year ended June 30, 1995.
Selling, general and administrative expenses were $6,251,100 for the
six months ended December 31, 1995 compared to $5,870,800 for the six month
period last year. Selling, general and administrative expenses were $3,146,500
for the quarter ended December 31, 1995 as compared to $3,063,900 for the
quarter last year. These increases of $380,300 and $82,600 respectively, were
due primarily to increases in professional fees, salaries, advertising expenses
as well as expenses associated with an alleged employee misappropriation of
funds at Transidyne which were partially offset by decreases in pension expenses
and amortization of goodwill.
8
<PAGE> 9
CUSTOMEDIX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
================================================================================
Income before income taxes was $87,100 for the six months ended
December 31, 1995 compared to $459,700 for the six months ended December 31,
1994. This decrease of $372,600 was attributable to increased selling, general
and administrative expenses as discussed above. Income before income taxes was
$42,300 for the quarter ended December 31, 1995 compared to $322,300 for the
quarter ended December 31, 1994. This decrease of $280,000 was primarily due to
increased selling, general and administrative expenses and decreased gross
profits for the reasons discussed above.
Provision for income taxes was $30,000 for the six months ended
December 31, 1995 compared to $185,000 for the six months ended December 31,
1994. Provision for income taxes was $10,000 for the quarter ended December 31,
1995 compared to $125,000 for the quarter ended December 31, 1994. These
decreases of $155,000 and $115,000, respectively, were caused by a decrease in
taxable income and due to the recording of deferred tax assets due to the
expected reversal of temporary differences which would enable the Company to
recapture alternative minimum taxes previously paid.
Impact of Inflation
The Company experienced only minor inflation-related cost increases
which were not a material factor in the comparison of expenses with respect to
the periods compared.
Liquidity and Capital Resources
Working capital increased by approximately $51,800 to $10,692,500 at
December 31, 1995 from June 30, 1995. This increase was due primarily to
earnings of the Company during the period.
For the six months ended December 31, 1995, cash generated by
operations and cash on hand were primarily used as follows: (i) to reduce debt
by approximately $679,700, which included the temporary reduction in the
revolving line of credit of $300,000 and (ii) to purchase property and equipment
totaling approximately $289,400.
As of December 31, 1995, the Company was in compliance with all of the
financial covenants contained in the loan agreement, as amended, with the
Company's principal lending bank (the "Bank"). The loan is scheduled to mature
on January 2, 2000. The interest rate on the term loan and the $1,000,000
revolving line of credit were reduced from 1/4% above the Bank's index rate to
the Bank's index rate effective November 8, 1995.
9
<PAGE> 10
CUSTOMEDIX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
================================================================================
The Company expects significant demands on cash during the next twelve
months as a result of anticipated advertising expenses, salaries, professional
fees, and federal alternative minimum taxes and state income taxes. In addition,
because of the Company's substantial debt burden, a significant portion of cash
flow will continue to be used to repay debt. This substantial use of cash limits
the funds available for general working capital purposes, product research and
marketing, as well as funds that can be expended on new facilities and capital
equipment. Furthermore, the ability of the Company to expand operations through
mergers or acquisitions is limited by the lack of available cash with which to
fund such activities.
Future Outlook
The Company expects to continue to incur high expenses in the areas of
new product development and research and product introduction. The Company
expects these efforts will primarily focus on dental products, and the
associated expenses could contribute to reduced earnings. In addition, the
dental products market faces increasing competition and profitability pressures,
both in domestic and foreign markets. Accordingly, the Company may experience
further reduction in its margins on certain dental products. The Company is
highly leveraged and any significant increase in interest rates could materially
and adversely affect the Company's profitability and cash flow.
10
<PAGE> 11
PART II
CUSTOMEDIX CORPORATION
OTHER INFORMATION
================================================================================
Item 1. Legal Proceedings
There has been no material change from the information set forth in
Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995 and Item 1 under the caption "Legal Proceedings" of the September
30, 1995 Form 10-Q except as follows:
The Company's subsidiary, Jeneric/Pentron Incorporated, has recently
filed suit in Connecticut Superior Court against two former employees and
business entities with which they are affiliated for unfair trade practices,
breach of contract and breach of common law duties of loyalty in connection with
the alleged sale of dental products through companies in competition with
Jeneric/Pentron. The Company is seeking injunctive relief and damages. The
Company's claims against its former employees, asserted in the Superior Court
action, have been submitted to arbitration under the auspices of the American
Arbitration Association; however, the Superior Court action remains pending.
Item 5. Other Information
On February 5, 1996, the Company's Board of Directors received a
proposal from Dr. Gordon S. Cohen, the Company's Chief Executive Officer and
Chairman of the Board, to acquire the Company through a negotiated merger. Under
the proposal, the Company's stockholders, other than Dr. Cohen and certain
members of his family, would receive $1-15/16 cash per share of Customedix
stock. The proposal is contingent upon the proponents' securing financing for
the transaction.
The Company's Board of Directors appointed a Special Committee,
comprised of Directors Robert N. Thomas and William T.S. Fitch, to review the
proposal. The Special Committee intends to retain independent legal and
financial advisors to advise and assist the Committee in the performance of its
functions, including its evaluation of Dr. Cohen's offer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Three
10(b)(v) Fourth Amendment to Employment Agreement between
Jeneric/Pentron, Incorporated and Gordon S. Cohen.
10(d)(viii) Seventh Amendment to Debt Consolidation Facility
dated November 8, 1995.
27 Financial Data Schedule
(b) Reports on Form 8-K: None
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 9, 1996 Customedix Corporation
Date Registrant
/S/Gordon S. Cohen
----------------------------
Gordon S. Cohen
Chairman and
Chief Executive Officer
/S/Barry L. Kosowsky
----------------------------
Barry L. Kosowsky
Principal Financial Officer
Principal Accounting Officer
12
<PAGE> 1
FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT, dated as of November 9, 1995, to that certain
employment agreement, dated as of January 1, 1987, by and between JENERIC
INDUSTRIES, INC. (the successor to which is JENERIC/PENTRON INCORPORATED), a
Connecticut corporation (hereinafter referred to as the "Corporation") and
GORDON S. COHEN (hereinafter referred to as the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Corporation
pursuant to an employment agreement dated as of January 1, 1987 (the
"Agreement") the extended term of which expires on December 31, 1996 (the
"Term"); and
WHEREAS, because of exceptional efforts and achievements by the
Executive during the course of his employment, the Board of Directors of the
Corporation has resolved to modify certain of the provisions of the Agreement;
and
WHEREAS, specifically, the Corporation desires to extend the Term, and
the Executive desires that the Term be extended, on the provisions and
conditions herein contained; and
WHEREAS, in order to carry out the resolution of the Board of
Directors, the Corporation and the Executive deem it necessary formally to make
certain written amendments to the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
<PAGE> 2
1. The Term of the Agreement is hereby extended to December 31, 2002.
2. Paragraph 11 of the Agreement is amended to provide:
"Automobile. In addition to reimbursement of the Executive's expenses
as set forth in Paragraph 6 hereof, the Corporation shall supply, at
its expense, an automobile of Executive's choice for his use in
rendering his services hereunder during the term of this Agreement,
and after a reasonable period of use, a replacement thereof, together
with a non-accountable automobile allowance in the amount of Three
Thousand ($3,000.00) Dollars per year."
3. Subsections (f) and (g), as amended, of Paragraph 2 of the Agreement
are hereby amended as follows:
"(f) In addition to the compensation provided for in subparagraphs (a)
and (c) of paragraph 2 hereof, on each of the anniversary dates of
this Agreement through and including January 1, 2002 (the "Anniversary
Date" or "Anniversary Dates"), the Executive shall receive an option
(the "Option") to acquire a bonus of up to 25,000 restricted shares of
the common stock of Customedix Corporation ("Customedix") (the
"Customedix Shares") exercisable at any time from the date of receipt
of the Option through December 31, 2002. In order to exercise the
Option to receive the Customedix Shares, the Executive shall give
written notice to the Corporation and Customedix of his decision to
accept all or a part of such shares no later than December 31, 2002,
said notice to specify the number of Customedix Shares in the Option
year as to which the Executive has exercised his Option. Within thirty
(30) days after receipt of such written notice, Customedix shall cause
to be issued the requested number of Customedix Shares to the
Executive.
(g) If the Executive fails to exercise any Option on or before
December 31, 2002, such Option shall expire, and the Executive shall
have no further rights to acquire any Customedix Shares pursuant to
this Agreement or the Option."
4. Subsections (h) and (i), as amended, of Paragraph 2 of the Agreement
are hereby amended by having references in subparagraphs 2(h) and 2(i) to "CESI"
mean
<PAGE> 3
Customedix and references to 1992 to mean 2002, and references to 1993 to mean
2003.
5. In keeping with Paragraph 4 of the "Third Amendment to Employment
Agreement", Paragraph 2 of the Agreement is hereby amended by adding
subparagraph (j) as follows:
"In addition to all other compensation provided to the Executive
pursuant to this Paragraph 2 of this Agreement, the Executive shall
receive for his services an additional annual bonus, not to exceed
$150,000.00 annually, equal to two (2%) percent of gross sales by the
Corporation, or its successors and/or assigns, of products in its
Dental Products Division (more specifically described on Schedule 1
hereto) in excess of base gross sales of such products in the amount
of $6,585,000.00, which bonus shall be paid commencing with respect to
the 1996 fiscal year of the Corporation."
IN WITNESS WHEREOF, the undersigned, individually, or by its duly
authorized officer, have executed this Agreement as of the day and year first
aforesaid.
JENERIC/PENTRON INCORPORATED
By /s/ Martin Schulman
--------------------------------------
/s/ Gordon S. Cohen
----------------------------------------
Gordon S. Cohen
<PAGE> 4
SCHEDULE 1
DENTAL PRODUCTS DIVISION
Whether sold directly or through distributors, included are all products
intended for use by dentists for the immediate treatment of patients. Products
requiring laboratory intervention prior to use or delivery to patients are
excluded; specifically excluded are casting metals, porcelains and ancillary
products intended for utilization by dental laboratories whether or not
purchased by dentists directly.
<PAGE> 1
SEVENTH AMENDMENT TO
DEBT CONSOLIDATION FACILITY AGREEMENT
THIS SEVENTH AMENDMENT TO DEBT CONSOLIDATION FACILITY AGREEMENT entered
into this 8th day of November, 1995 ("Seventh Amendment") by and among
CUSTOMEDIX CORPORATION (formerly Custom Energy Services, Inc.) ("Customedix"),
a corporation of the State of Delaware, JENERIC/PENTRON INCORPORATED
("Jeneric"), a corporation of the State of Connecticut, HUNTERDON TRANSPORT,
INC. ("Hunterdon"), a corporation of the State of New Jersey, AMERICAN
THERMOCRAFT CORPORATION ("Thermocraft"), a corporation of the State of New
Jersey, TRANSIDYNE GENERAL CORPORATION ("Transidyne"), a corporation of the
State of Delaware, DENPAC/FIVE STARS INCORPORATED ("Denpac"), a corporation of
the State of Connecticut (Customedix, Jeneric, Hunterdon, Thermocraft and
Transidyne are collectively referred to as the "Original Borrower", and Denpac
shall hereinafter be referred to as the "Additional Borrower") (the Original
Borrower and the Additional Borrower shall hereinafter be collectively referred
to as the "Borrower"), and NEW JERSEY NATIONAL BANK ("Bank"), a national
banking association, organized and existing under and by virtue of the Acts of
Congress of the United States.
S T I P U L A T I O N S
1. The parties to this Seventh Amendment have entered into:
A. A Debt Consolidation Facility Agreement (the "Original Agreement")
dated April 10, 1989, under which the Bank recast the outstanding indebtedness
of the Borrower in the amount of $10,645,123.21 evidenced by a Debt
Consolidation Note (the "Debt Consolidation Note").
B. An Amendment to Debt Consolidation Facility Agreement (the "First
Amendment") dated May 1, 1989 pursuant to which an additional term loan in the
amount of $166,200 was added to the Original Agreement evidenced by an
Additional Term Note (the "Additional Term Note").
C. A Second Amendment to Debt Consolidation Facility Agreement (the
"Second Amendment") dated September 24, 1990 pursuant to which a second
additional term loan in the
-1-
<PAGE> 2
amount of $700,000 was added to the Original Agreement pursuant to the terms of
a Second Additional Term Note (the "Second Additional Term Note").
D. A Third Amendment to Debt Consolidation Facility Agreement (the
"Third Amendment") dated February 28, 1991 pursuant to which the outstanding
indebtedness of the Borrower to the Bank was consolidated into a single Term
Note.
E. A Fourth Amendment to Debt Consolidation Facility Agreement (the
"Fourth Amendment") dated June 30, 1992 pursuant to which certain financial
covenants were modified.
F. A Fifth Amendment to Debt Consolidation Facility Agreement (the
"Fifth Amendment") dated February 1, 1993 pursuant to which the maturity date of
the Term Loan was extended and the interest rate was reduced.
G. A Sixth Amendment to Debt Consolidation Facility Agreement (the
"Sixth Amendment") dated October 29, 1993 pursuant to which a $600,000
Revolving Line of Credit was established. (The Original Agreement, the First
Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment,
the Fifth Amendment and the Sixth Amendment shall collectively be referred to
herein as the "Amended Agreement".)
2. The Bank and the Borrower have agreed to further amend the terms and
conditions of the Amended Agreement by, among other things, increasing the
Revolving Line of Credit to $1,000,000 pursuant to the terms of this Seventh
Amendment. Automatic Injection Molding, Inc., Customer Services, Inc. and SMS
Liquidating, Inc. have been released by the Bank from their obligations under
the Amended Agreement. Except as specifically provided herein, the Amended
Agreement and all terms, conditions, warranties, representations and covenants
thereunder shall remain in full force and effect as originally provided:
(a) The following term shall be deleted from Section 1.1 of the Amended
Agreement:
"Terminated Date": November 30, 1994
(b) Subsections 2.1(b), (d), (e) and (g) of the Amended Agreement are
hereby deleted and new Subsections 2.1(b), (d), (e) and (g) are
substituted therefor to read as follows:
(b) The outstanding principal amount of the Term Loan shall bear
interest at a rate of interest per annum equal to the Bank's
Prime Rate computed daily for the actual number of days elapsed
as if each full calendar year consisted of 360 days.
-2-
<PAGE> 3
(d) The remaining outstanding principal amount of this Term
Loan shall be repaid in monthly consecutive installments of
$33,333.33 per month through the month of December, 1999. A
final installment representing all unpaid principal as well as
accrued and unpaid interest shall be due and payable on
January 2, 2000.
(e) Intentionally left blank.
(g) The Term Loan is evidenced by a Term Note originally in the
amount of $10,176,719.65 dated February 28, 1991, together with
a Second Allonge to Term Note dated of even date herewith. A
copy of said Second Allonge is attached hereto as Exhibit A.
(c) Subsections 2A(a), (c), (d) and (g) of the Amended Agreement are
hereby deleted and new Subsections (a), (c), (d) and (g) are substituted
therefor to read as follows:
SECTION 2A
REVOLVING LOAN
2A.1 Subject to the terms and conditions of this Agreement, and
provided no event or condition constituting a Default or an Event of
Default has occurred:
(a) General Terms. The Bank shall lend and re-lend to the Borrower from
time to time amounts which shall not exceed in the aggregate of the
unpaid principal amount at any one time outstanding the sum of ONE
MILLION DOLLARS ($1,000,000) provided (i) each request for borrowings
hereunder shall be in increments of at least Ten Thousand Dollars
($10,000.00); and (ii) the Bank approves of the specific use for each
such advance.
(c) Interest Rate. The unpaid principal amount of the Revolving Loan
from time to time outstanding shall bear interest at a rate of interest
per annum equal to the Bank's Prime Rate computed daily, for the actual
number of days elapsed as if each full calendar year consisted of three
hundred sixty (360) days. Each time the Bank's Prime Rate shall change,
the rate of interest on the Revolving Loan shall change
contemporaneously without notice to the Borrower, but in no event shall
the rate on the Revolving Loan exceed the maximum rate of interest
permitted by law.
(d) Payments of Principal and Interest. The unpaid principal balance of
the Revolving Loan and all unpaid and accrued interest thereon shall be
payable by the Borrower to the Bank on demand or in accordance with
Subsection 8.1(a) in immediately available funds. Payment of interest
shall occur monthly, in immediately available funds, on the first
Business Day of the Bank of each month beginning on the first Business
Day of the Bank in the month next succeeding the date of this Agreement.
All payments of interest and principal, howsoever designated by the
Borrower shall be applied first on account of accrued interest and the
remainder of such payments, if any, on account of the unpaid principal
balance.
(g) Master Note. The maximum amount of the Revolving Loan is evidenced
by a Master Note dated October 29, 1993, together with an Allonge to
Master Note attached hereto as Exhibit B, and the balance due from time
to time on the Master
-3-
<PAGE> 4
Note shall be conclusively evidenced by the Bank's records of disbursements
and repayments, subject to Subsection 2A.1(f) of this Agreement.
Executed at Woodbridge, New Jersey on the date first above mentioned.
ATTEST: CUSTOMEDIX CORPORATION
/s/ BARRY L. KOSOWSKY BY: /s/ GORDON S. COHEN
- --------------------------------- -----------------------------
Secretary Chairman
[SEAL]
ATTEST: JENERIC/PENTRON INCORPORATED
/s/ MARTIN L. SCHULMAN BY: /s/ GORDON S. COHEN
- --------------------------------- -----------------------------
Secretary President
[SEAL]
ATTEST: HUNTERDON TRANSPORT, INC.
/s/ BARRY L. KOSOWSKY BY: /s/ MARTIN L. SCHULMAN
- --------------------------------- -----------------------------
Secretary President
[SEAL]
ATTEST: AMERICAN THERMOCRAFT CORPORATION
/s/ GORDON S. COHEN BY: /s/ MARTIN L. SCHULMAN
- --------------------------------- -----------------------------
Secretary Vice President
[SEAL]
ATTEST: TRANSIDYNE GENERAL CORPORATION
/s/ BARRY L. KOSOWSKY BY: /s/ GORDON S. COHEN
- --------------------------------- -----------------------------
Secretary Chairman
[SEAL]
ATTEST: DENPAC/FIVE STARS INCORPORATED
/s/ BARRY L. KOSOWSKY BY: /s/ GORDON S. COHEN
- --------------------------------- -----------------------------
Secretary Chairman
[SEAL]
NEW JERSEY NATIONAL BANK
BY: /s/ STEPHEN F. BAYER
-----------------------------
STEPHEN F. BAYER, Vice President
-4-
<PAGE> 5
SECOND ALLONGE TO $10,176,179.65 TERM NOTE
$10,176,719.65 November __, 1995
Woodbridge, New Jersey
This modification made this ___ day of November, 1995 to the Term Note
dated February 28, 1991 of the undersigned payable to the order of NEW JERSEY
NATIONAL BANK ("Bank") and to which Term Note these presents are so firmly
affixed as to become a part thereof.
1. Except as specifically modified herein, all of the terms and
conditions of said Term Note shall remain in full force and effect, and any
term capitalized and not otherwise defined herein shall have the meaning
ascribed thereto in the Term Note.
2. Notwithstanding anything to the contrary set forth in the Term Note,
the Term Note is hereby amended and modified as follows:
a. The outstanding principal amount shall be repaid to the Bank as
follows: consecutive monthly installments each in the amount of
$33,333.33 through the month of December, 1999, followed by a final
installment representing all outstanding principal and accrued
interest on January 2, 2000.
b. The outstanding principal amount of this Term Loan shall bear
interest at a rate of interest per annum equal to the Bank's Prime
Rate computed daily for the actual number of days elapsed as if each
full calendar year consisted of 360 days.
ATTEST: CUSTOMEDIX CORPORATION
BY:
- ------------------------------- ----------------------------
Secretary Chairman
[SEAL]
ATTEST: JENERIC/PENTRON INCORPORATED
BY:
- ------------------------------- ----------------------------
Secretary President
[SEAL]
ATTEST: HUNTERDON TRANSPORT, INC.
BY:
- ------------------------------- ----------------------------
Secretary President
[SEAL]
[Signatures Continued on Next Page]
EXHIBIT A
<PAGE> 6
ATTEST: AMERICAN THERMOCRAFT CORPORATION
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
ATTEST: TRANSIDYNE GENERAL CORPORATION
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
ATTEST: DENPAC/FIVE STARS INCORPORATED
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
-2-
<PAGE> 7
ALLONGE TO MASTER NOTE
$1,000,000 November __, 1995
Woodbridge, New Jersey
This modification made this ___ day of November, 1995 to the Master
Note dated October 29, 1993 of the undersigned payable to the order of NEW
JERSEY NATIONAL BANK ("Bank") and to which Master Note these presents are so
firmly affixed as to become a part thereof.
1. Except as specifically modified herein, all of the terms and
conditions of said Master Note shall remain in full force and effect, and any
term capitalized and not otherwise defined herein shall have the meaning
ascribed thereto in the Master Note.
2. Notwithstanding anything to the contrary set forth in the Master
Note, the Master Note is hereby amended and modified as follows:
a. The maximum amount advanceable pursuant to the Revolving Loan is
hereby increased from $600,000 to $1,000,000.
b. The Master Note shall be payable on demand rather than on any
specific date.
c. The outstanding principal amount of this Master Note shall bear
interest at a rate of interest per annum equal to the Bank's Prime Rate
computed daily for the actual number of days elapsed as if each full calendar
year consisted of 360 days.
ATTEST: CUSTOMEDIX CORPORATION
BY:
- ------------------------------- --------------------------------
Secretary Chairman
[SEAL]
ATTEST: JENERIC/PENTRON INCORPORATED
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
ATTEST: HUNTERDON TRANSPORT, INC.
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
EXHIBIT B
<PAGE> 8
ATTEST: AMERICAN THERMOCRAFT CORPORATION
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
ATTEST: TRANSIDYNE GENERAL CORPORATION
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
ATTEST: DENPAC/FIVE STARS INCORPORATED
BY:
- ------------------------------- --------------------------------
Secretary President
[SEAL]
-2-
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
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0
0
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