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 14, 1998)
BCAM INTERNATIONAL, INC.
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(exact name of registrant as specified in its charter)
NEW YORK 0-18109 13-3228375
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number
1800 WALT WHITMAN ROAD, MELVILLE, NEW YORK 11747
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(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (516) 752-3550
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(Former name or address, if changed since last report)
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Item 5. Other Events
a. Recent Sales of Unregistered Securities - Sale of common stock and
warrants of the Company - On April 14, 1998 the Company commenced an offering of
$2,000,000 of its common stock and warrants in a private placement to accredited
investors. Such offering was completed on April 22, 1998.
The offering raised aggregate proceeds of $2,000,000 for the purchase of
1,980,198 shares of common stock of the Company and warrants to purchase 250,000
shares of common stock at $2.05 for three years by seven accredited investors as
follows:
<TABLE>
<CAPTION>
Common Common
Common Shares in Total shares
Amount Shares escrow Common under
Name of purchaser paid(b) issued (a) (a)(b) Shares (a) warrants
----------------- ------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balmore Funds S.A. $ 850,000 631,189 210,395 841,584 106,250
Austost Anstalt Schaan $ 750,000 556,931 185,643 742,574 93,750
Beeston Investments Ltd. $ 200,000 148,515 49,505 198,020 25,000
Manor Investments $ 100,000 74,258 24,752 99,010 12,500
Ellis Enterprises $ 50,000 37,129 12,376 49,505 6,250
East Lane Corporation, Ltd. $ 50,000 37,129 12,376 49,505 6,250
---------- --------- ------- --------- -------
Totals $2,000,000 1,485,151 495,047 1,980,198 250,000
========== ========= ======= ========= =======
</TABLE>
(a) Prior to "repricing", if any, as discussed below.
(b) See below regarding proceeds and shares held in escrow pending the filing
of a registration statement.
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Of the amount raised by the Company, $500,000 and 495,145 shares are held in
escrow pending the Company's filing of a registration statement covering the
shares and shares underlying the warrants prior to June 13, 1998. The Company
has agreed to register such shares and has agreed to penalties of 3% per month
should the registration statement not be declared effective within 130 days.
The number of shares issuable to these investors will be "repriced" in
increments pursuant to a schedule. The increments are initially four $300,000
increments and then four $200,000 increments on eight occasions. The repricing
increments commence with the effectiveness of a registration statement covering
the shares, then one increment 60 days later and the remaining six increments in
30 day intervals thereafter. On such dates, the investor would receive the
additional number of shares, if any, that result from the difference between the
number of shares actually issued and the number of shares which would have been
issued at 77% of the average closing bid price, as defined, for the five trading
days immediately preceeding but not including, the "repricing" date. Each
"repricing' calculation is made independent of the other "repricing"
calculations.
The operation of the "repricing" provision could result in significantly greater
number of shares being issued than the amounts listed in the above table.
The investors have agreed not to sell any shares before at least 120 days after
the closing. The Company is exposed to significant penalties for failure to have
a registration statement declared effective covering such shares within 130
days. The Company has agreed not to issue certain financings for 270 days after
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issuance of all shares under the "repricing" provisions without the consent of
the investors and has agreed to a right of first refusal as defined in the
agreements.
The Company has paid a placement agent a 6.5% fee in connection with the
transaction.
The $2,000,000 issuance of common stock and warrants will trigger the
anti-dilution provisions of the 10%/13% Convertible Notes and the Company's
currently outstanding Class B and Class E warrants. Anti-dilution computations
have not yet been completed.
The Registrant claims exemption from registration of this placement by virtue of
Section 4(2) of the Securities Act of 1933.
b. Restructure of 10%/13% Convertible Notes - Effective April 14, 1998 the
Company and the holders of its 10%/13% Convertible Notes and related warrants
entered into a First Amendment (and related Stock Pledge Agreement and Security
Agreement) of the September 1997 Note Purchase Agreement in order to restructure
the obligation.
The key elements of the restructuring are as follows: (1) waiving of the
Company's violations of the financial covenants at December 31, 1997, as well as
certain other breaches of the agreement, (2) eliminating the financial covenants
through April 16, 1999, (3) securing the obligation with a pledge of all of the
assets of the Company (excluding the assets of Drew Shoe which are already
pledged to a bank), including the stock of the Company's subsidiaries, (4)
accelerating the maturity date for the obligation from September 19, 2002 to
April 16, 1999, (5) cancellation of Class DD warrants to purchase 400,000 shares
of common stock of the Company and (6) issuance to the holders a total of 10% of
the common shares of the Company's subsidiaries Drew Shoe Corporation and BCAM
Technologies, Inc., among other matters. The Company expects to take a
significant charge to operations in 1998 in connection with the finalization of
the restructuring of the debt.
c. Change in Directors - Effective April 1, 1998, Mr. Charles Schulyer
resigned from the Board of Directors of the Company. Mr. Schulyer continues in
his full-time role as President and Chief Executive Officer of the Company's
Drew Shoe Corporation subsidiary. Effective April 14, 1998, Mr. Joseph Jacobs,
President of Wexford Management LLC (an investment management firm providing
services for a series of investment partnerships, including Impleo, LLC the
holder of $5,000,000 face amount of Convertible Notes, several public companies
and several private investments) joined the Registrant's Board of Directors.
Item 7. Financial Statements and Exhibits
Exhibits
10.70 Form of Subscription Agreement between the Company and the investors
in the April 1998 private placement of common stock and warrants
10.71 Form of Common Stock Purchase Warrant between the Company and the
investors in the April 1998 private placement of common stock and
warrants.
10.72 Escrow Agreement between the Company, the several investors and
Grushko and Mittman (as escrow agent) in connection with the April
1998 private placement of common stock and warrants.
10.73 First Amendment, dated as of April 14, 1998, to Note Purchase
Agreement dated September 19, 1997 between the Company and Impleo,
LLC.
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10.74 First Amendment, dated as of April 14, 1998, to Note Purchase
Agreement dated September 19, 1997 between the Company and the
members of the Kirr Marbach group.
10.75 Security Agreement dated as of April 14, 1998 between Wexford
Management, LLC, as agent for the noteholders, and the Company.
10.76 Stock Pledge Agreement dated as of April 14, 1998 between Wexford
Management, LLC, as agent for the noteholders, and the Company.
Forward Looking Statements
This Form 8-K contains forward-looking statements which involve risks and
uncertainties. When used herein, the words "anticipate", "believe", "estimate"
and "expect" and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The Company's actual
results, performance or achievements could differ materially from the results
expressed in or implied by these forward-looking statements. Factors that could
cause or contribute to such differences are detailed from time to time in the
Company's Securities and Exchange Commission reports. Historical results are not
necessarily indicative of trends in operating results for any future period.
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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.
BCAM INTERNATIONAL, INC.
By: /s/ Michael Strauss
-------------------------------
Michael Strauss, President
Chairman of the Board and
Chief Executive Officer
Date: May 4, 1998
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SUBSCRIPTION AGREEMENT
You (the "Subscriber" or "Purchaser" or "Holder") hereby agree to
purchase, and BCAM International, Inc., a New York corporation (the "Company")
hereby agrees to issue and to sell to the Subscriber, the number of shares of
the Company's Common Stock, $.01 par value per share (the "Company Shares"), and
an amount of Common Stock Purchase Warrants (the "Warrants") designated on the
signature page hereof, in the form annexed hereto as Exhibit A. (The Company
Shares are sometimes referred to herein as the "Shares" or "Common Shares").
(The Company Shares, the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants are collectively referred to herein as, the
"Securities"). Upon acceptance of this Agreement by the Subscriber, the Company
shall issue and deliver to the Subscriber the Company Shares and Warrants
against payment, by federal funds (U.S.) wire transfer of the amount designated
on the signature page hereof pursuant to the terms of a Funds Escrow Agreement
annexed hereto as Exhibit B.
The following terms and conditions shall apply to this subscription.
1. Subscriber's Representations and Warranties. The Subscriber hereby
represents and warrants to and agrees with the Company that:
(a) Information on Company. The Subscriber has been furnished with
and has read the Company's most recent Form 10-KSB for the year ended December
31, 1996 and subsequent Forms 10-Q and 8-K as filed with the U.S. Securities and
Exchange Commission (the "Commission") (collectively, with exhibits thereto,
hereinafter referred to as the "Reports"). In addition, the Subscriber has
received from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested, and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities (such information in writing is
collectively, the "Other Written Information").
(b) Information on Subscriber. The Subscriber is an "accredited
investor", as such term is defined in Regulation D promulgated by the Commission
under the Securities Act of 1933, as amended, is experienced in investments and
business matters, has made investments of a speculative nature and has purchased
securities of United States publicly-owned companies in the past
<PAGE>
and, with its representatives, has such knowledge and experience in financial,
tax and other business matters as to enable the Subscriber to utilize the
information made available by the Company to evaluate the merits and risks of
and to make an informed investment decision with respect to the proposed
purchase, which represents a speculative investment. The Subscriber has the
authority and is duly and legally qualified to purchase and own the Securities.
(c) Correctness of Representations. The Subscriber represents that
the foregoing representations and warranties are true and correct as of the date
hereof and, unless the Subscriber otherwise notifies the Company prior to the
Closing Date (as hereinafter defined), shall be true and correct as of the
Closing Date. The foregoing representations and warranties shall survive the
Closing Date.
2. Company Representations and Warranties. The Company represents and
warrants to and agrees with the Subscriber that:
(a) Due Incorporation. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
and each of its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have
a material adverse effect on the business, operations or prospects or condition
(financial or otherwise) of the Company.
(b) Outstanding Stock. All issued and outstanding shares of capital
stock of the Company and each of its subsidiaries has been duly authorized and
validly issued and are fully paid and non-assessable.
(c) Authority; Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and is a valid and binding
agreement enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity; and the Company has full corporate power and
authority necessary to enter into this Agreement and to perform its obligations
hereunder.
<PAGE>
(d) Additional Issuances. There are no outstanding agreements or
preemptive or similar rights affecting the Company's common stock and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of, any shares of common stock or equity of the Company or
other equity interest in any of the subsidiaries of the Company, except as
described in the Reports or Other Written Information.
(e) Consents. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, or any of its affiliates is required for execution of this Agreement,
including, without limitation issuance and sale of the Securities, or the
performance of the Company's obligations hereunder.
(f) No Violation or Conflict. Assuming the representations and
warranties of the Subscriber in Paragraph 1 are true and correct and the
Subscriber complies with its obligations under this Agreement, neither the
issuance and sale of the Securities nor the performance of its obligations under
this Agreement by the Company will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice of the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the articles of incorporation, charter or bylaws of the Company, or any of its
affiliates, (B) any decree, judgment, order, law, treaty, rule, regulation or
determination applicable to the Company, or any of its affiliates of any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates or over the properties or assets of the Company, or any
of its affiliates, (C) the terms of any bond, debenture, note or any other
evidence of indebtedness, or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument to which the
Company, or any of its affiliates is a party, by which the Company, or any of
its affiliates is bound, or to which any of the properties of the Company, or
any of its affiliates is subject, or (D) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company, or any
of its affiliates is a
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party; or
(ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company, or any
of its affiliates.
(g) The Securities. The Securities upon issuance:
(i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances;
(ii) have been, or will be, duly and validly authorized and on
the date of issuance and on the Closing Date, as hereinafter defined, and the
date the Warrants are exercised according to their terms, as the case may be,
the Shares, and the Warrants and common stock issuable upon exercise of the
Warrants, will be duly and validly issued, fully paid and nonassessable, and if
permitted, free trading and unrestricted;
(iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company;
(iv) will not subject the holders thereof to personal
liability by reason of being such holders; and
(v) the Company Shares, are quoted on, and are listed for
trading on the NASDAQ SmallCap Market. The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for such listing, and the Company has maintained all requirements for the
continuation of such listing.
(h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would materially affect the execution by the
Company or the performance by the Company of its obligations under this
Agreement.
(i) Reporting Company. The Company is a publicly-held company whose
common stock is (and has been for the past 90 days) registered pursuant to
Section 12(g) of the
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Securities Exchange Act of 1934 (the "1934 Act") and is duly listed for trading
on the NASDAQ SmallCap Market. Pursuant to the provisions of the 1934 Act, the
Company has timely filed all reports and other materials required to be filed
thereunder with the Securities and Exchange Commission during the preceding
twelve months, and is eligible presently and as of the Closing Date to file a
Form S-1 to register the Company Shares.
(j) No Market Manipulation. The Company has not taken, and will not
take, directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the common stock of the Company to facilitate the sale or resale of the Company
Shares or affect the price at which the Reset Shares (as herein defined) may be
issued.
(k) Information Concerning Company. The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein. Since the date of the financial
statements set forth in the Reports, and except as modified in the Other Written
Information, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports and Other Written Information do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(l) Dilution. The number of Shares issuable upon Reset (as
hereinafter defined) may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to the Reset (as herein defined). The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon Reset is binding upon the Company and enforceable
regardless of the dilution such issuance
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may have on the ownership interests of other shareholders of the Company.
(m) Stop Transfer. The Company has not issued, and will not issue
any stop transfer order or other order impeding the sale and delivery of the
Securities.
(n) Defaults. Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or ByLaws. Except as described in
the Reports and Other Written Information, neither the Company nor any of its
subsidiaries is (i) in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) in violation
of any statute, rule or regulation of any governmental authority material to its
business.
(o) No Integrated Offering. Neither the Comany, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of NASDAQ
SmallCap, as applicable, nor will the Company or any of its subsidiaries take
any action or steps that would require registration of the Securities under the
1933 Act or cause the offering of the Securities to be integrated with other
offerings. The Company has not conducted and will not conduct any offering that
will be integrated with the issuance of the Securities solely for purposes of
Rule 4460(i) of the NASDAQ Stock Market, Inc.'s Marketplace Rules.
(p) Intentionally Omitted.
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(q) No General Solicitation. Neither the Company, nor any of its
affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) in connection with the offer or sale of
the Securities.
(r) Correctness of Representations. The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless the Company otherwise notifies the Subscriber prior to the
Closing Date, shall be true and correct as of the Closing Date. The foregoing
representations and warranties shall survive the Closing Date.
3. Regulation D Offering. This Offering is being made pursuant to the
exemption from the registration provisions of the Securities Act of 1933, as
amended, afforded by Rule 506 of Regulation D promulgated thereunder. On the
Closing Date, the Company will provide an opinion acceptable to Subscriber from
the Company's legal counsel opining on the availability of the Regulation D
exemption as it relates to the offer and issuance of the Securities. A form of
the legal opinion is annexed hereto as Exhibit C.
4. Issuance of Securities. Each certificate representing the Securities
shall be stamped or otherwise imprinted with a legend substantially in the
following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE STATE SECURITIES LAWS."
The Company agrees to reissue certificates representing the Securities without
the legend set forth above at such time as (a) the holder thereof is permitted
to dispose of such Securities pursuant to Rule 144(k) under the Act, (b) the
Securities are sold to a purchaser or purchasers who (in the opinion of counsel
to such purchasers, in form and substance reasonably satisfactory to the Company
and its counsel) are able to dispose of the Securities
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publicly without registration under the Act, or (c) the Securities are
registered under the Act.
5. Redemption/Resale.
(a) The Company may not redeem the Securities without the consent of
the holder of the Securities.
(b) Until the 120th day after the Closing Date, the Subscriber may
not sell, transfer or convey the Securities, without the consent of the Company,
except by operation of law.
6. Legal Fees/Commissions. The Company shall pay to counsel to the
Subscriber its bill for $20,000 for services rendered to the Subscriber in
reviewing this Agreement and other subscription agreements for the aggregate
subscription amounts of up to $2,000,000. The Company will pay at the time of
Closing a cash commission of six and one-half percent (6-1/2%) to certain
placement agents. The commissions and legal fees will be payable out of funds
held pursuant to a Funds Escrow Agreement to be entered into by the Company and
Subscriber. Additional cash commissions of six and one-half percent (6-1/2%)
will be payable to the placement agents in connection with gross proceeds from
the Company's exercise of the Put described in Section 11 of this Subscription
Agreement.
7. Covenants of the Company. The Company covenants and agrees with the
Subscriber as follows:
(a) The Company will advise the Subscriber, promptly after it
receives notice of issuance by the Commission, any state securities commission
or any other regulatory authority of any stop order or of any order preventing
or suspending the use of any offering of any securities of the Company, or of
the suspension of the qualification of the common stock of the Company for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
(b) The Company shall promptly secure the listing of the Company
Shares and Common Stock issuable upon the exercise of the Warrants upon each
national securities exchange other than the Boston Exchange, or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official
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notice of issuance) and shall maintain so long as any other shares of Common
Stock shall be so listed, such listing of all Common Stock from time to time
issuable upon exercise of the Warrants and upon Reset. The Company will obtain
and maintain the listing and trading of its Common Stock on NASDAQ SmallCap
Market, and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company shall
promptly provide to each Purchaser copies of any notices it receives regarding
the continued eligibility of the Common Stock for listing on such exchanges or
quotation systems, or any other exchange or quotation system on which the Common
Stock is then listed.
(c) The Company shall notify the SEC, NASD and applicable state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Subscriber
and promptly provide copies thereof to Subscriber.
(d) Until at least three (3) years after the effectiveness of the
Registration Statement on Form S-1 or such other Registration Statement
described in Section 10.1(iv) hereof, the Company will cause its Common Stock to
continue to be registered under Sections 12(b) or 12(g) of the Exchange Act,
will comply in all respects with its reporting and filing obligations under such
Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement and will not take any action or file
any document (whether or not permitted by the Act or the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Acts, except as
permitted herein. Until at least three (3) years after the Warrants have been
converted into Common Stock, the Company will take all action within its power
to continue the listing or trading of its Common Stock on the NASDAQ SmallCap
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the NASD and NASDAQ.
8. Covenants of the Company and Subscriber Regarding Indemnifications.
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(a) The Company agrees to indemnify, hold harmless, reimburse and
defend Subscriber against any claim, costs, expense, liability, obligation, loss
or damage (including reasonable legal fees) of any nature, incurred by or
imposed upon Subscriber which results, arises out of or is based upon (i) any
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or Reports or other
Written Information; or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder.
(b) Subscriber agrees to indemnify, hold harmless, reimburse and
defend the Company at all times against any claim, costs, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (a) any misrepresentation by Subscriber in this Agreement or in any
Exhibits or Schedules attached hereto; or (b) any breach or default in
performance by Subscriber of any covenant or undertaking to be performed by
Subscriber hereunder.
9. Reset.
(a) The amount of Company Shares issuable to the Subscriber shall be
redetermined from time to time as described herein (the "Reset") and if
appropriate additional shares of Common Stock (the "Additional Shares") will be
issued and delivered to the Subscriber. The original purchase price set forth on
the signature page of this Subscription Agreement (the "Purchase Price") shall
be deemed the purchase price of all the Common Stock to be delivered pursuant to
this Subscription Agreement.
(b) The Reset shall be determined on the following dates (each a
"Reset Date") for the designated amounts of the Purchase Price. The initial
Reset Date shall be the effective date of the Registration Statement described
in Section 10.1(iv) of this Subscription Agreement or at the Subscriber's
election on the 180th day after the Closing Date if the Registration Statement
has not been declared effective by such date, ("Trigger Date"). In the event the
effective date of the Registration Statement described in Section 10.1(iv) of
this Subscription Agreement is sooner than the 120th day after the Closing Date,
then the Trigger Date shall be the 120th day after
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the Closing Date. In the event any portion of the Common Shares comprising the
Registration Escrow (as hereinafter defined) is released to the Company pursuant
to Section 10.1(iv), then the Designated Portion of the Purchase Price shall
mean that portion of the Purchase Price set forth on the signature page to this
Subscription Agreement less the corresponding amount of Purchase Price returned
to the Subscriber. To the extent a Registration Escrow is held in escrow on a
Reset Date, then such Common Shares issuable in connection with such
Registration Escrow will be deposited in escrow to be held pursuant to the Funds
Escrow Agreement.
Designated Portion of
Purchase Price Date
-------------- ----
15% Trigger Date
15% 60 Days after Trigger Date
10% 90 Days after Trigger Date
10% 120 Days after Trigger Date
10% 150 Days after Trigger Date
10% 180 Days after Trigger Date
10% 210 Days after Trigger Date
10% 240 Days after Trigger Date
10% 270 Days after Trigger Date
(c) On each Reset Date a number of Company Shares will be calculated
for the designated portion of the Purchase Price by dividing the Designated
Portion of the Purchase Price by a number equal to seventy-seven percent (77%)
of the average closing bid price for the Common Stock on the NASDAQ SmallCap
Market, or on any securities exchange or other securities market on which the
Common Stock is then being traded, for the five trading days immediately
preceding, but not including, the Reset Date (the "Average Price"). If the
Average Price is less than $1.01 then the Company will issue to the Subscriber
the number of shares of Common Stock obtained by subtracting (y) the number of
shares obtained by dividing the Designated Portion of Purchase Price by $1.01
from (z) the number of shares obtained by dividing the Designated Portion of
Purchase Price by the Average Price.
(d) In no event will the Subscriber be required to return any
Company Shares to the Company. Each Reset calculation shall be made independent
of all other Reset
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calculations.
(e) The Company agrees to deliver the Additional Shares to the
Subscriber in hand, no later than fourteen (14) days after the Reset Date (the
"Delivery Date"). The Company understands that a delay in the delivery of the
Additional Shares beyond the Delivery Date could result in economic loss to the
Subscriber. As compensation to the Subscriber for such loss, the Company agrees
to pay late payments to the Subscriber for late delivery of Additional Shares
beyond the Delivery Date, in the amount of $100 per business day after the
Delivery Date for each $10,000 of Designated Portion of Purchase Price for which
a Reset has been calculated. The Company shall pay any payments incurred under
this Section in immediately available funds upon demand. The late payment
charges described above shall be payable through the date the Additional Shares
are received in hand by the Subscriber.
(f) Company Shares as defined and employed in this Subscription
Agreement shall mean and include Additional Shares for all purposes including
but not limited to Section 10 of this Subscription Agreement.
(g) Nothing contained herein or in any document referred to herein
shall be deemed to establish or require the payment of a rate of interest or
other charges in excess of the maximum permitted by applicable law. In the event
that the rate of interest required to be paid or other charges hereunder exceed
the maximum permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Company to the Subscriber and thus
refunded to the Company.
100 Registration Rights; Procedure; Indemnification.
10.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Company Shares and the Warrants.
(i) On one occasion, for a period commencing 50 days after the
Closing Date, but not later than three years from the date hereof, the Company,
upon a written request
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<PAGE>
therefor from any record holder or holders of more than 50% of the aggregate of
the Company's Shares and Common Stock issuable upon exercise of the Warrants
(the Company Shares and Common Stock issuable upon exercise of the Warrants
being, the "Registrable Securities"), shall prepare and file with the SEC a
registration statement under the Act covering the Registrable Securities which
are the subject of such request. In addition, upon the receipt of such request,
the Company shall promptly give written notice to all other record holders of
the Registrable Securities that such registration statement is to be filed and
shall include in such registration statement Registrable Securities for which it
has received written requests within 20 days after the Company gives such
written notice. Such other requesting record holders shall be deemed to have
exercised their demand registration right under this Section 10.1. As a
condition precedent to the inclusion of Registrable Securities, the holder
thereof shall provide the Company with such information as the Company
reasonably requests. The obligation of the Company under this Section 10.1(i)
shall be limited to one registration statement.
(ii) If the Company at any time proposes to register any of
its securities under the Act for sale to the public, whether for its own account
or for the account of other security holders or both, except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Registrable Securities for sale to the public, provided the
Registrable Securities are not otherwise registered for resale by the Subscriber
pursuant to an effective registration statement, each such time it will give at
least 30 days' prior written notice to the record holder of the Registrable
Securities of its intention so to do. Upon the written request of the holder,
received by the Company within 30 days after the giving of any such notice by
the Company, to register any of the Registrable Securities, the Company will
cause such Registrable Securities as to which registration shall have been so
requested to be included with the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent required to
permit the sale or other disposition of the Registrable Securities so registered
by the holder of such Registrable Securities (the "Seller"). In the event that
any registration pursuant to this Section 10.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced
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by the managing underwriter if and to the extent that the Company and the
underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the forgoing provisions, the Company may
withdraw any registration statement referred to in this Section 10.1(ii) without
thereby incurring any liability to the Seller.
(iii) If, at the time any written request for registration is
received by the Company pursuant to Section 10.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the Act in connection with the proposed offer and sale for cash of any of
its securities for the Company's own account, such written request shall be
deemed to have been given pursuant to Section 10.1(ii) rather than Section
10.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 10.1(ii) except that the Company or
underwriter, if any, may not withdraw such registration or limit the amount of
Registrable Securities included in such registration.
(iv) The Company shall file with the Commission, within sixty
(60) days of the Closing Date, and use its reasonable commercial efforts to
cause to be declared effective a Form S-1 registration statement in order to
register for resale and distribution under the Act, and Company Shares and all
shares of Common Stock issuable upon exercise of the Warrants. The registration
statement described in this paragraph must be declared effective by the
Commission within 130 days of the Closing Date. The Company will register not
less than 20,000 shares of Common Stock in the S-1 registration statement for
each $10,000 of Purchase Price as set forth on the signature page hereto and one
share of Common Stock for each share of Common Stock issuable upon exercise of
the Warrants. These shares to be registered shall be reserved and set aside
exclusively for the benefit of the Subscriber and not issued, employed or
reserved for anyone other than the Subscriber. It is the intention of the
parties that these shares include the Additional Shares described in Section 9
hereof. Such registration statement will be promptly amended or additional
registration statements will be promptly filed by the Company as required to
register additional shares of Common Stock issuable upon Reset. In the event the
Company may employ an S-3 Registration Statement, then the
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Company will file such form of registration statement in order to register the
Registrable Securities. One-quarter of the Purchase Price and one-quarter of the
Common Shares purchased as set forth on the signature page of this Subscription
Agreement shall be held in escrow pursuant to the Funds Escrow Agreement annexed
hereto as Exhibit B until the acceptance for filing by the Securities and
Exchange Commission of the registration statement described in this Section
10.1(iv) ("Registration Escrow"). In the event the registration statement
relating to the Registrable Securities is not filed within 60 days from the
Closing Date then the Registration Escrow shall be employed as a non-exclusive
remedy, to pay the damages described in Section 10.2(j) of this Subscription
Agreement. In the event the Registration Statement is not filed within 130 days
from the Closing Date, unless otherwise agreed to in writing by the Subscriber,
then one-quarter of the Purchase Price shall be released to the Subscriber, and
one-quarter of the Common Shares purchased as set forth on the signature page
hereof shall be returnable to the Company. In such event the Company shall not
be released from any of its obligations under this Subscription Agreement or any
agreement delivered in connection herewith including the Company's obligations
pursuant to this Section 10 and Reset provisions described in Section 9 of this
Subscription Agreement except that the Company shall no longer be required to
file a registration statement in connection with only those Common Shares
released to the Company and damages shall not accrue to the Subscriber in
relation to the Common Shares released to the Company from and after the date
the corresponding portion of the Purchase Price is returned to the Subscriber.
To the extent any part of the Purchase Price portion of the Registration Escrow
is released to a Subscriber, then that portion of the Registration Escrow may,
at the Subscriber's election, first be applied in satisfaction of payment by the
Company of damages accrued to such Subscriber under Section 9(e) and Section
10.2(j). Anything to the contrary herein or in the Funds Escrow Agreement
notwithstanding, the Company Shares component of the Registration Escrow will
not be released to the Company until all outstanding monetary obligations to the
Subscriber are satisfied. The Subscriber may elect to satisfy any such
outstanding Company obligations by demanding the release from escrow of cash
funds and/or Company Shares at a per share value equivalent to 77% of the lowest
bid price of the Company's Common Stock on the NASDAQ SmallCap Market or on any
exchange or other securities market on which the Common Stock is then being
traded, for the five trading days prior to the date notice of such election is
given to the
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Company. It is not the intention of the Subscriber to appoint an underwriter in
connection with the S-1 registration statement described in this Section
10.1(iv).
10.2. Registration Procedures. If and whenever the Company is required by
the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided):
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Act with respect to the disposition of all of the Registrable Securities
covered by such registration statement in accordance with the Seller's intended
method of disposition set forth in such registration statement for such period;
(c) furnish to the Seller, and to each underwriter if any, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;
(d) use its best efforts to register or qualify the Seller's
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Seller or, in the
case of an underwritten public offering, the managing underwriter shall
reasonably request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;
(e) list the Registrable Securities covered by such registration
statement with any securities exchange on which
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<PAGE>
the Common Stock of the Company is then listed;
(f) immediately notify the Seller and each underwriter under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Act, of the happening of any event of which
the Company has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) make available for inspection by the Seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by the Seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by the seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
(h) at the request of the Seller, provided a demand for registration
has been made pursuant to Section 10.1(i) or a request for registration has been
made pursuant to Section 10.1(ii), the Registrable Securities will be included
in a registration statement filed pursuant to this Section 10. In the event of a
firm commitment underwritten public offering in which the Registrable Securities
are so included, the lockup, if any, requested by the managing underwriter may
not exceed ninety (90) days after the effective date thereof.
(i) In connection with each registration hereunder, the Seller will
furnish to the Company in writing such information with respect to itself and
the proposed distribution by it as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws. In
connection with each registration pursuant to Section 10.1(i) or 10.1(ii)
covering an underwritten public offering, the Company and the Seller agree to
enter into a written agreement with the managing underwriter in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature.
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<PAGE>
(j) The Company and the Subscriber agree that the Seller will suffer
damages if any registration statement required under Section 10.1(i) or 10.1(ii)
above is not filed within 45 days after request by the Holder and not declared
effective by the Commission within 130 days after such request [or 45 days and
130 days, respectively, after the Closing Date in reference to the Registration
Statement on Form S-1 described in Section 10.1(iv)], and maintained in the
manner and within the time periods contemplated by Section 10 hereof, and it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement described in Sections 10.1(i) or
10.1(ii) is not filed within 45 days of such request, or is not declared
effective by the Commission on or prior to the date that is 130 days after such
request, or (ii) the registration statement on Form S-1 described in Section
10.1(iv) is not filed within 60 days after the Closing Date or not declared
effective within 130 days of the Closing Date, or (iii) any registration
statement described in Sections 10.1(i), 10.1(ii) or 10.1(iv) is filed and
declared effective but shall thereafter cease to be effective (without being
succeeded immediately by an additional registration statement filed and declared
effective) for a period of time which shall exceed 30 days in the aggregate per
year but not more than 20 consecutive calendar days (defined as a period of 365
days commencing on the date the Registration Statement is declared effective)
(each such event referred to in clauses (i), (ii) and (iii) of this Section
10.2(j) is referred to herein as a "Registration Default"), then, for so long as
such default shall continue, the Company shall pay in cash as Liquidated Damages
to each holder of any Securities an amount equal to three (3%) percent per month
for each thirty (30) days or part thereof thereafter of the Purchase Price of
the Company Shares then owned of record by such holder together with the
aggregate amount of the exercise prices of the Warrants whether or not
exercised, as of immediately following the occurrence of such Registration
Default. Payments to be made pursuant to this Section 10.2(j) shall be due and
payable immediately upon demand in immediately available funds.
10.3. Expenses. All expenses incurred by the Company in complying with
Section 10, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky"
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<PAGE>
laws, fees of the National Association of Securities Dealers, Inc., transfer
taxes, fees of transfer agents and registrars, fee of one counsel, if any, to
represent all the Sellers, and costs of insurance are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities, including any fees and disbursements of any
special counsel to the Seller, are called "Selling Expenses". The Seller shall
pay the fees of its own counsel, if any.
The Company will pay all Registration Expenses in connection with
the registration statement under Section 10. All Selling Expenses in connection
with each registration statement under Section 10 shall be borne by the Seller
in proportion to the number of shares sold by the Seller relative to the number
of shares sold under such registration statement or as all Sellers thereunder
may agree.
10.4. Indemnification and Contribution.
(a) In the event of a registration of any Registrable Securities
under the Act pursuant to Section 10, the Company will indemnify and hold
harmless the Seller, each officer of the Seller, each director of the Seller,
each underwriter of such Registrable Securities thereunder and each other
person, if any, who controls such Seller or underwriter within the meaning of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which the Seller, or such underwriter or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities was
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged
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<PAGE>
untrue statement or omission or alleged omission so made in conformity with
information furnished by any such Seller, the underwriter or any such
controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Act pursuant to Section 10, the Seller will indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, underwriter or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Act pursuant to Section 10, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the Registrable
Securities sold by the Seller under such registration statement bears to the
total public offering price of all securities sold thereunder, but not in any
event to exceed the gross proceeds
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<PAGE>
received by the Seller from the sale of Registrable Securities covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10.4(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10.4(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10.4(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified parties
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Act in any case in which either (i) the
Seller, or any controlling person of the Seller, makes a claim for
indemnification pursuant to this Section 10.4 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right
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of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 10.4 provides for indemnification in
such case, or (ii) contribution under the Act may be required on the part of the
Seller or controlling person of the Seller in circumstances for which
indemnification is provided under this Section 10.4; then, and in each such
case, the Company and the Seller will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Seller is responsible only for the
portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (A) the Seller will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
11.1. Future Offerings.
(a) Offering Restriction. Until 270 days after the delivery of all
Common Stock issuable upon Reset pursuant to Section 9 hereof, the Company and
its subsidiaries will not issue any equity, or convertible debt or other
securities or conduct any public or private offering without the consent of the
Subscriber if such offering would or could result in the issuance of Common
Stock or any other security of the Company that would be freely tradable on the
books of the Company, with or without registration with the Securities and
Exchange Commission or in reliance on any exemption from registration prior to
the effective date of a Registration Statement described in Section 10.1(iv)
relating to all the Registrable Securities. The foregoing restriction shall not
apply in connection with an offering, to raise no more than $5,500,000 on terms
more favorable to the investor, than the terms described herein, for the sole
purpose of purchasing the Wexford BCAM interest.
(b) Right of First Refusal. The Subscriber shall be given not less
than fifteen (15) business days prior written notice of any proposed sale by the
Company of its common stock or other securities in offerings made pursuant to
the last sentence
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of Section 11.1(a) above. The Subscriber shall have the right during the ten
(10) business days following the notice to agree to purchase an amount of
securities in the same proportion as being purchased in the aggregate offering
to which this Subscription Agreement relates (i.e. $2,000,000 in the aggregate),
of those securities proposed to be issued and sold, in accordance with the terms
and conditions set forth in the notice of sale. In the event such terms and
conditions are modified during the notice period, the Subscriber shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of fifteen (15) business days following the notice
of modification, whichever is longer, to exercise such right.
11.2. Obligation To Purchase.
(a) Until two years from the Closing Date, the Subscriber agrees to
purchase from the Company additional shares of Common Stock of the Company (the
"Put Shares") for the aggregate consideration designated on the signature page
hereof (the "Put").
(b) The agreement to purchase the Put Shares is contingent on the
Company registering the Put Shares with the Securities and Exchange Commission
on the Form S-3 or such other registration statement described in Section
10.1(iv) of this Subscription Agreement or another form suitable for such
purpose and with such States designated by the Purchaser on or before 130 days
from the Closing Date, and such registration statement being declared effective
by the Securities and Exchange Commission on or before 130 days from the Closing
Date.
(c) The agreement to purchase is further contingent on the
following:
(1) As of the effective date of the registration statement
described in Section 11.2(b), the Company will be a full reporting company with
the class of Shares registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934.
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(2) The Company's Common Stock will have traded at an average
daily trading volume of 75,000 shares for the thirty trading days prior to the
effective date of the registration statement described in Section 11.2(b) above,
with an average daily closing bid price of not less than $1.30 per share for the
same period.
(3) The Company's financial condition will be at least
equivalent to the Company's financial condition as reported in the Company's
most recent financial statements included in the Reports and Other Information.
(4) None of the following events of default ("Event of
Default") shall have occurred or be continuing:
(i) The Company shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for a substantial part of its property or business; or such a
receiver or trustee shall otherwise be appointed.
(ii) Any money judgment, writ or similar process shall
be entered or filed against Company or any of its property or other assets for
more than $50,000, and shall remain unvacated, unbonded or unstayed for a period
of forty-five (45) days.
(iii) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Company.
(iv) Delisting of any of the Company's securities from
the NASDAQ SmallCap Market or such other principal exchange on which such
security is listed for trading, except for the Boston Exchange.
(v) A concession by the Company of a default under any
one or more obligation in an aggregate monetary amount in excess of $50,000.
(vi) An SEC stop trade order or NASDAQ trading
suspension, if either applies for a period of ten days or longer.
(vii) Any representation or warranty of the Company made
in this Subscription Agreement or in connection
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<PAGE>
herewith, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection herewith shall be false or misleading.
(viii) The occurrence of a Registration Default as
described in Section 10.2(j) of this Subscription Agreement.
(ix) Any default by the Company of any covenant or
undertaking described in this Subscription Agreement or any document delivered
in connection herewith.
(5) A Closing shall have occurred on the aggregate $2,000,000
offering described in this Subscription Agreement.
(6) The Put Shares will be free-trading, unrestricted,
unlegended and not subject to volume resale limitations.
(7) Such other terms and condition as would reasonably and
customarily be included in an Underwriter's Firm Commitment or Best Efforts
underwriting agreement.
(d) The Subscriber is required to purchase Put Shares within ten
(10) business days of notice by the Company that the Company is exercising the
Put ("Put Notice"). The date notice is given is the "Put Date". The Company's
right to give a Put Notice expires two years from the Closing Date. The Company
may not give such notice more often than once each twenty-one (21) days, nor
within ten (10) days prior to nor within ten (10) days subsequent to a Reset
Date, as defined in Section 9 of this Subscription Agreement. Unless otherwise
agreed to by the Subscribers, Put Notices must be given to all Subscribers in
the same proportion to the amounts agreed to be purchased by all Subscribers
undertaking to purchase Put Shares. Payment for the Put Shares will be made upon
receipt of the Put Shares by the Subscriber or an escrow agent to be designated
by the Company and Subscriber.
(e) The price per common share for each Put Share shall be 77% of
the lowest bid price of the Company's Common Stock on the NASDAQ SmallCap
Market, or on any securities exchange or other securities market on which the
Common Stock is then being traded, for the five trading days commencing two
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trading days prior to the Put Date and ending two trading days after the Put
Date (the "Put Price").
(f) The aggregate purchase price of Put Shares for which each Put
Notice may be given to all Subscribers is as follows:
Average Per Common Average Daily Aggregate Dollar
Share Closing Common Stock Purchase Price of
Bid Price For Trading Volume For Put Shares For
15 Trading Days 15 Trading Days All Put Notices
Prior to Put Date Prior to Put Date On a Put Date
- ------------------ ------------------ -----------------
Between $1.30 Not Less Than Up to $500,000
and $1.60 75,000 Common Shares
Between $1.61 Not Less Than Up to $750,000
and $1.90 100,000 Common Shares
More than $1.90 Not Less Than Up to $1,000,000
125,000 Common Shares
(g) The Put Price and number of Common Shares to be issued pursuant
to this Section shall be subject to adjustment from time to time upon the
happening of certain events while the Put right remains outstanding, as follows:
(1) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the Put Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.
(2) Share Issuance. Subject to the provisions of this Section,
if the Company at any time shall issue any shares of Common Stock prior to the
exercise of the aggregate Put amounts (otherwise than as provided in Section
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<PAGE>
11.2(f)(1) or this subparagraph 11.2(f)(2) for a consideration less than the Put
Price that would be in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Put Price shall be reduced as follows:
(i) the number of shares of Common Stock outstanding immediately prior to such
issue shall be multiplied by the Put Price in effect at the time of such issue
and the product shall be added to the aggregate consideration, if any, received
by the Company upon such issue of additional shares of Common Stock; and (ii)
the sum so obtained shall be divided by the number of shares of Common Stock
outstanding immediately after such issue. The resulting quotient shall be the
adjusted Put Price. For purposes of this adjustment, the issuance of any
security of the Company carrying the right to convert such security into shares
of Common Stock or of any warrant, right or option to purchase Common Stock
shall result in an adjustment to the Put Price upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights.
(h) The Company shall not be entitled to exercise the Put without
the consent of the Subscriber, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Subscriber and its affiliates on a Put
Date, and (ii) the number of shares of Common Stock issuable upon the exercise
of the Put with respect to which the determination of this proviso is being made
on a Put Date, which would result in beneficial ownership by the Subscriber and
its affiliates of more than 4.99% of the outstanding shares of Common Stock of
the Company. For the purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder, except as otherwise provided in clause (i) of such proviso.
12. Miscellaneous.
(a) Notices. All notices or other communications given or made
hereunder shall be in writing and shall be personally delivered or deemed
delivered the day telecopied (with copy mailed by regular, certified or
registered mail, or overnight courier) to the party to receive the same at its
address set forth below or to such other address as either party shall hereafter
give to the other by notice duly made under this Section: (i) if to the Company,
to BCAM International, Inc.,
27
<PAGE>
1800 Walt Whitman Road, Melville, New York 11747, telecopier number: (516)
752-3558; and (ii) if to the Subscriber, to the name, address and telecopy
number set forth on the first page hereof.
(b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Mittman, 277 Broadway, Suite
801, New York, New York 10007, upon the satisfaction of all conditions to
Closing set forth in this Agreement. The closing date shall be the date one-half
of the subscriber funds are transmitted by wire transfer to the Company and the
other-half retained in escrow pursuant to Section 10.1(iv) hereof (the "Closing
Date").
(c) Entire Agreement; Assignment. This Agreement represents the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. No right
or obligation of either party shall be assigned by that party without prior
notice to and the written consent of the other party.
(d) Execution. This Agreement may be executed by facsimile
transmission, followed by delivery of an executed original copy.
(e) Law Governing this Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the United States of America and
the State of New York. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties agree to submit to the jurisdiction of such courts and
waive trial by jury. The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of any agreement.
28
<PAGE>
(f) Cancellation. Until a Closing actually takes place, either or
both the Company or Subscriber may withdraw without penalty from the
transactions described herein.
(g) Automatic Termination. This Agreement shall automatically
terminate without any further action of either party hereto if the Closing shall
not have occurred by the seventh (7th) business day following the date this
Agreement is accepted by the Subscriber, provided, however, that any such
termination shall not terminate the liability of any party which is then in
breach of the Agreement.
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
Very truly yours,
BCAM INTERNATIONAL, INC.
By:
--------------------------------
Dated: April ____, 1998
Accepted:
BALMORE FUNDS S.A.
Francois Morax
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
By:
------------------------
Dated as of April 13, 1998
Purchase Price: $850,000.00
29
<PAGE>
Common Shares Purchased: 841,584
Common Stock Purchase Warrants Obtained: 106,250
Aggregate Put Consideration: $1,275,000.00
Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.
Very truly yours,
BCAM INTERNATIONAL, INC.
By:
-------------------------------
Dated: April ____, 1998
Accepted:
BEESTON INVESTMENTS LTD.
119 Rothschild Boulevard
Tel Aviv, Israel
Fax: 011-972-25600201
<PAGE>
By:
------------------------
Dated as of April 13, 1998
Purchase Price: $200,000.00
Common Shares Purchased: 198,020
Common Stock Purchase Warrants Obtained: 25,000
Aggregate Put Consideration: $300,000.00
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO BCAM INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Right to Purchase 93,750 Shares of Common Stock of BCAM
International, Inc. (subject to adjustment as provided
herein)
COMMON STOCK PURCHASE WARRANT
No. 1 April 13, 1998
BCAM International, Inc., a corporation organized under the laws of the
State of New York (the "Company"), hereby certifies that, for value received,
BALMORE FUNDS S.A., or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company after April 13, 1998 at any time or from
time to time before 5:00 p.m., New York time, on April 13, 2001 (the "Expiration
Date"), up to 93,750 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $.01 par value per share, of the Company, at a purchase
price of $2.05 per share (such purchase price per share as adjusted from time to
time as herein provided is referred to herein as the "Purchase Price"). The
number and character of such shares of Common Stock and the Purchase Price are
subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term Company shall include BCAM International, Inc. and any
corporation which shall succeed or assume the obligations of BCAM International,
Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common Stock, $.01
par value per share, as authorized on the date of the Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after such date, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies, be entitled to vote for the
election of a majority of directors of the Company (even if the right so to vote
has been suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in (a) or (b)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
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<PAGE>
(c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 5 or otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the holder hereof shall
be entitled to receive, upon exercise of this Warrant in whole in accordance
with the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
holder hereof by surrender of this Warrant, with the form of subscription
attached as Exhibit A hereto (the Subscription Form") duly executed by such
holder, to the Company at its principal office or at the office of its Warrant
agent (as provided in Section 11), accompanied by payment, in cash or by
certified or official bank check payable to the order of the Company, in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Purchase Price (as hereinafter defined)
then in effect.
1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of shares of Common Stock designated by the holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the holder hereof a new Warrant of like tenor, in the name of
the holder hereof or as such holder (upon payment by such holder of any
applicable transfer taxes), may request, the number of shares of Common Stock
for which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean the Fair Market
Value of a share of the Company's Common Stock. Fair Market Value of a share of
Common Stock as of a Determination Date shall mean:
(a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System or the NASDAQ SmallCap Market, then
the closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.
2
<PAGE>
(b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is
traded in the over-the-counter market, then the mean of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then
standing of the American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the holder hereof acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Subsection 3.1, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 10 and shall accept,
in its own name for the account of the Company or such successor person as may
be entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of duly and validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Fair Market Value of one full share, together with any
other
3
<PAGE>
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 5.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the holders of the Warrants, if exercised, after the
effective date of such dissolution pursuant to this Section 3 to a bank or trust
company having its principal office in New York, NY, as trustee for the holder
or holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 5.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same
4
<PAGE>
manner upon the happening of any successive event or events described herein in
this Section 4. The number of shares of Common Stock that the holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1, be
entitled to receive shall be increased to a number determined by multiplying the
number of shares of Common Stock that would otherwise (but for the provisions of
this Section 4) be issuable on such exercise by a fraction of which (a) the
numerator is the Purchase Price that would otherwise (but for the provisions of
this Section 4) be in effect, and (b) the denominator is the Purchase Price in
effect on the date of such exercise.
5. Chief Financial Officer's Certificate as to Adjustments. In each case
of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrants, the Company at its expense
will promptly cause its Chief Financial Officer to compute such adjustment or
readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the holder of the Warrant and any
Warrant agent of the Company (appointed pursuant to Section 10 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with applicable
Securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the Shares. On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
Transferor Endorsement Form"), to the Company, the Company at its expense but
with payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant or Warrants
of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation,
5
<PAGE>
on surrender and cancellation of this Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and the initial
issuee of this Warrant at or prior to the issue date of this Warrant. The terms
of the Subscription Agreement are incorporated herein by this reference.
10. Warrant Agent. The Company may, by written notice to the each holder
of the Warrant, appoint an agent having an office in New York, NY for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7,
and replacing this Warrant pursuant to Section 8, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be, shall
be made at such office by such agent.
11. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
12. Notices, etc. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
13. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of
the date first written above.
BCAM INTERNATIONAL, INC.
By:
-------------------------------
6
<PAGE>
Title:
----------------------------
Witness:
- ------------------------------
7
<PAGE>
Exhibit A
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: BCAM INTERNATIONAL, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, _______ shares of Common
Stock of BCAM International, Inc. and herewith makes payment of $_______
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to _______ whose address is
_________________________________________.
Dated:___________________
------------------------------------------
(Signature must conform to name of holder
as specified on the face of the Warrant)
------------------------------------------
(Address)
8
<PAGE>
Exhibit B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto the person(s) named below under the heading "Transferees" the
right represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of BCAM International, Inc. to which the within Warrant
relates specified under the headings "Percentage Transferred" and "Number
Transferred," respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of BCAM
International, Inc. with full power of substitution in the premises.
================================================================================
Percentage Number
Transferees Transferred Transferred
----------- ----------- -----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Dated:__________ , 19___
------------------------------------
(Signature must conform to name of
holder as specified on the face of
the warrant)
Signed in the presence of:
- ------------------------------- ------------------------------------
(Name) (address)
------------------------------------
ACCEPTED AND AGREED: (address)
[TRANSFEREE]
- ---------------------------------
(Name)
FUNDS ESCROW AGREEMENT
This Agreement is dated as of the 13th day of April, 1998 among BCAM
INTERNATIONAL, INC. (the "Company"), BALMORE FUNDS S.A., AUSTOST ANSTALT SCHAAN,
BEESTON INVESTMENTS LTD., MANOR INVESTMENTS, ELLIS ENTERPRISES, and EAST LANE
CORPORATION LTD., ("Subscriber" or "Subscribers"), and GRUSHKO & MITTMAN (the
"Escrow Agent"):
W I T N E S S E T H:
WHEREAS, the Company and Subscriber have entered into a Subscription
Agreement ("Subscription Agreement") calling for the sale by the Company of
Common Stock ("Company Shares") and 250,000 Common Stock Purchase Warrants for
the aggregate purchase price of up to $2,000,000 to the Subscribers in the
denominations set forth on Schedule A hereto, against payment therefor; and
WHEREAS, the parties hereto require the Company to deliver the Notes
against payment therefor, with such Notes and payment to be delivered to the
Escrow Agent to be held in escrow and released by the Escrow Agent in accordance
with the terms and conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Whenever used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments made hereto
and thereto by written agreement between the parties;
(b) "Company Shares" means Common Stock, $.01 par value per share,
of the Company issued or to be issued to the Subscribers for the aggregate
consideration of up to $2,000,000, together with such additional common shares
which may be
1
<PAGE>
deposited pursuant to Section 9(b) of the Subscription Agreement.
(c) "Escrowed Payment" means the sum of up to $2,000,000 to be held
in escrow by the Escrow Agent on behalf of the Company and the Subscribers as
allocated on Schedule A hereto.
(d) "Subscription Agreement" means the Subscription Agreement
entered into or to be entered into by the parties in reference to the Company
Shares and Warrants (including the original legal opinion referenced therein).
(e) "Warrants" means the 250,000 Common Stock Purchase Warrants
issued or to be issued to the Subscribers in the amounts designated on Schedule
A hereto, the form of which Warrant is annexed to the Subscription Agreement as
Exhibit A.
(f) Collectively, this Agreement signed by the Company, Company
Shares, Warrants, and Subscription Agreement are referred to as "Company
Documents."
(g) Collectively, this Agreement, Escrowed Payment and Subscription
Agreement signed by a Subscriber without exhibits thereto are referred to as
"Subscriber Documents."
1.2. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the Company Documents and Subscriber
Documents and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. There are no warranties,
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement.
1.3. Extended Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a
2
<PAGE>
written instrument signed by all parties, or, in the case of a waiver, by the
party waiving compliance. Except as expressly stated herein, no delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any right, power or privilege hereunder preclude any other or future exercise of
any other right, power or privilege hereunder.
1.5. Headings. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
1.7. Consents to Service of Process. The Company and the Subscribers each
hereby irrevocably consent to the exclusive jurisdiction of the courts of the
State of New York and of any Federal Court located in the State of New York,
each as may have competent jurisdiction, in connection with any action, suit or
other proceeding arising out of or relating to this Agreement or any action
taken or omitted hereunder, and waive personal service of any summons, complaint
or other process and agree that the service thereof may be made by certified or
registered mail directed to such person at such person's address for purpose of
notice hereunder.
1.8. Fees. The Company shall pay the Escrow Agent a fee of $5,000 in
connection with the Escrow Agent's service hereunder in addition to the fee
described in Section 6 of the Subscription Agreement. These fees shall be paid
by deduction from the Escrowed Payment, but only if the balance of the Escrowed
Payment is to be released to or on behalf of the Company pursuant to this
Agreement. The Escrow Agent shall be paid an additional fee of $5,000 (without
apportionment) on each anniversary of the date of this Agreement upon which the
Escrow Agent is holding any Company Documents or Subscriber Documents.
ARTICLE II
STOCK TO BE DELIVERED TO THE ESCROW AGENT
3
<PAGE>
2.1. Delivery of Company Documents to Escrow Agent. On or about the date
hereof, the Company shall deliver to the Escrow Agent the Company Documents.
2.2 Delivery of Subscriber Documents to Escrow Agent. On or about the date
hereof, the Subscriber shall deliver to the Escrow Agent the Subscriber
Documents and the Escrowed Payment pursuant to the following wire transfer
instructions:
Citibank, N.A.
250 Broadway
New York, New York 10007, USA
ABA Number: 0210-00089
For Credit to: Grushko & Mittman
IOLA Trust Account
Account Number: 037-45208884
2.3. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.
2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents.
The Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROWED DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Company Documents and Subscriber Documents as
follows:
(a) Upon receipt by the Escrow Agent of the Company Documents and
the corresponding Subscriber Documents, the Escrow Agent will simultaneously
release the Company Documents to the Subscribers and release the corresponding
Subscriber Documents to the Company except that one-quarter of each Escrowed
Payment shall be retained in escrow and released in accordance with
4
<PAGE>
Section 3.2 of this Agreement and one-quarter of the Company Shares allocated to
each Subscriber (collectively one-quarter of the Escrowed Payments and
one-quarter of the Company Shares is the "Registration Escrow"). The
Registration Escrow shall be employed to satisfy any monetary obligations of the
Company to each Holder pursuant to the Subscription Agreement including Sections
9 and 10 of the Subscription Agreement. The Company will provide written
facsimile or original written instructions to the Escrow Agent as to the
disposition of all funds releasable to the Company.
(b) In the event the Escrow Agent does not receive Company Documents
and the corresponding Subscriber Documents prior to April 15, 1998, then the
Escrow Agent will return the Company Documents to the Company, and return the
Subscriber Documents to the Subscribers.
3.2. Release of Escrow.
(a) Upon receipt by the Escrow Agent of a notice ("Notice of
Return") signed by a Holder, reciting that a Holder is entitled to receive all
or part of the Registration Escrow designated on Schedule A hereto in accordance
with the terms of the Subscription Agreement, the Escrow Agent shall promptly
deliver a copy of such Notice of Return to the Company. If the Escrow Agent does
not receive from the Company within three (3) business days after notice is
given to the Company by the Escrow Agent, a written notice of objection stating
the reasons for the objection in accordance with the terms of the Subscription
Agreement ("Notice of Objection") signed by the Company, or if the Escrow Agent
shall within such period receive a written consent signed by the Company to such
return, then the Escrow Agent shall deliver to the Holder that amount of the
Registration Escrow as is called for in the Notice of Delivery. If the Escrow
Agent receives Notice of Objection from the Company within such three (3)
business day period, the Escrow Agent shall continue to hold the Registration
Escrow until otherwise authorized and directed to distribute the same pursuant
to the provisions of Sections 3.3(a) or 3.3(b).
(b) Upon receipt by the Escrow Agent of a notice ("Notice of
Delivery") signed by the Company stating that the Company is entitled to receipt
of the Registration Escrow or any portion thereof, in accordance with the
provisions of the Subscription Agreement, and stating the reasons therefor, the
5
<PAGE>
Escrow Agent shall promptly send a copy of such Notice of Payment to the Holder.
If the Escrow Agent does not receive from the Holder within three (3) business
days after notice is given to the Holder by the Escrow Agent, a written Notice
of Objection stating the reasons for the objection in accordance with the terms
of the Subscription Agreement signed by the Holder, or if the Escrow Agent shall
within such period receive a written consent signed by the Holder, then the
Escrow Agent shall deliver the Registration Escrow or such portion thereof to
the Company in accordance with the Notice of Delivery. If the Escrow Agent
receives a Notice of Objection from the Holder within such three (3) day period,
then the Escrow Agent shall continue to hold the Registration Escrow until
otherwise authorized and directed to distribute the same pursuant to the
provision of Sections 3.3(a) or 3.3(b).
3.3. Joint Instructions.
(a) Upon receipt by the Escrow Agent of joint written instructions
("Joint Instructions") signed by the Company and the Subscriber, it shall
deliver the Company Documents and Subscriber Documents in accordance with the
terms of the Joint Instructions.
(b) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "Court
Order"), the Escrow Agent shall deliver the Company Documents and Subscriber
Documents in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to
the effect that the court issuing the Court Order has competent jurisdiction and
that the Court Order is final and non-appealable.
3.4. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscriber acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Notes and Escrowed Payment. Any dispute with
respect to the release of the Notes and Escrowed Payment shall be resolved
pursuant to Section 4.2 or by agreement between the Company and Subscriber.
6
<PAGE>
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) The Subscriber and Company acknowledge and agree that the Escrow
Agent (i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscriber or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to, any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
may rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (v) shall not be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its
own similar property; and (vi) may consult counsel satisfactory to Escrow Agent,
the opinion of such counsel to be full and complete authorization and protection
in respect of any action taken, suffered or omitted by Escrow Agent hereunder in
good faith and in accordance with the opinion of such counsel.
(b) The Subscriber and Company acknowledge that the Escrow Agent is
acting solely as a stakeholder at their request and that the Escrow Agent shall
not be liable for any action taken by Escrow Agent in good faith and believed by
Escrow Agent to be authorized or within the rights or powers conferred upon
Escrow Agent by this Agreement. The Subscriber and Company, jointly and
severally, agree to indemnify and hold harmless the Escrow Agent and any of
Escrow Agent's partners, employees, agents and representatives for any action
taken or omitted to be taken by Escrow Agent or any of them hereunder, including
the fees of outside counsel and other costs and expenses of
7
<PAGE>
defending itself against any claim or liability under this Agreement, except in
the case of gross negligence or willful misconduct on Escrow Agent's part
committed in its capacity as Escrow Agent under this Agreement. The Escrow Agent
shall owe a duty only to the Subscriber and Company under this Agreement and to
no other person.
(c) The Subscriber and Company jointly and severally agree to
reimburse the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees) incurred in connection with the performance of its duties and
responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving five (5) days prior written notice of resignation to the
Subscriber and the Company. Prior to the effective date of the resignation as
specified in such notice, the Subscriber and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Notes and Escrowed Payment
to a substitute Escrow Agent selected by the Subscriber and Company. If no
successor Escrow Agent is named by the Subscriber and Company, the Escrow Agent
may apply to a court of competent jurisdiction in the State of New York for
appointment of a successor Escrow Agent, and to deposit the Notes and Escrowed
Payment with the clerk of any such court.
(e) The Escrow Agent does not have and will not have any interest in
the Company Documents and Subscriber Documents, but is serving only as escrow
Subscriber, having only possession thereof. The Escrow Agent shall not be liable
for any loss resulting from the making or retention of any investment in
accordance with this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent thereto and no implied
duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for the
Subscriber or the Company, as the case may be, in any dispute as to the
disposition of the Company Documents and Subscriber Documents, in any other
dispute between the Subscriber and Company, whether or not the Escrow Agent is
then holding the Company Documents and Subscriber Documents and
8
<PAGE>
continues to act as the Escrow Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.
4.2. Dispute Resolution: Judgments. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Company Documents and
Subscriber Documents, or if the Escrow Agent shall in good faith be uncertain as
to its duties or rights hereunder, the Escrow Agent shall be authorized, without
liability to anyone, to (i) refrain from taking any action other than to
continue to hold the Company Documents and Subscriber Documents pending receipt
of a Joint Instruction from the Subscriber and Company, or (ii) deposit the
Company Documents and Subscriber Documents with any court of competent
jurisdiction in the State of New York, in which event the Escrow Agent shall
give written notice thereof to the Subscriber and the Company and shall
thereupon be relieved and discharged from all further obligations pursuant to
this Agreement. The Escrow Agent may, but shall be under no duty to, institute
or defend any legal proceedings which relate to the Company Documents and
Subscriber Documents. The Escrow Agent shall have the right to retain counsel if
it becomes involved in any disagreement, dispute or litigation on account of
this Agreement or otherwise determines that it is necessary to consult counsel.
(b) The Escrow Agent is hereby expressly authorized to comply with
and obey any Court Order. In case the Escrow Agent obeys or complies with a
Court Order, the Escrow Agent shall not be liable to the Subscriber and Company
or to any other person, firm, corporation or entity by reason of such
compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber
9
<PAGE>
and Company.
5.2. Notices. All notices, request, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):
(a) If to the Company, to:
BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
(516) 757-3558 (Telecopier)
(b) If to the Subscriber, to the addresses and telecopier numbers set forth on
Schedule A hereto.
(c) If to the Escrow Agent, to:
Grushko & Mittman
Attorneys at Law
277 Broadway, Suite 801
New York, New York 10007
(212) 227-5865 (telecopier)
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3. Interest. The Escrowed Payment and Registration Escrow shall not be
held in an interest bearing account nor will interest be payable in connection
therewith.
5.4. Assignment; Binding Agreement. Neither this Agreement nor any right
or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties hereto. This Agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective legal
10
<PAGE>
representatives, successors and assigns.
5.5. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile transmission.
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Escrow Agreement and understands and agrees to it.
BCAM INTERNATIONAL, INC.
"Company"
By:
------------------------------
BALMORE FUNDS S.A.
"Subscriber"
By:
------------------------------
11
<PAGE>
AUSTOST ANSTALT SCHAAN
"Subscriber"
By:
------------------------------
BEESTON INVESTMENTS LTD.
"Subscriber"
By:
------------------------------
MANOR INVESTMENTS
"Subscriber"
By:
------------------------------
ELLIS ENTERPRISES
"Subscriber"
By:
------------------------------
EAST LANE CORPORATION LTD.
"Subscriber"
By:
------------------------------
ESCROW AGENT: GRUSHKO & MITTMAN
By:
------------------------------
12
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
=============================================================================================
ESCROWED WARRANTS COMMON ALLOC. OF ALLOC. OF
SUBSCRIBERS PAYMENT SHARES $500,000 COMPANY
REGIST. SHARES OF
ESCROW REGIST.
ESCROW
=============================================================================================
=============================================================================================
<S> <C> <C> <C> <C> <C>
BALMORE FUNDS S.A. $ 850,000 106,250 631,189 and $212,500 210,395
Francois Morax 210,395
P.O. Box 4603
Zurich, Switzerland
Fax: 011-411-201-6262
- ---------------------------------------------------------------------------------------------
AUSTOST ANSTALT SCHAAN $ 750,000 93,750 556,931 and $187,500 185,643
7440 Fuerstentum 185,643
Lichenstein
Landstrasse 163
Fax: 011-431-534532895
- ---------------------------------------------------------------------------------------------
BEESTON INVESTMENTS LTD. $ 200,000 25,000 148,515 and $ 50,000 49,505
119 Rothschild Blvd. 49,505
Tel Aviv, Israel
Fax: 011-972-25600201
- ---------------------------------------------------------------------------------------------
MANOR INVESTMENTS $ 100,000 12,500 74,258 and $ 25,000 24,752
c/o Y. Englander 24,752
9 Aharonson Street
Bnei-Brak, Israel
Fax:
- ---------------------------------------------------------------------------------------------
ELLIS ENTERPRISES $ 50,000 6,250 37,129 and $ 12,500 12,376
42A Waterloo Road 12,376
London, England
NW2 7UF
Fax: 011-441-814509004
- ---------------------------------------------------------------------------------------------
EAST LANE CORPORATION LTD. $ 50,000 6,250 37,129 and $ 12,500 12,376
5 Rehov Eloi 12,376
Jerusalem, Israel
Fax: 011-972-2-679-9266
- ---------------------------------------------------------------------------------------------
=============================================================================================
</TABLE>
13
<PAGE>
<TABLE>
=============================================================================================
<S> <C> <C> <C> <C> <C>
TOTALS 2,000,000 250,000 1,980,198 $500,000 495,047
=============================================================================================
</TABLE>
14
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
FIRST AMENDMENT dated as of April 14, 1998 (the "First Amendment"), to the
NOTE PURCHASE AGREEMENT (the "Agreement") dated as of September 19, 1997, among
BCAM INTERNATIONAL, INC., a New York corporation (the "Company"), IMPLEO LLC, a
Connecticut limited liability company (the "Purchaser"), and WEXFORD MANAGEMENT
LLC, as agent for the Purchaser and the holders of Other Notes (the "Agent").
Capitalized terms used herein shall have the respective meanings ascribed
thereto in the Agreement unless herein defined or the context shall otherwise
require.
W I T N E S S E T H
WHEREAS, the Purchaser and the Company have heretofore entered into that
certain Note Purchase Agreement dated as of September 19, 1997 (the
"Agreement"). The Company has heretofore issued, and the Purchaser has
heretofore purchased, the Company's 10%/13% convertible subordinated promissory
notes (the "Notes") in the aggregate principal amount of $5,000,000 pursuant to
the Agreement;
WHEREAS, concurrently with the Agreement, the Company entered into that
certain Note Purchase Agreement (the "Other Note Agreement"), on terms
substantially identical to the terms contained in the Agreement, providing for
the issuance of $1,000,000 principal amount of the Company's 10%/13% convertible
subordinated promissory notes (the "Other Notes");
WHEREAS, the Company has requested the Purchaser to make certain
adjustments to the covenants and other terms of the Agreement;
WHEREAS, the Purchaser and the Company now desire to amend and/or waive
certain provisions of the Agreement in the respects, but only in the respects,
hereinafter set forth;
WHEREAS, the Company has agreed to grant to the Agent, for the benefit of
the Purchaser and the holders of the Other Notes collateral security for the
prompt payment when due and performance by the Company of its obligations under
the Notes and the Other Notes;
WHEREAS, the Purchaser and the holders of the Other Notes desire to
appoint Wexford Management LLC as collateral agent for the purpose of
administering the collateral security;
NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this First Amendment set forth in Section 2
hereof, and in consideration of good and valuable consideration the receipt of
which is hereby acknowledged, the Purchaser and the Company hereby agree as
follows:
1. AMENDMENTS
1.1 Maturity Date. Section 1.1 of the Agreement shall be and is hereby
amended by substituting the words "a final maturity date of September 19, 2002"
as such words appear in the second full sentence of said Section 1.1 with the
words "a final maturity date of April 16, 1999".
<PAGE>
No later than April 30, 1998, the Company shall execute and deliver to the
Purchaser one or more new Notes (the "New Notes") in the aggregate principal
amount of $5,000,000, in form and substance identical to the Notes issued to the
Purchasers pursuant to the Purchase Agreement, but bearing the amended Maturity
Date. In exchange for the delivery by the Company of the New Notes, the
Purchaser shall deliver to the Company the original Note issued pursuant to the
Purchase Agreement.
1.2 Affirmative Covenants. Section 4.1 of the Agreement shall be and is
hereby amended by deleting the existing Section 4.1 and replacing in its
entirety as follows):
"(n) Board of Directors. Concurrently with the effectiveness of this First
Amendment, the Company agrees that it will appoint Joseph Jacobs to its
board of directors. In addition, so long as the Notes are outstanding, the
Purchaser shall have the right to designate a number of directors of the
Company equal to at least 25% (and if the number of directors is not
divisible by four, rounded up to the next whole number) of the number of
such directors. The Company also agrees that it will cause each of Drew
Shoe Corporation, an Ohio corporation ("Drew"), and BCAM Technologies,
Inc., a Delaware corporation ("BT"), to appoint Kenneth Rubin to their
respective boards of directors as the nominee of the Purchaser. In the
case that any nominee designated by the Purchaser ceases to serve as a
director of the Company, Drew or BT for any reason, the Company agrees
that, it will nominate to its board of directors or the board of directors
of Drew or BT, as the case may be, one or more replacement nominees
designated by the Purchaser and use its best efforts to cause such
replacement nominees to be elected."
1.3 Negative Covenants. Article 4 of the Agreement is hereby amended by
adding new Sections 4.2 (k), 4.2(l) and 4.2(m), which shall provide in their
entirety as follows:
"(k) Transactions with Drew. Without the consent of the Purchaser,
neither the Company nor any Subsidiary shall transfer any assets to Drew.
Without the consent of the Purchaser, neither the Company nor Drew shall create
any Subsidiaries of Drew.
(l) No Lien on Cash. The Company agrees that it will not, nor permit
any Subsidiary to, create any Lien on cash of the Company or such Subsidiary.
(m) BCAM Technologies, Inc. - New York. The Company represents and
warrants to the Purchaser that BCAM Technologies, Inc., a New York corporation
("BT-NY"), is inactive. The Company agrees that it will not transfer any assets
to, or conduct any business through, BT-NY, and neither the Company nor any
Subsidiary will create any Subsidiary of BT-NY. In addition, no later than April
30, 1998, the Company shall merge BT-NY with and into the Company, with the
Company being the surviving corporation.."
1.4 Notices. Section 8.9 of the Agreement shall and is hereby amended by
substituting the following address for the Purchaser and its counsel:
2
<PAGE>
If to the Purchaser:
Impleo LLC
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Joseph Jacobs
Tel: (203) 862-7020
Fax: (203) 862-7320
McDermott, Will & Emery
50 Rockefeller Plaza, 11th Fl.
New York, New York 10020
Attention: Stephen B. Selbst, Esq.
Telephone: (212) 547-5400
Telecopier: (212) 547-5444
1.5 Schedule II. Schedule II of the Agreement shall be and is hereby
amended in its entirety by substituting Schedule II attached hereto in place of
said Schedule II.
1.6 Schedule VI. Schedule VI of the Agreement shall be and is hereby
amended in its entirety by substituting Schedule VI attached hereto in place of
said Schedule VI.
2. WAIVERS
2.1 Events of Default. The Company hereby acknowledges the existence of
Events of Default under the Agreement arising as a result of (a) the failure of
the Company to make timely deliveries to required by Section 401(a) of the
Agreement to the Purchaser by March 31, 1998; (b) the breaches by the Company of
the debt service coverage covenant contained in Section 4.1(1) of the Agreement;
(c) the breaches by the Company of the leverage ratio covenant contained in
Section 4.1(m) of the Agreement; (d) the material inaccuracy of the
representation made by the Company in Section 6.1(b) of the Agreement; and (e)
the material inaccuracy of the representation made by the Company in Section
6.1(f) of the Agreement. The foregoing Events of Default are hereinafter
referred to collectively as the "Breaches".
2.2 Waivers. The Purchaser hereby waives (a) all Events of Default arising
under or related to the Breaches through and including the date hereof and (b)
compliance by the Company with Sections 4.1(l) and 4.1(m) of the Agreement
through and including April 16, 1999.
3. AGREEMENTS
3.1 Company Undertakings. In consideration of the agreement of the
Purchaser to waive the existing Events of Default under the Agreement as set
forth in Section 2.2 hereof and to consent to amend the Agreement in the
respects set forth in Article 1 hereof, the Company and the Purchaser agree as
follows:
3
<PAGE>
(i) Concurrently herewith, each of the Company, BT and BCA Services,
Inc., a New York corporation ("BCA"), shall execute and deliver in favor of the
Agent a Security Agreement substantially in the form of Exhibit A attached
hereto providing for the grant of a security interest in favor of the Agent with
respect to the Collateral described therein;
(ii) Concurrently herewith, the Company shall execute and deliver in
favor of the Agent a Stock Pledge Agreement substantially in the form of Exhibit
B attached hereto providing for the pledge of (A) ninety percent (90%) of the
issued and outstanding Capital Stock of each of Drew and BT, (B) to one hundred
percent (100%) of the issued and outstanding Capital Stock of HumanCad Systems,
Inc., an Ontario corporation ("HCS"), and (C) one hundred percent (100%) of the
issued and outstanding common stock of BCA.
(iii) Concurrently herewith, the Company shall deliver to the
Purchaser stock certificates evidencing the issuance to the Purchaser of 8.33%
of the issued and outstanding shares of common stock of each of Drew and BT;
(iv) Unless and until the Company shall have transferred to BT all
of the Company's right, title and interest in any technology patents, pending
patents, trademarks, license agreements, any General Intangibles (as such term
is defined in the Security Agreement), and all other assets associated with the
intelligent surface technology and micro-valve projects that the Company is
engaged in (collectively, the "Intellectual Property"), the Purchaser and the
holders of the Other Notes shall be entitled to receive a royalty (the
"Noteholder Royalty") in the amount of ten percent (10%) of the gross revenues
received by the Company or any Subsidiary from the sale, license royalty, use or
any other form of exploitation of the Intellectual Property, payable pro rata in
accordance with their holdings of Notes and the Other Notes. The Noteholder
Royalty shall be paid to the Agent monthly within fifteen days following the end
of each calendar month, and at the time of making each payment, the Company
shall deliver a certificate, executed by its Chief Financial Officer as to the
sources of and calculation of the amount of the Noteholder Royalty.
3.2 Cancellation of Warrants. On or prior to April 30, 1998 the Purchaser
agrees to cancel and return to the Company 333,333 Warrants to purchase 333,333
Shares of the Company previously issued to the Purchaser pursuant to the Warrant
Agreement. Concurrently with the delivery by the Purchaser to the Company of
Warrant Certificate W-1 issued pursuant to the Warrant Agreement, the Company
shall execute and deliver to the Purchaser one or more Warrant Certificates in
the amount of 1,666,667 Warrants.
4. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT
4.1 Conditions. This First Amendment shall not become effective until, and
shall become effective when, each and every one of the following conditions
shall have been satisfied:
(a) First Amendment. The Purchaser shall have received executed
counterparts of this First Amendment, duly executed by the Purchaser and the
Company.
(b) Opinion of Counsel. The Purchaser shall have received from
Ruskin, Moscou, Evans & Faltischek, P.C., counsel to the Company, a favorable
opinion dated the date
4
<PAGE>
of this First Amendment, which opinion shall be in form and substance
satisfactory to the Purchaser.
(c) Security Agreement. The Agent and each of the Company, BT and
BCA shall have executed and delivered the Security Agreement substantially in
the form of Exhibit A attached hereto.
(d) Stock Pledge Agreement. The Company and the Agent shall have
executed and delivered the Stock Pledge Agreement substantially in the form of
Exhibit B attached hereto.
(e) Issuance of Shares. The Company shall have delivered to the
Purchaser one or more stock certificates evidencing 8.33% of the issued and
outstanding common stock of each of Drew and BT.
(f) Amendment with Regard to Purchase and Sale of Other Notes.
Concurrently with the consummation of the transactions contemplated by this
First Amendment, the Company shall have entered into an amendment agreement with
the holders of the Other Notes on terms satisfactory to the Purchaser.
(g) Representations and Warranties; No Default. The representations
and warranties of the Company contained in this First Amendment, the Security
Agreement and the Stock Pledge Agreement (collectively, the "Transaction
Documents") or any other agreement or document executed pursuant to the
Transaction Documents shall be true in all material respects on and as of the
date of this First Amendment; the Company shall have complied with all of its
agreements and satisfied all conditions to be complied with or satisfied on or
prior to the date of this First Amendment.
(h) Proceedings. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in substance and form to the
Purchaser, and the Purchaser shall have received (i) copies of all corporate
action taken to authorize the Transaction Documents (including, without
limitation, a copy of the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance by the Company of the
Transaction Documents, certified by the Secretary or an Assistant Secretary of
the Company), and (ii) all such counterpart originals or certified or other
copies of such other documents as it may reasonably request.
(i) Charter Documents. The Purchaser shall have received copies of
the certificate of incorporation of each of Drew, BT, HCS and BCA, and by-laws
of Drew, BT, HCS and BCA, certified in each case as being true and complete as
of the date of this First Amendment. No later than April 30, 1998, the Company
shall deliver to the Purchaser long-form good standing certificates for Drew,
BT, HCS and BCA.
(j) Payment of Fees. The Purchaser shall have received evidence that
the Company has paid (i) the fees and disbursements of McDermott, Will & Emery,
counsel to the Purchaser, in connection with the negotiation, preparation,
approval, execution and delivery of
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the Transaction Documents (ii) and any unpaid fees and disbursements owed to
Berlack, Israels & Liberman LLP, prior counsel to the Purchaser.
Upon receipt of all of the foregoing, this First Amendment shall
become effective.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations, Warranties and Agreements of the Company. To induce
the Purchaser to execute and deliver this First Amendment (which representations
shall survive the execution and delivery of this First Amendment), the Security
Agreement and the Stock Pledge Agreement, the Company represents and warrants to
and agrees with the Purchaser:
(a) Authorization and Validity. The Company has the power and
authority and legal right to execute and deliver the Transaction Documents and
to perform its obligations hereunder. The execution and delivery by the Company
of the Transaction Documents and the performance of its obligations thereunder
have been duly authorized by the Company, and each of the Transaction Documents
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
(b) No Violation. Neither the execution and delivery by the Company
of each of the Transaction Documents nor the consummation of the transactions
therein contemplated, nor compliance with the provisions hereof will (i) violate
the Company's or any Subsidiary's certificate of incorporation or by-laws; (ii)
violate any judgment, decree, order, statute, law, regulation or rule of any
court or governmental authority to which the Company or any of its Subsidiaries
or any of their respective properties may be subject; or (iii) (A) cause the
acceleration of the maturity of any Debt or obligation of the Company or any of
its Subsidiaries or (B) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or result in the creation of, any Lien upon
any property of the Company or any of its Subsidiaries under any agreement or
instrument to which such Person is a party or by which such Person (or its
properties) may be bound. Neither the Company nor any of its Subsidiaries is (1)
in violation of any term of its respective certificates of incorporation or
by-laws, or (2) in default of or non-compliance with any material instrument,
contract or agreement to which it is a party or of any judgment, decree, order,
statute, rule or governmental regulation which is applicable to it or its
business or properties.
(c) Subsidiaries. The Subsidiaries and the capitalization thereof
are listed on Schedule II hereto.
(d) No Default. As of the date hereof and after giving effect to
this First Amendment, no Default or Event of Default has occurred which is
continuing, except to the extent expressly waived hereunder by the Purchaser.
(e) Representations and Warranties of Agreement. All the
representations and warranties contained in the Agreement are true and correct
in all material respects with the same force and effect as if made by the
Company on and as of the date hereof.
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<PAGE>
6. AGENCY PROVISIONS
6.1 Appointment. The Purchaser hereby appoints Wexford Management LLC as
its lawful agent and attorney-in-fact, with full power of substitution, for all
purposes under this First Amendment and all of the other Transaction Documents.
The Purchaser acknowledges and agrees that the Agent will also act as agent for
the holders of the Other Notes. This appointment is coupled with an interest,
and the Company as well as the Purchaser and the holders of Other Notes
(collectively, the "Noteholders") will rely upon the irrevocable nature of such
appointment.
6.2 Acceptance of Appointment. The Agent hereby accepts such appointment,
and agrees to exercise the powers granted hereunder and pursuant to the
Transaction Documents with the same degree of care it would use if the entire
risks and rewards were for its own account.
6.3 Application of Funds. In the event any monies received from the
Company directly or pursuant to any Transaction Document is in an amount
insufficient to pay all sums due to the Agent, the Purchaser and the holders of
the Other Notes, the Agent shall first apply the sum received to its own
out-of-pocket costs reasonably reimbursable under the terms of the Transaction
Documents, and shall pay the balance to the Noteholders pro rata in accordance
with the amounts then due and owing to each of them.
6.4 Agent's Liability. The Agent shall not be liable, except for its own
gross negligence or willful misconduct, and except with respect to claims based
upon such gross negligence or willful misconduct, that are successfully asserted
against the Agent, and any Person acting as the successor to the Agent, from and
against any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out of or in
connection with the Agent's good faith acceptance of or performances of its
duties and obligations under the Transaction Documents. The Agent shall be under
no duty to institute any suit, or to take any remedial procedures or to enter
any appearance or in any way defend any suit in which it may be made a defendant
hereunder until it shall be indemnified as provided herein. The Agent may act
pursuant to the advice of counsel with respect to any matter relating to the
Transaction Documents, and shall not be liable for any action taken or omitted
in accordance with such advice.
6.5 Indemnity. The Purchaser agrees to indemnify, save and hold the Agent
(and any officer, director, manager, employee or agent thereof) harmless if the
Agent shall at any time or from time to time suffer any damage, liability, loss,
cost, expense (including reasonable attorneys' fees and expenses), penalties,
impositions or fines arising out of or resulting from the performance of its
duties hereunder; provided, however, that the Agent shall not be indemnified for
any acts of gross negligence or willful misconduct.
6.6 Resignation of Agent. The Agent (or any successor Agent) may at any
time resign as such by delivering to the Company, and the Noteholder at least
fifteen (15) days' written notice of such resignation. Within fifteen days after
the giving of such notice, the Agent shall affect a transfer of all funds still
held in such Agent's possession to any successor Agent jointly designated by the
Company and the Noteholders in writing, or in the event no such successor has
been designated within such fifteen day period, to any court of competent
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jurisdiction, whereupon the Agent shall be discharged of and from any and all
further obligations arising in connection with the Transaction Documents. The
Agent's sole responsibility following the delivery of a notice of resignation
and prior to the delivery of the funds still under the Agent's control to a
successor Agent or to a court of competent jurisdiction shall be to safeguard
such funds until delivery thereof as aforesaid pursuant to a joint written
disposition instruction by all the other parties hereto or a final order of a
court of competent jurisdiction.
7. MISCELLANEOUS
7.1 Effect of Amendment. This First Amendment shall be construed in
connection with and as part of the Agreement, and except as modified and
expressly amended by this First Amendment, all terms, conditions and covenants
contained in the Agreement and the Notes are hereby ratified and shall be and
remain in full force and effect. From and after the effective date of this First
Amendment, references to the Agreement shall mean the Agreement as amended by
this First Amendment.
7.2 Limited Waiver. Upon and by virtue of this First Amendment becoming
effective as herein contemplated, the waivers set forth in Section 2.2 hereof
shall become effective. The Company understands and agrees that the waivers
contained in Section 2.2 pertain only to the Events of Default described in
Section 2.1 and to the extent so described and not to any other Default or Event
of Default which may exist under, or any other matters arising in connection
with, the Agreement or to any rights which the holders of the Notes have arising
by virtue of any such other actions or matters.
7.3 No Waiver by Purchaser. The Purchaser's failure, at any time or times,
to require strict performance by the Company of any provision of the Agreement
shall not waive, affect or diminish any right of the Purchaser thereafter to
demand strict compliance and performance therewith. Except as specifically
provided herein, any suspension or waiver by the Purchaser of any breach of the
Agreement shall not suspend, waive or affect any breach or Event of Default
under the Agreement, whether the same is prior or subsequent thereto and whether
of the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of the Company contained in the
Agreement shall be deemed to have been suspended or waived by the Purchaser,
except to the extent set forth in Section 2.2 hereof and unless such suspension
or waiver is by an instrument in writing signed by the Purchaser specifying such
suspension or waiver.
7.4 Notices, etc.. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
First Amendment may refer to the Agreement without making specific reference to
this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires.
7.5 Headings. The descriptive headings of the various Sections or parts of
this First Amendment are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof.
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7.6 Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
7.7 Severability. If any part of this First Amendment shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
and enforceability of the remaining portions.
7.8 Counterparts. The execution hereof by the parties hereto shall
constitute a contract between such parties for the uses and purposes hereinabove
set forth, and this First Amendment may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, and all of which
shall together constitute one agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment
to Note Purchase Agreement as of the date first written above.
BCAM INTERNATIONAL, INC.
By
------------------------------
Michael Strauss
President
IMPLEO LLC
By
------------------------------
WEXFORD MANAGEMENT LLC,
as Agent for Impleo LLC
By:
--------------------------
Joseph Jacobs
President
WEXFORD MANAGEMENT LLC,
As Agent
By
------------------------------
Joseph Jacobs
Title:
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SCHEDULE II
SUBSIDIARIES
Jurisdiction of Company's
Name Organization Form Of Entity Percentage Ownership
---- ------------ -------------- --------------------
Drew Shoe Corporation Ohio corporation 90%*
BCAM Technologies, Inc. Delaware corporation 90%*
HumanCAD Systems, Inc. Canada corporation 100%
BCAM Technologies, Inc. New York corporation 100% - Inactive
BCA Services, Inc. New York corporation 100% of Common
0% of the
Preferred Stock
- ----------
* After giving effect to the stock issued to the Noteholders
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SCHEDULE VI
INTELLECTUAL PROPERTY
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IMPLEO
EXECUTION COPY
BCAM INTERNATIONAL, INC.
------------------------------------
FIRST AMENDMENT
Dated as of April 14, 1998
to
Note Purchase Agreement
Dated as of September 19, 1997
------------------------------------
KIRR MARBACH
EXECUTION COPY
BCAM INTERNATIONAL, INC.
------------------------------------
FIRST AMENDMENT
Dated as of April 14, 1998
to
Note Purchase Agreement
Dated as of September 19, 1997
-------------------------------------
<PAGE>
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
FIRST AMENDMENT dated as of April 14, 1998 (the "First Amendment"), to the
NOTE PURCHASE AGREEMENT (the "Agreement") dated as of September 19, 1997, among
BCAM INTERNATIONAL, INC., a New York corporation (the "Company"), Ralph E. Weil,
Joseph Schueller, 621 Partners, R. Weil & Associates, Strafe & Company for the
account of David M. Kirr, Strafe & Company for the account of Terry B. Marbach,
and Strafe and Company for the account of Gregg T. Summerville, (the "KM
Purchasers"), and WEXFORD MANAGEMENT LLC, as agent for the KM Purchasers and the
holders of Other Notes (the "Agent"). Capitalized terms used herein shall have
the respective meanings ascribed thereto in the Agreement unless herein defined
or the context shall otherwise require.
W I T N E S S E T H
WHEREAS, the KM Purchasers and the Company have heretofore entered into
that certain Note Purchase Agreement dated as of September 19, 1997 (the
"Agreement"). The Company has heretofore issued, and the KM Purchasers has
heretofore purchased, the Company's 10%/13% convertible subordinated promissory
notes (the "Notes") in the aggregate principal amount of $1,000,000 pursuant to
the Agreement;
WHEREAS, concurrently with the Agreement, the Company entered into that
certain Note Purchase Agreement (the "Impleo Note Agreement") with Impleo LLC,
on terms substantially identical to the terms contained in the Agreement,
providing for the issuance of $5,000,000 principal amount of the Company's
10%/13% convertible subordinated promissory notes (the "Impleo Notes");
WHEREAS, the Company has requested the KM Purchasers to make certain
adjustments to the covenants and other terms of the Agreement;
WHEREAS, the KM Purchasers and the Company now desire to amend and/or
waive certain provisions of the Agreement in the respects, but only in the
respects, hereinafter set forth;
WHEREAS, the Company has agreed to grant to the Agent, for the benefit of
the KM Purchasers and the holders of the Impleo Notes collateral security for
the prompt payment when due and performance by the Company of its obligations
under the Notes and the Impleo Notes;
WHEREAS, the KM Purchasers and the holders of the Other Notes desire to
appoint Wexford Management LLC as collateral agent for the purpose of
administering the collateral security;
NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this First Amendment set forth in Section 2
hereof, and in consideration of good and valuable consideration the receipt of
which is hereby acknowledged, the KM Purchasers and the Company hereby agree as
follows:
<PAGE>
1. AMENDMENTS
1.1 Maturity Date. Section 1.1 of the Agreement shall be and is hereby
amended by substituting the words "a final maturity date of September 19, 2002"
as such words appear in the second full sentence of said Section 1.1 with the
words "a final maturity date of April 16, 1999". No later than April 30, 1998,
the Company shall execute and deliver to the KM Purchasers one or more new Notes
(the "New Notes") in the aggregate principal amount of $1,000,000, in form and
substance identical to the Notes issued to the KM Purchasers pursuant to the
Purchase Agreement, but bearing the amended Maturity Date. In exchange for the
delivery by the Company of the New Notes, the KM Purchasers shall deliver to the
Company the original Note issued pursuant to the Purchase Agreement.
1.2 Notes. Section 8.9 of the Agreement shall and is hereby amended by
substituting the address under "With a copy to" under Purchaser's address with
the following:
McDermott, Will & Emery
50 Rockefeller Plaza, 11th Fl.
New York, New York 10020
Attention: Stephen B. Selbst, Esq.
Telephone: (212) 547-5400
Telecopier: (212) 547-5444
1.3 Negative Covenants. Article 4 of the Agreement is hereby amended by
adding new Sections 4.2(k), 4.2(l) and 4.2(m), which shall provide in their
entirety as follows:
"(k) Transactions with Drew. Without the consent of the KM
Purchasers, neither the Company nor any Subsidiary shall transfer any assets to
Drew Shoe Corporation, an Ohio corporation ("Drew"). With the consent of the KM
Purchasers, neither the Company nor Drew shall create any Subsidiaries of Drew.
(l) No Lien on Cash. The Company agrees that it will not, nor permit
any Subsidiary to, create any Lien on cash of the Company or such Subsidiary.
(m) BCAM Technologies, Inc. - New York. The Company represents and
warrants to the KM Purchasers that BCAM Technologies, Inc., a New York
corporation ("BT-NY"), is inactive. The Company agrees that it will not transfer
any asset to, or conduct any business through, BT-NY, and neither the Company
nor any Subsidiary will create any subsidiary of BT-NY. In addition, no later
than April 30, 1998, the Company shall merge BT-NY with and into the Company,
with the Company being the surviving corporation."
1.4 Schedule II. Schedule II of the Agreement shall be and is hereby
amended in its entirety by substituting Schedule II attached hereto in place of
said Schedule II.
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1.5 Schedule VI. Schedule VI of the Agreement shall be and is hereby
amended in its entirety by substituting Schedule VI attached hereto in place of
said Schedule VI.
2. WAIVERS
2.1 Events of Default. The Company hereby acknowledges the existence of
Events of Default under the Agreement arising as a result of (a) the failure of
the Company to make timely deliveries required by Section 4.1(a) of the
Agreement to the KM Purchasers by March 31, 1998; (b) the breaches by the
Company of the debt service coverage covenant contained in Section 4.1(1) of the
Agreement; (c) the breaches by the Company of the leverage ratio covenant
contained in Section 4.1(m) of the Agreement; (d) the material inaccuracy of the
representation made by the Company in Section 6.1(b) of the Agreement; and (e)
the material inaccuracy of the representation made by the Company in Section
6.1(f) of the Agreement. The foregoing Events of Default are hereinafter
referred to collectively as the "Breaches".
2.2 Waivers. The KM Purchasers hereby waive (a) all Events of Default
arising under or related to the Breaches through and including the date hereof
and (b) compliance by the Company with Sections 4.1(l) and 4.1(m) of the
Agreement through and including April 16, 1999.
3. AGREEMENTS
3.1 Company Undertakings. In consideration of the agreement of the KM
Purchasers to waive the existing Events of Default under the Agreement as set
forth in Section 2.2 hereof and to consent to amend the Agreement in the
respects set forth in Article 1 hereof, the Company and the KM Purchasers agree
as follows:
(i) Concurrently herewith, each of the Company and BCAM Technologies, Inc.
("BT") and BCA shall execute and deliver in favor of the Agent a Security
Agreement substantially in the form of Exhibit A attached hereto providing
for the grant of a security interest in favor of the Agent with respect to
the Collateral described therein;
(ii) Concurrently herewith, the Company shall execute and deliver in favor
of the Agent a Stock Pledge Agreement substantially in the form of Exhibit
B attached hereto providing for the pledge of (A) ninety percent (90%) of
the issued and outstanding of the Capital Stock of each of Drew and BT,
(B) one hundred percent (100%) of the issued and outstanding Capital Stock
of HumanCad Systems, Inc., an Ontario corporation ("HCS"), and (C) one
hundred percent (100%) of the issued and outstanding common stock of BCA
Services, Inc., a New York corporation ("BCA").
(iii) Concurrently herewith, the Company shall deliver to the KM
Purchasers such Certificates evidencing the issuance to the KM Purchasers
of 1.67% of the issued and outstanding shares of common stock of each of
Drew and BT;
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<PAGE>
(iv) Unless and until the Company shall have transferred to BT all of the
Company's right, title and interest in any technology patents, pending
patents, trademarks, license agreements, and all other assets associated
with the intelligent surface technology and micro-valve projects that the
Company is engaged in (collectively, the "Intellectual Property"), the KM
Purchasers and the holders of the Other Notes shall be entitled to receive
a royalty (the "Noteholder Royalty") in the amount of ten percent (10%) of
the gross revenues received by the Company or any Subsidiary from the
sale, license royalty, use or any other form of exploitation of the
Intellectual Property, payable pro rata in accordance with their holdings
of Notes and the Other Notes. The Noteholder Royalty shall be paid to the
Agent monthly within fifteen days following the end of each calendar
month, and at the time of making each payment, the Company shall deliver a
certificate, at its Chief Financial Officer as to the sources of and
calculation of the amount of the Noteholder Royalty.
3.2 Cancellation of Warrants. On or prior to April 30,, 1998 the KM
Purchasers agrees to cancel and return to the Company 66,667 Warrants to
purchase 66,667 Shares of the Company previously issued to the KM Purchasers
pursuant to the Warrant Agreement. Concurrently with the delivery by the KM
Purchasers to the Company of Warrant Certificates issued pursuant to the Warrant
Agreement, the Company shall execute and deliver to the KM Purchasers one or
more Warrant Certificates in the amount of 333,333 Warrants.
4. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT
4.1 Conditions. This First Amendment shall not become effective until, and
shall become effective when, each and every one of the following conditions
shall have been satisfied:
(a) First Amendment. The KM Purchasers shall have received executed
counterparts of this First Amendment, duly executed by the KM Purchasers and the
Company.
(b) Opinion of Counsel. The KM Purchasers shall have received from Ruskin,
Moscou, Evans & Faltischek, P.C., counsel to the Company, a favorable opinion
dated the date of this First Amendment, which opinion shall be in form and
substance satisfactory to the KM Purchasers.
(c) Security Agreement. The Agent and each of the Company, BT and BCA have
executed and delivered the Security Agreement substantially in the form of
Exhibit A attached hereto.
(d) Stock Pledge Agreement. The Agent and the Company shall have executed
and delivered the Stock Pledge Agreement substantially in the form of Exhibit B
attached hereto.
(e) Issuance of Shares. The Company shall have delivered to the KM
Purchasers stock certificates evidencing 1.67% of the issued and outstanding
common
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<PAGE>
stock of each of Drew and BT, which shares shall be allocated pro rata among the
holders of the notes.
(f) Amendment with Regard to Purchase and Sale of Other Notes.
Concurrently with the consummation of the transactions contemplated by this
First Amendment, the Company shall have entered into an amendment agreement with
the holders of the Impleo Notes on terms satisfactory to the Purchaser.
(g) Representations and Warranties; No Default. The representations and
warranties of the Company contained in this First Amendment, the Security
Agreement and the Stock Pledge Agreement (collectively, the "Transaction
Documents") or any other agreement or document executed pursuant to the
Transaction Documents shall be true in all material respects on and as of the
date of this First Amendment; the Company shall have complied with all of its
agreements and satisfied all conditions to be complied with or satisfied on or
prior to the date of this First Amendment.
(h) Proceedings. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in substance and form to the
KM Purchasers, and the KM Purchasers shall have received (i) copies of all
corporate action taken to authorize the Transaction Documents (including,
without limitation, a copy of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance by the Company of
the Transaction Documents, certified by the Secretary or an Assistant Secretary
of the Company), and (ii) all such counterpart originals or certified or other
copies of such other documents as it may reasonably request.
(i) Charter Documents. The KM Purchasers shall have received copies of the
certificate of incorporation of each of Drew, BT, HCS and BCA, and by-laws of
Drew , BT, HCS and BCA, certified in each case as being true and complete as of
the date of this First Amendment. No later than April 30, 1998, the Company
shall deliver to the KM Purchasers long-form good standing certificates for
Drew, BT, HCS and BCA.
(j) Payment of Fees. The KM Purchasers shall have received evidence that
the Company has paid the fees and disbursements of McDermott, Will & Emery,
counsel to the Purchaser, in connection with the negotiation, preparation,
approval, execution and delivery of the Transaction Documents and (ii) any
unpaid fees and disbursements owed to Berlack, Israels & Liberman LLP, prior
counsel to the KM Purchasers..
Upon receipt of all of the foregoing, this First Amendment shall
become effective.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations, Warranties and Agreements of the Company. To induce
the KM Purchasers to execute and deliver this First Amendment (which
representations shall survive the execution and delivery of this First
Amendment), the Security Agreement and the Stock Pledge Agreement, the Company
represents and warrants to and agrees with the KM Purchasers:
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<PAGE>
(a) Authorization and Validity. The Company has the power and authority
and legal right to execute and deliver the Transaction Documents and to perform
its obligations hereunder. The execution and delivery by the Company of the
Transaction Documents and the performance of its obligations thereunder have
been duly authorized by the Company, and each of the Transaction Documents
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
(b) No Violation. Neither the execution and delivery by the Company of
each of the Transaction Documents nor the consummation of the transactions
therein contemplated, nor compliance with the provisions hereof will (i) violate
the Company's or any Subsidiary's certificate of incorporation or by-laws; (ii)
violate any judgment, decree, order, statute, law, regulation or rule of any
court or governmental authority to which the Company or any of its Subsidiaries
or any of their respective properties may be subject; or (iii) (A) cause the
acceleration of the maturity of any Debt or obligation of the Company or any of
its Subsidiaries or (B) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or result in the creation of, any Lien upon
any property of the Company or any of its Subsidiaries under any agreement or
instrument to which such Person is a party or by which such Person (or its
properties) may be bound. Neither the Company nor any of its Subsidiaries is (1)
in violation of any term of its respective certificates of incorporation or
by-laws, or (2) in default of or non-compliance with any material instrument,
contract or agreement to which it is a party or of any judgment, decree, order,
statute, rule or governmental regulation which is applicable to it or its
business or properties.
(c) Subsidiaries. The Subsidiaries and the capitalization thereof are
listed on Schedule II hereto.
(d) No Default. As of the date hereof and after giving effect to this
First Amendment, no Default or Event of Default has occurred which is
continuing, except to the extent expressly waived hereunder by the KM
Purchasers.
(e) Representations and Warranties of Agreement. All the representations
and warranties contained in the Agreement are true and correct in all material
respects with the same force and effect as if made by the Company on and as of
the date hereof.
6. AGENCY PROVISIONS
6.1 Appointment. The KM Purchasers hereby appoints Wexford Management LLC
as its lawful agent and attorney-in-fact, with full power of substitution, for
all purposes under this First Amendment and all of the other Transaction
Documents. The KM Purchasers acknowledges and agrees that the Agent will also
act as agent for the holders of the Impleo Notes. This appointment is coupled
with an interest, and the Company as well as the KM Purchasers and the holders
of Impleo Notes (collectively, the "Noteholders") will rely upon the irrevocable
nature of such appointment.
6.2 Acceptance of Appointment. The Agent hereby accepts such appointment,
and agrees to exercise the powers granted hereunder and pursuant to the
Transaction
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<PAGE>
Documents with the same degree of care it would use if the entire risks and
rewards were for its own account.
6.3 Application of Funds. In the event any monies received from the
Company directly or pursuant to any Transaction Document is in an amount
insufficient to pay all sums due to the Agent and the Noteholders, the Agent
shall first apply the sum received to its own out-of-pocket costs reasonably
reimbursable under the terms of the Transaction Documents, and shall pay the
balance to the Noteholders pro rata in accordance with the amounts then due and
owing to each of them.
6.4 Agent's Liability. The Agent shall not be liable, except for its own
gross negligence or willful misconduct, and except with respect to claims based
upon such gross negligence or willful misconduct, that are successfully asserted
against the Agent, and any Person acting as the successor to the Agent, from and
against any and all losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out of or in
connection with the Agent's good faith acceptance of or performances of its
duties and obligations under the Transaction Documents. The Agent shall be under
no duty to institute any suit, or to take any remedial procedures or to enter
any appearance or in any way defend any suit in which it may be made a defendant
hereunder until it shall be indemnified as provided herein. The Agent may act
pursuant to the advice of counsel with respect to any matter relating to the
Transaction Documents, and shall not be liable for any action taken or omitted
in accordance with such advice.
6.5 Indemnity. The KM Purchasers agree, jointly and severally, to
indemnify, save and hold the Agent harmless if the Agent shall at any time or
from time to time suffer any damage, liability, loss, cost, expense (including
reasonable attorneys' fees and expenses), penalties, impositions or fines
arising out of or resulting from the performance of its duties hereunder;
provided, however, that the Agent shall not be indemnified for any acts of gross
negligence or willful misconduct.
6.6 Resignation of Agent. The Agent (or any successor Agent) may at any
time resign as such by delivering to the Company, and the Noteholder at least
fifteen (15) days' written notice of such resignation. Within fifteen days after
the giving of such notice, the Agent shall affect a transfer of all funds still
held in such Agent's possession to any successor Agent jointly designated by the
Company and the Noteholders in writing, or in the event no such successor has
been designated within such fifteen day period, to any court of competent
jurisdiction, whereupon the Agent shall be discharged of and from any and all
further obligations arising in connection with the Transaction Documents. The
Agent's sole responsibility following the delivery of a notice of resignation
and prior to the delivery of the funds still under the Agent's control to a
successor Agent or to a court of competent jurisdiction shall be to safeguard
such funds until delivery thereof as aforesaid pursuant to a joint written
disposition instruction by all the other parties hereto or a final order of a
court of competent jurisdiction.
7
<PAGE>
7. MISCELLANEOUS
7.1 Effect of Amendment. This First Amendment shall be construed in
connection with and as part of the Agreement, and except as modified and
expressly amended by this First Amendment, all terms, conditions and covenants
contained in the Agreement and the Notes are hereby ratified and shall be and
remain in full force and effect. From and after the effective date of this First
Amendment. References to the Agreement shall mean the Agreement as amended by
this First Amendment.
7.2 Limited Waiver. Upon and by virtue of this First Amendment becoming
effective as herein contemplated, the waivers set forth in Section 2.2 hereof
shall become effective. The Company understands and agrees that the waivers
contained in Section 2.2 pertain only to the Events of Default described in
Section 2.1 and to the extent so described and not to any other Default or Event
of Default which may exist under, or any other matters arising in connection
with, the Agreement or to any rights which the holders of the Notes have arising
by virtue of any such other actions or matters.
7.3 No Waiver by KM Purchasers. The KM Purchasers' failure, at any time or
times, to require strict performance by the Company of any provision of the
Agreement shall not waive, affect or diminish any right of the KM Purchasers
thereafter to demand strict compliance and performance therewith. Except as
specifically provided herein, any suspension or waiver by the KM Purchasers of
any breach of the Agreement shall not suspend, waive or affect any breach or
Event of Default under the Agreement, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of the
Company contained in the Agreement shall be deemed to have been suspended or
waived by the KM Purchasers, except to the extent set forth in Section 2.2
hereof and unless such suspension or waiver is by an instrument in writing
signed by the KM Purchasers specifying such suspension or waiver.
7.4 Notices, etc.. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
First Amendment may refer to the Agreement without making specific reference to
this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires.
7.5 Headings. The descriptive headings of the various Sections or parts of
this First Amendment are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof.
7.6 Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
7.7 Severability. If any part of this First Amendment shall be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
and enforceability of the remaining portions.
8
<PAGE>
7.8 Counterparts. The execution hereof by the parties hereto shall
constitute a contract between such parties for the uses and purposes hereinabove
set forth, and this First Amendment may be executed simultaneously in any number
of counterparts, each of which shall be deemed an original, and all of which
shall together constitute one agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment
to Note Purchase Agreement as of the date first written above.
BCAM INTERNATIONAL, INC.
By
------------------------------------
Michael Strauss
President
WEXFORD MANAGEMENT LLC,
As Agent
By
------------------------------------
Joseph Jacobs
By
------------------------------------
Ralph E. Weil
By
------------------------------------
Joseph Schueller
621 PARTNERS
By
------------------------------------
R. WEIL & ASSOCIATES
By
------------------------------------
[Signatures continued on following page]
10
<PAGE>
STRAFE & COMPANY
for the account of David M. Kirr
By
------------------------------------
STRAFE & COMPANY
for the account of Terry B. Marbach
By
------------------------------------
STRAFE & COMPANY
for the account of Gregg T. Summerville
By
------------------------------------
11
<PAGE>
SCHEDULE II
SUBSIDIARIES
Company's
Jurisdiction of Form Of Percentage
Name Organization Entity Ownership
---- ------------ ------- ---------
Drew Shoe
Corporation Ohio corporation 90%*
BCAM
Technologies, Inc. Delaware corporation 90%*
BCAM New York corporation 100%
Technologies, Inc.
Human Cad
Systems Inc. Ontario corporation 100%
BCA Services, Inc. New York corporation 100% of the
Common Stock
0% of the
Preferred Stock
* After giving effect to the stock issued to the Noteholders,
12
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 14, 1998, made by BCAM
INTERNATIONAL, INC., a New York corporation (the "Company"), BCA SERVICES, INC.,
a New York corporation ("BCA"), and BCAM TECHNOLOGIES, INC., a Delaware
corporation ("BT" and collectively with the Company and BCA, the "Pledgors") in
favor of WEXFORD MANAGEMENT LLC, a Connecticut limited liability company, as
agent (the "Agent") for the Noteholders (as herein defined).
W I T N E S S E T H :
WHEREAS, pursuant to that certain Note Purchase Agreement dated as of
September 19, 1997, between the Company and Impleo LLC, as amended by that
certain First Amendment (the "First Amendment") dated as of April 14, 1998 (as
the same may from time to time be further amended, modified or supplemented,
collectively the "Purchase Agreement"), the Purchaser purchased the Notes (as
defined in the Purchase Agreement) from the Company;
WHEREAS, pursuant to that certain Note Purchase Agreement dated as of
September 19, 1997 among the Company, Ralph E. Weil, Joseph Schueller, R. Weil &
Associates, 621 Partners, Strafe & Company for the account of David M. Kirr,
Strafe & Company for the account of Terry B. Marbach and Strafe & Company for
the account of Gregg T. Summerville (collectively, the "KM Purchasers"), as
amended by that certain First Amendment (the "KM First Amendment") dated as of
April 14, 1998 (as the same may from time to time be further amended, modified
or supplemented, the "KM Purchase Agreement"), the KM Purchasers purchased the
Other Notes from the Company;
WHEREAS, the Purchaser is willing to enter into the First Amendment, but
only upon the condition, among others, that the Company shall have executed and
delivered to the Agent this Security Agreement; and
WHEREAS, the KM Purchasers are willing to enter into the KM First
Amendment, but only on the condition, among others, that the Company shall have
executed and delivered to the Agent the Security Agreement;
WHEREAS, each of the Pledgors will derive substantial direct and indirect
benefit from the transactions contemplated by the First Amendment and the KM
First Amendment;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Account Debtor" shall mean any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
"Accounts" shall mean any "account," as such term is defined in Section
9-106 of the UCC, now owned or hereafter acquired by the Pledgors and, in any
event, shall include, without limitation, all accounts receivable, book debts
and other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to the Pledgors (including, without
limitation, under any trade names, styles or divisions thereof) whether arising
out of goods sold or services rendered by the Pledgors or from any other
transaction, whether or not the same involves the sale of goods or services by
the Pledgors (including, without limitation, any such obligation which might be
characterized as an account or contract right under the UCC) and all of the
Pledgors' rights in, to and under all purchase orders or receipts now owned or
hereafter acquired by it for goods or services, and all of the Pledgors' rights
to any goods represented by any of the foregoing (including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), and all moneys
due or to become due to the Pledgors under all contracts for the sale of goods
or the performance of services or both by the Pledgors (whether or not yet
earned by performance on the part of the Pledgors or in connection with any
other transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"Chattel Paper" shall mean any "chattel paper," as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by the Pledgors.
"Collateral" shall have the meaning assigned to such term in Section 2 of
this Security Agreement.
"Contracts" shall mean all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which the Pledgors may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance thereof.
"Documents" shall mean any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or hereafter acquired by the Pledgors.
"Equipment" has the meaning set forth in Section 9-109(2) of the UCC.
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole (including, without limitation, any
schedules hereto)
<PAGE>
and not merely to the specific section, paragraph or clause in which the
respective word appears.
"Instruments" shall mean any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by the Pledgors,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
"Inventory" shall mean all "inventory," as such term is defined in Section
9-109(4) of the UCC, now owned or hereafter acquired by the Pledgors and, in any
event, shall include, without limitation, all inventory, merchandise, goods and
other personal property now owned or hereafter acquired by the Pledgors which
are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in any Pledgors' business,
or the processing, packaging, delivery or shipping of the same, and all finished
goods.
"KM Warrant Agreement" shall mean that certain Warrant Agreement dated as
of September 19, 1997 between the Company and the KM Purchasers.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, Lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Noteholders" shall mean the holders of the Notes and the Other Notes.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to the Pledgors from time to time with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and payable to the
Pledgors from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority), and (iii) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Secured Obligations" shall mean (i) all of the unpaid principal amount
of, and accrued interest on, the Notes and the Other Notes, (ii) all other
indebtedness, liabilities and obligations of the Pledgors to the Agent, whether
now existing or hereafter incurred, and whether created under, arising out of or
in connection with the Transaction Documents. This term includes, without
limitation, all fees, charges, expenses, attorneys'
<PAGE>
fees and any other sum chargeable to the Company under any of the Transaction
Documents.
"Security Agreement" shall mean this Security Agreement, as the same may
from time to time be amended, modified or supplemented and shall refer to this
Security Agreement as in effect on the date such reference becomes operative.
"Transaction Documents" shall mean, collectively, this Security Agreement,
the Stock Pledge Agreement, the Purchase Agreement, the KM Purchase Agreement,
the Warrant Agreement, the KM Warrant Agreement, the Notes and the Other Notes.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Agent's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest. (a) As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and to induce the
Purchaser to enter into the First Amendment and the KM Purchasers to enter into
the KM First Amendment, and the transactions contemplated thereby, each of the
Pledgors hereby assigns, conveys, mortgages, pledges, hypothecates and transfers
to the Agent, and hereby grants to the Agent, for the benefit of the
Noteholders, a security interest in, all of such Pledgor's right, title and
interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
(i) all Accounts of such Pledgor;
(ii) all Chattel Paper of such Pledgor;
(iii) all Contracts of such Pledgor;
(iv) all Documents of such Pledgor;
(v) all Equipment of such Pledgor;
(vi) all Instruments of such Pledgor;
(vii) all Inventory of such Pledgor;
(viii) the United States Patents and applications for patent described on
Schedule VI to the First Amendment, and the patents and applications for patent
in other countries described on Schedule VI to the First Amendment, and all
other United States
<PAGE>
and foreign patents and applications for patent of the Pledgors now existing or
hereafter filed or acquired;
(ix) the inventions disclosed and/or claimed in all of the said United
States and foreign patents and applications for patents, and all other
inventions now owned by the Pledgors or hereinafter made, created or acquired by
or for the Pledgors whether or not any of said inventions are patentable;
(x) all other applications for patent or like protection on any of said
inventions that have now or may in the future be filed by the Pledgors, or by
the assignor(s) of the rights to said inventions to the Pledgors, whether in the
United States or in any other country or place anywhere in the world;
(xi) all other patents or like protection that have been or may in the
future be granted on any of the aforesaid inventions and/or applications to the
Pledgors, or to any assignor of the rights to any such invention to the
Pledgors, whether in the United States or in any other country or place anywhere
in the world;
(xii) the United States copyrights and applications for copyrights
described on Schedule VI to the First Amendment, and the copyrights and
applications for copyrights in other countries described on Schedule VI to the
First Amendment, and all other copyrights of the Pledgors, now existing or
hereafter acquired, whether or not the underlying works of authorship have been
published and whether said copyrights are statutory or arise under the common
law, all applications of the Pledgors for copyright presently existing or
hereafter filed or acquired and all works of authorship and other intellectual
property rights now owned or hereafter created by or for, or acquired by the
Pledgors;
(xiii) the United States registered trademarks and applications for
registrations of trademarks described on Schedule VI to the First Amendment, and
the trademarks and applications for registrations of trademarks in other
countries described on Schedule VI to the First Amendment, and all other
trademarks, service marks and applications to register the same of the Pledgors,
whether registered or unregistered and wherever registered, now existing or
hereafter arising, created or acquired by the Pledgors;
(xiv) all renewals, reissues, continuations, extensions or the like of any
patents, copyrights, trademarks, service marks and like protection, including
without limitation, those obtained or permissible under past, present and future
laws and statutes;
(xv) all rights of action on account of past, present and future
unauthorized use of any of said inventions, copyrights, trademarks or service
marks and for infringement of said patents, copyrights, trademarks or service
marks and like protection;
(xvi) the right to file and prosecute applications for patents,
copyrights, and for registration of trademarks and service marks on any of said
inventions, copyrights, trademarks, service marks or for similar intellectual
property in the United States or any other country or place anywhere in the
world;
<PAGE>
(xvii) the entire goodwill of the businesses of the Pledgors connected
with and symbolized by the trademarks, service marks, trade names and the other
general intangibles of the Pledgors;
(xviii) all of the Pledgors' trade names, customer lists, trade secrets,
corporate and other business records, license rights, advertising materials,
operating manuals, methods, processes, know-how, sales literature, drawings,
specifications, descriptions, inventions, name plates, catalogs, dealer
contracts, supplier contracts, distributor agreements, confidential information,
consulting agreements, engineering contracts, and all other assets which
uniquely reflect the goodwill of the businesses of the Pledgor to which said
general intangibles relate;
(xix) all of the proceeds of any of the foregoing (the intangible assets
enumerated in subparagraphs (vii) through (xvii) being hereinafter collectively
referred to as the "General Intangibles"); and
(xx) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
(b) If Drew Shoe Corporation ("Drew") repays its loan from Bank One, N.A.
prior to the repayment in full of the Secured obligations, the Company shall
cause Drew to grant to the Agent a Lien on substantially all of the assets of
Drew (whether such assets are real property, personal property or mixed)
pursuant to such mortgages and security agreements as the Agent may require Drew
to execute and deliver. The Company agrees to take, and to cause Drew to take,
any and all acts and to execute and deliver any and all documents necessary, or
in the opinion of the Agent, desirable, to give effect to the foregoing
covenant.
(c) If the Company shall create any subsidiary after the date hereof, the
Company shall cause such Subsidiary to grant to the Agent a Lien on
substantially all of the assets of such subsidiary (whether such assets are real
property, personal property or mixed) pursuant to such mortgages and security
agreements as the Agent may require such Subsidiary to execute and deliver. The
Company agrees to take, and to cause such Subsidiary to take, any and all acts
and to execute and deliver any and all documents necessary, or in the opinion of
the Agent, desirable, to give effect to the foregoing covenant.
3. Rights of the Agent; Limitations on the Agent's Obligations. (a) It is
expressly agreed by each Pledgor that, anything herein to the contrary
notwithstanding, each Pledgor shall remain liable under each of its Contracts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder and each Pledgor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract. The Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting to the Agent of a security interest therein or the
receipt by the Agent of any payment relating to any Contract pursuant hereto,
nor shall the Agent be
<PAGE>
required or obligated in any manner to perform or fulfill any of the obligations
of the Pledgors under or pursuant to any Contract, or to make any payment, or to
make any inquiry as to the nature or the sufficiency of any payment received by
it or the sufficiency of any performance by any party under any Contract, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) The Agent authorizes each Pledgor to collect its Accounts, provided
that such collection is performed in a prudent and businesslike manner, and the
Agent may, upon the occurrence and during the continuation of an Event of
Default and without notice, limit or terminate said authority at any time. If
required by the Agent at any time during the continuation of any Event of
Default, any Proceeds, when first collected by any Pledgor, received in payment
of any such Account or in payment for any of its Inventory or on account of any
of its Contracts, shall be promptly deposited by such Pledgor in precisely the
form received (with all necessary endorsements) in a special bank account
maintained by the Agent subject to withdrawal by the Agent only, as hereinafter
provided, and until so turned over shall be deemed to be held in trust by such
Pledgor for and as the Agent's property and shall not be commingled with such
Pledgor's other funds or properties. Such Proceeds, when deposited, shall
continue to be collateral security for all of the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided. The Agent
shall apply all or a part of the funds on deposit in said special account to the
principal of or interest on or both in respect of any of the Secured Obligations
in accordance with the provisions of Section 8(d) hereof and any part of such
funds which the Purchaser elects not so to apply and deems not required as
collateral security for the Secured Obligations shall be paid over from time to
time by the Agent to the Pledgors. If an Event of Default has occurred and is
continuing, at the request of the Agent the Pledgors shall deliver to the Agent
all original and other documents evidencing, and relating to, the sale and
delivery of such Inventory or the performance of labor or service which created
such Accounts, including, without limitation, all original orders, invoices and
shipping receipts.
(c) The Agent may at any time, upon the occurrence and during the
continuation of any Event of Default (whether or not waived), after first
notifying the Pledgors of its intention to do so, notify Account Debtors of the
Pledgors, parties to the Contracts of the Pledgors, obligors of Instruments of
the Pledgors and obligors in respect of Chattel Paper of the Pledgors that the
Accounts and the right, title and interest of the Pledgors in and under such
Contracts, Instruments and Chattel Paper have been assigned to the Agent and
that payments shall be made directly to the Agent. Upon the request of the
Agent, the Pledgors will so notify such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of such Chattel
Paper. Upon the occurrence and during the continuation of or an Event of Default
(whether or not waived) the Agent may in its own name or in the name of others
communicate with such Account Debtors, parties to such Contracts, obligors of
such Instruments and obligors in respect of such Chattel Paper to verify with
such Persons to the Agent's satisfaction the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper.
<PAGE>
(d) Upon reasonable prior notice to the Pledgors (unless an Event of
Default has occurred and is continuing, in which case no notice is necessary),
the Agent shall have the right, during normal business hours, to make test
verifications of the Accounts and physical verifications of the Inventory in any
manner and through any medium that it considers advisable, and each Pledgor
agrees to furnish all such assistance and information as the Agent may require
in connection therewith. Each Pledgor at its expense will prepare and deliver to
the Agent at any time and from time to time promptly upon the Agent's request,
the following reports: (i) a reconciliation of all its Accounts, (ii) an aging
of all its Accounts, (iii) trial balances, and (iv) a test verification of such
Accounts as the Agent may request.
(e) The Agent (a) shall have no obligation or responsibility to protect or
defend the General Intangibles or the right to use thereof, and the Pledgors
shall, at their own expense, protect, defend and maintain the General
Intangibles to the full extent advisable for their business, and (b) to use
their best efforts to detect any infringers of the rights described herein and
shall forthwith advise the Agent in writing of material infringements detected,
and (c) if the Pledgors fails to comply with the foregoing, the Agent may do so
in the Pledgors' name to the extent permitted by law, but at the Pledgors'
expense, and the Pledgors hereby agree to reimburse the Agent in full for all
expenses, including reasonable attorney's fees, incurred by the Agent in
protecting, defending and maintaining the General Intangibles.
4. Representations and Warranties. Each Pledgor hereby represents and
warrants that:
(a) Except for the security interest granted to the Agent pursuant to this
Security Agreement, such Pledgor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all Liens. No
material amounts payable under or in connection with any of its Accounts or
Contracts are evidenced by Instruments which have not been delivered to the
Agent.
(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed by such Pledgor in favor of the Agent pursuant to this
Security Agreement.
(c) When appropriate financing statements have been filed in the
jurisdictions listed on Schedule I hereto, this Security Agreement will be
effective to create a valid and continuing lien on and first priority perfected
security interest in the Collateral with respect to which a security interest
may be perfected by filing pursuant to the UCC, prior to all other Liens, and
will be enforceable as such as against creditors of and purchasers from such
Pledgor (other than purchasers of Inventory in the ordinary course of business).
(d) Each Pledgor's principal place of business and the place where its
records concerning the Collateral are kept and the location of its Inventory are
set forth on
<PAGE>
Section 11 hereof, and such Pledgor will not change such principal place of
business or remove such records or change the location of its Inventory unless
it has taken such action as is necessary to cause the security interest of the
Agent in the Collateral to continue to be perfected. Each Pledgor will not
change its principal place of business or the place where its records concerning
the Collateral are kept or change the location of its Inventory and Equipment
without giving thirty (30) days' prior written notice thereof to the Agent.
(e) The amount represented by each Pledgor to the Agent from time to time
as owing by each Account Debtor or by all Account Debtors in respect of the
Accounts of the Pledgors will at such time be the correct amount actually and
unconditionally owing by such Account Debtors thereunder.
5. Covenants. Each Pledgor covenants and agrees with the Agent that from
and after the date of this Security Agreement and until the Secured Obligations
are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Agent, and at the sole expense of
such Pledgor, such Pledgor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Agent may reasonably deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted, including, without
limitation, using its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to the Agent of any Contract held by
such Pledgor or in which such Pledgor has any rights not heretofore assigned,
the filing of any financing or continuation statements under the UCC with
respect to the Liens and security interests granted hereby, and transferring
Collateral to the Agent's possession (if a security interest in such Collateral
can be perfected by possession). Each Pledgor hereby authorizes the Agent to
file any such financing or continuation statement without the signature of such
Pledgor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
Instrument, such Instrument shall be immediately pledged to the Agent hereunder,
and shall be duly endorsed in a manner satisfactory to the Agent and delivered
to the Agent.
(b) Maintenance of Records. Each Pledgor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. Each
Pledgor will mark its books and records pertaining to the Collateral to evidence
this Security Agreement and the security interests granted hereby. All Chattel
Paper will be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
Wexford Management LLC, as Agent". For the Agent's further security, each
Pledgor agrees that the Agent shall have a special property interest in all of
such Pledgor's books and records pertaining to the Collateral and, upon the
occurrence and during the continuation of an Event of Default, each Pledgor
shall deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent. Prior to the occurrence of
an Event of Default and upon reasonable notice from
<PAGE>
the Agent, each Pledgor shall permit any representative of the Agent to inspect
such books and records and will provide photocopies thereof to the Agent.
(c) Indemnification. In any suit, proceeding or action brought by the
Agent relating to any Account, Chattel Paper, Contract, or Instrument for any
sum owing thereunder, or to enforce any provision of any Account, Chattel Paper,
Contract, or Instrument, each Pledgor will save, indemnify and keep the Agent
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction of liability whatsoever
of the obligor there-under, arising out of a breach by any Pledgor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from any Pledgor, and all such obligations of any Pledgor shall be and remain
enforceable against and only against such Pledgor and shall not be enforceable
against the Agent.
(d) Compliance with Laws, etc. The Pledgors will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any govern-mental authority, applicable to the Collateral or any part thereof or
to the operation of such Pledgor's business; provided, however, that the
Pledgors may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not in the sole opinion of the Agent adversely
affect the Agent's rights hereunder or adversely affect the first priority of
its security interest in the Collateral.
(e) Payment of Obligations. Each Pledgor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such charge need be paid if (i) such nonpayment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein, and (ii) such charge is being contested in good faith,
by proper proceedings, and adequate reserves therefor have been established by
such Pledgor in accordance with and to the extent required by GAAP.
(f) Compliance with Terms of Accounts, etc. In all material respects, each
Pledgor will perform and comply with all obligations in respect of Accounts,
Chattel Paper, Contracts and all other agreements to which it is a party or by
which it is bound.
(g) Limitation on Liens on Collateral. Each Pledgor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral, and will
defend the right, title and interest of the Purchaser in and to any of such
Pledgor's rights under the Chattel Paper, Contracts, Documents, and Instruments
and Inventory and in and to the Proceeds thereof against the claims and demands
of all Persons whomsoever. Without limiting the foregoing, each of the Pledgors
acknowledges and agrees that the Agent has not had an opportunity to conduct a
Lien search against the Pledgors. If and to the extent that a Lien search
discloses that there are Liens on any of the Collateral, the Pledgors shall
provide the Agent with satisfactory evidence of the release of such Lien within
ten (10) Business Days. The failure by any Pledgor to deliver evidence of the
release of any such Lien
<PAGE>
within ten (10) Business Days shall be an Event of Default under the Notes and
the Other Notes.
(h) Limitations on Modifications of Accounts. Upon the occurrence and
during the continuation of any Event of Default, each Pledgor will not, without
the Agent's prior written consent, grant any extension of the time of payment of
any of the Accounts, Chattel Paper or Instruments, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon other than trade discounts granted in the ordinary
course of business of such Pledgor.
(i) Maintenance of Insurance. Each Pledgor will maintain, with financially
sound and reputable companies, insurance policies (i) insuring its Inventory
against loss by fire, explosion, theft and such other casualties as are usually
insured against by companies engaged in the same or similar businesses and (ii)
insuring each Pledgor and the Agent against liability for personal injury and
property damage relating to such Inventory, and Equipment, such policies to be
in such amounts and against at least such risks as are usually insured against
in the same general area by companies engaged in the same or a similar business,
naming the Agent as an additional insured with losses payable to each Pledgor
and the Agent as their respective interests may appear under a standard Agent
"loss-payable" clause.
(j) Limitations on Disposition. Each Pledgor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except for sales of Inventory or licenses of General Intangibles in the
ordinary course of business.
(k) Further Identification of Collateral. Each Pledgor will, if so
requested by the Agent, furnish to the Agent, as often as the Agent reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
(l) Notices. Each Pledgor will advise the Agent promptly, in reasonable
detail, (i) of any material Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, (ii) of any material change in the
composition of the Collateral, and (iii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereunder.
(m) Right of Inspection. Upon reasonable notice to each Pledgor (unless an
Event of Default has occurred and is continuing, in which case no notice is
necessary), the Agent shall at all times have full and free access during normal
business hours to all the books and records and correspondence of each Pledgor,
and the Agent or its representatives may examine the same, take extracts
therefrom and make photocopies thereof.
<PAGE>
(n) Continuous Perfection. Each Pledgor will not change its name, identity
or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless such Pledgor shall have given the Agent at least
thirty (30) days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by the Agent to amend such financing statement or
continuation statement so that it is not seriously misleading.
(o) General Intangibles. (i) The Pledgors shall diligently prosecute all
applications for patents, copyrights and trademarks and shall file and prosecute
any and all continuations, continuations-in-part, applications for reissue,
applications for certificate of correction and like matters as shall be
reasonably indicated to be desirable from facts available to it from time to
time during the term of this Agreement, and the Pledgors shall bear the entire
cost of all such filing and proceedings. The Pledgors agree to retain a licensed
patent attorney if necessary and an experienced copyright and trademark counsel
approved by the Agent for the filing and prosecution of all such applications
and other proceedings.
(ii) The Pledgors agrees to pay when due all fees, including license fees,
taxes and other expenses which shall be incurred or which shall accrue with
respect to any of the patents or patent applications, copyrights and copyright
applications, trademarks and trade mark applications and know-how within the
General Intangibles.
(iii) The Pledgors shall not allow any patent, copyright, trademark, trade
name, service mark or any application for patent, copyright, trademark or like
protection included within the General Intangibles to become abandoned, nor any
patent, copyright, trademark or like protection to be forfeited or dedicated to
the public without express written approval of the Agent and any license thereof
by the Pledgors shall be legally sufficient to prevent any abandonment,
forfeiture or dedication to public use. In the event any pending or hereafter
filed patent or trademark application, other than trademark renewal
applications, has been finally rejected by the United States Patent and
Trademark Office or any foreign patent or trademark office and the Pledgors have
exhausted their administrative remedies, the Pledgors may abandon the same after
sixty (60) days written notice to the Agent, who may thereafter at its own
expense pursue judicial appeals. The Pledgors shall cooperate in any such
appeal.
(iv) The Agent may, at its option, whether before or after default, but
without obligation to do so, discharge taxes, Liens, or security interests or
other encumbrances at any time levied or placed upon the General Intangibles, or
pay for maintenance or preservation of the General Intangibles, or pay any other
fee, attorneys' fee or other expenses necessary to preserve and protect the
assignment and security interest hereby granted.
6. Agent's Appointment as Attorney-in-Fact. (a) Each Pledgor hereby
irrevocably constitutes and appoints the Agent and any officer or agent thereof,
with full
<PAGE>
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Pledgor and in
the name of such Pledgor or in its own name, from time to time in the Agent's
sole and absolute discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby gives the Agent the power and
right, on behalf of such Pledgor, without notice to or assent by such Pledgor to
do the following:
(i) to ask, demand, collect, receive and give acquittances and receipts
for any and all moneys due and to become due under any Collateral and, in the
name of such Pledgor or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or other Instruments
for the payment of moneys due under any Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever pay-able and to file any claim or to
take any other action or proceeding in any court of law or equity or other-wise
deemed appropriate by the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance called for by the terms of this Security Agreement
and to pay all or any part of the premiums therefor and the costs thereof; and
(iii) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Agent or as the Agent shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and other amounts due, and
to become due at any time, in respect of or arising out of any Collateral; (C)
to sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other Documents
constituting or relating to the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against any Pledgor with respect to any Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Purchaser
may deem appropriate; (G) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Purchaser's option and such Pledgors's expense, at
any time, or from time to time, all acts and things which the Agent reasonably
deems necessary to protect, preserve or realize upon the Collateral and the
Agent's Lien therein, in order to effect the intent of this Security Agreement,
all as fully and effectively as such Pledgor might do.
<PAGE>
(b) The Agent agrees that, except upon the occurrence and during the
continuation of an Event of Default, it will forebear from exercising the power
of attorney or any rights granted to the Agent pursuant to this Section 6. Each
Pledgor hereby ratifies, to the extent permitted by law, all that said attorneys
shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6 is a power coupled with an interest and shall
be irrevocable until the Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on the Agent hereunder are solely to protect the
Agent's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Agent shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be responsible to
each Pledgor for any act or failure to act, except for its own gross negligence
or willful misconduct.
(d) Each Pledgor also authorizes the Agent, at any time and from time to
time upon the occurrence and during the continuation of an Event of Default, (i)
to communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of such Pledgor in and under the
Contracts hereunder and other matters relating thereto and (ii) to execute, in
connection with the sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
7. Performance by the Agent of each Pledgor's Obligations. If any Pledgor
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Agent incurred in connection with such
performance or compliance, together with interest thereon at the rate then in
effect in respect of the Notes and the Other Notes, shall be payable by such
Pledgor to the Agent on demand and shall constitute Secured Obligations secured
hereby.
8. Remedies, Rights Upon Default. (a) If an Event of Default shall occur
and be continuing, in addition to all other rights and remedies granted to it in
this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, the Agent may exercise all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, each Pledgor expressly agrees that in any such
event the Agent, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon such Pledgor or any other person (all and
each of which demands, advertisements and/or notices are hereby expressly waived
to the maximum extent permitted by the UCC and other applicable law), may
forth-with collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker's board or at the Agent's
offices or elsewhere at such prices as it may deem best, for cash or on credit
or for
<PAGE>
future delivery without assumption of any credit risk. The Agent shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption each Pledgor hereby releases. Each Pledgor further agrees, at the
Agent's request, to assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such Pledgor's
premises or elsewhere. The Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in Section 8(d) hereof, each Pledgor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Agent of any other amount required by any
provision of law, including Section 9-504(1)(c) of the UCC, need the Agent
account for the surplus, if any, to such Pledgor. To the maximum extent
permitted by applicable law, each Pledgor waives all claims, damages, and
demands against the Agent arising out of the repossession, retention or sale of
the Collateral except such as arise out of the gross negligence or willful
misconduct of the Agent. Each Pledgor agrees that the Agent need not give more
than ten (10) days' notice (which notification shall be deemed given when mailed
or delivered on an overnight basis, postage prepaid, addressed to such Pledgor
at its address referred to in Section 11 hereof) of the time and place of any
public sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. Each Pledgor shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all amounts to which the Purchaser is
entitled, such Pledgor also being liable for the fees of any attorneys employed
by the Purchaser to collect such deficiency. In addition to the foregoing,
during the existence of any Event of Default, the Agent shall have the right (x)
to obtain an absolute assignment of any General Intangible, (y) to sell, assign,
transfer, or convey any General Intangible, or (z) to license any Person to use
any General Intangible on terms deemed reasonable by the Agent.
(b) Each Pledgor also agrees to pay all costs of the Agent, including,
without limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
(c) Each Pledgor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon all or
any part of the Collateral shall be distributed by the Agent in the following
order of priorities:
first, to the Agent in an amount sufficient to pay in full the expenses of
the Agent in connection with such sale, disposition or other realization,
including all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, including, without limitation, attorney's fees;
second, to the Agent in an amount equal to the then unpaid principal of
and accrued interest on the Secured Obligations;
<PAGE>
third, to the Agent in an amount equal to any other Secured Obligations
which are then unpaid; and
finally, upon payment in full of all of the Secured Obligations, to pay to
each Pledgor, or its representatives or as a court of competent jurisdiction may
direct, any surplus then remaining from such Proceeds.
9. Limitation on the Agent's Duty in Respect of Collateral. The Agent
shall not have any duty as to any Collateral in its possession or control or in
the possession or control of any agent or nominee of it or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto, except that the Purchaser shall use reasonable care with
respect to the Collateral in its possession or under its control. Upon request
of any Pledgor, the Agent shall account for any moneys received by it in respect
of any foreclosure on or disposition of the Collateral.
10. Termination of Security Interests. Upon the payment in full of all
Secured Obligations, the Agent shall release all Liens granted in its favor and
shall file appropriate UCC termination statements.
11. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Pledgor for liquidation or reorganization, should any Pledgor become insolvent
or make an assignment for the benefit of creditors or should a receiver or
trustee be appointed for all or any significant part of any Pledgor's assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
12. Notices. Except as otherwise provided here-in, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback addressed as follows:
<PAGE>
If to the Agent, at:
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Joseph Jacobs
Telephone: (203)862-7020
Telecopier: (203)862-7320
With a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza, 11th Fl.
New York, New York 10020
Attention: Stephen B. Selbst, Esq.
Telephone: (212) 547-5400
Telecopier: (212) 547-5444
If to either of the Pledgors, at:
c/o BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
Attention: Michael Strauss, President
Telephone: (516) 752-7530
Telecopier: (516) 752-3558
With a copy to:
Ruskin, Moscou, Evans & Faltischek, PC
170 Old Country Road
Mineola, New York 11501
Attention: Norman Friedland, Esq.
Telephone: (516) 663-6600
Telecopier: (516) 663-6642
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated
<PAGE>
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
13. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability with-out
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. No Waiver; Cumulative Remedies. The Agent shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by the Agent,
and then only to the extent therein set forth. A waiver by the Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of the
Agent, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by the Agent and,
where applicable by each Pledgor.
15. Successors and Assigns; Governing Law. (a) This Security Agreement and
all obligations of each Pledgors hereunder shall be binding upon the successors
and assigns of such Pledgor, and shall, together with the rights and remedies of
the Agent hereunder, inure to the benefit of the Agent, all future holders of
the Notes and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or any portion
thereof or interest therein shall in any manner affect the security interest
granted to the Agent hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
16. Waiver of Jury Trial. EACH PLEDGOR WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER, UNDER THE AGREEMENT, THE KM AGREEMENT OR UNDER THE OTHER TRANSACTION
DOCUMENTS OR RELATING TO EACH OF THE FOREGOING.
<PAGE>
17. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
18. Counterparts. This Security Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the Agent and each Pledgor have caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
BCAM INTERNATIONAL, INC.
By:
----------------------------------
Name: Michael Strauss
Title: President
BCAM TECHNOLOGIES, INC.
By:
----------------------------------
Name:
Title:
BCA SERVICES, INC.
By:
----------------------------------
Name:
Title:
WEXFORD MANAGEMENT LLC, as Agent
By:
----------------------------------
Name: Joseph Jacobs
Title: President
<PAGE>
SCHEDULE I
FILINGS
Jurisdiction Filing Office
------------ -------------
New York Secretary of State
New York Suffolk County Clerk
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of April 14, 1998, between WEXFORD
MANAGEMENT LLC, a Connecticut limited liability company, as agent for the
Noteholders (the "Agent") and BCAM International, Inc., a New York corporation
(the "Pledgor").
W I T N E S S E T H:
WHEREAS, Pledgor is the record and beneficial owner of the shares of
common stock described on Schedule I hereto (the "Pledged Shares") issued by the
Subsidiaries of the Pledgor named therein; and
WHEREAS, Pledgor and IMPLEO LLC are parties to that certain Note Purchase
Agreement dated as of September 19, 1997, as amended by that certain First
Amendment (the "First Amendment") dated as of April 14, 1998 (as the same may be
further amended, modified and supplemented from time to time, the "Purchase
Agreement") pursuant to which the Purchaser purchased certain Notes from the
Company;
WHEREAS, Pledgor and Ralph E. Weil, Joseph Schueller, 621 Partners, R.
Weil & Associates, Strafe & Company for the account of David M. Kirr, Strafe &
Company for the account of Terry B. Marbach, and Strafe & Company for the
account of Gregg T. Summerville (collectively, the "KM Purchasers") are parties
to that certain Note Purchase Agreement dated as of September 19, 1997, as
amended by that certain First Amendment (the "KM First Amendment") dated as of
April 14, 1998 (as the same may be further amended, modified and supplemented
from time to time, the "KM Purchase Agreement") pursuant to which the KM
Purchasers purchased the Other Notes from the Company.
WHEREAS, terms defined in the Purchase Agreement, unless separately
defined herein, shall have the meanings assigned to such terms therein; and
WHEREAS, in connection with the transactions contemplated under the
Purchase Agreement, as amended by the First Amendment thereto, and the KM
Purchase Agreement, as amended by the KM First Amendment, and as security for
all of the obligations of the Company under the Notes, the Other Notes and the
Transaction Documents, the Purchaser and the KM Purchasers are requiring that
Pledgor shall have executed and delivered this Stock Pledge Agreement and
granted the security interest contemplated hereby in favor of the Agent;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Purchaser to enter into the First
Amendment and to induce the KM Purchasers to enter into the KM First Amendment,
it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the
Purchase Agreement and the Notes are used herein as therein defined, and the
following shall
<PAGE>
have (unless otherwise provided elsewhere in this Agreement) the following
respective meanings (such meanings being equally applicable to both the singular
and plural form of the terms defined):
"Agreement" means this Stock Pledge Agreement, including all amendments,
modifications and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be in effect at the
time such reference becomes operative.
"Bankruptcy Code" means title 11, United States Code, as amended from time
to time, and any successor statute thereto.
"Capital Stock" means any shares of authorized capital stock of a
corporation.
"KM Warrant Agreement" means that certain Warrant Agreement dated as of
September 19, 1997 among the Company and the KM Purchasers.
"Noteholders" means the holders of the Notes and the Other Notes.
"Pledged Collateral" has the meaning assigned to such term in Section 2
hereof.
"Secured Obligations" has the meaning assigned to such term in Section 3
hereof.
"Security Agreement" means the Security Agreement of even date herewith
among BCAM International, Inc., BCAM Technologies, Inc., and Impleo LLC, as the
Agent as the same may be amended from time to time hereafter.
"Transaction Documents" means this Agreement, the Security Agreement, the
Purchase Agreement, the KM Purchase Agreement, the Notes, the Other Notes, the
Warrant Agreement and the KM Warrant Agreement.
"Warrant Agreement" means that certain Warrant Agreement dated as of
September 19, 1997 between the Company and Impleo LLC.
2. Pledge. The Pledgor hereby pledges to the Agent, and grants to the
Agent, a first priority security interest in, all of the following
(collectively, the "Pledged Collateral"):
(a) the Pledged Shares owned by the Pledgor listed on Schedule I hereto
and the certificates representing the Pledged Shares, and all dividends,
distributions, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares;
(b) all additional shares of stock of any issuer of the Pledged Shares
from time to time acquired by the Pledgor in any manner (which shares shall be
deemed to be part of the Pledged Shares), and the certificates representing such
additional shares, and all dividends, distributions, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and
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(c) all shares of any Person who, after the date of this Agreement,
becomes, as a result of any occurrence, a wholly-owned Subsidiary of the Pledgor
(which shares shall be deemed to be part of the Pledged Shares) and the
certificates representing such shares, and all dividends, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares.
(d) Notwithstanding the foregoing, if the Pledgor is unable to deliver to
the Agent stock certificates representing all of the issued and outstanding
shares of Capital Stock of HumanCAD Systems, Inc., an Ontario corporation,
concurrently with the execution and delivery of this Agreement, then the Pledgor
agrees (i) not to pledge such shares of Capital Stock in favor of any other
Person, and (ii) to pledge such shares of Capital Stock to the Agent as promptly
as practicable after the Pledgor comes into possession thereof.
3. Security for Obligations. This Agreement secures, and the Pledged
Collateral is security for, the prompt payment in full when due, whether at
stated maturity, by acceleration or otherwise, and performance of the
obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of the Pledgor now or hereafter existing under the
Transaction Documents (collectively, the "Secured Obligations"). This term
includes, without limitation, the Notes and any and all future advances, as well
as all interest, fees, charges, expenses, attorneys' fees and any other sum
chargeable to the Company under any of the Transaction Documents.
4. Delivery of Pledged Collateral. All certificates representing or
evidencing the Pledged Shares shall be delivered to and held by or on behalf of
the Agent pursuant hereto and shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Agent. Upon the occurrence of an Event of Default, the Agent shall have the
right, at any time in its sole and absolute discretion and without notice to the
Pledgor, to transfer to or to register in the name of the Agent or any of its
nominees any or all of the Pledged Shares. In addition, the Agent shall have the
right at any time to exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of smaller or larger
denominations.
5. Representations and Warranties. The Pledgor represents and warrants to
the Agent that:
(a) The Pledgor is, and at the time of delivery of the Pledged Shares to
the Agent pursuant to Section 4 hereof will be, the sole holder of record and
the sole beneficial owner of the Pledged Collateral free and clear of any Lien
thereon or affecting the title thereto, except for the Lien created by this
Agreement.
(b) All of the Pledged Shares pledged pursuant to this Agreement have been
duly authorized, validly issued and are fully paid and non-assessable.
(c) The Pledgor has the right and requisite corporate authority to pledge,
assign, transfer, deliver, deposit and set over the Pledged Collateral pledged
by the Pledgor to the Agent as provided herein.
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(d) None of the Pledged Shares pledged pursuant to this Agreement has been
issued or transferred in violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such issuance or
transfer may be subject.
(e) The authorized Capital Stock of each of the corporations listed on
Schedule I hereto consists of the number of shares of common stock, with the
number of shares issued and outstanding that are described in Schedule I hereto.
Schedule I correctly states the Company's ownership percentage of each class of
Capital Stock of the Subsidiaries listed thereon. No Subsidiary listed on
Schedule I owns, directly or indirectly, any Subsidiaries. As of the date the
Pledged Collateral is delivered to the Agent, there are no existing options,
warrants, calls or commitments of any character whatsoever relating to any
Capital Stock of any of such corporations. Except as listed on Schedule I, the
Company has no Subsidiaries.
(f) No consent, approval, authorization or other order of any Person and
no consent, authorization, approval, or other action by, and no notice to or
filing with, any Governmental Authority is required either (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Pledgor or (ii) for
the exercise by the Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Pledged Collateral pursuant to this
Agreement, except as may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
(g) The pledge, assignment and delivery of the Pledged Collateral pursuant
to this Agreement will create a valid first priority Lien on and a first
priority perfected security interest in the Pledged Collateral pledged by the
Pledgor, and the proceeds thereof, securing the payment of the Secured
Obligations, subject to no other Lien or security interest.
(h) This Agreement has been duly authorized, executed and delivered by the
Pledgor and constitutes a legal, valid and binding obligation of the Pledgor
enforceable in accordance with its terms.
(i) Schedule I correctly states the Company's ownership percentage of each
class of Capital Stock of the Subsidiaries listed thereon.
The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Agreement.
6. Covenants. The Pledgor covenants and agrees that until the payment in
full of all of the Secured Obligations:
(a) Without the prior written consent of the Agent, the Pledgor will not
sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to
the Pledged Collateral pledged by the Pledgor or any unpaid dividends or other
distributions or payments with respect thereto or grant a Lien therein.
(b) The Pledgor will, at its expense, promptly execute, acknowledge and
deliver all such instruments and take all such action as the Agent from time to
time may reasonably request in order to ensure to the Agent the benefits of the
Liens in and to the Pledged Collateral intended to be created by this Agreement,
including the filing of any necessary
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Uniform Commercial Code financing statements, which may be filed by the Agent
with or without the signature of the Pledgor, and will cooperate with the Agent,
at the Pledgor's expense, in obtaining all necessary approvals and making all
necessary filings under federal or state law in connection with such Liens or
any sale or transfer of the Pledged Collateral.
(c) The Pledgor has and will defend the title to the Pledged Collateral
and the Liens of the Agent thereon against the claim of any Person and will
maintain and preserve such Liens until the payment in full of all of the Secured
Obligations.
(d) The Pledgor will, upon obtaining any additional shares of any
Subsidiaries or any new directly owned Subsidiary, which shares are not already
Pledged Collateral, promptly (and in any event within three (3) Business Days)
deliver to the Agent a Pledge Amendment, duly executed by the Pledgor, in
substantially the form of Schedule II hereto (a "Pledge Amendment"), in respect
of the additional Pledged Shares which are to be pledged pursuant to this
Agreement. The Pledgor hereby authorizes the Agent to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to the Agent shall for all purposes hereunder be
considered Pledged Collateral.
7. Pledgors' Rights. As long as no Event of Default shall have occurred
and be continuing and until written notice shall be given to the Pledgor in
accordance with Section 8(a) hereof,
(a) the Pledgor shall have the right, from time to time, to vote and give
consents with respect to the Pledged Collateral or any part thereof for all
purposes not inconsistent with the provisions of this Agreement, the Notes, the
Other Notes and any Transaction Document; provided, however, that no vote shall
be cast, and no consent shall be given or action taken, which would have the
effect of impairing the position or interest of the Agent in respect of the
Pledged Collateral or which would authorize or effect (i) the dissolution or
liquidation, in whole or in part, of any corporation listed on Schedule I, (ii)
the consolidation or merger of any corporation listed on Schedule I with any
other Person, (iii) the sale, disposition or encumbrance of all or substantially
all of the assets of any corporation or partnership listed on Schedule I, (iv)
any change in the authorized number of shares, the stated capital or the
authorized share capital of any corporation listed in Schedule I or the issuance
of any additional shares of its capital stock, or (v) the alteration of the
voting rights with respect to the Capital Stock of any corporation listed on
Schedule I; and
(b) all dividends and all other distributions in respect of any of the
Pledged Shares of the Pledgor, whenever paid or made, shall be delivered to the
Agent to hold as Pledged Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Agent, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Agent as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
8. Defaults and Remedies.
(a) Upon the occurrence of an Event of Default and during the continuation
of such Event of Default, then or at any time after such declaration and
following written notice to the Pledgor, the Agent (personally or through an
agent) is hereby authorized and empowered to transfer and register in its name
or in the name of its nominee the whole or any part of the
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Pledged Collateral, to exchange certificates or instruments representing or
evidencing Pledged Securities for certificates or instruments of smaller or
larger denominations, to exercise the voting rights with respect thereto, to
collect and receive all cash dividends and other distributions made thereon, to
sell in one or more sales after seven (7) days' notice of the time and place of
any public sale or of the time after which a private sale is to take place
(which notice the Pledgor agrees is commercially reasonable), but without any
previous notice or advertisement, the whole or any part of the Pledged
Collateral and to otherwise act with respect to the Pledged Collateral as though
the Agent was the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-fact of the
Pledgor, with full power of substitution to do so, and which shall remain in
effect until the Secured Obligations are paid in full; provided, however, the
Agent shall not have any duty to exercise any such right or to preserve the same
and shall not be liable for any failure to do so or for any delay in doing so.
Any sale shall be made at a public or private sale at the Agent's place of
business, or at any public building in the City of New York or elsewhere to be
named in the notice of sale, either for cash or upon credit or for future
delivery at such price as the Agent may deem fair, and the Agent may be the
purchaser of the whole or any part of the Pledged Collateral so sold and hold
the same thereafter in its own right free from any claim of the Pledgor or any
right of redemption. Each sale shall be made to the highest bidder, but the
Agent reserves the right to reject any and all bids at such sale which, in its
sole and absolute discretion, it shall deem inadequate. Demands of performance,
except as otherwise herein specifically provided for, notices of sale,
advertisements and the presence of property at sale are hereby waived and any
sale hereunder may be conducted by an auctioneer or any officer or agent of the
Agent.
(b) If, at the original time or times appointed for the sale of the whole
or any part of the Pledged Collateral, the highest bid, if there be but one
sale, shall be inadequate to discharge in full all the Secured Obligations, or
if the Pledged Collateral be offered for sale in lots, if at any of such sales,
the highest bid for the lot offered for sale would indicate to the Agent, in its
sole and absolute discretion, the unlikelihood of the proceeds of the sales of
the whole of the Pledged Collateral being sufficient to discharge all the
Secured Obligations, the Agent may, on one or more occasions and in its sole and
absolute discretion, postpone any of said sales by public announcement at the
time of sale or the time of previous postponement of sale, and no other notice
of such postponement or postponements of sale need be given, any other notice
being hereby waived; provided, however, that any sale or sales made after such
postponement shall be after seven (7) days' notice to the Pledgor.
(c) In the event of any sales hereunder the Agent shall, after deducting
all costs or expenses of every kind (including reasonable attorneys' fees and
disbursements) for care, safekeeping, collection, sale, delivery or otherwise,
apply the residue of the proceeds of the sales to the payment or reduction,
either in whole or in part, of the Secured Obligations in accordance with the
agreements and instruments governing and evidencing such Obligations, returning
the surplus, if any, to the Pledgor.
(d) If, at any time when the Agent in its sole and absolute discretion
determines, following the occurrence and during the continuance of an Event of
Default, that, in connection with any actual or contemplated exercise of its
rights (when permitted under this Section 8) to sell the whole or any part of
the Pledged Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Pledged Collateral pursuant to the
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Securities Act of 1933, as amended (or any similar statute then in effect) (the
"Act"), the Pledgor shall, in an expeditious manner, cause its Subsidiaries, if
any, to:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to the Pledged
Collateral and use its best efforts to cause such registration statement
to become and remain effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Pledged Collateral covered
by such registration statement whenever the Agent shall desire to sell or
otherwise dispose of the Pledged Collateral.
(iii) Furnish to the Agent such numbers of copies of a prospectus
and a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as the Agent may request in order to
facilitate the public sale or other disposition of the Pledged Collateral
by the Agent.
(iv) Use its best efforts to register or qualify the Pledged
Collateral covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States
as the Agent shall request, and do such other reasonable acts and things
as may be required of it to enable the Agent to consummate the public sale
or other disposition in such jurisdictions of the Pledged Collateral by
the the Agent.
(v) Furnish, at the request of the Agent, on the date that shares of
the Pledged Collateral are delivered to the underwriters for sale pursuant
to such registration or, if the security is not being sold through
underwriters, on the date that the registration statement with respect to
such shares of the Pledged Collateral becomes effective, (A) an opinion,
dated such date, of the independent counsel representing such registrant
for the purposes of such registration, addressed to the underwriters, if
any, and in the event the Pledged Collateral is not being sold through
underwriters, then to the Agent, in customary form and covering matters of
the type customarily covered in such legal opinions; and (B) a comfort
letter, dated such date, from the independent certified public accountants
of such registrant, addressed to the underwriters, if any, and in the
event the Pledged Collateral is not being sold through underwriters, then
to the Agent, in a customary form and covering matters of the type
customarily covered by such comfort letters and as the underwriters or the
Agent shall reasonably request. The opinion of counsel referred to above
shall additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the Agent
may reasonably request. The letter referred to above from the independent
certified public accountants shall additionally cover such other financial
matters (including information as to the period ending not more than five
(5) Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the Agent
may reasonably request.
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(vi) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later than 18
months after the effective date of the registration statement, an earnings
statement covering the period of at least 12 months beginning with the
first full month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the Act.
(e) All expenses incurred in complying with Section 8(d) hereof,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the registrant,
the fees and expenses of counsel for the Agent, expenses of the independent
certified public accountants (including any special audits incident to or
required by any such registration) and expenses of complying with the securities
or blue sky laws or any jurisdictions, shall be paid by the Pledgor.
(f) If, at any time when the Agent shall determine to exercise its right
to sell the whole or any part of the Pledged Collateral hereunder, such Pledged
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Act, the Agent may, in its sole and absolute
discretion (subject only to applicable requirements of law), sell such Pledged
Collateral or part thereof by private sale in such manner and under such
circumstances as the Agent may deem necessary or advisable, but subject to the
other requirements of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without limiting the
generality of the foregoing, in any such event the Agent in its sole and
absolute discretion (x) may, in accordance with applicable securities laws,
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Pledged Collateral or part thereof could be
or shall have been filed under the Act (or similar statute), (y) may approach
and negotiate with a single possible purchaser to effect such sale, and (z) may
restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment and not with a view
to the distribution or sale of such Pledged Collateral or part thereof. In
addition to a private sale as provided above in this Section 8, if any of the
Pledged Collateral shall not be freely distributable to the public without
registration under the Act (or similar statute) at the time of any proposed sale
pursuant to this Section 8, then the Agent shall not be required to effect such
registration or cause the same to be effected but, in its sole and absolute
discretion (subject only to applicable requirements of law), may require that
any sale hereunder (including a sale at auction) be conducted subject to
restrictions (i) as to the financial sophistication and ability of any Person
permitted to bid or purchase at any such sale, (ii) as to the content of legends
to be placed upon any certificates representing the Pledged Collateral sold in
such sale, including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at such
sale relating to that Person's access to financial information about the Pledgor
and such Person's intentions as to the holding of the Pledged Collateral so sold
for investment, for its own account, and not with a view to the distribution
thereof, and (iv) as to such other matters as the Agent may, in its sole and
absolute discretion, deem necessary or appropriate in order that such sale
(notwithstanding any failure so to register) may be effected in compliance with
the Bankruptcy Code and other laws affecting the enforcement of creditors'
rights and the Act and all applicable state securities laws.
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(g) The Pledgor acknowledges that notwithstanding the legal availability
of a private sale or a sale subject to the restrictions described above in
Section 8(f), the Agent may, in its sole and absolute discretion, elect to
register any or all the Pledged Collateral under the Act (or any applicable
state securities law) in accordance with its rights hereunder. The Pledgor,
however, recognizes that the Agent may be unable to effect a public sale of any
or all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof. The Pledgor also acknowledges that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. The Agent shall be under no obligation to delay a sale of any of the
Pledged Collateral for the period of time necessary to permit the registrant to
register such securities for public sale under the Act, or under applicable
state securities laws, even if the Pledgor would agree to do so.
(h) The Pledgor agrees that following the occurrence and during the
continuance of an Event of Default it will not at any time plead, claim or take
the benefit of any appraisal, valuation, stay, extension, moratorium or
redemption law now or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the whole or any part of
the Pledged Collateral or the possession thereof by any purchaser at any sale
hereunder, and the Pledgor waives the benefit of all such laws to the extent it
lawfully may do so. The Pledgor agrees that it will not interfere with any
right, power and remedy of the Agent provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Agent of any one or more of such
rights, powers or remedies. No failure or delay on the part of the Agent to
exercise any such right, power or remedy and no notice or demand which may be
given to or made upon the Pledgor by the Agent with respect to any such remedies
shall operate as a waiver thereof, or limit or impair the right of the Agent to
take any action or to exercise any power or remedy hereunder, without notice or
demand, or prejudice its rights as against the Pledgor in any respect.
(i) The Pledgor further agrees that a breach of any of the covenants
contained in this Section 8 will cause irreparable injury to the Agent, that the
Agent have no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 8
shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that the Secured Obligations
are not then due and payable in accordance with the agreements and instruments
governing and evidencing such obligations. The Pledgor further acknowledges the
impossibility of ascertaining the amount of damages which would be suffered by
the Agent by reason of a breach of any of such covenants and, consequently,
agrees that, if the Agent shall sue for damages for breach, it shall pay, as
liquidated damages and not as a penalty, an amount equal to the lesser of (i)
the value of the Pledged Collateral pledged by the Pledgor on the date the Agent
shall demand compliance with this Section 8, and (ii) the amount required to pay
in full the Secured Obligations.
9. Application of Proceeds. Any cash held by the Agent as Pledged
Collateral and all cash proceeds received by the Agent in respect of any sale
of, liquidation of, or other realization upon all or any part of the Pledged
Collateral shall be applied by the Agent as follows:
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first, to the Agent in an amount sufficient to pay in full the
expenses of the Agent in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances incurred or
made by the Agent in connection therewith, including, without limitation,
attorneys' fees;
second, to the Agent in an amount equal to the then unpaid principal
of and accrued interest and prepayment premiums, if any, on the Secured
Obligations;
third, to the Agent in an amount equal to any other Secured
Obligations which are then unpaid; and
finally, after payment in full of all Secured Obligations, to pay to
the Pledgor, or its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct, any surplus then remaining from such proceeds.
10. Waiver. No delay on the part of the Agent in exercising any power of
sale, Lien, option or other right hereunder, and no notice or demand which may
be given to or made upon the Pledgor by the Agent with respect to any power of
sale, Lien, option or other right hereunder, shall constitute a waiver thereof,
or limit or impair the Agent's right to take any action or to exercise any power
of sale, Lien, option, or any other right hereunder, without notice or demand,
or prejudice any of their rights as against the Pledgor in any respect.
11. Assignment. The Agent may assign, endorse or transfer any instrument
evidencing all or any part of the Secured Obligations as provided in, and in
accordance with, the Transaction Documents, and the holder of such instrument
shall be entitled to the benefits of this Agreement.
12. Termination. Immediately following the payment of all Secured
Obligations, the Agent shall deliver to the Pledgor the Pledged Collateral at
the time subject to this Agreement and all instruments of assignment executed in
connection therewith, free and clear of the Liens hereof and, except as
otherwise provided herein, all of the Pledgor's obligations hereunder shall at
such time terminate.
13. Lien Absolute. All rights of the Agent hereunder, and all obligations
of the Pledgor hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any Transaction Document or
any other agreement or instrument governing or evidencing any Secured
Obligations;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any part of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from any Transaction Document or any
other agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
for all or any of the Secured Obligations; or
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(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor.
14. Release. The Pledgor consents and agrees that the Agent may at any
time, or from time to time, in its sole and absolute discretion (a) renew,
extend or change the time of payment, and/or the manner, place or terms of
payment of all or any part of the Secured Obligations and (b) exchange, release
and/or surrender all or any of the Pledged Collateral, or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by the Agent in
connection with all or any of the Secured Obligations; all in such manner and
upon such terms as the Agent may deem proper, and without notice to or further
assent from the Pledgor, it being hereby agreed that the Pledgor shall be and
remain bound upon this Agreement, irrespective of the existence, value or
condition of any of the Pledged Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal or extension, and
notwithstanding also that the Secured Obligations may, at any time, exceed the
aggregate principal amount thereof set forth in the Notes, or any other
agreement governing any Secured Obligations. The Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon the Pledgor. No act or
omission of any kind on the part of the Agent shall in any event affect or
impair this Agreement.
15. Indemnification. The Pledgor agrees to indemnify and hold the Agent
harmless from and against any taxes, liabilities, claims and damages, including
reasonable attorney's fees and disbursements, and other expenses incurred or
arising by reason of the taking or the failure to take action by the Agent, in
good faith, in respect of any transaction effected under this Agreement or in
connection with the Lien provided for herein, including, without limitation, any
taxes payable in connection with the delivery or registration of any of the
Pledged Collateral as provided herein. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Pledgor agrees to pay
to the Agent all out-of-pocket costs and expenses incurred in connection with
this Agreement and all reasonable fees, expenses and disbursements, including
registration costs under the Act (or similar statute) and the reasonable fees of
the Agent's agents or representatives, incurred in connection with the execution
and delivery of this Agreement and the performance by the Agent of the
provisions of this Agreement and of any transactions effected in connection with
this Agreement. The obligations of the Pledgor under this Section 15 shall
survive the termination of this Agreement.
16. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against the
Pledgor for liquidation or reorganization, should the Pledgor become insolvent
or make an assignment for the benefit of creditors or should a receiver or
trustee be appointed for all or any significant part of the Pledgor's assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "violable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
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17. WAIVER OF JURY TRIAL. THE PLEDGOR WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER THE
AGREEMENT, THE KM AGREEMENT OR UNDER THE OTHER TRANSACTION DOCUMENTS OR RELATING
TO ANY OF THE FOREGOING.
18. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or through agents
or employees and shall be entitled to advice of counsel concerning all matters
pertaining to its duties hereunder.
(b) The Pledgor agrees to promptly reimburse the Agent for actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred by the Agent in connection with the administration and enforcement of
this Agreement.
(c) None of the Agent, nor any of their respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon the Pledgor and its successors
and assigns, and shall inure to the benefit of, and be enforceable by, the Agent
and its respective successors and assigns, and shall be governed by, and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of the Agent
and the Pledgor.
19. Severability. If for any reason any provision or provisions hereof are
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or effect those portions of this
Agreement which are valid.
20. Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other a communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy and addressed as follows:
(a) If to the Agent, at:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Joseph Jacobs
12
<PAGE>
Telephone: (203) 862-7020
Telecopier: (203) 862-7320
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza, 11th Fl.
New York, New York 10020
Attn: Stephen B. Selbst, Esq.
Telephone: (212) 547-5400
Telecopier: (212) 547-5444
13
<PAGE>
(b) If to the Pledgors, to:
c/o BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
Attn: Michael Strauss, President
Telephone: (516) 752-7530
Telecopier: (516) 752-3558
With a copy to:
Ruskin, Moscou, Evans & Faltischek, PC
170 Old Country Road
Mineola, New York 11501
Attn: Norman Friedland, Esq.
Telephone: (212) 663-6600
Telecopier: (212) 663-6642
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
21. Section Titles. The Section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.
14
<PAGE>
22. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first written above.
BCAM INTERNATIONAL, INC.
By:
--------------------------------------
Name: Michael Strauss
Title: President
WEXFORD MANAGEMENT LLC, as the Agent
for the Noteholders
By:
--------------------------------------
Name: Joseph Jacobs
Title: President
15
<PAGE>
SCHEDULE I
to the Stock Pledge Agreement
Issued and Outstanding
State of Authorized Shares Before Issuance of
Company Organization Capital Stock to the Noteholders
------- ------------ ------- -------------------------
Drew Shoe Ohio 1,711.3422 shares 1,709.829
Corporation of common stock,
no par value
BCAM Technologies, Delaware 1,000 shares 1,000
Inc common stock par
value $.001 per
share
100 shares of mutual 0
stock, par value
$.001 preferred per
share
HumanCAD Systems, Ontario An unlimited number [to be provided]
Inc. of shares, without
par value
BCAM Technologies, New York [to be provided] [to be provided]
Inc.
BCA Services, Inc. New York 10,000,000 shares of 10,000,000
common stock, par
value $.01 per share
16
<PAGE>
SCHEDULE II
to the Stock Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated __________ __, 19__ is delivered pursuant to
Section 6(d) of the Stock Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to that certain Stock
Pledge Agreement, dated as of April __, 1998 by the undersigned, as Pledgor, to
Wexford Management LLC, as Agent, and that the Pledged Securities listed on this
Pledge Amendment shall be and become a part of the Pledged Collateral referred
to in said Stock Pledge Agreement and shall secure all Secured Obligations
referred to in said Stock Pledge Agreement.
BCAM INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
<TABLE>
<CAPTION>
Class of Certificate Number of Shares Issued
Name and Address of Pledgor Issuer Stock Number(s) Number of Shares and Outstanding
- --------------------------- ------ ----- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
</TABLE>
