SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 11, 2002
MFRI, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-18370 36-3922969
(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
7720 LEHIGH AVENUE, NILES, ILLINOIS 60714
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, include area code: (847) 966-1000
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On July 11, 2002, the Registrant completed new financing arrangements (the
"Refinancing") by entering into a secured loan and security agreement with a
financial institution ("Loan Agreement") and secured note purchase agreements
with certain institutional investors ("Note Purchase Agreements"). Under the
terms of the Loan Agreement, which matures on July 10, 2005, the Registrant can
borrow up to $28,000,000, subject to borrowing base and other requirements,
under a revolving line of credit. Interest rates generally are based on options
selected by the Registrant as follows: (a) a margin in effect plus a base rate;
or (b) a margin in effect plus the LIBOR rate for the corresponding interest
period. Letters of credit have been issued in connection with the Loan Agreement
to guarantee amounts owed for other borrowings, property taxes and insurance
premiums. Upon consummation of the Refinancing, the prime rate was 4.75 percent
and the margins added to the prime rate and the LIBOR rate, which are determined
each quarter based on the applicable financial statement ratio, were 1.00 and
3.00 percent respectively. The Registrant borrowed $11,652,659 under the
revolving line of credit at July 11, 2002. The Loan Agreement replaces a
three-year secured credit agreement with a bank which had provided a revolving
line of credit up to $8,000,000 ("Prior Credit Agreement"). Prior to the
consummation of the Refinancing, the Registrant was not in compliance with
certain covenants contained in the Prior Credit Agreement. The bank did not,
however, declare an event of default nor accelerate the indebtedness of the
Registrant. Upon consummation of the Refinancing, the Registrant was in
compliance with all covenants contained in the Loan Agreement.
Under the terms of the Note Purchase Agreements, the Registrant entered
into a five-year $6,000,000 term loan replacing prior term loans with certain
institutional investors which had originally provided for senior notes with an
aggregate original principal balance of $25,000,000 ("Prior Term Loans"). The
outstanding principal balance of the Prior Term Loans at July 11, 2002 was
$16,000,000. Interest rates under the Note Purchase Agreements are 12% per annum
if the outstanding principal is greater than $5,000,000 or 10% per annum if the
outstanding principal is $5,000,000 or less. The Registrant is required to pay
$187,500 in aggregate principal on the last day of March, June, September and
December in each year, commencing on September 30, 2002 and ending on June 30,
2007. In addition, the Registrant is required to make annual prepayments of
excess cash flow (as defined in the Note Purchase Agreements). Finally, the Loan
Agreement and the Note Purchase Agreements permit voluntary prepayments
sufficient to reduce the outstanding term loan principal to $5,000,000 subject
to certain conditions. The Company expects to meet such conditions and make such
prepayments during its current fiscal year, although there is no assurance that
this will be accomplished. Prior to the consummation of the Refinancing, the
Registrant was not in compliance with certain financial covenants contained in
the note purchase agreements relating to the Prior Term Loans. The institutional
investors did not declare an event of default nor did they accelerate the
indebtedness of the Registrant under the Term Loans. The Note Purchase
Agreements do, however, contain a waiver for prior non-compliance. Upon
consummation of the Refinancing, the Registrant was in compliance with all
covenants contained in the Note Purchase Agreement.
The Registrant pledged substantially all of its assets pursuant to the
terms of each of the Loan Agreement and the Note Purchase Agreements. The
Registrant believes the Refinancing will address its existing capital needs.
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 hereunto duly authorized.
MFRI, INC.
(Registrant)
Date: JULY 17, 2002 By: __________________________________
Michael D. Bennett
Vice President