UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): April 20, 2012
| AMERICAN BIO MEDICA CORPORATION |
(Exact name of registrant as specified in its charter)
| New York | 0-28666 | 14-1702188 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification Number) |
| 122 Smith Road, Kinderhook, NY | 12106 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 518-758-8158
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
On April 20, 2012 (the “Closing Date”), American Bio Medica Corporation (the “Company”) entered into a Loan and Security Agreement (the “Loan Agreement”) with Medallion Financial Corp (“Medallion”), a new Senior Lender, to refinance the Company’s Line of Credit with Rosenthal and Rosenthal, Inc. (“Rosenthal”) (see Current Report on Form 8-K filed with the United States Securities and Exchange Commission (the “Commission”) on July 6, 2009 and other subsequent periodic reports filed with the Commission for details on the Rosenthal Line of Credit).
Under the Loan Agreement, Medallion has agreed to provide the Company with up to $1,000,000 under a revolving secured line of credit (the “Medallion Line of Credit”), which is secured by a first security interest in all of the Company’s receivables, inventory, and intellectual property rights along with a second security interest in the Company’s machinery and equipment. The maximum amount available under the Medallion Line of Credit is subject to an Advance Rate that consists of: 85% of eligible accounts receivable and up to 30% of eligible inventory (not to exceed $150,000). “Eligible Receivables” are defined as those receivables that are paid within ninety (90) days of the invoice date. Eligible Receivables consists of both domestic sales and those international sales made in North America. An Eligible Receivable becomes ineligible if more than 25% of the aggregate receivables due from a customer are more than ninety (90) days past due or the aggregate receivables from a customer exceed 25% of the then total outstanding Eligible Receivables. “Eligible Inventory” is defined as raw materials and finished goods that are not obsolete or unmerchantable and are acceptable to Medallion. From the loan availability, the Company has drawn approximately $566,000 to pay off the Rosenthal Line of Credit. As of the date of the closing, the Company’s loan availability under the Medallion Line of Credit was $49,000 and the Company’s balance due under the Medallion Line of Credit was $566,000.
The Company was charged a facility fee of 1% of the balance of the Medallion Line of Credit on the Closing Date and will be charged the same facility fee of 1% on each anniversary of the Closing Date thereafter. Under the Loan Agreement, interest on outstanding borrowings is payable monthly and is charged at an annual rate equal to 4% above a base rate (which is the Wall Street Journal Prime as published from time to time. As of the date of this report, the Wall Street Journal Prime is 3.25%). If the Company were to default under the Loan Agreement, interest on outstanding borrowings under the Medallion Line of Credit would be charged at an annual rate of 2% above the interest rate in effect at the time of such default. The Company is subject to two audits per year by Medallion (provided the Company is not in default); at a rate of $950.00 per person per day. Prior to closing, the Company also paid a non-refundable fee in the amount of $10,000 to Medallion for field exam and due diligence costs.
So long as any obligations are due to Medallion under the Medallion Line of Credit, the Company must maintain stockholders’ equity of at least $1,750,000.
As a condition to the financing, the Company’s Chief Executive Officer, Stan Cipkowski (“Cipkowski”) and its controller J. Duncan Urquhart (“Urquhart”) were required to execute Validity Guarantees (the “Validity Guarantee”). Under the Validity Guarantee, Cipkowski and Urquhart provide representations and warranties with respect to the validity of the Company’s receivables as well as guaranteeing the accuracy of the Company’s reporting to Medallion related to the Company’s receivables. (See Item 5.02 below for information related to compensatory arrangements related to the execution of the Validity Guarantee).
As another condition to the financing, the Company’s President and Chairman of the Board, Edmund Jaskiewicz (“Jaskiewicz”) was required to execute Subordination Agreement (“Subordination Agreement”) related to $124,000 currently owed to Jaskiewicz by the Company (the “Jaskiewicz Debt”). Under the Subordination Agreement, the Jaskiewicz Debt shall not be payable, shall be junior in right to the Medallion Line of Credit and no payment may be accepted or retained by Jaskiewicz for the Jaskiewicz Debt unless and until the Company has paid and satisfied in full any obligations to Medallion. (See Item 5.02 below for information related to compensatory arrangements related to Jaskiewicz’s execution of the Subordination Agreement).
| Item 1.02 | Termination of a Material Definitive Agreement |
February 28, 2012, the Company gave Rosenthal written notice of non-renewal as provided under the Financing Agreement, and as a result, the Financing Agreement would have terminated on May 31, 2012; however on April 20, 2012, all indebtedness due to Rosenthal was paid in full and Rosenthal’s security interest in the Company’s assets were terminated.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
A) As compensation for his execution of the Validity Guarantee, on April 20, 2012, Cipkowski was awarded an option grant representing 250,000 common shares of the Company under the Company’s Fiscal 2001 stock option plan, at an exercise price of $0.18, the closing price of the Company’s common shares on the date of the grant. The option grant vests over three (3) years in equal installments. (Although not an officer of the Company, Urquhart was awarded a similar grant on April 20, 2012).
B) As compensation for his execution of the Subordination Agreement, on April 20, 2012 Jaskiewicz was awarded an option grant representing 150,000 common shares of the Company under the Company’s Fiscal 2001 stock option plan, at an exercise price of $0.18, the closing price of the Company’s common shares on the date of the grant. The option grant vests over three (3) years in equal installments.
C) The Company ‘s Board of Directors has appointed Melissa A. Waterhouse as Executive Vice President and Chief Compliance Officer effective April 23, 2012. Ms. Waterhouse joined the Company in 1997 and previously served as the Company’s Vice President & Chief Compliance Officer. She has also served as the Company’s Corporate Secretary since 2003. On April 23, 2012, the Company entered into an Employment Contract with Melissa A. Waterhouse and a copy of this contract is attached as an exhibit to this report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
10.36 Employment Contract between the Company and Melissa A. Waterhouse
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.
| AMERICAN BIO MEDICA CORPORATION (Registrant) | ||
| Dated: April 25, 2012 | By: | /s/ Melissa A. Waterhouse |
| Melissa A. Waterhouse | ||
| Executive Vice President | ||
| Chief Compliance Officer | ||
| Corporate Secretary | ||
Exhibit 10.26
April 20, 2012
Melissa A. Waterhouse
PO Box 769
Philmont, New York 12565
Dear Melissa,
It is our pleasure to formally offer you the position of Executive Vice President and Chief Compliance Officer of American Bio Medica Corporation (“ABMC” or the “Company”), reporting directly to the ABMC Chief Executive Officer. This agreement supersedes all other agreements whether written or verbal and may not be amended except by a writing signed by you and the Chief Executive Officer, and approved by the Board of Directors. Your position will be primarily located at our New York corporate facility although overnight travel may be required from time to time. You will perform all duties as are generally associated with the position of Executive Vice President and Chief Compliance Officer, as directed by the Chief Executive Officer. Below, we have outlined the major terms and conditions applicable to your position.
Term
Your employment with ABMC will be for a term of one year unless sooner terminated for cause, beginning on the date set forth above and automatically renewed for successive one-year terms unless either side gives written notice of intent not to renew at least sixty (60) days prior to the end of any one-year term. If AMBC terminates your employment for cause, this agreement shall be terminated and you will be entitled to no severance and no further compensation or benefits from ABMC, other than payment of salary and benefits up to and including the date of termination.
Compensation
Effective with the signing of this letter, your base salary will remain $8,333 per month, which is equivalent to $100,000 on an annualized basis. You will be eligible for your first performance review by the Board of Directors in October 2012.
If you so desire, the cost of your health insurance (including family coverage if you so require) shall be borne 100% by the Company. Please notify Human Resources if you wish to receive this benefit.
You shall participate in the Management Bonus Program as approved by the Board of Directors on January 19, 2005, and as amended by the Board of Directors on November 9, 2005.
Benefits
| 20 vacation days | |
| Usual corporate holidays | |
| 2 personal days | |
| 401 (k) |
Severance
In the unlikely event that ABMC elects to terminate your employment for anything other than cause, you will receive severance pay equal to twelve (12) months of your current base salary at the time of separation, with continuation of all medical benefits during the twelve-month period at ABMC’s expense. Cause shall be defined as (1) death, (2) commission of a felony (3) acts of dishonesty, fraud or malfeasance in connection with your service on behalf of the Company, (4) gross dereliction of duty willful failure to carry out any lawful directive of the Chief Executive Officer or the Board of Directors, or material violations of Company policies which continue after Company has provided you with written notice thereof and a period of thirty (30) days to cure such action or misconduct or (5) disability of a period of more than six (6) months). The severance payment will be made under the current pay cycle, each pay period, during the twelve (12) months, subject to all customary withholdings.
Additionally, you may resign your position and elect to exercise this severance provision at your option under the following circumstances:
If you are required to relocate by the Company or its Board of Directors more than 50 miles from the Company’s Kinderhook facility as a condition of continued employment
A substantial change in responsibilities normally assumed by an Executive Vice President/Chief Compliance Officer at the direction of the Company or its Board of Directors (i.e. demotion)
You are asked to commit or conceal the commitment of any illegal act by any officer or member of the board of directors of the Company.
Change in Control
If there is a Change in Control (defined below) of ABMC, you may elect to resign your position and to receive a lump sum severance payment equal to two (2) times your annual base salary (“CIC Payment”). If you elect to resign, ABMC will pay you the CIC Payment within thirty (30) days after you make your election, which election must be in writing and received by ABMC’s Board of Directors within ten (10) days after a Change in Control. In the event you continue employment with ABMC or any successor to ABMC following a Change in Control or fail to make an election within ten (10) days after a Change in Control, you will not be entitled to receive the CIC Payment.
Change in Control is defined as follows:
(i) the approval by shareholders of ABMC of a merger or consolidation of ABMC with any other corporation, other than a merger or consolidation which would result in the voting securities of ABMC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of ABMC or such surviving entity outstanding immediately after such merger or consolidation; or
(ii) the approval by the shareholders of ABMC of a plan of complete liquidation of ABMC or an agreement for the sale or disposition by ABMC of all or substantially all of ABMC’s assets.
Restrictive Covenants
Company Handbook/Compliance Certification
You are aware that it is your responsibility to read the ABMC Employee Handbook thoroughly and comply with the policies contained in the Handbook. You understand that the policies, benefits and information contained in the Handbook are subject to change and that revisions to the Handbook may be made. Any such changes will be communicated through official written notices and you hereby acknowledge that any such revisions may supercede, modify or eliminate existing policies. Only a majority of the Executive Officers, or a majority of the Board of Directors may adopt revisions to the policies contained in the Handbook. In no circumstance may a change to the employee handbook reduce the salary, benefits or other conditions outlined in this employment agreement.
You agree that in addition to any covenants included in this Employment Letter, you will sign a Compliance Certification simultaneously with the signing of this Employment Letter. If a conflicting covenant exists between the Employment Letter and the Compliance Certification and/or the Company Handbook, the Employment Letter shall be the ruling document.
Non-Solicitation
During the twelve (12) months immediately following your termination from employment with ABMC for any reason, you agree that:
You will not, directly or indirectly, solicit in any manner or capacity whatsoever, including by way of illustration, but not limitation, call upon, mail or e-mail notices to, or make telephone calls to, any Customer (defined below) or Customer Prospect (defined below) of ABMC, for the purpose of selling any Covered Services (defined below) or engaging in any business which directly or indirectly competes with ABMC.
You will not solicit, endeavor to entice away from ABMC, or otherwise interfere with the relationship of ABMC with any person who is employed (or, but for any violation of this agreement, would have been employed) by or otherwise engaged to perform services for ABMC, whether for your own account or for the account of any other person or entity.
You will not, directly or indirectly, solicit in any manner or capacity whatsoever, including by way of illustration, but not limitation, call upon, mail, or e-mail notices to, or make telephone call to, any supplier or vendor of ABMC for the purpose of engaging in any business which directly or indirectly competes with ABMC.
Confidentiality
You agree not to disclose any Confidential Information (defined below) and you promise to take all reasonable precautions to prevent its unauthorized dissemination, both at all times during your employment with ABMC and after termination of your employment for any reason. You agree to limit the disclosure of any Confidential Information to only those employees and agents of ABMC who have a need to know the information and who have similarly agreed to keep such information confidential. Upon termination of your employment or upon request, you will deliver to ABMC all documents and electronic files containing Confidential Information and any personal property owned by ABMC.
You further agree not to use any Confidential Information for your own benefit or for the benefit of anyone other than ABMC. You acknowledge that all Confidential Information is and remains the property of ABMC and that no license or rights in the Confidential Information has been or is granted to you.
“Confidential Information" means and includes all information not previously known by you prior to your employment with ABMC relating to marketing, advertising, public relations, development, services, trade secrets, trade "know-how," business plans, Customer (as defined below) and Customer Prospect (as defined below) lists, distributor lists, Customers and Customer Prospects information, distributor information, financial data, personnel data, employee compensation and benefits information, new personnel acquisition plans, details of contracts, pricing policies, operational methods, marketing plans or strategies, service development techniques or plans, business acquisition or investment plans, or other confidential and proprietary information related to the business or affairs of ABMC and/or its Customers or Customer Prospects.
The term "Customer" means any person or entity for which ABMC performed any Covered Services during the one (1) year period immediately preceding the termination of your employment with ABMC for any reason whatsoever.
"Customer Prospect" means any person or entity to which ABMC made a new business presentation or proposal, whether formal or informal related to Covered Services during the one (1) year period immediately preceding the termination of your employment with ABMC for any reason whatsoever.
“Covered Services” means any services or products of whatever kind or character offered or provided by ABMC to any person or entity.
Enforcement
If any provision of the covenants in this agreement shall be held invalid or unenforceable, the remainder nevertheless shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it nevertheless shall remain in full force and effect in all other circumstances.
If, in connection with any action taken by ABMC to enforce the provisions of the covenants of this agreement, a court shall hold that all or any portion of the restrictions contained therein are unreasonable under the circumstances then existing so as to render such covenants invalid or unenforceable, the parties agree that any court of competent jurisdiction may reform such unreasonable restrictions to the extent necessary to make such restrictions reasonable under the circumstances then existing so as to render such restrictions both valid and enforceable.
You acknowledge and agree that all of the covenants contained in this agreement are necessary for the protection of ABMC's valuable and legitimate business interests and are reasonable in scope and content. Accordingly, you acknowledge and agree that if you violate any of the provisions of this agreement ABMC shall sustain irreparable harm and, therefore, in addition to the other remedies which ABMC may have under this agreement or otherwise, ABMC will be entitled to specific performance, injunctive, and other equitable relief.
You agree to indemnify, save and hold harmless ABMC from and against any and all claims, damages, losses, costs and expenses (including reasonable attorneys' fees) incurred by ABMC in any action in which a court enforces the terms of the covenants of this agreement.
Other Employment Information
In making this offer of continued employment, ABMC has relied on your representations that: (a) you are not currently a party to any contract of employment that might impede your ability to accept this offer or to perform the services completed thereby; and (b) that you are not subject to any non-competition arrangement or other restrictive covenants that might restrict your employment at ABMC as contemplated by this offer.
Exclusive Service
You will perform services exclusively for ABMC and you will not perform services for any other persons or entities related to or conducting business with the Company for personal profit during the term of this agreement without the written agreement of the Chief Executive Office or Board of Directors.
Miscellaneous
This writing represents the entire agreement with respect to your employment and any prior agreements or understandings, written or oral, are merged herein. This agreement shall be governed by the laws of the State of New York. ABMC will not be deemed to have waived any provision of this agreement except by a signed writing. This agreement may not be amended, except by a signed writing. Notices given pursuant to this Agreement shall be in writing and delivered personally or by nationally recognized overnight courier in the case of ABMC to its Kinderhook facility to the attention of the Chief Executive Officer and in your case to your home address as set forth in ABMC’s personnel file.
Melissa, we are enthusiastic about your appointment as Executive Vice President and Chief Compliance Officer, and our expectation is that you will continue to make a tremendous contribution to the long-term success of ABMC.
Sincerely,
| /s/ Stan Cipkowski | |
| Stan Cipkowski | |
| Chief Executive Officer | |
| By order of the American Bio Medica Corporation Board of Directors | |
| Accepted this 23rd Day of April, 2012: | |
| /s/ Melissa A. Waterhouse | |
| Melissa A. Waterhouse | |