<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
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 0-14996
CRYENCO SCIENCES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 52-1471630
- -------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3811 Joliet Street, Denver, Colorado 80239
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(303) 371-6332
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 Registrant's
classes of common stock, as of the latest practicable date: Class A common
stock, par value $.01 per share; 7,062,422 shares outstanding as of July 11,
1997.
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION...................................... 3
Item 1. Financial Statements................................. 3
Introductory Comments.................................. 3
Consolidated Balance Sheets
August 31, 1996 and May 31, 1997 ...................... 4
Consolidated Statements of Operations
Three Month and Nine Month Periods Ended
May 31, 1996 and May 31, 1997.......................... 6
Consolidated Statements of Cash Flows
Nine Month Periods Ended May 31, 1996
and May 31, 1997....................................... 7
Notes to Consolidated Financial Statements............. 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................................... 11
PART II - OTHER INFORMATION......................................... 14
Item 6. Exhibits and Reports on Form 8-K.................... 14
SIGNATURES ........................................................ 19
</TABLE>
2
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Comments:
The Consolidated Financial Statements included herein have been
prepared by Cryenco Sciences, Inc. (the "Company"), without audit, pursuant to
9the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. It is suggested that these
Consolidated Financial Statements be read in conjunction with the financial
information set forth in the Company's Annual Report for the fiscal year ended
August 31, 1996.
3
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1996 1997
------ ------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 111 $ 426
Accounts receivable, trade 5,352 4,510
Accounts receivable, affiliate 1,423 --
Costs and estimated earnings in excess of
billings on uncompleted contracts 3,944 2,666
Inventories (Note 2) 4,333 5,558
Prepaid expenses 57 100
------- -------
Total current assets 15,220 13,260
Property and equipment:
Leasehold improvements 739 867
Machinery and equipment 5,355 5,306
Office furniture and equipment 1,231 1,421
-------- ---------
7,325 7,594
Less accumulated depreciation 3,099 3,810
-------- ---------
4,226 3,784
Property on operating leases 604 51
Deferred financing costs 120 56
Goodwill 5,226 5,114
Other assets 308 199
--------- ---------
Total assets $ 25,704 $ 22,464
========= =========
</TABLE>
4
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,224 $ 1,490
Accrued expenses 1,123 1,431
Accrued management fees 324 323
Current portion of long-term debt (Note 3) 1,382 294
Income tax payable 344 --
----------- -----------
Total current liabilities 5,397 3,538
Long-term debt, less current portion (Note 3) 8,634 6,964
----------- -----------
14,031 10,502
Stockholders' equity:
Preferred stock, $0.01 par value,
authorized shares - 2,000,000, preferences,
limitations and relative rights to be established by
the Board of Directors:
Series A, nonvoting, 150,000 authorized shares,
67,838 and 68,517 issued and outstanding shares
(aggregate liquidation preference of $678,380
and $685,170) 1 1
Common stock, $0.01 par value:
Class A, voting, 21,500,000 authorized shares,
6,996,997 shares issued and outstanding 70 70
Class B, nonvoting, 1,500,000 authorized
shares, none issued or outstanding -- --
Additional paid-in capital 14,020 14,027
Warrants 169 169
Retained earnings (deficit) (2,587) (2,305)
----------- -----------
Total stockholders' equity 11,673 11,962
----------- -----------
Total liabilities and stockholders' equity $ 25,704 $ 22,464
=========== ==========
</TABLE>
5
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Three months ended Nine months ended Nine months ended
May 31, 1996 May 31, 1997 May 31, 1996 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Contract revenue $ 8,232 $ 7,680 $ 24,420 $ 20,518
Cost of revenue 6,405 6,409 19,544 16,496
---------- ---------- ---------- ----------
Gross profit 1,827 1,271 4,876 4,022
Selling, general and
administrative expenses 894 1,024 2,433 2,510
Research and development
expenses 277 (14) 708 315
Amortization expense 87 59 259 181
---------- ---------- ---------- ----------
Operating income 569 202 1,476 1,016
Other (income) expense:
Interest income -- -- (1) --
Interest expense 226 231 666 722
Other expense, net 5 (213) 1 (269)
---------- ---------- ---------- ----------
Income from operations before
income taxes and
extraordinary item 338 184 810 563
Income tax expense 126 68 300 208
---------- ---------- ---------- ----------
Income from operations before
extraordinary item 212 116 510 355
Extraordinary item (net of
income tax benefit of $54)
(Note 4) -- -- (93) --
---------- ---------- ---------- ----------
Net income $ 212 $ 116 $ 417 $ 355
========== =========== ========== ==========
Earnings per common and
common equivalent share
(Note 5)
Income from operations
before extraordinary item $ 0.03 $ 0.01 $ 0.06 $ 0.04
Extraordinary item -- -- (0.01) --
---------- ---------- --------- ----------
Net income $ 0.03 $ 0.01 $ 0.05 $ 0.04
========== ========== ========= ==========
Weighted average number of
shares and common
equivalent shares outstanding
7,318,413 7,188,423 7,320,789 7,203,180
========== ========== ========= =========
</TABLE>
6
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
MAY 31, 1996 MAY 31, 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 417 $ 355
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation 611 868
Amortization 482 245
Gain from sale of assets -- (259)
Changes in operating assets and liabilities:
Accounts receivable (3,894) 2,265
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,941 1,278
Inventories 14 (1,226)
Income taxes 33 (344)
Prepaid expenses and other assets (159) (1)
Accounts payable (958) (735)
Accrued expenses 190 315
-------- --------
Net cash provided (used) used by operating activities (1,323) 2,761
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (1,510) (380)
Proceeds from sale of assets -- 765
-------- --------
Net cash provided (used) by investing activities (1,510) 385
-------- --------
FINANCING ACTIVITIES
Payments of long-term debt (17,309) (25,180)
Borrowings 19,684 22,421
Dividends paid on preferred stock (67) (72)
-------- --------
Net cash provided (used) by financing activities 2,308 (2,831)
-------- --------
Net increase (decrease) in cash and cash equivalents (525) 314
Cash and cash equivalents at beginning of period 632 111
-------- --------
Cash and cash equivalents at end of period $ 107 $ 426
======== ========
Supplementary disclosure of cash flow information:
Cash paid for interest $ 590 $ 679
Cash paid for taxes 319 562
Supplementary disclosure of noncash financing activity:
Issuance of preferred stock in consideration for dividends
payable $ 2 $ 7
Equipment acquired and financed under capital leases 304 --
</TABLE>
7
<PAGE>
<PAGE>
CRYENCO SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997
(Unaudited, except information for the fiscal year ended August 31, 1996)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended May 31,
1997 are not necessarily indicative of the results that may be expected for the
year ending August 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended August 31, 1996.
2. INVENTORIES
Inventories (in thousands) consisted of the following:
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1996 1997
------ -----
<S> <C> <C>
Raw Materials $3,344 $3,997
Finished goods and work-in-process 1,139 1,683
------ ------
4,483 5,680
Less reserve for obsolescence (150) (122)
------ ------
$4,333 $5,558
====== ======
</TABLE>
8
<PAGE>
<PAGE>
3. LONG-TERM DEBT
Long-term debt (in thousands) at May 31, 1997 is comprised of the
following:
<TABLE>
<S> <C>
Termloan maturing December 31, 1998 bearing interest at
the reference rate (as defined in the loan
agreement) plus 3/4% (9.25% May 31, 1997) payable
monthly. Principal payments of $12,806 are payable
monthly. 499
Revolving credit facility maturing December 31, 1998
bearing interest at the reference rate (as defined
in the loan agreement) plus up to an additional
1.0% depending upon financial performance (9.0% at
May 31, 1997). 6,363
Other 396
------
7,258
Less current portion 294
------
$6,964
======
</TABLE>
On April 10, 1997, the Company prepaid the outstanding balance
($1,150,000) of the note payable to The CIT Group/Equity Investments, Inc.
("CIT").
The Company must comply with certain financial covenants in connection
with its long-term debt, including the maintenance of certain financial ratios
and restrictions on dividends.
9
<PAGE>
<PAGE>
4. EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT
As a result of the early retirement of the Chemical Bank debt and the
partial payment on the CIT note, the Company recognized an extraordinary expense
of $93,000 (net of the related tax benefit of $54,000) for the write down of
deferred financing expenses related to these debts during the three months ended
February 29, 1996.
5. EARNINGS PER SHARE
Net earnings per share is computed using the weighted average number of
shares of common stock outstanding for the period. When dilutive, stock options
and warrants are included as share equivalents using the treasury stock method.
In calculating net earnings per share, preferred dividends of $24,718 and
$71,746 reduced the net earnings available to common stockholders for the three
months and nine months ended May 31, 1997, respectively. Fully diluted net
earnings per common share is not significantly different from primary net
earnings per common share.
6. RECENT DEVELOPMENTS
On April 30, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Chart Industries, Inc. ("Chart") and
certain of Chart's wholly-owned subsidiaries pursuant to which the Company will
become an indirect, wholly-owned subsidiary of Chart (the "Merger"). As a result
of the Merger, each outstanding share of common stock of the Company will be
converted into the right to receive $2.75 in cash, without interest. The Merger
Agreement and the Merger are subject to approval by the stockholders of the
Company. A Special Meeting of the Company's stockholders is scheduled for July
31, 1997 in order to vote upon approval and adoption of the Merger Agreement and
the transactions contemplated thereby.
10
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Quarterly Report on Form 10-Q contains certain forward-looking
statements that involve risks and uncertainties. Discussions containing such
forward-looking statements may be found in the materials set forth below in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company's actual results could differ materially from those
anticipated in the forward-looking statements.
Results of Operations - Three and Nine
Months Ended May 31, 1996 and May 31, 1997
Contract revenue decreased 6.7% to $7.7 million for the three months
ended May 31, 1997 from $8.2 million for the three months ended May 31, 1996.
Contract revenue for the first nine months of the 1997 fiscal year decreased
16.0% to $20.5 million from $24.4 million for the same period of the preceding
year. The quarterly decrease is the result of decreases in revenue from
industrial gas and LNG trailers, MRI cryostats and components, and LNG
dispensing equipment, which decreased $1.4 million, $834,000 and $141,000,
respectively, over the corresponding period in the prior year. The Company does
not believe that these decreases are indicative of a long-term trend. These
decreases were offset somewhat by increased revenues from TVAC'r' intermodal
containers which increased $1.7 million over the corresponding 1996 period. For
the nine month period the decrease was primarily the result of the decrease in
revenues from industrial gas and LNG trailers, MRI cryostats and components, and
LNG dispensing equipment, which decreased $4.5 million, $2.0 million and
$679,000, respectively, over the corresponding nine month period in the prior
year. These decreases were offset somewhat by increased revenues from TVAC'r'
intermodal containers and cryogenic spares, which increased $2.7 million and
$327,000, respectively, over the corresponding 1996 period.
Gross profit for the three months ended May 31, 1997 decreased 30.4% to
$1.3 million, or 16.5% of contract revenue, from $1.8 million, or 22.2% of
contract revenue, for the three months ended May 31, 1996. Gross profit for the
first nine months of the 1997 fiscal year decreased 17.5% to $4.0 million, or
19.6% of contract revenue, from $4.9 million, or 20.0% of contract revenue, for
the same period of the previous year. The gross profit decrease for the quarter
was the result of the reduced revenues combined with lower sales prices on
trailers and unabsorbed manufacturing overhead expenses due to the reduced level
of shop activity. For the nine month period the decrease was primarily due to
the reduced revenues and increased unabsorbed manufacturing overhead expenses.
Selling, general and administrative expenses increased $14.5% to $1.0
million for the three months ended May 31, 1997 from $894,000 for the three
months ended May 31, 1996, and increased as a percentage of contract revenue to
13.3% from 10.9% during the same period. Selling, general and administrative
expenses for the first nine months of fiscal 1997 increased 3.2% to $2.5 million
or 12.2% of contract revenue from $2.4 million or 10.0% of contract revenue
compared to the corresponding period in the prior year. The increase is
primarily due
11
<PAGE>
<PAGE>
to the legal and consulting expenses related to the anticipated merger with
Chart Industries, Inc., and to a lesser extent is due to increased sales
expenses. Research and development costs decreased to $(14,000) for the three
months ended May 31, 1997 from $277,000 for the three months ended May 31, 1996,
and to $315,000 for the first nine months of fiscal 1997 compared to $708,000
for the comparable period of the prior year. The credit in the current period is
due to the timing of billings for the reimbursement of TADOPTR development costs
under a development contract. The decrease in expenses for both the three and
nine month periods is primarily the result of the decrease in expenditures for
the development of new LNG products compared to the prior year. Amortization
expense decreased to $59,000 for the three months ended May 31, 1997 from
$87,000 for the three months ended May 31, 1996, and to $181,000 for the first
nine months of fiscal 1997 compared to $259,000 for the comparable period of the
prior year due to the completion of the organization cost amortization in the
prior year.
Interest expense for the three months ended May 31, 1997 increased 2.2%
to $231,000 from $226,000 for the three months ended May 31, 1996 and increased
8.4% to $722,000 for the first nine months of the 1997 fiscal year from $666,000
for the same period of the preceding year. This increase in the current quarter
is due to increased debt issuance cost amortization due to the repayment of the
balance of the subordinated debt during the quarter. The cumulative increase is
primarily due to an increased average level of borrowing. Other non-operating
items resulted in income of $213,000 for the three months ended May 31, 1997,
compared to an expense of $5,000 in the comparable period of 1996, and income of
$269,000 in the first nine months of this fiscal year compared to an expense of
$1,000 for the first nine months of the 1996 fiscal year. The increase in income
in the current period is the result of a gain on the sale of capital equipment.
In addition, the increase in income in the nine month period includes a $49,000
profit on the sale of the Company's interest in Applied LNG Technologies USA,
LLC.
Income tax expense decreased to $68,000 for the three months ended May
31, 1997 from $126,000 for the three months ended May 31, 1996 and to $208,000
for the first nine months of this fiscal year from $300,000 for the first nine
months of the prior year. The expense in both years is the result of taxable
income for the periods and estimated annual tax rates.
The resulting net income decreased to $116,000 for the three months
ended May 31, 1997 from $212,000 for the corresponding prior year period, and
decreased to $355,000 for the nine months ended May 31, 1997 from $510,000 for
the corresponding nine month period of the prior year. This change is the result
of the cumulative effect of the above factors.
Liquidity and Capital Resources
At May 31, 1997, the Company's working capital was $9.7 million, which
represented a current ratio of 3.7 to 1. Also, the Company's outstanding
indebtedness under the Credit Agreement with FBS Business Finance Corporation
was $6.9 million, of which $499,000 represented term indebtedness and $6.4
million represented revolving indebtedness.
12
<PAGE>
<PAGE>
Cash flow from operations for the nine months ended May 31, 1997
resulted in cash provided in the amount of $2.8 million compared to cash used of
$1.3 million in the same period of the prior year. In the current year, cash was
provided primarily by the decreases in accounts receivable and by net income. In
the nine months ended May 31, 1996 cash was used to increase accounts
receivable, which was somewhat offset by the decrease in costs and estimated
earnings in excess of billings on uncompleted contracts and by net income.
The Company believes that its existing capital resources, together with
cash flow from future operations will be sufficient to meet its short term
working capital needs. Additional financing may be required for future expansion
of operations.
Recent Developments
On April 30, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Chart Industries, Inc. ("Chart") and
certain of Chart's wholly-owned subsidiaries pursuant to which the Company will
become an indirect, wholly-owned subsidiary of Chart (the "Merger"). As a result
of the Merger, each outstanding share of common stock of the Company will be
converted into the right to receive $2.75 in cash, without interest. The Merger
Agreement and the Merger are subject to approval by the stockholders of the
Company. A Special Meeting of the Company's stockholders is scheduled for July
31, 1997 in order to vote upon approval and adoption of the Merger Agreement and
the transactions contemplated thereby.
13
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Description of Exhibits
3.1 Restated Certificate of Incorporation of the Company, incorporated
by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-2, File No. 33-48738, filed on June 19, 1992
(the "S-2 Registration Statement").
3.2 By-laws of the Company, incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1, File No.
33-7532, filed on July 25, 1986.
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company, incorporated by reference to Exhibit
3.3 to the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1995 (the "1995 Annual Report").
3.4 Certificate of Designation, Preferences and Rights of the Series A
Preferred Stock of the Company, incorporated by reference to
Exhibit 3.4 to the Company's 1995 Annual Report.
3.5 Corrected Certificate of Amendment of Restated Certificate of
Incorporation of the Company, incorporated by reference to Exhibit
3.5 to the Company's 1995 Annual Report.
4.1 See Article Fourth of the Restated Certificate of Incorporation,
as amended and corrected, of the Company (Exhibit 3.5 hereof),
incorporated by reference to Exhibit 4.1 to the Company's 1995
Annual Report.
4.2 Forms of Common Stock and Class B Common Stock certificates of the
Company, incorporated by reference to Exhibit 4.3 of the Company's
Registration Statement on Form S-4, File No. 33-43782, filed on
December 19, 1991.
14
<PAGE>
<PAGE>
4.3 Registration Rights Agreement dated as of August 30, 1991 among
Cryenco Holdings, Inc. ("CHI"), The CIT Group/Equity Investments,
Inc. ("CIT"), Chemical Bank and the Investors named therein,
incorporated by reference to Exhibit 4.3 to the Company's 1995
Annual Report.
4.4 Warrant Agreement dated as of August 30, 1991 between Chemical
Bank, CHI and the Company, incorporated by reference to Exhibit
4.4 to the Company's 1995 Annual Report.
4.5 Letter Agreement dated April 15, 1992 among the Company, CIT and
Chemical Bank relating to the Warrants referred to herein at
Exhibits 4.8 and 4.9, incorporated by reference to Exhibit 4.9 to
the S-2 Registration Statement.
4.6 Letter Agreement dated August 12, 1992 between the Company and
Chemical Bank relating to the Warrants referred to herein at
Exhibit 4.8, incorporated by reference to Exhibit 4.6 to the
Company's 1995 Annual Report.
4.7 Letter Agreement dated August 12, 1992 between the Company and CIT
relating to the Warrants referred to herein at Exhibit 4.9,
incorporated by reference to Exhibit 4.7 to the Company's 1995
Annual Report.
4.8 Warrants issued to Chemical Bank each dated April 27, 1992,
incorporated by reference to Exhibit 4.8 to the Company's 1995
Annual Report.
4.9 Warrants issued to CIT each dated April 27, 1992, incorporated by
reference to Exhibit 4.9 to the Company's 1995 Annual Report.
4.10 Warrant issued to Dain Bosworth Incorporated dated August 20,
1992, incorporated by reference to Exhibit 4.12 to the S-2
Registration Statement.
4.11 Warrant Agreement dated as of March 12, 1993 between the Company
and Alfred Schechter, incorporated by reference to Exhibit 4.11 to
the Company's 1995 Annual Report.
4.12 Warrant Agreement dated as of March 12, 1993 between the Company
and Don M. Harwell, incorporated by reference to Exhibit 4.12 to
the Company's 1995 Annual Report.
15
<PAGE>
<PAGE>
4.13 Warrant Agreement dated as of March 12, 1993 between the Company
and Mezzanine Capital Corporation Limited ("MCC"), incorporated by
reference to Exhibit 4.13 to the Company's 1995 Annual Report.
4.14 Warrant issued to Alfred Schechter dated March 12, 1993,
incorporated by reference to Exhibit 4.14 to the Company's 1995
Annual Report.
4.15 Warrant issued to Don M. Harwell dated March 12, 1993,
incorporated by reference to Exhibit 4.15 to the Company's 1995
Annual Report.
4.16 Warrant issued to MCC dated March 12, 1993, incorporated by
reference to Exhibit 4.16 to the Company's 1995 Annual Report.
4.17 Letter Agreement dated as of June 9, 1993 between the Company and
Alfred Schechter with respect to the Exercise Price for the
Warrant referred to herein at Exhibit 4.14, incorporated by
reference to Exhibit 4.17 to the Company's 1995 Annual Report.
4.18 Letter Agreement dated as of June 9, 1993 between the Company and
Don M. Harwell with respect to the Exercise Price for the Warrant
referred to herein at Exhibit 4.15, incorporated by reference to
Exhibit 4.18 to the Company's 1995 Annual Report.
4.19 Letter Agreement dated as of June 9, 1993 between the Company and
MCC with respect to the Warrant referred to herein at Exhibit
4.16, incorporated by reference to Exhibit 4.19 to the Company's
1995 Annual Report.
4.20 Warrant issued to Chemical Bank dated November 24, 1993,
incorporated by reference to Exhibit 4.20 to the Company's 1995
Annual Report.
4.21 Warrant issued to CIT dated November 24, 1993, incorporated by
reference to Exhibit 4.21 to the Company's 1995 Annual Report.
4.22 Warrant Agreement dated as of January 26, 1995 between the Company
and Alfred Schechter, incorporated by reference to Exhibit 4.22 to
the Company's 1995 Annual Report.
4.23 Warrant Agreement dated as of January 26, 1995 between the
16
<PAGE>
<PAGE>
Company and Don M. Harwell, incorporated by reference to Exhibit
4.23 to the Company's 1995 Annual Report.
4.24 Warrant Agreement dated as of January 26, 1995 between the Company
and MCC, incorporated by reference to Exhibit 4.24 to the
Company's 1995 Annual Report.
4.25 Warrant issued to Alfred Schechter dated January 26, 1995,
incorporated by reference to Exhibit 4.25 to the Company's 1995
Annual Report.
4.26 Warrant issued to Don M. Harwell dated January 26, 1995,
incorporated by reference to Exhibit 4.26 to the Company's 1995
Annual Report.
4.27 Warrant issued to MCC dated January 26, 1995, incorporated by
reference to Exhibit 4.27 to the Company's 1995 Annual Report.
4.28 See the Certificate of Designation, Preferences and Rights of the
Series A Preferred Stock of the Company (Exhibit 3.4 hereof),
incorporated by reference to Exhibit 4.28 to the Company's 1995
Annual Report.
4.29 Warrant Agreement dated as of June 8, 1994 between the Company and
Cryogenic TADOPTR Company, L.P. and the Form of Warrant
Certificate issued pursuant thereto, incorporated by reference to
Exhibit 4.29 to the Company's 1995 Annual Report.
4.30 Warrant Agreement dated as of December 20, 1994 between the
Company and The Edgehill Corporation, incorporated by reference to
Exhibit 4.30 to the Company's 1995 Annual Report.
4.31 Warrant issued to The Edgehill Corporation dated as of December
20, 1994, incorporated by reference to Exhibit 4.31 to the
Company's 1995 Annual Report.
4.32 Registration Rights Agreement dated as of December 20, 1994 among
the Company, certain parties named therein and International
Capital Partners, Inc., incorporated by reference to Exhibit 4.32
to the Company's 1995 Annual Report.
17
<PAGE>
<PAGE>
4.33 Form of Warrant issued to each of International Capital Partners,
Inc. and the parties named in the Registration Rights Agreement
dated as of December 20, 1994 (Exhibit 4.32 hereof), incorporated
by reference to Exhibit 4.33 to the Company's 1995 Annual Report.
*10.1 Second Amendment dated as of January 13, 1997 between FBS Business
Finance Corporation, Cryenco, Inc., the Company and Cryenex, Inc.,
amending the Credit and Security Agreement dated as of December
19, 1995, as amended (the "Credit Agreement").
*10.2 Third Amendment dated as of April 9, 1997 between FBS Business
Finance Corporation, Cryenco, Inc., the Company and Cryenex, Inc.,
amending the Credit Agreement.
10.3 Plan and Agreement of Merger dated as of April 30, 1997 among
Chart Industries, Inc., Greenville Tube Corporation, Chart
Acquisition Company, Inc. and the Company, incorporated by
reference to Annex A to the Company's Definitive Proxy Statement
filed with the Securities and Exchange Commission on July 1, 1997.
*27 Financial Data Schedule pursuant to Article 5 of Regulation S-X
filed with EDGAR filing only.
- ----------------
* Filed herewith
(b) No reports on Form 8-K have been filed during the quarter ended
May 31, 1997.
18
<PAGE>
<PAGE>
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.
CRYENCO SCIENCES, INC.
(Registrant)
By: /s/ Alfred Schechter
-----------------------------
Alfred Schechter, Chairman
of the Board, Chief Executive
Officer and President
/s/ James A. Raabe
-----------------------------
James A. Raabe,
Chief Financial Officer
July 14, 1997
19
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibits Page
- ------- ----------------------- ----
3.1 Restated Certificate of Incorporation of the Company,
incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-2, File No. 33-48738, filed
on June 19, 1992 (the "S-2 Registration Statement").
3.2 By-laws of the Company, incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1, File
No. 33-7532, filed on July 25, 1986.
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company, incorporated by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended August 31, 1995 (the "1995 Annual
Report").
3.4 Certificate of Designation, Preferences and Rights of the
Series A Preferred Stock of the Company, incorporated by
reference to Exhibit 3.4 to the Company's 1995 Annual Report.
3.5 Corrected Certificate of Amendment of Restated Certificate of
Incorporation of the Company, incorporated by reference to
Exhibit 3.5 to the Company's 1995 Annual Report.
4.1 See Article Fourth of the Restated Certificate of
Incorporation, as amended and corrected, of the Company
(Exhibit 3.5 hereof), incorporated by reference to Exhibit
4.1 to the Company's 1995 Annual Report.
4.2 Forms of Common Stock and Class B Common Stock certificates
of the Company, incorporated by reference to Exhibit 4.3 of
the Company's Registration Statement on Form S-4, File No.
33-43782, filed on December 19, 1991.
E-1
<PAGE>
<PAGE>
Exhibit Description of Exhibits Page
- ------- ----------------------- ----
4.3 Registration Rights Agreement dated as of August 30, 1991
among Cryenco Holdings, Inc. ("CHI"), The CIT Group/Equity
Investments, Inc. ("CIT"), Chemical Bank and the Investors
named therein, incorporated by reference to Exhibit 4.3 to
the Company's 1995 Annual Report.
4.4 Warrant Agreement dated as of August 30, 1991 between
Chemical Bank, CHI and the Company, incorporated by reference
to Exhibit 4.4 to the Company's 1995 Annual Report.
4.5 Letter Agreement dated April 15, 1992 among the Company, CIT
and Chemical Bank relating to the Warrants referred to herein
at Exhibits 4.8 and 4.9, incorporated by reference to Exhibit
4.9 to the S-2 Registration Statement.
4.6 Letter Agreement dated August 12, 1992 between the Company
and Chemical Bank relating to the Warrants referred to herein
at Exhibit 4.8, incorporated by reference to Exhibit 4.6 to
the Company's 1995 Annual Report.
4.7 Letter Agreement dated August 12, 1992 between the Company
and CIT relating to the Warrants referred to herein at
Exhibit 4.9, incorporated by reference to Exhibit 4.7 to the
Company's 1995 Annual Report.
4.8 Warrants issued to Chemical Bank each dated April 27, 1992,
incorporated by reference to Exhibit 4.8 to the Company's
1995 Annual Report.
4.9 Warrants issued to CIT each dated April 27, 1992,
incorporated by reference to Exhibit 4.9 to the Company's
1995 Annual Report.
4.10 Warrant issued to Dain Bosworth Incorporated dated August 20,
1992, incorporated by reference to Exhibit 4.12 to the S-2
Registration Statement.
E-2
<PAGE>
<PAGE>
Exhibit Description of Exhibits Page
- ------- ----------------------- ----
4.11 Warrant Agreement dated as of March 12, 1993 between the
Company and Alfred Schechter, incorporated by reference to
Exhibit 4.11 to the Company's 1995 Annual Report.
4.12 Warrant Agreement dated as of March 12, 1993 between the
Company and Don M. Harwell, incorporated by reference to
Exhibit 4.12 to the Company's 1995 Annual Report.
4.13 Warrant Agreement dated as of March 12, 1993 between the
Company and Mezzanine Capital Corporation Limited ("MCC"),
incorporated by reference to Exhibit 4.13 to the Company's
1995 Annual Report.
4.14 Warrant issued to Alfred Schechter dated March 12, 1993,
incorporated by reference to Exhibit 4.14 to the Company's
1995 Annual Report.
4.15 Warrant issued to Don M. Harwell dated March 12, 1993,
incorporated by reference to Exhibit 4.15 to the Company's
1995 Annual Report.
4.16 Warrant issued to MCC dated March 12, 1993, incorporated by
reference to Exhibit 4.16 to the Company's 1995 Annual
Report.
4.17 Letter Agreement dated as of June 9, 1993 between the Company
and Alfred Schechter with respect to the Exercise Price for
the Warrant referred to herein at Exhibit 4.14, incorporated
by reference to Exhibit 4.17 to the Company's 1995 Annual
Report.
4.18 Letter Agreement dated as of June 9, 1993 between the Company
and Don M. Harwell with respect to the Exercise Price for the
Warrant referred to herein at Exhibit 4.15, incorporated by
reference to Exhibit 4.18 to the Company's 1995 Annual
Report.
E-3
<PAGE>
<PAGE>
Exhibit Description of Exhibits Page
- ------- ----------------------- ----
4.19 Letter Agreement dated as of June 9, 1993 between the Company
and MCC with respect to the Warrant referred to herein at
Exhibit 4.16, incorporated by reference to Exhibit 4.19 to
the Company's 1995 Annual Report.
4.20 Warrant issued to Chemical Bank dated November 24, 1993,
incorporated by reference to Exhibit 4.20 to the Company's
1995 Annual Report.
4.21 Warrant issued to CIT dated November 24, 1993, incorporated
by reference to Exhibit 4.21 to the Company's 1995 Annual
Report.
4.22 Warrant Agreement dated as of January 26, 1995 between the
Company and Alfred Schechter, incorporated by reference to
Exhibit 4.22 to the Company's 1995 Annual Report.
4.23 Warrant Agreement dated as of January 26, 1995 between the
Company and Don M. Harwell, incorporated by reference to
Exhibit 4.23 to the Company's 1995 Annual Report.
4.24 Warrant Agreement dated as of January 26, 1995 between the
Company and MCC, incorporated by reference to Exhibit 4.24 to
the Company's 1995 Annual Report.
4.25 Warrant issued to Alfred Schechter dated January 26, 1995,
incorporated by reference to Exhibit 4.25 to the Company's
1995 Annual Report.
4.26 Warrant issued to Don M. Harwell dated January 26, 1995,
incorporated by reference to Exhibit 4.26 to the Company's
1995 Annual Report.
4.27 Warrant issued to MCC dated January 26, 1995, incorporated by
reference to Exhibit 4.27 to the Company's 1995 Annual
Report.
E-4
<PAGE>
<PAGE>
Exhibit Description of Exhibits Page
- ------- ----------------------- ----
4.28 See the Certificate of Designation, Preferences and Rights of
the Series A Preferred Stock of the Company (Exhibit 3.4
hereof), incorporated by reference to Exhibit 4.28 to the
Company's 1995 Annual Report.
4.29 Warrant Agreement dated as of June 8, 1994 between the
Company and Cryogenic TADOPTR Company, L.P. and the Form of
Warrant Certificate issued pursuant thereto, incorporated by
reference to Exhibit 4.29 to the Company's 1995 Annual
Report.
4.30 Warrant Agreement dated as of December 20, 1994 between the
Company and The Edgehill Corporation, incorporated by
reference to Exhibit 4.30 to the Company's 1995 Annual
Report.
4.31 Warrant issued to The Edgehill Corporation dated as of
December 20, 1994, incorporated by reference to Exhibit 4.31
to the Company's 1995 Annual Report.
4.32 Registration Rights Agreement dated as of December 20, 1994
among the Company, certain parties named therein and
International Capital Partners, Inc., incorporated by
reference to Exhibit 4.32 to the Company's 1995 Annual
Report.
4.33 Form of Warrant issued to each of International Capital
Partners, Inc. and the parties named in the Registration
Rights Agreement dated as of December 20, 1994 (Exhibit 4.32
hereof), incorporated by reference to Exhibit 4.33 to the
Company's 1995 Annual Report.
*10.1 Second Amendment dated as of January 13, 1997 between FBS
Business Finance Corporation, Cryenco, Inc., the Company and
Cryenex, Inc., amending the Credit and Security Agreement
dated as of December 19, 1995, as amended (the "Credit
Agreement").
E-5
<PAGE>
<PAGE>
*10.2 Third Amendment dated as of April 9, 1997 between FBS
Business Finance Corporation, Cryenco, Inc., the Company and
Cryenex, Inc., amending the Credit Agreement.
10.3 Plan and Agreement of Merger dated as of April 30, 1997 among
Chart Industries, Inc., Greenville Tube Corporation, Chart
Acquisition Company, Inc. and the Company, incorporated by
reference to Annex A to the Company's Definitive Proxy
Statement filed with the Securities and Exchange Commission
on July 1, 1997.
*27 Financial Data Schedule pursuant to Article 5 of Regulation
S-X filed with EDGAR filing only.
- ----------------
* Filed herewith
E-6
<PAGE>
<PAGE>
EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT (this "Amendment"), dated as of January 13, 1997,
amends and modifies a certain Credit and Security Agreement, dated as of
December 19, 1995 (as the same may be amended, replaced, restated and/or
supplemented from time to time, the "Credit Agreement"), between FBS BUSINESS
FINANCE CORPORATION, a Delaware corporation (the "Lender"), and CRYENCO, INC., a
Colorado corporation, CRYENCO SCIENCES, INC., a Delaware corporation and
CRYENEX, INC., a Delaware corporation (collectively and/or individually the
"Borrower"). Terms not otherwise expressly defined herein shall have the
meanings set forth in the Credit Agreement.
PRELIMINARY STATEMENT
WHEREAS, an event has occurred constituting an Event of Default under
the terms of the Credit Agreement, which the Borrower has requested the Lender
to waive; and
WHEREAS, the Lender has agreed to waive the Event of Default identified
herein, subject to the terms and conditions set forth in this Amendment.
NOW, THEREFORE, for value received, the Borrower and the Lender agree as
follows:
SECTION 1. CAPITALIZED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement, unless the context shall otherwise require.
SECTION 2. DEFAULT AND WAIVER.
2.1 Event of Default. Under Section 9.3 of Supplement A to the Credit
Agreement, the Borrower was to maintain a ratio, as of the last day of
each fiscal quarter, of the consolidated EBITDA of the Borrower during
the four consecutive fiscal quarters then ending, to the sum of their
consolidated unfinanced capital expenditures, cash taxes, interest
payments, dividends and mandatory debt retirement payments during the
four consecutive fiscal quarters then ending, of not less than 1.15:1
from September 1, 1996 through August 31, 1997. The Borrower has advised
the Lender that as of November 30, 1996, the foregoing ratio was 1.05:1,
in violation of Section 9.3 of Supplement A.
2.2 Waiver. Upon the date upon which this Amendment becomes effective,
the Lender hereby waives the Event of Default described in the preceding
Section 2.1. The waiver set forth herein shall not constitute a waiver
by the Lender of any Unmatured Event of Defaults or any other Event of
Default, if any, under the Credit Agreement, and shall not be, and shall
not be deemed to
-1-
<PAGE>
<PAGE>
be, a course of action with respect thereto upon which
the Borrower may rely in the future and the Borrower hereby expressly
waives any claim to such effect.
SECTION 3. REPRESENTATIONS; NO DEFAULT. The Borrower hereby represents
that on and as of the date hereof and after giving effect to this Amendment (a)
all of the representations and warranties contained in the Credit Agreement are
true, correct and complete in all respects as of the date hereof as though made
on and as of such date, except for changes permitted by the terms of the Credit
Agreement, and (b) there will exist no Unmatured Event of Default or Event of
Default under the Credit Agreement as amended by this Amendment on such date
which has not been waived by the Lender. The Borrower represents and warrants
that the Borrower has the power and legal right and authority to enter into this
Amendment and has duly authorized as appropriate the execution and delivery of
the Amendment Document and other agreements and documents executed and delivered
by the Borrower in connection herewith or therewith by proper corporate action,
and neither this Amendment nor any of the agreements contained herein contravene
or constitute a default under any agreement, instrument or indenture to which
the Borrower is a party or a signatory or a provision of the Borrower's Articles
of Incorporation, Bylaws or, to the best of the Borrower's knowledge any other
agreement or requirement of law, or result in the imposition of any Lien on any
of its property under any agreement binding on or applicable to the Borrower or
any of its property except, if any, in favor of the Lender. The Borrower
represents and warrants that no consent, approval or authorization of or
registration or declaration with any Person, including without limitation, any
governmental authority, is required in connection with the execution and
delivery by the Borrower of this Amendment or other agreements and documents
executed and delivered by the Borrower in connection therewith or the
performance of obligations of the Borrower therein described, except for those
which the Borrower has obtained or provided and as to which the Borrower has
delivered certified copies of documents evidencing each such action to the
Lender.
The Borrower warrants that no events have taken place and no
circumstances exist at the date hereof which would give the Borrower assert a
defense, offset or counterclaim to any of the Obligations.
SECTION 4. AFFIRMATION, FURTHER REFERENCES. The Lender and the Borrower
each acknowledge and affirm that the Credit Agreement, as hereby amended, is
hereby ratified and confirmed in all respects and all terms, conditions and
provisions of the Credit Agreement as amended prior to the date of this
Amendment, shall remain unmodified and in full force and effect except as
amended by this Amendment. All references in any document or instrument to the
Credit Agreement are hereby amended and shall refer to the Credit Agreement as
amended from time to time.
-2-
<PAGE>
<PAGE>
SECTION 5. SEVERABILITY. Whenever possible, each provision of this
Amendment and the other Amendment Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but if any provision of this
Amendment, the other Amendment Documents or any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be held to be prohibited, invalid or unenforceable under the applicable law,
such provision shall be ineffective in such jurisdiction only to the extent of
such prohibition, invalidity or unenforceability, without invalidating or
rendering unenforceable the remainder of such provision or the remaining
provisions of this Amendment, the other Amendment Documents or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any other jurisdiction.
SECTION 6. SUCCESSORS. This Amendment shall be binding upon the Borrower
and the Lender and their respective successors and assigns, and shall inure to
the benefit of the Borrower and the Lender and the successors and assigns of the
Lender.
SECTION 7. LEGAL EXPENSES. The Borrower agrees to reimburse the Lender,
upon execution of this Amendment, for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses of Dorsey & Whitney LLP, counsel
for the Lender) incurred in connection with the Credit Agreement, including in
connection with the negotiation, preparation and execution of this Amendment and
all other documents negotiated, prepared and executed in connection with this
Amendment, which obligations of the Borrower shall survive any termination of
the Credit Agreement.
SECTION 8. HEADINGS. The Headings of various sections of this
Amendment have been inserted for reference only and shall not be deemed to be a
part of this Amendment.
SECTION 9. COUNTERPARTS. This Amendment may be executed in several
counterparts as deemed necessary and convenient, each of which, when so
executed, shall be deemed an original, provided that all such counterparts shall
be regarded as one and the same document, and any party to the Amendment
Documents may execute any such agreement by executing a counterpart of such
agreement.
SECTION 10. GOVERNING LAW. The Amended Documents shall be governed by
the internal laws of the State of Minnesota, without giving effect to conflict
of law principles thereof.
-3-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
FBS BUSINESS FINANCE CORPORATION
By /s/ William C. Phelps
------------------------------
Its Vice President
------------------------------
CRYENCO, INC.
By /s/ James A. Raabe
------------------------------
Its CFO
------------------------------
CRYENCO SCIENCES, INC.
By /s/ James A. Raabe
------------------------------
Its CFO
------------------------------
CRYENEX, INC.
By /s/ James A. Raabe
------------------------------
Its CFO
------------------------------
<PAGE>
<PAGE>
EXHIBIT 10.2
THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT, dated as of April 9, 1997, amends and modifies a
certain Credit and Security Agreement, dated as of December 19, 1995 (the
"Credit Agreement"), between FBS BUSINESS FINANCE CORPORATION, a Delaware
corporation (the "Lender"), CRYENCO, INC., a Colorado corporation and CRYENCO
SCIENCES, INC., a Delaware corporation, and CRYENEX, INC., a Delaware
corporation (collectively and/or individually the "Borrower") as amended by a
First Amendment to Credit and Security Agreement dated as of January 16, 1996
and by a Second Amendment to Credit and Security Agreement dated as of January
13, 1997. Terms not otherwise expressly defined herein shall have the meanings
set forth in the Credit Agreement.
PRELIMINARY STATEMENT
WHEREAS, the Borrower and the Lender desire to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for value received, the Borrower and the Lender agree
as follows:
ARTICLE I - AMENDMENTS
1.1 Definitions. The following definitions of the terms "Additional
Term Loan" and "Additional Term Loan Availability" are hereby added to Section
1.1 of the Credit Agreement:
"Additional Term Loan": The term "Additional Term Loan
shall have the meaning given such term in Section 2.1.3.
"Additional Term Loan Availability": The term "Additional
Term Loan Availability shall have the meaning given such term in Supplement A.
1.2 Definitions. The definition of the term "Loan" in Section 1.1 of
the Credit Agreement is amended to read as follows:
"Loan": Any Revolving Loan made by the Lender to the Borrower
pursuant to Section 2.1.1, the Term Loan made by the Lender to the Borrower
pursuant to Section 2.1.2, the Additional Term Loan made by the Lender to the
Borrower pursuant to Section 2.1.3 and any other loan or advance made by the
Lender to the Borrower under or pursuant to this Agreement.
1.3 Additional Term Loan. Section 2.1.3 of the Credit Agreement is
redesignated Section 2.1.4, and the following Section 2.1.3 is inserted in the
Credit Agreement:
<PAGE>
<PAGE>
2.1.3 ADDITIONAL TERM LOAN.
(a) Subject to the terms and conditions of the Loan
Documents, and in reliance upon the warranties of the Borrower set forth herein
and in the other Loan Documents, the Lender agrees to make such loans or
advances (individually and collectively, the "Additional Term Loan") to the
Borrower as the Borrower may from time to time through February 28, 1998
request, up to but not in excess of the Additional Term Loan Availability.
(b) Unless otherwise required to be sooner paid
pursuant to this Agreement, (i) the outstanding principal of the Additional Term
Loan on August 31, 1997 shall be payable in consecutive equal monthly
installments of one forty-eighth (1/48th) of the outstanding principal amount of
the Additional Term Loan as of such date, payable on the fifteenth (15th) day of
each month, commencing September 15, 1997, and (ii) the outstanding principal of
loans or advances on the Additional Term Loan made from September 1, 1997
through February 28, 1998, determined as of February 28, 1998 shall be payable
in consecutive equal monthly installments of one forty-eighth (1/48th) of the
outstanding principal amount of such loans or advances on the Additional Term
Loan outstanding as of February 28, 1998, payable on the fifteenth (15th) day of
each month, commencing March 15, 1998, and in each case, a final installment in
the outstanding principal balance of the Additional Term Loan on the Termination
Date.
(c) The Borrower may, upon three Business Days'
notice to the Lender, prepay the principal of the Additional Term Loan in whole
or in part without premium except as set forth in Supplement A. Any partial
prepayment of principal of the Additional Term Loan shall be in a minimum amount
of the lesser of (i) the outstanding principal balance of the Additional Term
Loan and (ii) $50,000 or an integral multiple thereof and shall be applied to
the unpaid installments of the Additional Term Loan in the inverse order of
their maturities. Any principal of the Additional Term Loan which is repaid may
not be reborrowed.
(d) Any payment of the Additional Term Loan may be
made with the proceeds of a Revolving Loan only if, immediately before and after
giving effect to such payment, no Event of Default or Unmatured Event of Default
then exists or would result therefrom.
1.4 Investments. Section 6.10(g) of the Credit Agreement is deleted and
Section 6.10(h) of the Credit Agreement is inserted in its place and restyled as
6.10(g).
1.5 Supplement A. Supplement A to the Credit Agreement is deleted and
Supplement A attached hereto is substituted in its place.
1.6 Schedules. Schedules 4.8, 4.10 and 4.13 to the Credit Agreement are
amended to read as per the Schedules 4.8, 4.10 and 4.13 attached hereto.
-2-
<PAGE>
<PAGE>
1.7 Construction. All references in the Credit Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.1 Authorization; Validity and Binding Effect. To induce the Lender to
enter into this Amendment and to make and maintain the Loans under the Credit
Agreement as amended hereby, the Borrower hereby warrants and represents to the
Lender that it is duly authorized to execute and deliver this Amendment and each
other document delivered in connection herewith, and to perform its obligations
under the Credit Agreement as amended hereby and each other document delivered
in connection herewith, that this Amendment and the other documents delivered in
connection herewith constitute the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms except as
enforceability may be limited by bankruptcy, insolvency or other similar laws of
general application affecting the enforcement of creditors rights or by general
principles of equity limiting the availability of equitable remedies, and that
the Borrower has taken all action necessary under its Articles of Incorporation,
Bylaws and applicable law regarding the transactions contemplated herein.
2.2 Affirmation of Representations and Warranties. The Borrower hereby
restates all the representations and warranties in Article IV of the Credit
Agreement and affirms to the Lender that such representations and warranties are
true and correct as though made on the date hereof the same as if made on the
date hereof and fully set forth herein, except for changes that are permitted by
the terms of the Credit Agreement, and except for any waiver and consent set
forth in this Amendment.
2.3 Warrants. All outstanding warrants for the issuance of common stock
of CSI and the holders thereof have previously been disclosed to the Lender and
have not changed since such disclosure.
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth
above; provided, however, that the effectiveness of this Amendment is subject to
the satisfaction of each of the following conditions precedent:
3.1 Warranties. Before and after giving effect to this Amendment, the
representations and warranties in Article IV of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement.
-3-
<PAGE>
<PAGE>
3.2 Defaults. Before and after giving effect to this Amendment, no
Event of Default and no Unmatured Event of Default shall have occurred and be
continuing under the Credit Agreement, except as waived herein. The execution by
the Borrower of this Amendment shall be deemed a representation that the
Borrower has complied with the foregoing condition.
3.3 Documents. The following shall have been delivered to the Lender,
each duly executed and dated, or certified, as of the date hereof, as the case
may be:
(a) Amendment. This Amendment and Supplement A each duly executed
by the Borrower.
(b) Resolutions. Certified copies of resolutions of the Board of
Directors of each of Cryenco, CSI and Cryenex authorizing or
ratifying the execution, delivery and performance, respectively, of
this Amendment and other documents provided for in this Amendment.
(c) Consents. Certified copies of all documents evidencing any
necessary corporate action, consent or governmental or regulatory
approval (if any) with respect to this Amendment.
(d) Incumbency and Signatures. A certificate of the Secretary or an
Assistant Secretary of each Borrower certifying the names of the
officer or officers of such Borrower authorized to sign this
Amendment and other documents provided for in this Amendment,
together with a sample of the true signature of each such officer
and a certification that the Articles of Incorporation and bylaws
of each Borrower have not changed since the same were last
certified to the Lender.
3.4 Other Conditions. The Borrower shall have satisfied such other
conditions as specified by the Lender or counsel to the Lender, including
payment of all unpaid legal fees and expenses incurred by the Lender through the
date of this Amendment in connection with the Credit Agreement and the Amendment
Documents.
-4-
<PAGE>
<PAGE>
ARTICLE IV - GENERAL
4.1 Waiver. The Borrower has informed the Lender that it was not in
compliance with a loan covenant in its agreement with The CIT Group/Equity
Investments, Inc. ("CIT") regarding consolidated interest coverage for the
period ended February 28, 1997. The failure to comply with such covenant is an
Event of Default under Section 7.1 of the Credit Agreement. Upon the effective
date of this Amendment and compliance with all requirements of Article III
hereof, the Lender hereby waives the Event of Default described in this Section
4.1 for the period ended February 28, 1997. This waiver is limited to the
express terms hereof and to the period described herein and does not apply to
any other Default or Event of Default or any other period. This waiver is not
and shall not be deemed to be a course of dealing or performance upon which the
Borrower may rely with respect to any other Default, Event of Default or request
for a waiver of the same, and the Borrower hereby expressly waives any such
claim.
4.2 Consent. The Borrower has requested the consent of the Lender to
the sale by CSI of its interest in ALT USA to Jack B. Kelley, Inc. (or an
affiliate thereof) and the use of a portion of the proceeds of such sale to pay
off the Subordinated Debt of the Borrower to CIT. Any such sale by the Borrower
and prepayment of the Subordinated Debt to CIT would violate the covenants set
forth in Sections 6.2 and 6.8 of the Credit Agreement. The Lender hereby
consents to the sale by CSI of its interest in ALT USA to Jack B. Kelley, Inc.
(or an affiliate thereof) for approximately $1,957,000 cash and a note in the
amount of $300,000, and further consents to the prepayment of the Borrower's
Subordinated Debt to CIT in the principal amount of $1,150,000 (plus accrued
interest) from the proceeds of the sale of ALT USA.
4.3 Expenses. The Borrower agrees to reimburse the Lender upon demand
for all reasonable expenses (including reasonable attorneys' fees and legal
expenses of Dorsey & Whitney LLP, counsel for the Lender) incurred in connection
with the preparation of this Amendment and in enforcing the obligations of the
Borrower hereunder, and to pay and save the Lender harmless from all liability
for any stamp or other taxes which may be payable with respect to the execution
or delivery of this Amendment, which obligations of the Borrower shall survive
any termination of the Credit Agreement.
4.4 Counterparts. This Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original but all such counterparts shall constitute but one and the
same instrument.
4.5 Severability. Any provision of this Amendment which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the
-5-
<PAGE>
<PAGE>
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.6 Law. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.7 Successors; Enforceability. This Amendment shall be binding upon
the Borrower and the Lender and their respective successors and assigns, and
shall inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender. Except as hereby amended, the Credit Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects.
- 6 -
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
FBS BUSINESS FINANCE
CORPORATION
By /s/ William C. Phelps
---------------------
Its Vice President
---------------------
CRYENCO, INC.
By /s/ James A. Raabe
----------------------------
Its Chief Financial Officer
----------------------------
CRYENCO SCIENCES, INC.
By /s/ James A. Raabe
---------------------------
Its Chief Financial Officer
---------------------------
CRYENEX, INC.
By /s/ James A. Raabe
---------------------------
Its Chief Financial Officer
---------------------------
- 7 -
<PAGE>
<PAGE>
SUPPLEMENT A
(AMENDED APRIL 9, 1997)
TO
CREDIT AND SECURITY AGREEMENT
DATED AS OF DECEMBER 19, 1995 BETWEEN
FBS BUSINESS FINANCE CORPORATION (THE "LENDER")
AND
CRYENCO, INC., CRYENCO SCIENCES, INC. AND CRYENEX, INC. (COLLECTIVELY
THE "BORROWER")
1. CREDIT AGREEMENT REFERENCE. This Supplement A, as it may be amended
or modified from time to time, is a part of the Credit and Security Agreement,
dated as of December 19, 1995, between the Borrower and the Lender (together
with all amendments, modifications and supplements thereto, the "Credit
Agreement"). Capitalized terms used herein which are defined in the Credit
Agreement shall have the meanings given such terms in the Credit Agreement
unless the context otherwise requires.
2. DEFINITIONS.
2.1 CREDIT AMOUNTS.
(a) CREDIT AMOUNT. The term "Credit Amount" shall
mean the maximum amount of Loans which the Lender
will make available to the Borrower which amount
shall not exceed Twelve Million Twenty-Five Thousand
Thirty-Nine and No/100ths ($12,025,039); provided,
however, that the aggregate outstanding principal
balance of the Loans plus the Letter of Credit
Obligations shall not exceed the Credit Amount.
(b) REVOLVING CREDIT AMOUNT. The term "Revolving
Credit Amount" shall mean: (i) from the Closing Date
until December 31, 1997, $9,000,000; and (ii) from
December 31, 1997 through the Termination Date,
$10,000,000, provided, however, that the aggregate
outstanding principal balance of the Revolving Loans
plus the Letter of Credit Obligations shall not
exceed the Revolving Credit Amount.
2.2 BORROWING BASE.
(a) DEFINITION. The term "Borrowing Base" shall mean:
(i) an amount (the "Accounts Receivable
Availability") of up to 85% of the net amount (as
determined by the Lender after deduction of such
reserves and allowances as the Lender deems proper
and necessary) of the Borrower's Eligible Accounts
Receivable (such dollar amount, as adjusted from time
to time, is hereinafter called the "Accounts
Receivable Availability Sublimit"); plus
(ii) an amount (the "Inventory Availability")
of up to the lesser of
<PAGE>
<PAGE>
(1) $5,600,000 or (2)(x) 60% of the net value (the
lower of the cost, determined on a first in first out
basis, or market value) of the finished goods and raw
materials components of Borrower's Eligible
Inventory, as determined by the Lender after
deduction of such reserves and allowances as the
Lender deems proper and necessary, plus (y) 60% of
the net value (the lower of the cost, determined on a
first in first out basis, or market value) of the
finished goods and raw materials components of
Borrower's Costs, as determined by the Lender after
deduction of such reserves and allowances as the
Lender deems proper and necessary (and after
deduction of any amount included in the Borrower's
Costs which represents labor or overhead), plus (z)
15% of the net value (the lower of the cost,
determined on a first in first out basis, or market
value) of the materials component of the
work-in-process component of the Borrower's Inventory
and Costs (which materials component is identified as
the "total material cost" included in the actual
costs incurred for all jobs in progress, as shown on
the Borrower's job status report prepared at the end
of each month), as determined by the Lender after
deduction of such reserves and allowances as the
Lender deems proper and necessary (and after
deduction of any amount included in the Borrower's
Costs which represents labor or overhead), as
adjusted as hereafter provided in Section 2.2(b)
hereof (such dollar amount, as adjusted from time to
time, is hereinafter called the "Inventory
Availability Sublimit"); plus
(iii) an amount (the "Equipment
Availability") of up to the lesser of (1) 100% of the
forced liquidation value (as determined by the Lender
after deduction of such reserves and allowances as
the Lender deems proper and necessary) of the
Borrower's now owned Eligible Equipment or (2)
$1,364,800 as adjusted as hereafter provided in
Section 2.2(b) hereof (such dollar amount, as
adjusted from time to time, is herein called the
"Equipment Availability Sublimit").
(b) AVAILABILITY ADJUSTMENTS.
(i) Inventory. On December 31, 1997, the
Inventory Availability Sublimit shall increase to
$6,600,000.
(ii) Equipment. On September 1, 1996, the
Equipment Availability Sublimit shall reduce to the
lesser of (i) 80% of the forced liquidation value (as
determined by the Lender after deduction of such
reserves and allowances as the Lender deems proper
and necessary) of the Borrower's now owned Eligible
Equipment or $1,091,840. On the fifteenth day of each
month beginning September 15, 1996, the Equipment
Availability Sublimit shall further reduce by one
thirty-sixth (1/36) of the amount of the Equipment
Availability Sublimit on September 1, 1996, until the
Equipment Availability Sublimit is zero unless the
Lender, in its sole discretion, agrees to adjust or
terminate
2
<PAGE>
<PAGE>
such reductions.
2.3 LETTER OF CREDIT SUBLIMIT. The term "Letter of Credit
Sublimit" shall mean $500,000.
2.4 TERMINATION DATE. The term "Termination Date" shall mean
February 28, 2000.
2.5 TERM LOAN AVAILABILITY. The term "Term Loan Availability"
shall mean, initially, an amount of up to the lesser of (1) 80% of the
lower of the cost or the forced liquidation value (as determined by the
Lender after deduction of such reserves and allowances as the Lender
deems proper and necessary) of the Borrower's hereafter acquired
Eligible Equipment or (2) $2,960,000.
2.6 ADDITIONAL TERM LOAN AVAILABILITY. The term "Additional
Term Loan Availability" shall mean an amount of up to the lesser of (1)
80% of the lower of the cost or the forced liquidation value (as
determined by the Lender after deduction of such reserves and
allowances as the Lender deems proper and necessary) of the Borrower's
hereafter acquired Eligible Equipment or (2) $1,500,000.
2.7 ADDITIONAL DEFINITIONS. As used herein, the following
terms shall have the following respective meanings:
"Adjusted Eurodollar Rate": With respect to each
Interest Period applicable to a Eurodollar Rate Advance, the
rate (rounded upward, if necessary, to the next one hundredth
of one percent) determined by dividing the Eurodollar Rate for
such Interest Period by 1.00 minus the Eurodollar Reserve
Percentage.
"Advance": Any portion of the outstanding principal
balance of the Revolving Loans as to which the Borrower
elected one of the available interest rate options and, if
applicable, an Interest Period. An Advance may be a Eurodollar
Rate Advance or a Reference Rate Advance.
"Applicable Margin": The term "Applicable Margin"
shall mean: (1) the Initial Applicable Margin through February
29, 1996 and thereafter if the Cash Flow Leverage Ratio (as
described in Section 9.2 below) is greater than or equal to
2.5:1 but less than or equal to 3.25:1 at the end of the
fiscal quarter then ended (beginning with the fiscal quarter
ending February 29, 1996); (2) the Reduced Applicable Margin
if the Cash Flow Leverage Ratio (as described in Section 9.2
below) is less than 2.5:1 at the end of the fiscal quarter
then ended (beginning with the fiscal quarter ending February
29, 1996); and (3) the Increased Applicable Margin if the Cash
Flow Leverage Ratio (as described in Section 9.2 below) is
greater than 3.25:1 at the end of the fiscal quarter then
ended (beginning with the fiscal quarter ending February 29,
1996). As used in this definition, the following terms shall
have the following respective meanings:
3
<PAGE>
<PAGE>
"Increased Applicable Margin": With respect to:
(a) Reference Rate Advances -- 1.0%,
(b) Eurodollar Rate Advances -- 3.5%.
"Initial Applicable Margin": With respect to:
(a) Reference Rate Advances -- 0.5%,
(b) Eurodollar Rate Advances -- 3.0%.
"Reduced Applicable Margin": With respect to:
(a) Reference Rate Advances -- 0.%,
(b) Eurodollar Rate Advances -- 2.5%.
"Board": The Board of Governors of the Federal
Reserve System or any successor thereto.
"Domestic Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board for determining the maximum
reserve requirement (including without limitation, any basic,
supplemental or emergency reserves) for a member bank of the
Federal Reserve System, with deposits comparable in amount to
those held by FBNA, in respect of new non-personal time
deposits in dollars having a maturity comparable to the then
remaining term of the Term Loan and in an amount of $100,000
or more. The rate of interest applicable to the Term Loan
shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Eurodollar Business Day": A Business Day which is
also a day for trading by and between Lenders in United States
dollar deposits in the interbank Eurodollar market and a day
on which banks are open for business in New York City.
"Eurodollar Rate": With respect to each Interest
Period applicable to a Eurodollar Rate Advance, the interest
rate per annum (rounded upward, if necessary, to the next
one-sixteenth of one percent) at which United States dollar
deposits are offered to the Lender in the interbank Eurodollar
market two Eurodollar Business Days prior to the first day of
such Interest Period for delivery in Immediately Available
Funds on the first day of such Interest Period and in an
amount approximately equal to the Advance to which such
Interest Period is to apply as determined by the Lender and
for a maturity comparable to the Interest Period; provided,
that in lieu of determining the rate in the foregoing manner,
the Lender may substitute the per annum Eurodollar interest
rate
4
<PAGE>
<PAGE>
(LIBOR) for United States dollars displayed on the Reuters
Screen LIBO Page two Eurodollar Business Days prior to the
first day of the Interest Period. "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuter
Monitor Money Rates Screen (or such other page as may replace
the LIBO page on that service) for the purpose of displaying
London Interbank offered rates of major Lenders for United
States dollar deposits.
"Eurodollar Rate Advance": An Advance with respect to
which the interest rate is determined by reference to the
Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage": As of any day, that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board for determining the maximum
reserve requirement (including any basic, supplemental or
emergency reserves) for a member Lender of the Federal Reserve
System, with deposits comparable in amount to those held by
the Lender, in respect of "Eurocurrency Liabilities" as such
term is defined in Regulation D of the Board. The rate of
interest applicable to any outstanding Eurodollar Rate
Advances shall be adjusted automatically on and as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Interest Period": With respect to each Eurodollar
Rate Advance, the period commencing on the date of such
Advance or on the last day of the immediately preceding
Interest Period, if any, applicable to an outstanding Advance
and ending one, two, three or six months thereafter, as the
Borrower may elect in the applicable notice of borrowing,
continuation or conversion; provided that:
(1) Any Interest Period that would otherwise
end on a day which is not a Eurodollar Business Day
shall be extended to the next succeeding Eurodollar
Business Day unless such Eurodollar Business Day
falls in another calendar month, in which case such
Interest Period shall end on the next preceding
Eurodollar Business Day;
(2) Any Interest Period that begins on the
last Eurodollar Business Day of a calendar month (or
a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day
of a calendar month; and
(3) Any Interest Period that would otherwise
end after the Termination Date shall end on the
Termination Date.
"Reference Rate Advance": An Advance with respect to
which the interest rate is determined by reference to the
Reference Rate.
"Regulatory Change": Any change after the date of the
Credit Agreement in federal, state or foreign laws or
regulations or the adoption or
5
<PAGE>
<PAGE>
making after such date of any interpretations, directives or
requests applying to a class of Lenders including the Lender
under any federal, state or foreign laws or regulations
(whether or not having the force of law) by any court or
governmental or monetary authority charged with the
interpretation or administration thereof.
3. REVOLVING LOANS.
3.1 PROCEDURE FOR ADVANCES. Any request for an Advance must be
given so as to be received by the Lender not later than 1:00 p.m.
(Minneapolis time) two Eurodollar Business Days prior to the date of
the requested Advance if the Advance is requested as a Eurodollar Rate
Advance and not later than 1:00 p.m. on the date of the requested
Advance if the Advance is requested as a Reference Rate Advance. Each
request for an Advance shall specify (i) the date of the Advance, (ii)
the amount of the Advance to be made on such date which shall be in a
minimum amount of $500,000 for Eurodollar Rate Advances or, if more in
the case of Eurodollar Rate Advances, an integral multiple of $500,000,
(iii) whether such Advance is to be funded as a Reference Rate Advance
or a Eurodollar Rate Advance, and (iv) in the case of a Eurodollar Rate
Advance, the duration of the initial Interest Period applicable
thereto.
3.2 CONVERSIONS AND CONTINUATIONS. On the terms and subject to
the limitations hereof, the Borrower shall have the option at any time
and from time to time to convert all or any portion of the Advances
into Reference Rate Advances or Eurodollar Rate Advances, or to
continue a Eurodollar Rate Advance as such; provided, however that a
Eurodollar Rate Advance may be converted or continued only on the last
day of the Interest Period applicable thereto and no Advance may be
converted or continued as a Eurodollar Rate Advance if a Default or
Event of Default has occurred and is continuing on the proposed date of
continuation or conversion. Advances may be converted to, or continued
as, Eurodollar Rate Advances only in amounts of $500,000 or an integral
multiple thereof. The Borrower shall give the Lender written notice of
any continuation or conversion of any Advance and such notice must be
given so as to be received by the Lender not later than 3:00 p.m.
(Minneapolis time) two Eurodollar Business Days prior to requested date
of conversion or continuation in the case of the continuation of, or
conversion to, a Eurodollar Rate Advance. Each such notice shall
specify (a) the amount to be continued or converted, (b) the date for
the continuation or conversion (which must be (i) the last day of the
preceding Interest Period for any continuation or conversion of
Eurodollar Rate Advances, and (ii) a Eurodollar Business Day), and (c)
in the case of conversions to or continuations as Eurodollar Rate
Advances, the Interest Period applicable thereto. Any notice given by
the Borrower under this Section shall be irrevocable. If the Borrower
shall fail to notify the Lender of the continuation of any Eurodollar
Rate Advance within the time required by this Section, such Advance
shall, on the last day of the Interest Period applicable thereto,
automatically be converted into a Reference Rate Advance of the same
principal amount.
3.3 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST.
Interest shall accrue and be payable on the Advances as follows:
6
<PAGE>
<PAGE>
(a) Each Eurodollar Rate Advance shall bear interest
on the unpaid principal amount thereof during the Interest
Period applicable thereto at a rate per annum equal to the sum
of (i) the Adjusted Eurodollar Rate for such Interest Period,
plus (ii) the Applicable Margin.
(b) Each Reference Rate Advance shall bear interest
on the unpaid principal amount thereof at a varying rate per
annum equal to the sum of (i) the Reference Rate, plus (ii)
the Applicable Margin.
(c) Any Advance not paid when due, whether at the
date scheduled therefor or earlier upon acceleration, shall
bear interest until paid in full (i) during the balance of any
Interest Period applicable to such Advance, at a rate per
annum equal to the sum of the rate applicable to such Advance
during such Interest Period plus 2.0%, and (ii) otherwise, at
a rate per annum equal to the sum of (A) the Reference Rate,
plus (B) the Applicable Margin for Reference Rate Advances,
plus (C) 2.0%.
(d) Interest shall be payable (i) with respect to
each Eurodollar Rate Advance having an Interest Period of
three months or less, on the last day of the Interest Period
applicable thereto; (ii) with respect to any Eurodollar Rate
Advance having an Interest Period greater than three months,
on the last day of the Interest Period applicable thereto and
on each day that would have been the last day of the Interest
Period for such Advance had successive Interest Periods of
three months duration been applicable to such Advance; (iii)
with respect to any Reference Rate Advance, on the fifteenth
(15) day of each month beginning January 15, 1996; (iv) with
respect to all Advances, upon any permitted prepayment (on the
amount prepaid); and (v) with respect to all Advances, on the
Termination Date; provided that interest under Section 3.3 (c)
shall be payable on demand.
3.4 OPTIONAL PREPAYMENTS. The Borrower may prepay Reference
Rate Advances, in whole or in part, at any time, without premium or
penalty except in the case of termination or cancellation of the Credit
by the Borrower, in which event a credit termination fee shall be due
and payable in accordance with Section 5.4. Except upon an acceleration
following an Event of Default or upon termination of the Credit in
whole, the Borrower may pay Eurodollar Rate Advances only on the last
day of the Interest Period applicable thereto. Amounts paid (unless
following an acceleration or upon termination of the Credit in whole)
or prepaid on Advances under this Section 3.4 may be reborrowed upon
the terms and subject to the conditions and limitations of the Credit
Agreement.
3.5 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to
the date for determining the Adjusted Eurodollar Rate in respect of the
Interest Period for any Eurodollar Rate Advance, the Lender determines
(which determination shall be conclusive and binding, absent error)
that:
(a) deposits in dollars (in the applicable amount)
are not being
7
<PAGE>
<PAGE>
made available to the Lender in the relevant market for such
Interest Period, or
(b) the Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Lender of funding or
maintaining Eurodollar Rate Advances for such Interest Period,
the Lender shall forthwith give notice to the Borrower of such
determination, whereupon the obligation of the Lender to make or
continue, or to convert any Advances to, Eurodollar Rate Advances, as
the case may be, shall be suspended until the Lender notifies the
Borrower that the circumstances giving rise to such suspension no
longer exist. While any such suspension continues, all further Advances
by the Lender shall be made as Reference Rate Advances. No such
suspension shall affect the interest rate then in effect during the
applicable Interest Period for any Eurodollar Rate Advance outstanding
at the time such suspension is imposed.
3.6 INCREASED COST. If any Regulatory Change:
(a) shall subject the Lender to any tax, duty or
other charge with respect to its Eurodollar Rate Advances, its
obligation to make Eurodollar Rate Advances or shall change
the basis of taxation of payment to the Lender of the
principal of or interest on Eurodollar Rate Advances or any
other amounts due under this Agreement in respect of
Eurodollar Rate Advances or its obligation to make Eurodollar
Rate Advances (except for changes in the rate of tax on the
overall net income of the Lender imposed by the jurisdiction
in which the Lender's principal office is located); or
(b) shall impose, modify or deem applicable any
reserve, special deposit, capital requirement or similar
requirement (including, without limitation, any such
requirement imposed by the Board, but excluding with respect
to any Eurodollar Rate Advance any such requirement to the
extent included in calculating the applicable Adjusted
Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, the Lender or shall impose
on the Lender or on the interbank Eurodollar market any other
condition affecting its Eurodollar Rate Advances or its
obligation to make Eurodollar Rate Advances;
and the result of any of the foregoing is to increase the cost to the
Lender of making or maintaining any Eurodollar Rate Advance, or to
reduce the amount of any sum received or receivable by the Lender under
this Agreement or under the Note, then, within 30 days after demand by
the Lender, the Borrower shall pay to the Lender such additional amount
or amounts as will compensate the Lender for such increased cost or
reduction. The Lender will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will
entitle the Lender to compensation pursuant to this Section. A
certificate of the Lender claiming compensation under this Section,
setting forth the additional amount or amounts to be paid to it
hereunder and stating in reasonable detail the basis for the charge and
the method of computation, shall be conclusive in the absence of error.
In determining
8
<PAGE>
<PAGE>
such amount, the Lender may use any reasonable averaging and
attribution methods. Failure on the part of the Lender to demand
compensation for any increased costs or reduction in amounts received
or receivable with respect to any Interest Period shall not constitute
a waiver of the Lender's rights to demand compensation for any
increased costs or reduction in amounts received or receivable in any
subsequent Interest Period.
3.7 ILLEGALITY. If any Regulatory Change shall make it
unlawful or impossible for the Lender to make, maintain or fund any
Eurodollar Rate Advances, the Lender shall notify the Borrower,
whereupon the obligation of the Lender to make or continue, or to
convert any Advances to, Eurodollar Rate Advances shall be suspended
until the Lender notifies the Borrower that the circumstances giving
rise to such suspension no longer exist. If the Lender determines that
it may not lawfully continue to maintain any Eurodollar Rate Advances
to the end of the applicable Interest Periods, all of the affected
Advances shall be automatically converted to Reference Rate Advances as
of the date of the Lender's notice, and upon such conversion the
Borrower shall indemnify the Lender in accordance with Section 3.8.
3.8 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower
shall compensate the Lender, upon its written request, for all losses,
expenses and liabilities (including any interest paid by the Lender to
lenders of funds borrowed by it to make or carry Eurodollar Rate
Advances to the extent not recovered by the Lender in connection with
the re-employment of such funds and including loss of anticipated
profits) which the Lender may sustain: (i) if for any reason, other
than a default by the Lender, a funding of a Eurodollar Rate Advance
does not occur on the date specified therefor in the Borrower's request
or notice as to such Advance under Section 3.1 or 3.2, or (ii) if, for
whatever reason (including, but not limited to, acceleration of the
maturity of Advances following an Event of Default), any repayment of a
Eurodollar Rate Advance, or a conversion pursuant to Section 3.7,
occurs on any day other than the last day of the Interest Period
applicable thereto. The Lender's request for compensation shall set
forth the basis for the amount requested and shall be final, conclusive
and binding, absent error.
3.9 DISCRETION OF LENDER AS TO MANNER OF FUNDING. The Lender
shall be entitled to fund and maintain its funding of Eurodollar Rate
Advances in any manner it may elect, it being understood, however, that
for the purposes of this Agreement all determinations hereunder
(including, but not limited to, determinations under Section 3.8, but
excluding determinations that the Lender may elect to make from the
Telerate System, Inc. screen) shall be made as if the Lender had
actually funded and maintained each Eurodollar Rate Advance during the
Interest Period for such Advance through the purchase of deposits
having a maturity corresponding to the last day of the Interest Period
and bearing an interest rate equal to the Eurodollar Rate for such
Interest Period.
3.10 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over
Advances shall bear interest at the rate(s) determined pursuant to
Section 2.7 or Section 2.8 of the Credit Agreement, as applicable.
9
<PAGE>
<PAGE>
4. TERM LOAN AND ADDITIONAL TERM LOAN.
4.1 PROCEDURE FOR TERM LOAN AND ADDITIONAL TERM LOAN ADVANCES.
Any request for an advance under the Term Loan or the Additional Term
Loan must be given so as to be received by the Lender not later than
1:00 p.m. (Minneapolis time) on the date of the requested advance. Each
request for a Term Loan or Additional Term Loan advance shall: (i)
specify the date of the advance, (ii) specify the amount of the advance
to be made on such date which shall be in a minimum amount of $25,000,
and (iii) be accompanied by evidence satisfactory to the Lender as to
the purchase price or value of Eligible Equipment hereafter acquired by
the Borrower.
4.2 INTEREST. The unpaid principal balance of the Term Loan
and the Additional Term Loan shall bear interest to maturity at the
Reference Rate in effect from time to time plus 0.75% per annum.
4.3 PAYMENTS. Interest on the Term Loan and the Additional
Term Loan shall be due and payable in arrears on the first (1st) day of
each month for interest then accrued. No principal shall be due and
payable on the Term Loan until September 15, 1996. Commencing on
September 15, 1996, the Borrower shall pay on the fifteenth (15th) day
of each month, one forty-eighth (1/48) of the outstanding principal
balance of the Term Loan on September 1, 1996. The principal of the
Additional Term Loan shall be payable as set forth in Section 2.1.3 (b)
of the Credit Agreement.
4.4 PREPAYMENTS. The Term Loan and the Additional Term Loan
may be prepaid in whole or in part at any time without premium or
penalty.
5. FEES.
5.1 FACILITY FEE. The Borrower shall pay to the Lender on the
Closing Date a facility fee of $32,400.
5.2 NON-USE FEE. The Borrower shall pay to the Lender a
non-use fee for the period from the earlier to occur of the Closing
Date or December 29, 1995 to the date the Credit terminates in an
amount equal to 0.25% per annum on the average daily Unused Revolving
Credit Amount, which non-use fee shall be payable quarterly in arrears
on the first (1st) day of the month following the close of each
quarter, beginning with the quarter ending March 31, 1996.
5.3 LETTER OF CREDIT FEES. The Borrower shall pay the Lender,
or any Affiliate, a commission on the undrawn amount of each Letter of
Credit and on each L/C Draft accepted by the Lender, or such Affiliate,
in an amount equal to 2.0% per annum for a stand-by Letter of Credit or
1.5% for a documentary Letter of Credit.
5.4 CREDIT TERMINATION FEE. Upon termination or cancellation
of the Credit by the Borrower, the Borrower shall pay to the Lender a
termination fee in an amount equal to (a) two percent (2%) of the
Revolving Credit Amount in the event that
10
<PAGE>
<PAGE>
the Credit is terminated or canceled by the Borrower during the period
from the date hereof through the two year anniversary of such date, and
(b) one percent (1%) of the Revolving Credit Amount thereafter,
provided, however, that no termination fee shall be due or payable for
six (6) months after the Lender has demanded from the Borrower such
amount or amounts as will compensate the Lender for increased capital
requirements as set forth in Section 10.3 of the Credit Agreement.
6. ELIGIBLE ACCOUNT RECEIVABLE REQUIREMENTS. The Account Receivable
must not be unpaid on the date that is 91 days after the date of the invoice
evidencing such Account Receivable. If invoices representing 10% or more of the
unpaid amount of all Accounts Receivable from any one Account Debtor are unpaid
more than 90 days after the dates of such invoices, then all Accounts Receivable
relating to such Account Debtor shall cease to be Eligible Accounts Receivable.
Accounts Receivable owed by Jack B. Kelley, Inc. and/or ALT USA or any affiliate
of either and which together or separately exceed more than forty percent (40%)
of the aggregate amount of all Accounts Receivable, shall not be deemed Eligible
Accounts Receivable.
7. ELIGIBLE INVENTORY REQUIREMENTS. None other than as stated in the
Credit Agreement.
8. ELIGIBLE EQUIPMENT REQUIREMENTS. Only Equipment to be used directly
in the Borrower's manufacturing operations shall constitute Eligible Equipment
Without limiting the generality of the foregoing, office Equipment shall not
constitute Eligible Equipment.
9. ADDITIONAL COVENANTS. From the date of the Credit Agreement and
thereafter until all of the Borrower's Obligations under the Credit Agreement
are paid in full, the Borrower agrees that, unless the Lender shall otherwise
consent in writing, it will not do any of the following:
9.1 BOOK NET WORTH. Permit the consolidated Book Net Worth of
the Borrower to be less than $10,750,000 at any time during the
Borrower's 1996 fiscal year. Permit the consolidated Book Net Worth of
the Borrower at any time during the Borrower's 1997 fiscal year to be
less than $10,750,000 plus 50% of the Borrower's 1996 consolidated net
income after taxes plus 100% of all other equity increases during the
Borrower's 1996 fiscal year (without reduction for net losses or for
other equity decreases during the Borrower's 1996 fiscal year). Permit
the consolidated Book Net Worth of the Borrower at any time during the
Borrower's 1998 fiscal year to be less than $10,750,000 plus 50% of the
Borrower's 1996 and 1997 consolidated net income after taxes plus 100%
of all other equity increases during the Borrower's 1996 and 1997
fiscal years (without reduction for net losses or for other equity
decreases during the Borrower's 1996 or 1997 fiscal years). Permit the
consolidated Book Net Worth of the Borrower at any time during the
Borrower's 1999 fiscal year to be less than $10,750,000 plus 50% of the
Borrower's 1996, 1997 and 1998 consolidated net income after taxes plus
100% of all other equity increases during the Borrower's 1996, 1997 and
1998 fiscal years (without reduction for net losses or for other equity
decreases during the Borrower's 1996, 1997 or 1998 fiscal years).
Permit the consolidated Book Net Worth of the Borrower at any time
during the Borrower's fiscal
11
<PAGE>
<PAGE>
year 2000 to be less than $10,750,000 plus 50% of the Borrower's 1996,
1997, 1998 and 1999 consolidated net income after taxes plus 100% of
all other equity increases during the Borrower's 1996, 1997, 1998 and
1999 fiscal years (without redution for net losses or for other equity
decreases during the Borrower's 1996, 1997, 1998 or 1999 fiscal years).
9.2 CASH FLOW LEVERAGE RATIO. Permit the ratio, as of the last
day of any fiscal quarter, of the consolidated interest bearing debt of
the Borrower, to the consolidated EBITDA of the Borrower during the
four consecutive fiscal quarters then ending, to exceed 3.5:1.
9.3 FIXED CHARGE COVERAGE RATIO. Permit the ratio, as of the
last day of any fiscal quarter, of the consolidated EBITDA of the
Borrower during the four consecutive fiscal quarters then ending, to
the sum of their consolidated unfinanced capital expenditures, cash
taxes, interest payments, dividends and mandatory debt retirement
payments during the four consecutive fiscal quarters then ending, to be
less than: (a) 1.1:1 through August 31, 1996; (b) 1.15:1 thereafter
through November 30, 1996; (c) .7:1 thereafter through February 28,
1997; (d) .90:1 thereafter through May 31, 1997; (e) 1.0:1 thereafter
through August 31, 1997; (f) 1.15:1 thereafter through August 31, 1998;
and (g) 1.2:1 thereafter.
9.4 CAPITAL EXPENDITURES. Make consolidated Capital
Expenditures and/or acquire the use of property pursuant to operating
leases, if the aggregate amount of such Capital Expenditures, plus the
value of such property to be used pursuant to any such operating lease
exceeds the following amounts for the following periods: (a) $3,700,000
during the 1996 fiscal year, (b) $1,500,000 during the 1997 fiscal
year, (c) $1,800,000 during the 1998 fiscal year or (d) $1,800,000
during the 1999 fiscal year.
Borrower's Initials /s/ JAR
------------------
Borrower's Initials /s/ JAR
------------------
Borrower's Initials /s/ JAR
------------------
Lender's Initials /s/ WCP
------------------
Date As of 4/9/97
------------------
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as...'r'
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE REGISTRANT'S QUARTERLY REPORT ON
FORM 10-Q FOR THE FISCAL QUARTER ENDED
MAY 31, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<PERIOD-TYPE> 3-MOS
<CASH> 426
<SECURITIES> 0
<RECEIVABLES> 4,522
<ALLOWANCES> 12
<INVENTORY> 5,558
<CURRENT-ASSETS> 13,260
<PP&E> 7,594
<DEPRECIATION> 3,810
<TOTAL-ASSETS> 22,464
<CURRENT-LIABILITIES> 3,538
<BONDS> 0
<COMMON> 70
0
1
<OTHER-SE> 11,891
<TOTAL-LIABILITY-AND-EQUITY> 22,464
<SALES> 7,680
<TOTAL-REVENUES> 7,680
<CGS> 6,409
<TOTAL-COSTS> 6,409
<OTHER-EXPENSES> 856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 184
<INCOME-TAX> 68
<INCOME-CONTINUING> 116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<PAGE>
