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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - May 31, 1996
Bio-Dyne Corporation
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(Exact name of registrant as specified in its charter)
Georgia 0-19562 58-1865733
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(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
5400 Bucknell Drive, SW
Atlanta, GA 30336
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (404) 346-3100
- ------------------------------ ---------------------
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Item 1. CHANGES IN CONTROL OF REGISTRANT
On May 23, 1996, Registrant entered into a two year, $1,000,000
Revolving Credit Agreement with Continental American Transportation,
Inc. (Lender). The Agreement calls for Loans to Registrant up to
$1,000,000 in aggregate principal amount at any one time, with
interest on the outstanding balance at 12% per annum, payable
quarterly. Registrant can prepay any part of the outstanding balance
at any time with no prepayment penalty, with the full outstanding
balance due on the termination date two years from May 23, 1996.
Lender is obligated to provide funds five business days after so
requested by Registrant.
The Agreement provides for an Initial Advance of $300,000, which was
made on May 23, 1996, and a Subsequent Advance of $150,000, which was
made on May 31, 1996. Concurrent with the Subsequent Advance on May
31, 1996, five members of the Registrant's seven member Board of
Directors resigned, namely Edward B. Beam, Jr., Edward B. Beam, Sr.,
L. Clark Brand, William C. Buck and Harvey Miller. Edward B. Beam,
Jr. also resigned as Chairman, President, Chief Executive Officer and
Chief Operating Officer, and Harvey Miller also resigned as Executive
Vice President, Chief Financial Officer, Chief Accounting Officer,
Secretary and Treasurer. David H. York, who remains as a Director,
resigned as Assistant Secretary and Assistant Treasurer.
In accordance with the Registrant's by-laws, the two remaining Board
members appointed three new Board members, namely Timothy Holstein to
fill the Board seat vacated by Edward B. Beam, Sr. as a Class A
director and to serve the remainder of his term until the 1998 Annual
Meeting, Erik Bailey to fill the Board seat vacated by William A. Buck
as a Class A director and to serve the remainder of his term until the
1998 Annual Meeting, and Brian Henninger to fill the Board seat
vacated by Harvey Miller as a Class C Director to serve the remainder
of his term until the 1997 Annual Meeting. The remaining two Board
seats remain vacant. In addition, the Board appointed Timothy Holstein
as Chairman and Chief Executive Officer, Erik Bailey as Chief
Financial Officer and Brian Henninger as Secretary and Treasurer of
the Registrant. The three new officers hold similar positions as
directors and officers of the Lender.
Neither the Lender nor any of the new directors and officers have any
beneficial ownership in the Registrant's capital stock.
Edward B. Beam, Jr. and Harvey Miller entered into amendments to their
Employment Agreements on May 31, 1996, the date of the Subsequent
Advance and of their resignations as directors and officers of the
Registrant. The amendments provide for the termination date of each
agreement to be changed to November 30, 1996, from April 18, 1997,
salary of each to be increased to $15,000 per month from $12,500 per
month, and
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provides that each employee must continue full time activities for the
Registrant until June 30, 1996. In addition, both Mr. Beam Jr. and
Mr. Miller entered into Amendments to Non-Qualified Stock Option
Agreements on May 31, 1996 under the April 1994 Stock Option Plan of
the Registrant, which allows both to exercise their previously granted
stock options for 36 months from May 31, 1996. Mr. Beam, Jr. holds a
grant for 100,000 stock options and Mr. Miller holds a grant for
250,000 stock options.
The Revolving Credit Agreement is secured by, among other things,
secondary security interests in all the assets of Registrant's five
wholly owned subsidiaries. In addition, Registrant assigned to the
Lender its interest in an existing UCC filing on the assets of
Carolina Fitness Equipment, Inc. (a North Carolina corporation) (CFE),
a wholly owned subsidiary of the Registrant, which was granted to the
Registrant to secure a $250,000 advance made to CFE as part of its
1994 bankruptcy.
The Revolving Credit Agreement required that half of the $450,000
Initial and Subsequent Advances be used to pay down the outstanding
balance of the debt due to Edward B. Beam, Sr. and Carolyn M. Beam,
and Edward B. Beam, Jr. (the Beam notes), leaving a aggregate balance
due of $72,293 at May 31, 1996 on the Beam notes after the payments.
On May 31, 1996, Registrant entered into amendments to the Beam notes
providing that they are due and payable in full on July 1, 1996. Upon
payment in full, the Beams will cancel their current security interest
in the assets of Home Fitness Studios, Inc. (a Florida corporation),
and its two subsidiaries, which are wholly owned subsidiaries of
Registrant, leaving the Lender will sole security rights.
Item 7. EXHIBITS
(a) $1,000,000 Revolving Credit Agreement between Bio-Dyne Corporation
and Continental American Transportation, Inc., dated May 23, 1996.
(b) Promissory Note between Bio-Dyne Corporation and Continental American
Transportation, Inc., dated May 23, 1996.
(c) Security Agreement between Bio-Dyne North Corporation, Carolina
Fitness Equipment, Inc., Home Fitness Studios, Inc., Home Fitness
Studio of Florida, Inc., Home Fitness Studios North, Inc. and
Continental American Transportation, Inc., dated May 23, 1996.
(d) Amendment to Promissory Note between Bio-Dyne Corporation and Edward
B. Beam, Sr. and Carolyn M. Beam, dated May 31, 1996.
(e) Amendment to Promissory Note between Bio-Dyne Corporation and Edward
B. Beam, Jr., dated May 31, 1996.
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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.
Bio-Dyne Corporation
--------------------
(Registrant)
Dated: June 14, 1996 By: /s/ Erik Bailey
----------------
Erik Bailey
Chief Financial Officer
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-----------------
EXHIBIT VOLUME
TO
FORM 8-K
-----------------
BIO-DYNE CORPORATION
(Name of small business issuer in its charter)
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INDEX
Exhibit Name
Exhibit
Number
(a) $1,000,000 Revolving Credit Agreement between Bio-Dyne Corporation and
Continental American Transportation, Inc., dated May 23, 1996.
(b) Promissory Note between Bio-Dyne Corporation and Continental American
Transportation, Inc., dated May 23, 1996.
(c) Security Agreement between Bio-Dyne North Corporation, Carolina Fitness
Equipment, Inc., Home Fitness Studios, Inc., Home Fitness Studio of
Florida, Inc., Home Fitness Studios North, Inc. and Continental American
Transportation, Inc., dated May 23, 1996.
(d) Amendment to Promissory Note between Bio-Dyne Corporation and
Edward B. Beam, Sr. and Carolyn M. Beam, dated May 31, 1996.
(e) Amendment to Promissory Note between Bio-Dyne Corporation and
Edward B. Beam, Jr., dated May 31, 1996.
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EXHIBIT A
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$1,000,000
REVOLVING CREDIT AGREEMENT
between
BIO-DYNE CORPORATION
and
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Dated May 23, 1996
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REVOLVING CREDIT AGREEMENT
THIS AGREEMENT is made as of May 23, 1996, by and between Bio-Dyne
Corporation, a Georgia corporation (the "Borrower"), and Continental
American Transportation, Inc., a Colorado corporation (the "Lender").
SECTION 1. DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms
have the respective meanings set forth below:
"Affiliate" of a Person shall mean any Person controlling, controlled by,
or under common control with, such person.
"Bankruptcy Law" shall mean Title 11 of the U.S. Code, as in effect from
time to time, or any similar Federal or state law for the relief of
debtors.
"Borrowing Date" shall mean the date of any borrowing by the Borrower
pursuant hereto.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close in
New York City.
"Debt" shall mean any indebtedness, contingent or otherwise, of the
Borrower, including, without limitation, (i) indebtedness evidenced by
guarantees or in effect guarantees by the Borrower of Debt of any other
Person, (ii) indebtedness evidenced by notes, debentures, bonds or
similar instruments or letters of credit, (iii) indebtedness representing
the deferred and unpaid balance of the purchase price of any property or
interest therein and obligations of the Borrower under any agreement to
lease, or lease of, any real or personal property in each case which, in
accordance with generally accepted accounting principles then in effect,
appears as a liability upon a balance sheet of the Borrower, and (iv)
obligations of the Borrower under interest rate swaps, caps, collars,
calls and similar arrangements, and
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foreign currency hedges entered into in respect of any indebtedness or
obligations.
"Default" shall mean any event which, with the giving of notice or lapse
of time or both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Environmental Law" means any and all present and future federal, state,
local and statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, grants, franchises, licenses or agreements
relating to (a) the protection of the environment, health or workers
safety; (b) pollution or environmental contamination; or (c) the use,
processing, distribution, generation, treatment, storage, recycling,
transportation, disposal, handling, Release or threatened or potential
Release of any Material of Environmental Concern.
"Event of Default" shall have the meaning assigned to it in Section 7.1.
"Governmental or Regulatory Body" means any government or political
subdivision thereof, whether federal, state, county, local or foreign, or
any agency, authority or instrumentality of any such government or
political subdivision.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect
of any of the foregoing).
"Loan" shall have the meaning assigned to it in Section 2.1.
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"Loan Commitment" shall have the meaning assigned to it in Section 2.1.
"Loan Commitment Period" shall mean the period from the date hereof
through the Termination Date.
"Material Adverse Effect" or "Material Adverse Change" means any change
or changes or effect or effects that individually or in the aggregate are
or may reasonably be expected to be materially adverse to (a) the
business or the assets, operations, income, prospects or conditions
(financial or otherwise) of the Borrower or its Subsidiaries or (b) the
ability of the Borrower to perform its obligations under this Agreement.
"Material of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous, petroleum or petroleum
products.
"Note" shall have the meaning assigned to it in Section 2.2.
"Person" shall mean an individual, a corporation, a partnership, a joint
venture, a firm, an enterprise, a trust, an unincorporated organization,
a government or any agency or political subdivision thereof.
"Plan" means any plan, fund, program, understanding, policy, arrangement,
contract or commitment, whether qualified or not qualified for federal
income tax purposes, whether formal or informal, whether for the benefit
of a single individual or more than one individual, which is in the
nature of (a) an employee pension benefit plan (as defined in ERISA ss.
3(2)) (b) an employee welfare benefit plan (as defined in ERISA ss. 3(1))
or (c) an incentive, deferred compensation, or other benefit arrangement
for employees, former employees, their dependents or their beneficiaries.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment.
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"Tax" or "Taxes" mean all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign Taxing
Authority, including, without limitation, gross income, gross receipts,
income, capital, excise, property (tangible and intangible), sales,
transfer, value added, employment, payroll and franchise taxes and such
terms shall include any interest, penalties or additions attributable to
or imposed on or with respect to such assessments.
"Termination Date" shall mean the date falling 2 years following the date
hereof.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS
2.1 The Loan Commitment. Subject to the terms and conditions of
this Agreement, the Lender agrees to make revolving credit loans
(individually, a "Loan"; collectively, the "Loans") to the Borrower from
time to time during the Loan Commitment Period in an aggregate principal
amount at any one time outstanding not to exceed $1,000,000(the "Loan
Commitment").
2.2 The Note. The Loans made by the Lender shall be evidenced by
a promissory note of the Borrower substantially in the form of Exhibit A,
with appropriate insertions, which shall be payable to the order of the
Lender and shall represent the obligation of the Borrower to pay the
amount of the Loan or, if less, the aggregate unpaid principal amount of
all Loans made by the Lender, with interest thereon as prescribed in
Section 2.5. The date and amount of each Loan made by the Lender and each
payment of principal with respect thereto may be endorsed by the Lender
on the schedule annexed to and constituting a part of the Note, which
endorsement, absent manifest error, shall constitute prima facie evidence
of the accuracy of the information endorsed. The Note shall (a) be dated
the date hereof, (b) be stated to mature on the Termination Date and (c)
bear interest for the period from the date hereof until paid in full on
the unpaid principal amount thereof from time to time outstanding at the
rates prescribed in Section 2.5.
2.3 Procedure for Borrowing Under Loan Commitment. Except with
respect to the Initial Advance (as hereinafter
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defined) and the Subsequent Advance (as hereinafter defined), the
Borrower may borrow under the Loan Commitment at any time during the Loan
Commitment Period following the date of the Subsequent Advance, provided
that the Borrower shall give the Lender irrevocable notice at least five
(5) Business Days prior to the requested Borrowing Date, specifying (i)
the requested Borrowing Date (which shall be a Business Day) and (ii) the
amount of the requested borrowing. Not later than 12:00 noon, New York
time, on the date specified in such notice from the Borrower, the Lender
shall make available to the Borrower at such account of the Borrower as
the same may designate from time to time, in immediately available funds,
the amount to be then loaned by it.
2.4 Optional Prepayment The Borrower may, at its option, prepay
the Note without premium or penalty, in whole or in part, upon at least
two Business Day's prior notice to the Lender, specifying the date and
amount of prepayment. Such notice shall be irrevocable and the payment
amount specified in such notice shall be due and payable on the date
specified.
2.5 Interest Rates. (a) The Loans shall bear interest
(calculated on the basis of a 360-day year for the actual number of days
elapsed) on the unpaid principal amount thereof at a rate per annum equal
to 12%, payable quarterly in arrears on the last day of each June,
September, December and March in each year.
(b) If all or a portion of the principal amount of any of the Loans
shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue principal amount shall bear
interest at the rate of 18% per annum, to the extent permitted by law.
2.6 Use of Proceeds. The Borrower covenants that it will apply all of the
proceeds of the Loan for the Borrower's general corporate purposes,
except with respect to the Initial Advance (as hereinafter defined).
2.7 Payment. All payments made by the Borrower to the Lender
shall be made in federal or other immediately available funds in lawful
money of the United States for credit, not later than 12:00 noon, New
York time, on the day when due, or
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in any case by such other reasonable method or at such other address as
the Lender shall have from time to time notified the Borrower.
2.8 Maturity of Loans. The outstanding principal amount of the
Loans shall be due and payable on the Termination Date.
2.9 Initial Advance. The Lender agrees at Closing to advance an
amount equal to $300,000 (the "Initial Advance") to Borrower to be
disbursed in accordance with the terms and conditions of that certain
Escrow Agreement by and among the Borrower, the Lender and Kutak Rock, as
escrow agent, as amended by First Amendment to Escrow Agreement, forms of
which are attached hereto as Exhibit B. As a condition to Lender's making
the Initial Advance, the Borrower has agreed to use a portion of the
Initial Advance to repay $100,000 of that certain promissory note of the
Borrower to Edward and Carol Beam currently in the aggregate amount of
$171,525.66 and to repay $50,000 of that certain promissory note of the
Borrower to Edward Beam, Jr. currently in the aggregate amount of
$122,823.55.
2.10 Subsequent Advance. The Lender agrees to advance an amount
of not less than $150,000 (the "Subsequent Advance") by or before May 31,
1996 (or such other date as agreed upon by the parties) so long as the
Resignations and Appointments (as such terms are hereinafter defined) are
delivered in form and substance satisfactory to Lender, forms of which
have already been approved by Lender. As a condition to Lender's making
the Subsequent Advance, the Borrower has agreed to use a portion of the
Subsequent Advance to repay $37,094.58 of that certain promissory note of
the Borrower to Edward and Carol Beam and to repay $37,905.43 of that
certain promissory note of the Borrower to Edward Beam, Jr.
SECTION 3. COVENANTS
3.1 Payment of Note. The Borrower shall pay the principal of,
and interest on, the Note on the dates and in the manner provided herein
and in the Note.
3.2 Financial and Business Information. The Borrower covenants
and agrees that so long as the Loan Commitment shall
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be in effect or any Debt under the Note shall be outstanding, the
Borrower will deliver to the Lender:
(a) as soon as available, but not later than 120 days after the
close of each fiscal year of the Borrower, the consolidated balance sheet
of the Borrower as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and changes in
financial position of the Borrower for such fiscal year, setting forth in
each case in the comparative form the figures for the previous year,
reported on by independent certified public accountants of nationally
recognized standing selected by the Borrower;
(b) promptly on their becoming available, any such other
financial data, information or reports as from time to time may be
furnished to all stockholders of the Borrower in their capacity as
stockholders.
3.3 Notice of Default. If any one or more events occur which
constitute a Default or an Event of Default, upon obtaining knowledge
thereof, the Borrower will forthwith give notice to the Lender,
specifying the nature and status of the Default or Event of Default.
3.4 Covenants of the Borrower. The Borrower covenants and
agrees that from and after the date hereof to the date of the making of
the Subsequent Advance:
(a) Neither the Borrower nor any of its Subsidiaries will sell,
pledge, encumber, assign or transfer, or enter into any agreement,
commitment, instrument or contract pursuant to which any right, title or
interest may be sold, pledged, encumbered, assigned or transferred in or
to the shares of capital stock of the Borrower or any of its
Subsidiaries.
(b) The Borrower and its Subsidiaries shall continue to conduct
their business and affairs in the ordinary course of business and shall
not enter into any agreement, commitment, instrument or contract or take
any action out of the ordinary course of business, including without
limitation:
(i) Declare, or pay, any dividend or any other distribution with
respect to the capital stock of the Borrower or its Subsidiaries, or
purchase or redeem any of such stock;
(ii) Sell or issue, or enter into any contract, instrument or
agreement pursuant to which the Borrower or its Subsidiaries might be
obligated to sell or issue, any capital stock or any other security;
(iii) Enter into any mortgage, indenture, pledge or other contract,
instrument or agreement, or take, suffer or permit any action to be
taken, as the result of which any lien, claim, charge or encumbrance of
any kind or nature whatsoever would be established or created with
respect to any of the assets of the Borrower or its Subsidiaries;
(iv) Borrow any money, or enter into any contract, commitment or
agreement to borrow any money on behalf of the Borrower or its
Subsidiaries; and
(v) Pay, or enter into any contract, commitment or agreement to pay
any additional compensation, bonus or commission or any benefit of any
kind to any officer, director or consultant of the Borrower and its
Subsidiaries.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
make the Loans hereunder, the Borrower hereby represents and warrants as
follows:
4.1 Organization and Qualification. Each of the Borrower and
its direct and indirect subsidiaries ("Subsidiaries") is a corporation
validly existing and in good standing under the laws of the state of its
incorporation, and has all requisite corporate power and authority to (a)
own, lease and operate its properties and assets as they are now owned,
leased and operated and (b) carry on its business as now presently
conducted and as proposed to be conducted. Each of the Borrower and its
Subsidiaries is duly qualified to do business in each jurisdiction in
which the nature of its business or properties makes such qualification
necessary, except where the failure to do so would not have a Material
Adverse Effect.
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The jurisdictions in which the Borrower and its Subsidiaries are
qualified are set forth on Schedule 4.1.
4.2 Capitalization; Subsidiaries and Affiliates. For each of
the Borrower and its Subsidiaries, if any, Schedule 4.2 sets forth the
par value, number of authorized shares of capital stock and number of
issued and outstanding shares of each class of its capital stock. All of
the issued and outstanding shares of capital stock of each of the
Borrower and its Subsidiaries are duly authorized, validly issued, fully
paid and non-assessable. All of the issued and outstanding shares of the
Borrower and its Subsidiaries are owned of record by the shareholders
attached to Schedule 4.2 as of April 25, 1996. Except for those certain
warrants set forth on the Borrower's SB-2 Registration Statement
effective April 18, 1996 (the "Registration Statement"), there are no
securities outstanding which are exchangeable or exercisable for, or
convertible into shares of capital stock of the Borrower and its
Subsidiaries. Except as set forth on Schedule 4.2, the Borrower has no
subsidiaries nor does any affiliate of the Borrower or any of its
Subsidiaries thereof own any equity interest in any other corporation,
partnership, joint venture or other entity. To the best knowledge of the
Borrower, no officer, director or five percent (5%) or greater
stockholder of the Borrower has been convicted of any felony, securities
law violation or been a party to any agreement, understanding or consent
with any state or federal securities commission or the National
Association of Securities Dealers.
4.3. Validity and Execution of Agreement. The Borrower has the
full legal right, capacity and power and all requisite corporate
authority and approval required to enter into, execute and deliver this
Agreement and any other agreement or instrument contemplated hereby, and
to perform fully its respective obligations hereunder and thereunder.
The board of directors of the Borrower has approved the transactions
contemplated pursuant to this Agreement and each of the other agreements
required to be entered into pursuant hereto by the Borrower. This
Agreement and such other agreements and instruments have been duly
executed and delivered by the Borrower and each constitutes the valid and
binding obligation of the Borrower enforceable against it in accordance
with its terms, subject to the qualifications that enforcement of the
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rights and remedies created hereby is subject to (i)
bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies
of creditors, and (ii) general principals of equity
(regardless of whether such enforcement is considered in a
proceedings in equity or at law).
4.4. No Conflict. Neither the execution and delivery of this
Agreement nor the performance by the Borrower of the transactions
contemplated hereby will violate or conflict with (a) any of the
provisions of the Articles of Incorporation or By-Laws of the Borrower;
(b) or result in the acceleration of, or entitle any party to accelerate
the maturity or the cancellation of the performance of any obligation
under, or result in the creation or imposition of any Lien in or upon the
assets of the Borrower or constitute a default (or an event which might,
with the passage of time or the giving of notice, or both, constitute a
default) under any contract, (c) to the best of Borrower's knowledge, any
order, judgment, regulation or ruling of any Governmental or Regulatory
Body to which the Borrower is a party or by which any of its property or
assets may be bound or affected or to the best of Borrower's knowledge,
with any provision of any law, rule, regulation, order, judgment, or
ruling of any Governmental or Regulatory Body applicable to the Borrower.
4.5 Litigation. Except as disclosed in the Registration
Statement, there are no outstanding orders, judgments, injunctions,
investigations, awards or decrees of any court, Governmental or
Regulatory Body or arbitration tribunal by which the Borrower or its
Subsidiaries, or any of its securities, assets, properties or business is
bound. Except as disclosed in the Registration Statement, there are no
actions, suits, claims, legal, administrative or arbitration proceedings
pending or, to the best knowledge of the Borrower, overtly threatened
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) against or affecting the Borrower or any Affiliate
thereof, or any of its assets or properties, that, individually or in the
aggregate, could, if determined adversely to the Borrower or such
affiliate have a Material Adverse Effect, nor, to the best knowledge of
the Borrower, are there any facts which are likely to give rise to any
such action, suit, claim,
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investigation or legal, administrative or arbitration proceeding.
4.6 The Assets. The Borrower owns outright and has good and
marketable title (except for leasehold interests specifically set forth
on Schedule 4.6 and its assets pledged to Colonial Financial Services, a
Division of First Factors Corporation) to its assets, free and clear of
any Lien. To the best of Borrower's knowledge, the assets reflected on
Borrower's Financial Statements (as hereinafter defined) constitute all
of the assets necessary and appropriate for the conduct of Borrower's
business and the business of its Subsidiaries in substantially the same
manner as its business has heretofore been conducted.
4.7 Intangible Property. No patents, trademarks, service marks,
trade names, copyrights, logos and the like and franchises exist that are
material to the Borrower's business operations.
4.8 Inventory. The inventory of the Borrower and its
Subsidiaries is or was, prior to the sale thereof, in good and
merchantable condition and suitable and usable or saleable in the
ordinary course of business for the purposes for which intended.
Assuming that the Borrower has sufficient funds with which to pay
suppliers, to the best of Borrower's knowledge, the Borrower is not aware
of any material adverse condition affecting the supply of inventory
available to the Borrower and its Subsidiaries.
4.9 Accounts Receivable. All accounts and notes receivable
reflected on the Borrower's Financial Statements, and all accounts and
notes receivable arising subsequent to December 31, 1995, (a) have arisen
in the ordinary course of business of the Borrower, (b) represent valid
obligations due to the Borrower enforceable in accordance with their
terms and (c) except to the extent of the reserves therefor reflected on
the Borrower's Financial Statements, are fully collectible in the
ordinary course of business in the aggregate recorded amounts thereof in
accordance with their terms.
4.10 Financial Statements. The balance sheet of the Borrower
as of December 31, 1995 and the related statements of
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income and cash flow for the 3 and 9 months then ended, including the
footnotes thereto (collectively, the "Financial Statement"), true and
complete copies of which have been delivered to the Lender, will fairly
present the financial position of the Borrower as at such date and for
the period then ended, in accordance with generally accepted accounting
principles as then in effect ("GAAP") consistently applied for the period
covered thereby.
4.11 Undisclosed Liabilities. To the best of Borrower's
knowledge, the Borrower does not have any Liabilities that is not fully
and adequately reflected or reserved against on the Borrower Financial
Statements or covered in full by insurance. To the best of Borrower's
knowledge, the Borrower and its Subsidiaries do not have any, direct or
indirect, indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise (collectively, the "Liabilities"), whether or not
of a kind required by GAAP to be set forth on a financial statement,
other than (a) Liabilities incurred since December 31, 1995 in the
ordinary course of business (none of which is to the best of Borrower's
knowledge a liability for a breach of contract, breach of warranty, tort
or infringement claim or lawsuit), none of which individually or in the
aggregate, to the best of the Borrower's knowledge has had or could
reasonably be expected to have a Material Adverse Effect or (b)
Liabilities disclosed and reflected as liabilities on the Financial
Statements.
4.12 No Material Adverse Change. Except as disclosed in the
Registration Statement and with respect to a diminished cash position,
supplier credit and inventory since April 10, 1996, there has been no
material adverse change in the business, operations or condition
(financial or otherwise) of the Borrower or its Subsidiaries, or in the
assets, liabilities, net worth or properties of the Borrower or its
Subsidiaries, and the Borrower does not know of any such change that is
threatened, or has there been any damage, destruction or loss which could
have a Material Adverse Effect, whether or not covered by insurance.
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4.13 Tax Matters. All Tax Returns required to be filed with
respect to the Borrower have been duly filed and were in all material
respects true, complete and correct and filed on a timely basis, (b) the
Borrower has paid all Taxes that are due, or claimed or asserted by the
IRS or any Taxing Authority to be due from the Borrower for the periods
covered by such Tax Returns or Borrower has duly and fully provided
reserves adequate to pay all Taxes in the Borrower's Financial
Statements, (c) the Borrower has complied in all material respects with
all applicable laws relating to withholding of Taxes (including
withholding Taxes pursuant to Sections 1441 and 1442 of the Internal
Revenue Service Code of 1986, as amended (the "Code") and similar
provisions under any other applicable laws) and the payment thereof over
to the Taxing Authorities (d) insofar as is known to Borrower, the income
Tax Returns of the Borrower have not been audited or examined by any the
Taxing Authority (including the IRS) for any period for which the
applicable statute of limitations period has not yet expired and no
statute of limitations for any such period has been extended.
4.14 Contracts and Other Agreements. Schedules 4.14 and 4.15
sets forth all material written agreements (and, to the best knowledge of
the Borrower, any oral agreement) and arrangements to which either the
Borrower or its Subsidiaries is a party or by or to which the Borrower or
its Subsidiaries or any of their respective assets or properties is bound
or subject and specifically identifies which contracts or arrangements
require the consent of a third party upon a change in control of the
Borrower.
4.15 Real Estate. Schedule 4.15 sets forth a list and supplies
descriptions of (a) all real property owned by the Borrower and its
Subsidiaries; (b) all leases, subleases or other agreements under which
each of the Borrower and its Subsidiaries is lessor or lessee of any real
property; (c) all options held by the Borrower or contractual obligations
on its respective part to purchase or acquire any interest in real
property (as set forth on Schedule 4.15) and (d) all options granted by
the Borrower or contractual obligations on any such Persons' part to sell
or dispose of any interest in real property (as set forth on Schedule
4.15) (collectively, the "Borrower Real Estate Documents"). To the best
of Borrower's
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knowledge, all of the Borrower's Real Estate Documents, true, correct and
complete copies of which have been delivered to the Borrower, are in full
force and effect and the Borrower has not received any notice of any
default thereunder. Except as separately identified on Schedule 4.15, no
approval or consent of any person is needed for the Borrower's Real
Estate Documents to continue to be in full force and effect and such
documents will not become unenforceable by the Borrower following the
consummation of the transactions contemplated by this Agreement.
4.16 Transactions with Affiliates. Except in the ordinary
course of each party's business and as set forth on Schedule 4.16, no
Affiliate of the Borrower or its Subsidiaries has: (a) borrowed money
from or loaned money to the Borrower which remains outstanding; (b) any
contractual or other claim, express or implied, of any kind whatsoever
against or by any Affiliate; (c) any interest in any property or assets
used by any Affiliate in their respective businesses; or (d) engaged in
any other transaction with any Affiliate (other than employment
relationships).
4.17 ERISA. (a) Except as set forth on Schedule 4.17, the
Borrower does not sponsor, or maintain, or have any obligation to
contribute to, or have any liability under, nor is Borrower otherwise a
Party to, any Plan. None of the Plans is a "multiemployer" plan with the
meaning of Section 3(37) of ERISA and none of the Plans is subject to
Title IV of ERISA. Neither the Borrower nor any Affiliate has ever
participated in nor had an obligation to contribute to any "multiemployer
plan" or any plan subject to Title IV of ERISA.
(b) With respect to each Plan, Borrower has delivered to Lender
to the extent applicable, a copy of (i) the plan document as currently in
effect (or a written description of any Plan for which there in no plan
document) and all relevant document related thereto, including but not
limited to all current trust agreements, insurance contracts, investment
management contracts and administrative service contracts, (ii) the most
recent annual reports (Form 5500 Series) filed with the Internal Revenue
Service, together with all schedules, actuarial reports, accountant's
statement and
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trustee reports, and (iii) all IRS determination letters and pending IRS
determination letters.
(c) Each Plan has been maintained, operated and administered in
compliance with its terms and any related documents or agreement and in
compliance with ERISA and the Code.
(d) There are no pending or, to the knowledge of the Borrower,
overtly threatened claims (other than routine claims for benefits),
assessments, complaints, proceedings or investigations of any kind by any
court or governmental agency with respect to any Plan.
(e) No Plan provides benefits, including without limitation,
death or medical benefits (whether or not insured), beyond retirement or
other termination of service other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits or retirement
benefits under any "employee pension plan" as that term is defined in
Section 3 (2) of ERISA, or (ii) deferred compensation benefits accrued as
liabilities on the Unaudited Financials.
(f) Neither a "prohibited transaction" within the meaning of
ERISA Section 406 or Code Section 4975 nor any breach of a duty imposed
by Title I of ERISA has occurred with respect to any Plan.
(h) With respect to each Plan that is a "group health plan"
within the meaning of ERISA Section 607(l) and that is subject to Code
Section 4980B, Borrower and each ERISA Affiliate have complied in all
material respects with the continuation coverage requirements of the Code
and ERISA.
(i) Except as noted on Schedule 3.17, all contributions to, and
payments from, any Plan that may have been required to be made in
accordance with the Plan, or the Code or ERISA, have been timely made.
(j) Neither Borrower nor any ERISA Affiliate has incurred or is
reasonably likely to incur any liability with respect to any plan or
arrangement that would be included in the definition of Plan hereunder
but for the fact that such plan
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or arrangement was terminated before the date of this Agreement.
4.18 Employees. Each of the Borrower and its Subsidiaries is
not a party to, and there does not otherwise exist, any agreements with
any labor organization, collective bargaining or similar agreement with
respect to employees of the Borrower. Schedule 4.18 sets forth the name
and current annual salary, including any bonus, if applicable, of all
present officers and employees of the Borrower and its Subsidiaries whose
current annual salary, including any promised, expected or customary
bonus, equals or exceeds $50,000. All health and health related employee
benefits and other costs have been paid or adequately reserved for on the
Audited Financials. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with its obligations under all
Federal, state, and local statutes and ordinances, executive orders,
regulations and common law governing its employment practices with
respect to the Borrower. To the best knowledge of the Borrower, there
are no attempts being made to organize any employees presently employed
by the Borrower.
4.19 Environmental Matters. To the best of Borrower's knowledge,
(a) each of the Borrower and its Subsidiaries is not in violation of, or
delinquent in respect to, any Environmental Law which violation or
delinquency would have a Material Adverse Effect, and (b) neither the
Borrower nor to the best of Borrower's knowledge any of its Subsidiaries
has received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the
Borrower or any of its Subsidiaries is not in full compliance with the
Environmental Laws, and (c) the Borrower and its Subsidiaries have
obtained all permits, licenses and other authorizations required under
the Environmental Laws, if any, the absence of which would have a
Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
has received any written notice by any Person alleging that Borrower or
to the best of Borrower's knowledge any of its Subsidiaries has or may
have liability, either directly, by contract or by operation of law,
based on or resulting from the presence of, or threatened Release or any
Material of Environmental Concern. To the best of Borrower's
16
<PAGE>
knowledge, there are no present and have been no past Release of any
Material of Environmental Concern that could form the basis of any claim
of liability against the Borrower or any of the Subsidiaries under
Environmental Laws or the common law, which, if decided adversely to the
Borrower or any of its Subsidiaries, would have a Material Adverse
Effect.
4.20 Insurance. Schedule 4.20 sets forth a list and brief
description (specifying the insurer, the policy number or covering note
number with respect to binders and the amount of any deductible,
describing the pending claims if such claims exceed applicable policy
limits, setting forth the aggregate amount paid out under each such
policy through the date hereof and the aggregate limit, if any, of the
insurer's liability thereunder) of all policies or binders of fire,
liability, product liability, workmen's compensation, vehicular,
unemployment and other insurance held by or on behalf of the Borrower.
Such policies and binders are valid and enforceable in accordance with
their terms in all material risks and liabilities to the extent and in
respect of amount, types and risks insured, as are customary in the
industries in which the Borrower operates. The Borrower is not in
default with respect to any material provision contained in any such
policy or binder or has failed to give any notice or present any claim
under any such policy or binder in due and timely fashion. Except for
claims disclosed pursuant to Section 4.5 hereof, to the best of
Borrower's knowledge, there are no outstanding unpaid claims under any
such policy or binder which have gone unpaid for more than forty-five
(45) days or as to which the carrier has disclaimed liability.
4.21 Licenses and Permits. Schedule 4.21 sets forth a list of
the governmental permits, licenses, registrations and other governmental
consents (federal, state and local) which the Borrower and its
Subsidiaries have obtained and which are necessary in connection with
their respective operations and properties, and to the best of Borrower's
knowledge no others are required. All such permits, licenses,
registrations and consents are in full force and effect and in good
standing. The Borrower has not received any written notice of any claim
of revocation or has actual knowledge of any event which might give rise
to such a claim.
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4.22 Compliance with Laws. Each of the Borrower and to the best
of Borrower's knowledge, its Subsidiaries has complied in all respects
with all applicable federal, state and local laws, regulations and
ordinances or any requirement of any Governmental or Regulatory Body,
court or arbitrator affecting the business or the assets of the Borrower
and its Subsidiaries, the failure to comply with which could have a
Material Adverse Effect on the Business or the Assets.
4.23 Products. There are no written statements, citations or
decisions by any Governmental or Regulatory Body that any product
manufactured, marketed or distributed at any time by the Borrower and its
Subsidiaries("Product") is defective or fails to meet in any material
respect any standards promulgated by any such Governmental or Regulatory
Body. There have been no recalls ordered by any such Governmental or
Regulatory Body with respect to any Product. To the best of Borrower's
knowledge, there is no (a) fact relating to any Product that may impose
upon the Borrower (or the Borrower upon consummation of the transactions
contemplated hereby) a duty to recall any Product or a duty to warn
customers of a defect in any Product, other than defects about which the
Borrower has issued appropriate and adequate warnings or (b) latent or
overt design, manufacturing or other defect in any Product.
4.24 SEC Reports. The Borrower has filed all required forms,
reports and documents with the Securities and Exchange Commission ("SEC")
and The Nasdaq Stock Market since October 1991 (collectively, the
"Borrower SEC Reports"), all of which complied as to form in all material
respects with all applicable requirements of The Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended. To the
best of the Borrower's knowledge, none of the SEC Reports, including
without limitation any financial statements or schedules included therein,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading. Except as set forth in the SEC
Reports, each of the balance sheets (including the related notes)
included in the SEC Reports fairly presents the consolidated financial
position of the Borrower and its Subsidiaries as of the respective dates
thereof, and the other
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<PAGE>
related statements (including the related notes) included therein fairly
present the results of operations and the changes in financial position
of the Borrower and its Subsidiaries for the respective fiscal years,
except, in the case of interim financial statement, for year-end audit
adjustments, consisting only of normal recurring accruals. Except as set
forth in the SEC Reports, each of the financial statements (including the
related notes) included in the SEC Reports has been prepared in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except as otherwise noted therein.
4.25 Disclosure. To the best knowledge of the Borrower, neither
this Agreement, nor any Schedule or Exhibit to this Agreement contains an
untrue statement of a material fact or omits a material fact necessary to
make the statements contained herein or therein not misleading. To the
best knowledge of Borrower, all statements, documents, certificates or
other items prepared or supplied by the Borrower with respect to the
transactions contemplated hereby are true, correct and complete and
contain no untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein not misleading.
4.26 Survival. All of the representations and warranties of the
Borrower contained herein shall survive the Closing Date until the date
upon which the liability to which any claim relating to any such
representation or warranty is barred by all applicable statutes of
limitations.
SECTION 5. CONDITIONS TO INITIAL ADVANCE
The obligation of the Lender to make the Initial Advance pursuant to
this Agreement shall be subject to compliance by the Borrower with its
agreements herein contained, and, to the satisfaction, prior to or
substantially contemporaneously with, the making of such initial Loan, of
the following conditions:
5.1 Note. The Borrower shall have executed and delivered to the
Lender the Note in the form of Exhibit A hereto (appropriately
completed).
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5.2 Corporate Proceedings. The Lender shall have received a
copy of the resolutions, in form and substance reasonably satisfactory to
the Lender, of the board of directors of the Borrower authorizing the
execution, delivery and performance of thus this Agreement and the Note,
in each case, certified by a duly authorized officer of the Borrower as
of the date hereof; and such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded
as of the date of such certificate.
5.3 Incumbency Certificates. The lender shall have
received a certificate of the Secretary or an Assistant Secretary of the
Borrower, dated the date hereof, as to the incumbency and signatures of
the officers of the Borrower executing this Agreement, and the Note and
any certificate or other documents to be delivered by it pursuant
thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary, as the case may be.
5.4 Certain Legal Opinions. The Lender shall have received the
executed legal opinion of Kutak Rock, counsel to the Borrower, in form
and substance reasonably satisfactory to the Lender, together with copies
of the legal opinions, if any, upon which such counsel rely.
5.5 Representations and Warranties. Each of the representations
and warranties made by the Borrower pursuant to this Agreement shall be
true and correct in all material respects on and as of the date hereof,
as if made on and as of such date.
SECTION 6. CONDITIONS TO ALL LOANS
Except with respect to the Initial Advance, the obligation of the
Lender to make a Loan on any Borrowing Date is subject to fulfillment of
the following conditions precedent to the satisfaction of the Lender:
6.1 Representations and Warranties. The representations and
warranties made by the Borrower in this Agreement and in any certificate,
document or financial or other statement furnished at any time hereunder
shall be true and correct in
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all material respects unless stated to relate to a specific earlier date.
6.2 No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such Borrowing Date.
6.3 Resignations by Certain Directors of the Borrower.
Immediately preceding the making of the Subsequent Advance by Lender,
Messrs. Edward B. Beam, Jr., Harvey Miller, Edward B. Beam, Sr., L. Clark
Brand and William C. Buck shall deliver irrevocable written notification
to the Borrower that effective as of receipt by the borrower of the
Subsequent Advance, such individuals resign as officers and directors of
the Borrower (the "Resignations"). Contemporaneously with the execution
and delivery of the Resignations, Messrs. Kenneth Jones and David York
shall execute and deliver a written consent in lieu of a meeting of the
Board of Directors of the Borrower appointing Messrs. Erik Bailey,
Timothy Holstein, and Brian Henniger to fulfill the vacancies created on
the Borrower's Board of Directors resulting from the delivery of the
Resignations (the "Appointments").
SECTION 7. DEFAULTS AND REMEDIES
7.1 Events of Default. "Event of Default" whenever
used herein means any of the following events:
(a) the Borrower defaults in the due and punctual
payment of principal of, interest on, or any other amount owing in
respect of, the Note when and as the same shall become due and payable,
and continuance of such default for a period of 5 Business Days after
receipt of notice;
or
(b) the Borrower defaults in the performance or
observance of any covenant or agreement of the Borrower in this Agreement
or the Note and the continuance of such default for a period of 30
calendar days after there has been given to the Borrower by the Lender a
written notice specifying such default and requiring it to be remedied;
or
(c) the Borrower shall (i) default in any payment of
principal of or interest on any Debt or (ii) default in the
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observance or performance of any agreement or condition relating to any
such Debt or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause (immediately or
with the giving of notice or lapse of time or both) any such Debt to
become due prior to its stated maturity; or
(d) the Borrower, either pursuant to or within the
meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary
case, (iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or (iv) makes a general
assignment for the benefit of its creditors; or
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the
Borrower in an involuntary case, (ii) appoints a custodian of the
Borrower for any substantial part of all the property of the Borrower, or
(iii) orders the liquidation of the Borrower; and the order or decree
remains unstayed and in effect for 60 days.
The term "Custodian" means any receiver, trustee, assignee,
custodian, liquidator or similar official under any Bankruptcy Law.
7.2 Acceleration of Maturity. If an Event of Default occurs
and is continuing, then and in every such case the Lender may, declare
the principal of the Note to be due and payable immediately and the Loan
Commitment to be terminated, by a notice in writing to the Borrower, and
upon any such declaration the principal of the Note shall become
immediately due and payable and the Loan Commitment shall be terminated.
SECTION 8. SECURITY INTEREST
8.1 Security Interest. In order to secure the payment of all
of Borrower's obligations under this Agreement and the Note, the Borrower
shall, simultaneously with the delivery to Borrower of the Subsequent
Advance, cause its Subsidiaries to
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execute and deliver to Lender a Security Agreement, a form of which is
attached hereto as Exhibit C.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waiver. This Agreement and the Note may
be amended, and the terms hereof waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the party
waiving compliance.
9.2 Notices. Any notice, demand or delivery pursuant to the
provisions hereof shall be sufficiently given or made if sent by hand or
by registered or certified mail, postage prepaid, addressed to the Lender
at 401 West High Street, Pottstown, PA 19464, Attention: President or,
except as otherwise expressly provided herein, to the Borrower at 5400
Buchnell Drive S.W. Atlanta, GA 30366, or such other address as shall
have been furnished to the party giving or making such notice, demand or
delivery. Any such notice shall be deemed given when so delivered
personally or, if mailed, three days after the date of deposit in the
United States mails or one day following the deposit with a reputable
overnight courier.
9.3 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia without
regard to principles of conflicts of law.
9.4 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Lender, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
9.5 Successors and Assigns. This Agreement and each document
and certificate delivered pursuant thereto shall be binding upon and
inure to the benefit of the Borrower and the Lender and their respective
successors and permitted assigns,
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except that neither the Borrower nor the Lender may assign or transfer
any of its rights under this Agreement or the Note without the prior
written consent of the other.
9.6 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute
one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Lender.
9.7 Severability. Any provision of this Agreement or the Note
which is prohibited, invalid or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition, invalidity or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition, invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction or any other
provision of this Agreement or the Note.
9.8 Investment. The Lender is acquiring the Note for its own
account and not with a view to resale.
9.9 Entire Agreement. This Agreement (including the Exhibits
and Schedules hereto) and the agreements, certificates and other
documents delivered pursuant to this Agreement contain the entire
agreement among the parties with respect to the transactions described
herein, and supersede all prior agreements, written or oral, with respect
thereto.
9.10 Agreement Regarding Transaction. The Lender represents and
warrants that it has had the opportunity to ask questions of and receive
answers from management of the Borrower. The Lender represents and
warrants that it has received any and all materials, documents,
certificates, and other matters it requested be made available and has
reviewed and evaluated the same and, based upon such review and
evaluation as well as the representations, warranties and covenants of
the Borrower contained in this Agreement and the Exhibits hereto, the
Lender has entered into this Agreement with the Borrower. Lender hereby
acknowledges that given the current financial condition of the Borrower
as of the date of
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this Agreement and that as a result of such financial condition, the
Borrower is in immediate need for cash in order to continue its
operations. Notwithstanding its participation in the preparation of this
Agreement, Kutak Rock (as special counsel to the Borrower) is hereby
released by the parties hereto with respect to any and all
responsibilities and liabilities to the Borrower or otherwise in
connection with the negotiation, execution and performance of this
Agreement. Borrower and Lender hereby acknowledge and agree that Kutak
Rock had no responsibility for the preparation of any schedules attached
hereto, providing any information to the Lender, or conducting any
diligence whatsoever. The Borrower hereby acknowledges and agrees that
the transaction contemplated hereby is based on the Borrower's
independent review and analysis of the abilities (financial or
otherwise) of the Lender to perform its respective obligations hereunder.
The Borrower also agrees that any and all schedules attached to this
Agreement and any documents referred to therein have been prepared and
thoroughly reviewed by the Borrower and that the Borrower is responsible
for its own due diligence in connection with preparing such items,
executing this Agreement and agreeing to the transactions contemplated
hereby. The Borrower has made its independent analysis of such
information and has not relied on any factors, conversations or
communications made by any other party.
9.11 Lender Covenants. Lender hereby covenants that it shall
use its best efforts to cause the continued listing of the Borrower's
shares of Common Stock on The Nasdaq SmallCap Market through the
Termination Date.
9.12 Indemnification. The Borrower agrees to indemnify, defend
and hold harmless the Lender and its respective shareholders, officers,
directors, employees, and any Affiliates of the foregoing, and their
successors and assigns (collectively, the "Lender Group") from and
against any and all losses, liabilities (including punitive or exemplary
damages and fines or penalties and any interest thereon), expenses
(including reasonable fees and disbursements of counsel and expenses of
investigation and defense), claims, Liens or other obligations of any
nature whatsoever (hereinafter individually, a "Loss" and collectively,
"Losses") which, directly or indirectly, arise out of, result
25
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form or relate to, (i) any inaccuracy in or any breach of any
representation or warranty of the Borrower contained in Section 4, and
(ii) any breach of any covenant of the Borrower contained in this
Agreement or in any other document contemplated by this Agreement.
9.13 Recourse. Except with respect to any potential claim based
on any fraud, any obligation or liability whatsoever of Borrower which
may arise at any time under this Agreement shall be satisfied, if at all,
out of the Borrower's, or any of its Subsidiaries assets only. No such
obligation or liability shall be personally binding upon, nor shall
resort for the enforcement thereof be had to, the property of any of
Borrower's or Subsidiaries' shareholders, directors, officers, employees
or agents, regardless of whether such obligation or liability is in the
nature of contract, tort or otherwise, unless such obligation or
liability relates to fraudulent conduct on the part of such entity or
individuals. Notwithstanding the foregoing, nothing in this Section
shall be interpreted or construed as an agreement or admission by the
Borrower, its shareholders, directors, officers, employees or agents that
any such entity or person is or may be personally liable for any
obligation or liability (whether the result of fraud or otherwise) with
respect to this Agreement.
9.14 Validity and Execution of Agreement. The Lender has the
full legal right, capacity and power and all requisite corporate
authority and approval required to enter into, execute and deliver this
Agreement and any other agreement or instrument contemplated hereby, and
to perform fully its respective obligations hereunder and thereunder.
The board of directors of the Lender has approved the transactions
contemplated pursuant to this Agreement and each of the other agreements
required to be entered into pursuant hereto by the Lender. This
Agreement and such other agreements and instruments have been duly
executed and delivered by the Lender and each constitutes the valid and
binding obligation of the Lender enforceable against it in accordance
with its terms, subject to the qualifications that enforcement of the
rights and remedies created hereby is subject to (i) bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors, and (ii)
general principals of equity
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(regardless of whether such enforcement is considered in a proceedings in
equity or at law).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BIO-DYNE CORPORATION
By/s/Edward B. Beam, Jr.
-----------------------
Name: Edward B. Beam, Jr.
Title: Chief Executive Officer and
Chief Operating Officer
CONTINENTAL AMERICAN TRANSPORTATION,
INC.
By/s/Erik L. Bailey
------------------------
Name: Erik L. Bailey
Title: Chief Financial Officer
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EXHIBIT B
<PAGE>
PROMISSORY NOTE
$1,000,000 May 23, 1996
FOR VALUE RECEIVED, the undersigned, Bio-Dyne Corporation, a Georgia
corporation, hereby unconditionally promises to pay on May 9, 1998, to the
order of Continental American Transportation, Inc., a Colorado corporation (the
"Lender"), at the account of the Lender maintained at
_______________________________________Bank Account Number ___________ (or at
such other account in the United States as the Lender shall notify the
undersigned), in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of (i) ONE
MILLION DOLLARS ($1,000,000) and (ii) the aggregate unpaid principal amount of
all Loans made by the Lender to the undersigned pursuant to Section 2.1 of the
Revolving Credit Agreement, dated as of the date hereof, between the
undersigned and the Lender (the "Credit Agreement"). Capitalized terms used
herein shall have the same meanings as set forth in the Credit Agreement,
unless otherwise defined herein.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof until such amount shall be paid (whether at the stated maturity, by
acceleration or otherwise) on the dates and at the applicable rates per annum
as provided in Section 2.5 of the Credit Agreement.
The holder of this Note is authorized to endorse the date and amount of
each Loan pursuant to Section 2.2 of the Credit Agreement, the date and amount
of each payment or prepayment of principal thereof and the interest rate with
respect thereto, on the schedule annexed hereto and made a part hereof or on a
continuation thereof, which endorsement, absent manifest error, shall
constitute prima facie evidence of the accuracy of the information so endorsed.
<PAGE>
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
This Note is the Note referred to in the Credit Agreement and is entitled
to the benefits thereof and is subject to the terms and conditions provided
therein.
Except as expressly provided herein, the undersigned hereby waives
presentation, demand, protest and all other notices of any kind.
This Note shall be governed by, and construed in accordance with, the laws
of the State of Georgia without regard to principles of conflicts of law.
BIO-DYNE CORPORATION
By/s/Edward B. Beam
--------------------
Name: Edward B. Beam
Title: President and Chief
Operating Officer
<PAGE>
EXHIBIT C
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of May 17, 1996 made by and among Bio-Dyne
North Corporation, a North Carolina corporation ("BDNC"), Carolina Fitness
Equipment, Inc., a North Carolina corporation ("Carolina Fitness"), Home
Fitness Studios, Inc., a Florida corporation ("HFS"), Home Fitness Studio of
Florida, Inc., a Florida corporation ("HFSF"), Home Fitness Studios North,
Inc., a Florida corporation ("HFSN"), and Continental American Transportation,
Inc., a Georgia corporation (the "Lender").
W I T N E S S E T H
WHEREAS, Bio-Dyne Corporation, a Georgia corporation (the "Borrower") and the
Lender entered into that certain Revolving Credit Agreement (the "Credit
Agreement") dated as of the date hereof, pursuant to which the Borrower may
borrow from time to time an amount not to exceed $1,000,000 (the "Loans"); and
WHEREAS, BDNC, Carolina Fitness, HFS, HFSF and HFSN (collectively, the
"Subsidiaries") as subsidiaries of the Borrower, will benefit from the Loans;
and
WHEREAS, as a condition to entering into the Credit Agreement, the Lender
required that the Subsidiaries (collectively, the "Pledgors") agreed to pledge
the Collateral (as hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and the mutual promises and
covenants contained herein, the parties hereto agree as follows:
SECTION 1. Definitions of Terms Used Herein.
"Accounts Receivable" means any and all rights of each Pledgor to payment of
accounts, whether due or to become due, whether or not earned by performance,
and whether now owned or hereafter acquired or arising in the future, together
with all rights, titles, securities and guarantees with respect thereto and all
related security interest, liens and pledges, whether voluntary or involuntary.
"Collateral" means all Accounts Receivable, Inventory, General Intangibles,
Instruments, Equipment and Proceeds.
"Equipment" means with respect to each Pledgor existing, future-created and
future-acquired equipment, machines, trade fixtures, fixtures, tools, molds,
dies, stamps, appliances, office equipment, computer software, furniture, motor
vehicles and all proceeds and products of the above as well as all related
warranties, documents and insurance policies.
<PAGE>
"General Intangible(s)" means with respect to each Pledgor existing,
future-acquired and future-created trade secrets, know-how, inventions,
good-will, patents, applications for patents, renewals and continuation of
patents, reissues, trademarks, service marks, customer lists, copyrights,
manufacturing processes, rights of payments from, or performance of,
obligations by any Person, all intangible property of any kind, all "general
intangibles" of any kind as defined in the Georgia Uniform Commercial Code, and
all rights, agreements, records and documents relating to any of the property
described in this provision.
"Instruments" means all of the Debtor's existing, future created and
future-acquired "instruments" as that term is defined in the Georgia Uniform
Commercial Code.
"Inventory" means any and all now owned or hereafter acquired inventory,
merchandise, raw materials, parts, supplies, work in process and finished
products intended for sale, of every kind and description, including extracted
minerals, in the custody or possession, actual or constructive, of each
Pledgor, including such inventory as is temporarily out of the custody or
possession of each Pledgor and items in transit and including any returns upon
any accounts or other proceeds, including insurance proceeds, resulting from
the sale and disposition of any of the foregoing.
"Proceeds" means any and all consideration received from the sale, exchange,
lease or other disposition of any asset or property which constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person as a
result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property which constitutes Collateral.
SECTION 2. Security Interest. To secure the prompt and complete payment
and performance of the obligations of the Borrower (the "Obligations") to the
Lender under the Credit Agreement, the Pledgors hereby pledge, hypothecate,
assign, transfer, set over and deliver unto the Lender and hereby grant to the
Lender its successors and assigns a continuing first priority security interest
in the Collateral (collectively, the "Security Interest"), subject to the
terms, covenants and conditions herein set forth. Without limiting the
foregoing, the Lender is hereby authorized, to the extent permitted by
applicable law, to file one or more financing statements, continuation
statements or other documents, without the signature of each of the Pledgors,
for the purpose of perfecting, confirming, continuing, enforcing or protecting
the Security Interest, naming the Pledgors as debtor and the Lender as secured
party. Each of the Pledgors agree at all times to keep accurate and complete
accounting records with respect to the Collateral, including a record of all
payments and Proceeds received.
SECTION 3. Further Assurances. Each of the Pledgors agree, at their
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Lender may
from time to time reasonably request for the better assuring and preserving of
the Security Interest and the rights and remedies created hereby, including the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest created
hereby and the filing of any financing
2
<PAGE>
statements or other documents in connection herewith. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall be
immediately pledged and delivered to the Lender, duly endorsed in a manner
satisfactory to the Lender. Each of the Pledgors agrees promptly to notify the
Lender of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records relating to the Accounts Receivable owned by it. Each of the Pledgors
agrees promptly to notify The Lender if any material portion of the Collateral
is damaged or destroyed.
SECTION 4. Inspection and Verification. The Lender and such persons as
it may reasonably designate in a written notice provided to Pledgors shall have
the right, upon prior notice, at any reasonable time or times during the
Pledgors' usual business hours, to inspect the Collateral and all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss the Pledgor's
affairs with the officers of the Pledgor and its independent accountants and to
verify under reasonable procedures the validity, amount, quality, value and
condition of, or any other matter relating to, the Collateral.
SECTION 5. Records of Accounts Receivable. Each of the Pledgors shall
keep or cause to be kept records of Accounts Receivable which are accurate in
all material respects.
SECTION 6. Use and Disposition of Collateral. Each of the Pledgors
agree that it ill not sell, transfer or otherwise dispose of any of the
Collateral outside the ordinary course of business.
SECTION 7. Remedies on Default. In the event that the obligations of the
Borrower shall remain unpaid after the principal amount of and interest on the
Loan shall have been declared due and payable whether at maturity or otherwise,
in accordance with the terms thereof (an "Event of Default"), the Lender may
seize the Collateral and exercise any or all of its rights as a secured lender
including, without limitation, the rights granted to a secured lender under the
Georgia Uniform Commercial Code. If any notification of intending disposition
of the Collateral is required by law, such notification, if mailed, shall be
deemed reasonably and properly given if mailed at least ten (10) days before
such disposition, postage prepaid, addressed to Pledgor at the address of
Pledgor shown below.
SECTION 8. Application of Proceeds. The proceeds of the sale of the
Collateral in accordance with Section 7 hereof, if any, shall be applied:
first, to the payment of all costs and expenses of the collection of such
moneys, including all reasonable expenses, including reasonable legal fees,
incurred by the Lender; second, to the payment or reduction of the obligations
owing by the Borrower to the Lender under the Credit Agreement; and third, to
the Borrower, unless otherwise directed by a court of competent jurisdiction.
SECTION 9. Continuing Security Interest. This Security Agreement shall
create a continuing security interest in the Collateral and shall remain in
full force and effect until payment in full of the Obligations.
3
<PAGE>
SECTION 10. Termination. This Security Agreement shall terminate as to
the Pledgors when all of the Borrower's obligations secured hereby have been
fully paid and performed at which time the Lender shall release the Collateral
and deliver to each of the Pledgors appropriate instruments of release.
SECTION 11. Entire Agreement. This Agreement (including the Exhibits
hereto) and the agreements, certificates and other documents delivered pursuant
to the Credit Agreement contain the entire agreement among the parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
SECTION 12. Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties hereto or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof.
SECTION 13. Binding Effect; No Assignments. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors, assigns and legal representatives except that the Pledgors shall
not, except in the ordinary course of business, be permitted to assign this
Agreement or any interest herein or in the Collateral, or any part thereof, or
otherwise pledge, encumber or grant any option with respect to the Collateral
or any part thereof, except as contemplated by this Agreement.
SECTION 14. Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
SECTION 15. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
SECTION 16. Exhibits and Schedules. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
SECTION 17. Severability of Provisions. If any provision or any portion
of any provision of this Agreement or the application of such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, or the application of such provision or portion
of such provision as is held invalid or unenforceable to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affect thereby.
4
<PAGE>
SECTION 18. Governing Law. This Security Agreement, and the authority,
liabilities, duties and obligations of the Lender hereunder, shall be
determined in accordance with and governed by the laws of the State of Georgia,
without regard to the principles of conflict of laws.
SECTION 19. Section Headings. The Section headings in this Security
Agreement are for convenience only and shall not affect the construction
hereof.
SECTION 20. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be given personally, telegraphed, telefaxed, sent by facsimile
transmission or sent by prepaid air courier or certified, registered or express
mail, postage prepaid. Any such notice shall be deemed to have been given (a)
when received, if delivered in person, telegraphed, telexed, sent by facsimile
transmission and confirmed in writing within three (3) Business Days thereafter
or sent by prepaid air courier or (b) three (3) Business Days following the
mailing thereof, if mailed by certified first class mail, postage prepaid,
return receipt requested, in any such case as follows (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 20):
If to the Lender, to:
Continental American Transportation, Inc.
401 West High Street
Pottstown, PA 19464
Telephone Number: (800) 562-0707
Telecopier Number: (706) 629-2720
If to the Subsidiaries, to:
3883 Pembroke Rd.
Hollywood, FL 33021
Telephone Number: (954) 963-2900
Telecopier Number: (954) 963-4677
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be fully executed and delivered as of the day and year first
above written.
HOME FITNESS STUDIOS OF CONTINENTAL AMERICAN
FLORIDA, INC. TRANSPORTATION, INC.
By:/s/Edward B. Beam, Jr. By:/s/Edward B. Beam, Jr.
---------------------------------- -------------------------------
Name: Edward B. Beam, Jr. Name: Edward B. Beam, Jr.
Title: Chief Executive Officer Title: Chief Executive Officer
HOME FITNESS STUDIOS BIO-DYNE NORTH CORPORATION
NORTH, INC.
By:/s/Edward B. Beam, Jr. By /s/Edward B. Beam, Jr.
---------------------------------- -------------------------------
Name: Edward B. Beam, Jr. Name: Edward B. Beam, Jr.
Title: Chief Executive Officer Title: Chief Executive Officer
CAROLINA FITNESS
EQUIPMENT, INC.
By:/s/Edward B. Beam, Jr.
-------------------------------
Name: Edward B. Beam, Jr.
Title: Chief Executive Officer
HOME FITNESS STUDIOS, INC.
By:/s/Edward B. Beam, Jr.
-------------------------------
Name: Edward B. Beam, Jr.
Title: Chief Executive Officer
6
<PAGE>
EXHIBIT D
<PAGE>
AMENDMENT TO PROMISSORY NOTE
This Second Amendment to Promissory Note ("Amendment") is made this 16th day of
May, 1996 by and between BIO-DYNE CORPORATION, a Georgia corporation
("Bio-Dyne"), and EDWARD B. BEAM, SR. and CAROLYN M. BEAM (collectively, the
"Lender").
W I T N E S S E T H
WHEREAS, H.F.S. Acquisition Co., Inc., n/k/a Home Fitness Studios, Inc., a
Florida corporation ("HFS"), executed that certain Promissory Note dated May
17, 1989 (the "Note") in favor of the Lender in the original principal amount
of $200,000.00; and
WHEREAS, Bio-Dyne executed that certain Promissory Note dated April 18, 1994
(the "Note") in favor of the Lender as part of Bio-Dyne's acquisition of HFS on
April 18, 1994; and
WHEREAS, the Note was further amended by Agreement effective September 1, 1995
(the "Amendment Agreement") executed by Bio-Dyne, the Lender and Edward B.
Beam, Jr.; and
WHEREAS, the parties hereto wish to further modify said Note in accordance with
the terms and conditions of this Amendment.
NOW, THEREFORE, for and in consideration of the agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Section 3 of the Amendment Agreement is hereby dels l m 7 its
entirety.
2. The outstanding principal balance of the Note is hereby reduced to
$36,146.34 (the "Outstanding Principal Balance") as a result of the payment to
the Lender on the date hereof of an amount equal to $137,094.58 (which amount
is comprised of principal in the amount of $135,379.32 and interest in the
amount of $1,715.26. The Outstanding Principal Balance shall continue to accrue
interest at the rate of 12% per annum and the Outstanding Principal Balance,
together with any and all accrued but unpaid interest with respect to the Note
(as previously modified) shall be due and payable in its entirety on July 1,
1996.
3. The Note, as previously modified and as modified by this
Amendment, together with all prior existing notes, security agreements, UCC
filings and obligations thereunder and in connection therewith by and between
the parties hereto are all specifically acknowledged and confirmed by the
parties hereto and will remain in full force and effect in accordance with
their respective terms, and the parties hereto hereby ratify and affirm the
same. In addition, Bio-Dyne and the Lender hereby acknowledge and agree that no
default and no rights of offset or nonpayment exist with respect to the Note,
as previously modified and as modified by this Amendment. Finally, the Note, as
modified by this Amendment, shall not constitute a novation.
4. This Amendment was approved by Bio-Dyne's Board of Directors on
May 15, 1996.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment under seal
as of the day and year first above written.
/s/ (SEAL)
--------------------------
Edward B. Beam, Sr.
/s/ (SEAL)
--------------------------
Carolyn M. Beam
BIO-DYNE CORPORATION
By /s/Harvey Miller
---------------------
Harvey Miller
Secretary
[CORPORATE SEAL]
2
<PAGE>
EXHIBIT E
<PAGE>
AMENDMENT TO PROMISSORY NOTE
This Amendment to Promissory Note ("Amendment") is made this 16th day of May,
1996 by and between BIO-DYNE CORPORATION, a Georgia corporation ("Bio-Dyne"),
and EDWARD B. BEAM, JR. (the "Lender").
W I T N E S S E T H
WHEREAS, H.F.S. Acquisition Co., Inc., n/k/a Home Fitness Studios, Inc., a
Florida corporation ("HFS"), executed that certain Promissory Note dated May
17, 1989 in favor of the Lender in the original principal amount of
$150,000.00; and
WHEREAS, Bio-Dyne executed that certain Promissory Note dated April 18, 1994
(the "Note") in favor of the Lender as part of Bio-Dyne's acquisition of HFS on
April 18, 1994; and
WHEREAS, the Note was further amended by Agreement effective September 1, 1995
(the "Amendment Agreement") executed by Bio-Dyne, the Lender and Edward B.
Beam, Sr. and Carolyn M. Beam; and
WHEREAS, the parties hereto wish to further modify said Note in accordance with
the terms and conditions of this Amendment.
NOW, THEREFORE, for and in consideration of the agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
Section 3 of the Amendment Agreement is hereby deleted in its entirety.
The outstanding principal balance of the Note is hereby reduced to
$36,146.36 (the "Outstanding Principal Balance") as a result of the payment to
the Lender on the date hereof of an amount equal to $87,905.43 (which amount is
comprised of principal in the amount of $86,677.19 and interest in the amount
of $1,228.24) The Outstanding Principal Balance shall continue to accrue
interest at the rate of 12% per annum and the Outstanding Principal Balance,
together with any and all accrued but unpaid interest with respect to the Note
(as previously modified) shall be due and payable in its entirety on July 1,
1996.
The Note, as previously modified and as modified by this Amendment,
together with all prior existing notes, security agreements, UCC filings and
obligations thereunder and in connection therewith by and between the parties
hereto are all specifically acknowledged and confirmed by the parties hereto
and will remain in full force and effect in accordance with their respective
terms, and the parties hereto hereby ratify and affirm the same. In addition,
Bio-Dyne and the Lender hereby acknowledge and agree that no default and no
rights of offset or nonpayment exist with respect to the Note, as previously
modified and as modified by this Amendment. Finally, this Note, as modified by
this Amendment, shall not constitute a novation.
This Amendment was approved by Bio-Dyne's Board of Directors on May 15,
1996.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment under seal
as of the day and year first above written.
/s/ (SEAL)
--------------------------
Edward B. Beam, Sr.
BIO-DYNE CORPORATION
By /s/Harvey Miller
---------------------
Harvey Miller
Secretary
[CORPORATE SEAL]
2
