UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 23, 1999
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 offices) (Zip code)
Registrant's telephone number, including area code: (516) 752-3550
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(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant
See Item 2.
Item 2. Acquisition or Disposition of Assets
On September 23, 1999, BCAM International, Inc., ("BCAM," or the "Company")
through its wholly-owned subsidiary, LungCheck Health, Inc., a Delaware
corporation, , pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated September 15, 1999, acquired LungCheck, Inc. ("LungCheck"), a
Delaware corporation, in a statutory merger of LungCheck, Inc. into LungCheck
Health, Inc. (the "Merger").
The terms of the Plan of Merger provide that each outstanding share of
LungCheck common stock, par value $.001, immediately prior to the Merger shall
be converted into 0.0032958 of a share of BCAM Series B convertible acquisition
preferred stock, par value $.01 per share, and that each share of LungCheck
preferred stock, par value $.001 per share shall be converted into 0.098884 of a
share of BCAM Series A convertible acquisition preferred stock, par value $.01
per share. A description of the Series A and B preferred stock is contained in
the attachments to the Merger Agreement which is attached as Exhibit (2) to this
report on Form 8-K. Upon conversion of the BCAM Series A and B preferred stock
into common stock of the Company, the shareholders of LungCheck will become the
holders of approximately 80% of the total issued and outstanding common stock of
the Company. Therefore, as a result of the Merger, effective control of the
Company passed to the former shareholders of LungCheck. Michael Strauss,
Chairman, Chief Executive Officer and President of the Company, will continue in
that capacity.
Holders of LungCheck options and warrants will receive comparable BCAM
options and warrants.
Since BCAM had no business operations immediately prior to the Merger as a
result of the sinoff (defined below), and since the security holders of
LungCheck will own approximately 80% of the equity of the combined Companies
upon conversion of the BCAM Series A and B convertible acquisition preferred
stock, the Merger will be treated as a "purchase business combination" and a
"reverse acquisition" for accounting purposes in which BCAM is the legal
acquirer and LungCheck is the accounting acquirer. As a result, the assets and
liabilities of LungCheck will continue to be recorded at their historical
carrying values (for accounting purposes, the assets and liabilities of BCAM
that LungCheck acquired will not be significant), and the historical financial
statements of the merged companies before and after the effective date of the
Merger will be those of LungCheck, the accounting acquirer.
Immediately prior to the Merger, the Company transferred to ISTX, Inc.
("ISTX"), a Delaware corporation, which was then a 90% owned subsidiary of the
Company, all of the then technology holdings at the Company, including
intelligent surface technology and microvalve technology, and the Company also
assigned all of its licensing agreements with Textron and Reebok. to ISTX. In
consideration of the technology transfer and assignment, ISTX agreed to assume
substantially all of the trade debt of the Company immediately prior to the
Merger and the Company agreed to transfer Two Hundred Fifty Thousand ($250,000)
Dollars to ISTX immediately after the Merger, which transfer was made.
Immediately prior to the Merger, the Company transferred its 90% interest
in ISTX to the Company's stockholders of record on September 22, 1999 by way of
a declared stock dividend on the basis of one share of ISTX for one share of
BCAM common stock held of record on September 22, 1999 (the "Spinoff").
Certificates of ISTX common stock issuable in the Spinoff will not be delivered
until ISTX has filed a registration statement with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, and ISTX has
prepared a disclosure statement to accompany the delivery of the certificates
representing the shares.
As a result of the Spinoff, the Company had virtually no business
operations immediately by the Merger and the business of LungCheck is now the
sole business of the Company.
The LungCheck Business
LungCheck is a medical technology company whose products identify the
presence of the most common forms of lung irritants and monitor cellular
abnormalities in the lungs thereby assisting physicians with the early detection
of disease. LungCheck provides innovative pathology services in conjunction with
the quantitative sputum cytology test. In addition to marketing its products and
services to specialty medical providers currently servicing the occupational
health market, LungCheck has been marketing to large companies within the
occupational health market that are compelled (by OSHA, EPA or self-imposed
standards) to screen and monitor their employee populations for lung disease.
LungCheck also sells its products to large corporations and non-corporate
organizations such as unions and the military that are part of the occupational
health market. The Company plans to expand on this strategy by making sales to
the life and health insurance industry for risk assessment screenings as well as
to companies of organized providers. To date, sales have not been significant.
Management believes that there is a need for a medical technology that
enables early detection of serious pulmonary disease. Like cervical cancer, if
detected early, lung cancer can be treated successfully in a majority of cases.
Based on the long-term success of the Pap Smear for early detection of cervical
cancer, management believes that LungCheck, a tool that can be viewed as a "Pap
Smear for the lungs," is an equally valuable tool to be used for the early
detection and monitoring of pulmonary disease.
The LungCheck laboratory test (the "LungCheck Test") is an enhancement to
routine sputum cytology, which is a test for the presence of cancerous cells
only. When performing the LungCheck Test, doctors perform analyses whereby
certain specific cellular and non-cellular components collected from the fluid
that lines the airways of the lungs (called "sputum") are identified and
quantified. These cellular components are indicators of inflammation as well as
the overall level of damage that has been done to the lungs through
occupational, environmental and/or smoking irritants. Upon completion of the
LungCheck Test, a report is generated that helps physicians and patients
identify the condition of their lungs and provides information about steps to be
taken to reduce existing damage.
The LungCheck Test utilizes a patented collection device whereby the
patient or physician collects a specimen for three consecutive mornings and then
mails the specimen container to the Company's laboratory for processing,
evaluation and interpretation. The LungCheck Test collection service has several
important attributes: (i) it is easy to use; (ii) it is designed for mail
delivery; and (iii) it can be administered without a visit to a physician's
office. Once the collected specimen arrives at the laboratory, specially trained
personnel then utilize a proprietary screening technique to perform the
analysis.
LungCheck has compiled a proprietary database and archive system that
consists of approximately 15,000 patient lung pathology cases which is complete
with demographic and medical data on each patient. It serves as the basis for
the proprietary diagnostic algorithms used to produce the Company's pathology
report and can be the foundation for follow-on research pertaining to various
aspects of pulmonary cytology.
The Company's Strategy
The Company believes that there is significant market opportunity in the
life insurance and health insurance industry due to the frequency with which
corporations are requiring pre-enrollment physicals for life, health and
accidental death & disability policies (paramedical testing). The Company
intends to access this market through the medical directors of these insurance
companies.
The Company believes that there is an opportunity to provide (i) a
value-added test to organized large physician groups to enhance revenue at the
provider level; (ii) provide screening and monitoring capabilities; and (iii)
additional clinical data which is currently unavailable with routine sputum
cytology and/or any other medical diagnostic tool. The Company intends to access
this market through the medical directors of healthcare provider companies.
There are several healthcare delivery models that exist in the market for
occupational health services. The Company plans to penetrate the occupational
health market by targeting businesses that have involvement with the delivery of
care to potential end-users of the LungCheck service.
The Company plans to target corporations that administer their own
healthcare programs for employees, corporations who outsource occupational
health examinations to large medical companies that own and/or manage outpatient
clinics, corporations who outsource testing of employees to Preferred Provider
Organizations when a large coverage network is needed, and companies who
contract with outside consultants that perform the function of medical director
and have responsibility for setting medical surveillance policies, corporate
compliance programs and overall health and safety standards and programs.
In addition to the foregoing, Company has established relationships with
various unions and is attempting to establish relationships with various groups
within the military that are considered "at-risk" for lung disease due to
occupation related exposure.
The Company, which has only recently acquired LungCheck, will need to
implement its sales and marketing strategy, and it is not expected that
sufficient sales of LungCheck tests will be generated in the short term to place
the Company on a self-sustaining cost flow basis. Several financing transactions
were concluded in connection with the Merger which have and are expected to
result in the infusion of approximately Seven Hundred Fifty Thousand ($750,000)
Dollars of working capital. A substantial part of these funds has been expended
for transaction costs and the payment of certain obligations. Accordingly, if
self-sustaining cash flow is not achieved in the first quarter of 2000,
additional financing will be required by the Company to continue operations.
Elimination of Repricing Rights
In a transaction related to the Merger, the Company issued 13,125,000
shares of common stock to the holders of certain shares of common stock
purchased in a 1998 private placement which had "repricing rights" based on the
market value of the BCAM common stock. Such issuance was in full satisfaction of
such repricing rights.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
See Index to Financial Statements of LungCheck, Inc. on page F-1 herein.
(b) Pro Forma Financial Statements.
Subsequent to the Merger, which is to be accounted for as a "reverse
acquisition," the historical financial statements of the Company will be those
of LungCheck Inc., the accounting acquirer (see Item 2 herein). Information as
to any significant pro forma effects of the Merger on the historical financial
statements of LungCheck Inc. will either be filed by amendment or included in
the Company's Quarterly Report on Form 10-QSB for the nine months ended
September 30, 1999.
(c) Exhibits.
(2) Agreement and Plan of Merger among BCAM
International, Inc., LungCheck Health, Inc. and
LungCheck Inc. dated as of September 15, 1999.
(2.1) Amendment to Merger Agreement dated October 8, 1999.
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.
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, Chairman
of the Board of Directors,
President and Chief Executive
Officer
Date: October 7, 1999
<PAGE>
LUNGCHECK INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
BALANCE SHEET
DECEMBER 31, 1998 F-3
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 30, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997 F-4
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 30, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997 F-5
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 30, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997 F-6/7
NOTES TO FINANCIAL STATEMENTS F-8/24
</TABLE>
* * *
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
LungCheck Inc.
We have audited the accompanying balance sheet of LUNGCHECK INC. as of December
31, 1998, and the related statements of operations, stockholders' deficiency and
cash flows for the year ended December 31, 1998 and the period from January 30,
1997 (date of inception) to December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LungCheck Inc. as of December
31, 1998, and its results of operations and cash flows for year ended December
31, 1998 and the period from January 30, 1997 (date of inception) to December
31, 1997, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As further discussed in Note 2 to the
financial statements, the Company has not generated any significant revenues
from the LungCheck(R) diagnostic test technology that is its principal asset,
and its operations have generated losses and cash flow deficiencies from its
inception. As of December 31, 1998, the Company had substantial working capital
and stockholders' deficiencies. In addition, it was in violation of certain of
the covenants in its loan agreements. Such matters raise substantial doubt about
the Company's ability to continue as a going concern and realize the carrying
value of the LungCheck(R) diagnostic test technology. Management's plans
concerning these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
J.H. COHN LLP
Roseland, New Jersey
July 23, 1999
F-2
<PAGE>
LUNGCHECK INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ -
Accounts receivable, less allowance for contractual discounts
and doubtful accounts of $56,000 26,401
Other current assets 1,261
------------
Total current assets 27,662
Equipment, net of accumulated depreciation of $19,956 103,278
Technology costs, net of accumulated amortization of $168,241 1,009,448
Debt issuance costs, net of accumulated amortization of $27,705 123,858
------------
Total $1,264,246
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable (including obligations in default) $1,971,465
Current portion of capital lease obligations 15,634
Accounts payable 50,256
Accrued expenses 422,104
------------
Total current liabilities 2,459,459
Capital lease obligations, net of current portion 29,496
------------
Total liabilities 2,488,955
------------
Commitments and contingencies
Stockholders' deficiency:
Preferred stock, 4,000,000 shares authorized; 3,000,000 shares of Series A
Convertible preferred stock, $.001 par value, authorized;
2,658,511 shares issued and outstanding 2,658
Common stock, par value $.001; 10,000,000 shares authorized;
3,000,000 shares issued and outstanding 3,000
Additional paid-in capital 3,378,021
Accumulated deficit (4,608,388)
------------
Total stockholders' deficiency (1,224,709)
------------
Total $1,264,246
==========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
LUNGCHECK INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 30, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net revenues $ 93,740 $ 45,481
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Operating expenses:
Cost of revenues 345,632 154,638
Selling 468,620 445,494
General and administrative 1,431,849 1,258,337
------------ ------------
Totals 2,246,101 1,858,469
------------ ------------
Loss from operations (2,152,361) (1,812,988)
------------ ------------
Nonoperating income (expense):
Interest expense (249,118) (208,997)
Interest income 36,097
Other income 1,290
------------ -------------
Totals (213,021) (207,707)
------------ -------------
Net loss $(2,365,382) $(2,020,695)
=========== ===========
Basic net loss per common share $(.79) $(.67)
===== =====
Basic weighted average number of common shares outstanding 3,000,000 3,000,000
========= =========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
LUNGCHECK INC.
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 30, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Series A Convertible Additional
Preferred Stock Common Stock Subscriptions Paid-in Accumulated
Shares Amount Shares Amount Receivable Capital Deficit Total
------ ------ ------ ------ ---------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial issuance of shares effective
January 30, 1997 ....................... 3,000,000 $3,000 $ 3,000
Estimated fair value of detachable warrants
issued in connection with convertible
bridge notes ........................... $ 161,709 161,709
Conversion of bridge notes into preferred
stock .................................. 851,250 $ 851 850,399 851,250
Unamortized bridge note issuance costs ..... (87,953) (87,953)
Unamortized discount on bridge notes ....... (101,068) (101,068)
Costs related to conversion of bridge notes (85,125) (85,125)
Units of shares and warrants sold in Decem-
ber 1997 through private placement and
subscription to purchase units ......... 1,693,539 1,694 $(100,000) 2,877,323 2,779,017
Costs related to private placement ......... (474,017) (474,017)
Estimated fair value of:
Stock options issued for services ...... 60,000 60,000
Warrants issued for loan fees .......... 24,633 24,633
Preferential distribution to stockholders in
conjunction with the purchase of techno-
logy ................................... $(222,311) (222,311)
Net loss ................................... (2,020,695) (2,020,695)
--------- ----- --------- ----- --------- --------- ----------- -----------
Balance, December 31, 1997 ................. 2,544,789 2,545 3,000,000 3,000 (100,000) 3,225,901 (2,243,006) 888,440
Proceeds from payments of subscriptions
receivable ............................. 100,000 100,000
Units of shares and warrants sold in March
and April 1998 through private placement 113,722 113 193,214 193,327
Costs related to private placement ......... (41,094) (41,094)
Net loss ................................... (2,365,382) (2,365,382)
--------- ------ --------- ------ ------- ----------- ------------ ------------
Balance, December 31, 1998 ................. 2,658,511 $2,658 3,000,000 $3,000 $ -- $ 3,378,021 $(4,608,388) $(1,224,709)
========= ====== ========= ====== ======= =========== ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
F-5
<PAGE>
LUNGCHECK INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM
JANUARY 30, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Operating activities:
Net loss $(2,365,382) $(2,020,695)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation of equipment 20,339 19,956
Amortization of technology costs 168,241
Amortization of debt issuance costs and debt discount 32,705 113,414
Deferred interest expense 96,280
Provision for bad debts 20,900 35,000
Issuance of stock options for services 60,000
Changes in operating assets and liabilities:
Accounts receivable (32,460) (49,842)
Other current assets 35,160 (36,421)
Accounts payable 13,523 36,734
Accrued expenses (8,100) 333,924
Liability under agreement for purchase of technology (1,025,000) 1,025,000
------------ ------------
Net cash used in operating activities (3,043,794) (482,930)
------------ ------------
Investing activities:
Purchases of equipment (49,945) (29,587)
Purchase of technology (1,050,000)
-------------- ------------
Net cash used in investing activities (49,945) (1,079,587)
-------------- ------------
Financing activities:
Proceeds from issuances of convertible bridge notes 851,250
Proceeds from issuances of notes payable 100,000 1,612,800
Repayments of notes payable (71,702)
Debt issuance and conversion costs (13,035) (279,254)
Repayments of capital lease obligations (13,345) (5,566)
Proceeds from issuances of preferred stock, net of
expenses 252,233 2,219,875
Proceeds from initial issuance of common stock 3,000
--------------- ------------
Net cash provided by financing activities 254,151 4,402,105
--------------- ------------
Net increase (decrease) in cash and cash equivalents (2,839,588) 2,839,588
Cash and cash equivalents, beginning of period 2,839,588 -
--------------- ------------
Cash and cash equivalents, end of period $ - $ 2,839,588
================ ===========
</TABLE>
F-6
<PAGE>
LUNGCHECK INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM
JANUARY 30, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow data:
Interest paid $ 120,129 $ 19,782
=========== ============
Supplemental schedule of noncash investing and financing activities:
Capital lease obligations incurred to acquire equipment $ 93,528
============
Carrying value of bridge notes, net of unamortized debt discount and
debt issuance costs of $189,021, converted into preferred stock $ 662,229
===========
Notes issued to related parties for technology of which $127,689 was
allocated to technology costs and $222,311 was allocated to preferential
distribution to
stockholders in connection with purchase of technology $ 350,000
============
</TABLE>
See Notes to Financial Statements.
F-7
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business and summary of significant accounting policies:
Business and organization:
LungCheck Inc. (the "Company") was incorporated on January 30, 1997 in the
State of Delaware for the purpose of acquiring, enhancing and marketing
LungCheck(R) diagnostic test technology. The technology, which was
originally licensed by and then acquired from a related party (see Note 4)
is used to provide a specialized sputum cytology laboratory service. The
service includes a quantitative assessment of the pulmonary health of lung
cells based on a comprehensive review of different cellular and noncellular
indicators, as well as the early identification of cancer and other
abnormal cells in the fluids found in the lungs known as sputum. The
results of the assessment are included in a cytology report which is
produced from a database and specialized software containing comparative
pulmonary health information.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Revenue recognition:
Revenues are recognized upon the completion of the cytology report.
Cash and cash equivalents:
The Company considers all highly liquid debt instruments with a maturity of
three months or less when purchased to be cash equivalents.
Equipment:
Equipment is stated at cost net of accumulated depreciation. Depreciation
is computed using the straight-line method over the estimated useful lives
of the related assets which range from five to seven years.
Intangible assets:
Intangible assets are stated at cost. Technology costs are amortized using
the straight-line method over an estimated useful life of seven years. Debt
issuance costs are amortized over the term of the related obligation.
F-8
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business and summary of significant accounting policies (continued):
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of ("SFAS 121"). Under SFAS 121,
impairment losses on long-lived assets, such as equipment and technology
costs, are recognized when events or changes in circumstances indicate that
the undiscounted cash flows estimated to be generated by such assets are
less than their carrying value and, accordingly, all or a portion of such
carrying value may not be recoverable. Impairment losses are then measured
by comparing the fair value of the assets to their carrying amounts.
Advertising:
The Company expenses the cost of advertising and promotions as incurred.
Advertising costs charged to operations were immaterial in 1998 and totaled
approximately $131,000 for the period from January 30, 1997 to December 31,
1997.
Stock options:
In accordance with the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees ("APB 25"), the Company
will only recognize compensation costs as a result of the issuance of stock
options to employees based on the excess, if any, of the fair value of the
underlying stock at the date of grant or award (or at an appropriate
subsequent measurement date) over the amount the employee must pay to
acquire the stock. Therefore, the Company will not be required to recognize
compensation expense as a result of any grants to employees at an exercise
price that is equal to or greater than fair value. The Company will also
make pro forma disclosures, in accordance with the provisions of Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), of net income or loss as if a fair value based
method of accounting for stock options had been applied instead if such
amounts differ materially from the historical amounts.
Income taxes:
The Company accounts for income taxes pursuant to the asset and liability
method which requires deferred income tax assets and liabilities to be
computed annually for temporary differences between the financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized. The
income tax provision or credit is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities.
F-9
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business and summary of significant accounting policies (concluded):
Net earnings (loss) per share:
The Company presents "basic" earnings (loss) per common share and, if
applicable, "diluted" earnings (loss) per common share pursuant to the
provisions of Statement of Financial Accounting Standards No. 128, Earnings
per Share ("SFAS 128"). Basic earnings (loss) per common share is
calculated by dividing net income or loss applicable to common stock (net
income or loss adjusted for preferred dividend requirements, if any) by the
weighted average number of common shares outstanding during each period.
The calculation of diluted earnings (loss) per common share is similar to
that of basic earnings (loss) per common share, except that the denominator
is increased to include the number of additional common shares that would
have been outstanding if all potentially dilutive common shares, such as
those issuable upon the exercise of stock options and warrants and the
conversion of preferred stock, were issued during the period.
No diluted per share amounts have been presented in the accompanying
statements of operations because the assumed effects of the exercise of
options and warrants outstanding at December 31, 1998 and 1997 would have
been anti-dilutive.
Recent accounting pronouncements:
The Financial Accounting Standards Board and the Accounting Standards
Executive Committee of the American Institute of Certified Public
Accountants had issued certain accounting pronouncements as of December 31,
1998 that will become effective in subsequent periods; however, management
of the Company does not believe that any of those pronouncements would have
significantly affected the Company's financial accounting measurements or
disclosures had they been in effect as of December 31, 1998.
F-10
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 2- Basis of presentation:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has not generated any
significant revenues from the LungCheck(R) diagnostic test technology that
is its principal asset (see Note 4), and its operations have generated
losses and cash flow deficiencies from its inception on January 30, 1997.
The Company had substantial working capital and stockholders' deficiencies
and was in violation of certain of the covenants in its loan agreements
(see Note 6) as of December 31, 1998. During January 1999, the Company
extended the due dates of certain loans (see Note 6) and borrowed an
additional $400,000 through the private placement of secured notes (see
Note 12); however, certain of the loans now bear extremely high interest
rates or require issuance of a substantial number of shares of common stock
as fees for loan extensions. During the period from January 1, 1999 to June
30, 1999, the Company's operations continued to generate substantial losses
and cash flow deficiencies. Management expects that such losses and cash
flow deficiencies will continue through at least December 31, 2001 while
the Company continues to develop markets for its services. Such matters
raise substantial doubt about the Company's ability to continue as a going
concern and realize the carrying value of its technology unless the Company
is able to obtain additional financing and, ultimately, increase revenues
and generate sufficient profits and cash flows to sustain its operations.
During the last three months of 1998 and the first six months of 1999,
management began to reorganize the Company's operations. The Company has
engaged a consulting firm specializing in medical sales and marketing
strategies to prepare a business plan and explore strategic alternatives
which include, among other things, potential business combinations and
other potential sources of financing. Expenses have been reduced through
the outsourcing of certain medical, sales and marketing positions. The
Company has also reduced expenses by eliminating certain internal personnel
costs and other costs of services through an agreement whereby a medical
diagnostic company is processing LungCheck(R) tests and reporting on their
results. In addition, management believes the Company has developed a more
viable marketing strategy. This strategy focuses on the promotion of
prevention programs, instead of monitoring programs, and on the
occupational health and corporate wellness program markets.
In order to implement its new marketing strategy and enable the Company to
become commercially successful, the Company will need to restructure its
debt and obtain additional debt and/or equity financing. During January
1999 and the period from its inception through December 31, 1998, the
Company obtained financing primarily from loans from InterEquity (a small
business investment company); loans from stockholders and other related
parties; the private placement of convertible bridge notes (which were
subsequently converted into common stock) and secured promissory notes; and
the private placement of units of shares of preferred stock and warrants to
purchase common stock. Management is continuing its efforts to obtain
additional debt and/or equity financing for the Company from financial
institutions, other private investors and potential strategic partnerships.
F-11
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 2- Basis of presentation (concluded):
As further described in Note 12, on June 11, 1999, the Company signed a
nonbinding letter of intent pursuant to a plan for its recapitalization and
merger with BCAM International, Inc. ("BCAM"). If the plan is consummated,
(i) the Company would become a subsidiary of BCAM and continue its current
operations and BCAM would have been a nonoperating, publicly held "shell
company" immediately prior to the consummation of the plan; (ii) certain
accounts payable, the notes and loans payable to stockholder as of December
31, 1998, the notes issued in January 1999 and the accrued interest on
those notes and loans would be converted into convertible preferred stock
of the combined companies; (iii) the Company's preferred and common
stockholders would become the holders of convertible preferred stock that
would comprise the majority of the voting shares of the combined companies;
and (iv) the combined companies would have approximately $750,000 in cash
from new financing. Management of the Company believes that the combined
companies will have sufficient resources for the continuation of their
operations through at least December 31, 1999 if the plan is consummated.
Management cannot assure that the Company will be able to develop a
successful marketing strategy or obtain the financing needed to develop
commercially successful operations through the consummation of the plan for
the Company's recapitalization and merger or through any other means. The
accompanying financial statements do not include any adjustments related to
the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue its operations as a going concern.
Note 3 - Equipment:
<TABLE>
<CAPTION>
Equipment consisted of the following at December 31, 1998:
<S> <C>
Furniture and fixtures $ 30,355
Computer equipment 49,177
Equipment under capital lease obligations 64,041
----------
143,573
Less accumulated depreciation (A) 40,295
----------
Total $103,278
==========
<FN>
(A) Includes $21,846 applicable to equipment under capital
leases at December 31, 1998.
</FN>
</TABLE>
F-12
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 4 - Acquisition of technology:
The Company acquired the LungCheck(R) diagnostic test technology from
LungCheck, Ltd. ("LC Ltd.") on December 30, 1997. The Company had been
using the technology from its inception through the date of acquisition
without charge pursuant to a license agreement with LC Ltd. The technology
acquired included a patent, registered trademarks, software and other
copyrights, a data base, know-how and other intellectual property used in
the provision of pathology services for the early detection of pulmonary
diseases. Since LC Ltd. was controlled by stockholders that also owned a
16.2% interest (on a fully diluted basis) in the Company as of the date of
the acquisition, the Company allocated $1,177,689 of the total
consideration of $1,400,000 to the cost of the technology and the remaining
$222,311 as a preferential noncash distribution to stockholders that was
charged to stockholders' equity.
Note 5 - Income taxes:
The Company had net operating loss carryforwards of approximately
$3,900,000 and $1,700,000 available to reduce future Federal taxable income
as of December 31, 1998 and 1997, respectively. There were no other
material temporary differences as of those dates. If not used, net
operating loss carryforwards as of December 31, 1998 will expire at various
dates through 2018. As a result of changes in the ownership of the Company
arising from the planned recapitalization and merger described in Note 12,
the utilization of these loss carryforwards may be subject to substantial
annual limitations.
Deferred tax assets of approximately $1,326,000 and $578,000 attributable
to the potential benefits from such net operating loss carryforwards as of
December 31, 1998 and 1997, respectively, were offset by equivalent
valuation allowances due to the uncertainties related to the extent and
timing of the Company's future taxable income and, accordingly, the Company
did not recognize a credit for income taxes in 1998 and 1997.
F-13
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Long-term debt:
<TABLE>
<CAPTION>
Long-term debt was comprised of the following at December 31, 1998:
<S> <C>
Note originally payable to InterEquity Capital Partners
("InterEquity") in monthly installments of $24,057 including
interest at 12% through December 31, 2002; net of unamortized
discount of $19,634 (see Note 10); secured by a first lien on
substantially all of the Company's assets. The Company was in
violation of certain loan covenants as of December 31, 1998
and, as a result, payments totaling $727,299 originally due
in years subsequent to December 31, 1999 have been
reclassified as current liabilities (A) $ 908,665
Note payable to LC Ltd. for the purchase of technology (see
Note 4); with interest at 10%; originally payable on December
31, 1999; secured by the Company's technology (B) (C) 350,000
Note payable to stockholder; with interest at 10%; originally
payable on December 31, 1999; secured by all of the Company's
assets other than technology (B) (C) 612,800
Noninterest bearing loans payable to stockholder due on demand (D) 100,000
------------
1,971,465
Less current portion 1,971,465
------------
Long-term debt $ -
============
<FN>
(A) On January 15, 1999, the loan agreement was amended to
allow the Company to defer any monthly principal
payment due in 1999. The Company will be required to
issue the number of shares of its common stock that
equals the principal amount deferred multiplied by 1.5
to InterEquity as a fee for each payment deferred (see
Note 12). The principal balance remaining as of
December 31, 1999 will be amortized through equal
monthly payments, including interest at 12%, over the
period from January 1, 2000 through December 31, 2002.
(B) Pursuant to amendments to the loan agreements dated
January 30, 1999, principal and interest are payable
within 30 days after the conclusion of the sale of
substantially all of the Company's assets or on the
record date set by the Company for any payments to be
made to liquidate the outstanding shares of
convertible preferred stock.
(C) The rights to payments and the interests in the
pledged assets are subordinated to the rights of
InterEquity.
F-14
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Long-term debt (concluded):
(D) On January 15, 1999, the $100,000 loan became
evidenced by a senior subordinated promissory note
with a principal balance of $250,000 that will be
payable on the earlier of December 31, 1999 or the
date, if any, on which there is a change in the
control of the Company. The discount on the note of
$150,000 (60%) will be amortized to expense over the
period from January 15, 1999 to December 31, 1999. The
note is secured by all of the Company's assets. The
rights to payments and the interests in the pledged
assets are subordinated to the rights of InterEquity.
</FN>
</TABLE>
Interest expense on loans from related parties totaled approximately
$96,000 and $54,000 for the year ended December 31, 1998 and for the period
from January 30, 1997 to December 31, 1997, respectively.
Management believes that the fair value of the Company's note payable to
InterEquity does not differ materially from their aggregate carrying value
at December 31, 1998 because the note is a short-term obligation with terms
that were renegotiated shortly-after that date. Because of the relationship
between the Company and its related parties, management believes that there
is no practical method that can be used to determine the fair values of
notes and loans payable to related parties.
Note 7 - Other related party transactions
During 1998, the Company was charged fees totaling approximately $198,000
by a stockholder for pathology services.
F-15
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 8 - Capital lease obligations:
The Company leases laboratory equipment under capital leases that expire
through February 2002. The following is a schedule by years of the future
minimum lease payments under capital leases together with the present value
of the net minimum lease payments as of December 31, 1998:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C> <C>
1999 $19,186
2000 17,908
2001 12,982
2002 1,299
---------
51,375
Less amount representing interest dis-
counted at rates ranging from 8.25%
to 10.5% 6,245
---------
45,130
Less current portion 15,634
---------
Long-term portion $29,496
=========
</TABLE>
Note 9 - Commitments and contingencies:
Operating leases:
The Company leases its facilities under an operating lease that expires in
June 2002. The lease, as amended in November 1998, requires the payment of
minimum annual rentals plus real estate taxes, insurance, utilities and
maintenance costs. Rent expense totaled approximately $94,000 and $63,000
for the year ended December 31, 1998 and the period from January 30, 1997
to December 31, 1997, respectively. The Company was originally leasing the
facilities from one of its stockholders. In April 1999, the stockholder
sold the premises and assigned the lease to the new, unrelated owner.
Future minimum rental payments required under the noncancelable operating
lease in years subsequent to December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
------------ ------
<S> <C> <C>
1999 $ 42,612
2000 45,150
2001 47,406
2002 24,282
----------
Total $ 159,450
==========
</TABLE>
F-16
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 9 - Commitments and contingencies (concluded):
Employment agreement:
The Company is committed to compensate an officer at the annual rate of
$130,000 through February 2000.
Consulting agreements and commitment to issue stock options:
The Company has agreed to make monthly payments to a marketing consultant
during a three year period that began in September 1997 equal to the
greater of $4,000 or a percentage of sales that declines as sales volume
increase. The Company is also obligated to issue options to the consultant
to purchase 5,000 shares of the Company's common stock after the consultant
has generated total sales of 1,000 LungCheck(R) tests and options to
purchase an additional 5,000 shares of the Company's common stock after the
consultant has generated total sales of 5,000 LungCheck(R) tests. The
options will be exercisable at $2.20 per share during the five-year period
after their issuance.
In 1997, the Company also agreed to make monthly payments of $4,000 to an
investment banker for consulting services through August 13, 1999.
Commitment to issue warrants:
If the Company has not completed an initial public offering of its common
stock, or a majority of its common stock has not been acquired, at a price
of at least $5.00 per share, and the loan from InterEquity (see Note 6) has
not been repaid at any time prior to January 1, 2002, the Company will be
required to issue warrants to purchase up to 350,000 shares of its common
stock to InterEquity at various dates as follows: 50,000 warrants on
January 1, 2000, 100,000 warrants on January 1, 2001 and 200,000 warrants
on January 1, 2002. Each warrant will be exercisable for the purchase of
one share of common stock at $2.20 per share for a period of five years
from the date of issuance.
Note 10- Stockholders' deficiency:
In July 1997, the Board of Directors and stockholders of the Company
approved a 3-for-1 split and a decrease from $.003 to $.001 per share of
the par value of its common stock. All share and per share amounts in the
accompanying financial statements and these notes have been retroactively
restated to reflect the effects of the stock split and change in par value.
F-17
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 10- Stockholders' deficiency (continued):
In September 1997, the stockholders approved amendments to the Company's
charter that authorized the issuance of up to 10,000,000 shares of common
stock and up to 4,000,000 shares of preferred stock with a par value of
$.001 per share. Up to 3,000,000 shares of preferred stock may be issued as
Series A convertible preferred stock ("Series A"). Each Series A share has
a liquidation preference of $1.70. Accordingly, the 2,658,525 Series A
shares outstanding at December 31, 1998 had an aggregate liquidation
preference of $4,519,492. Each Series A share is entitled, effectively, to
one vote per share and to a dividend equivalent to any cash dividend
declared on a share of the Company's common stock. Each Series A share is
convertible into one share of common stock at the option of the holder one
year after the date of issuance and will be converted into one share of
common stock upon the consummation of an initial public offering of the
Company's common stock that generates proceeds of at least $10,000,000 and
meets certain other conditions. If such an offering is not consummated by
October 1, 2002, the holders of Series A shares will have the option to
redeem their shares during the subsequent twelve month period.
On August 15, 1997, the Company sold 12% convertible bridge notes ("Bridge
Notes") with an aggregate principal balance of $851,250, convertible into
Series A shares at $1.00 per share through August 14, 1998, and detachable
warrants to purchase 851,250 shares of common stock, exercisable at $1.10
per share through August 14, 2002. The sales were made through a private
placement that was exempt from registration under the Securities Act of
1933. The Company received proceeds from the sale of $766,125, net of
issuance costs for commissions paid to the placement agent of $85,125. The
Company also issued warrants to purchase 85,125 shares of common stock at
$1.10 per share exercisable through August 14, 2002 as an additional fee
for the services of the placement agent. The Company valued the warrants
issued in connection with the issuance of the Bridge Notes at $161,000
based on their estimated fair value determined by using methods required by
SFAS 123. Accordingly, the Company initially reduced the carrying value of
the Bridge Notes for debt discount, and increased additional paid-in
capital, by the $161,000 value attributed to the warrants.
The Bridge Notes were initially scheduled to mature on August 14, 1998. The
Company issued 851,250 Series A shares in December 1997 upon the conversion
of all of the Bridge Notes and reduced its stockholders' deficiency by
$577,104, which represented the initial principal amount of the notes of
$851,250 net of unamortized issuance costs of $87,953, unamortized debt
discount of $101,068 and additional costs of conversion of $85,125.
F-18
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 10- Stockholders' deficiency (continued):
On December 30, 1997, the Company sold 57.58 units for a total of
$2,879,017 or $50,000 per unit. The sales were made through a private
placement that was exempt from registration under the Securities Act of
1933. Each unit consisted of 29,412 Series A shares and warrants to
purchase 22,059 shares of common stock exercisable for the purchase of one
share of common stock at $2.20 per share through December 2002 and,
accordingly, the Company issued 1,693,537 Series A shares and warrants to
purchase a total of 1,270,161 shares of common stock. The Company received
proceeds of $2,040,500, net of commissions and other offering expenses of
$474,017, of which $1,940,500 was received through a cash payment at the
closing and $100,000 was received pursuant to a subscription agreement. The
receivable from the subscription was paid during 1998. The Company also
issued warrants to the placement agent for the purchase of Series A shares
as further explained below.
On December 30, 1997, the Company issued warrants to purchase 591,528
shares of common stock exercisable at $2.20 per share through December 29,
2002 as part of the consideration for the loan from InterEquity (see Note
6). The Company valued the warrants at $24,633 based on their estimated
fair value determined by using methods required by SFAS 123. Accordingly,
the Company initially reduced the carrying value of the note payable to
InterEquity for debt discount, and increased additional paid-in capital, by
the $24,633 value attributed to the warrants.
The Company increased additional paid-in capital and charged operating
expenses for the estimated fair value of $60,000 attributed to options
issued to consultants during 1997 (see Note 11).
In March and April 1998, the Company sold 3.87 units for a total of
$193,327 or $50,000 per unit. The sales were made through a private
placement that was exempt from registration under the Securities Act of
1933. Each unit consisted of 29,412 Series A shares and warrants to
purchase 22,059 shares of common stock exercisable for the purchase of one
share of common stock at $2.20 per share through March 22, 2003 and,
accordingly, the Company issued 113,722 Series A shares and warrants to
purchase a total of 85,303 shares of common stock. The Company received
proceeds of $152,233, net of commissions and other offering expenses of
$41,094
In connection with the private placements of units in December 1997 and
March and April 1998, the Company also issued warrants to purchase 672,500
shares of common stock at $2.20 per share exercisable through December 31,
2002 as an additional fee for the services of the placement agent.
F-19
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 10- Stockholders' deficiency (concluded):
As a result of the transactions described above, the Company issued a total
of 2,658,525 Series A shares and 3,555,867 common shares during the period
from its inception on January 30, 1997 through December 31, 1998, all of
which remained outstanding as of December 31, 1998. There were 2,658,525
common shares reserved for issuance upon the conversion of Series A shares
as of December 31, 1998. The number of common shares reserved for issuance
upon the exercise of warrants as of December 31, 1998 and their exercise
prices and expiration dates are summarized below:
<TABLE>
<CAPTION>
Shares Subject
to Warrants Exercise Price Expiration Date
----------- -------------- ---------------
<S> <C> <C> <C>
936,375 $1.10 August 14, 2002
1,861,689 2.20 December 29, 2002
672,500 2.20 December 31, 2002
85,303 2.20 March 22, 2003
</TABLE>
Note 11- Stock options:
During 1997, the Company adopted and the Board of Directors approved the
1997 Stock Incentive Plan (the "1997 Plan"). The 1997 Plan provides for
grants of incentive stock options ("ISOs"), nonqualified stock options
and/or stock appreciation rights to the Company's employees, directors,
consultants and advisors to purchase up to 750,000 shares of the Company's
common stock. The option price per share for ISOs granted under the 1997
Plan may not be less than the fair market value of a share of the Company's
common stock on the date of grant, provided that the exercise price of any
ISO granted to an employee owning more than 10% of the outstanding common
shares of the Company may not be less than 110% of the fair market value of
the shares on the date of grant. Options vest and are exercisable over
periods determined by the Board of Directors provided that no option may be
exercisable more than ten years from the date of grant.
F-20
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 11- Stock options (continued):
A summary of the status of the Company's shares subject to and/or reserved
for issuance upon the exercise of incentive and nonqualified stock options
as of December 31, 1998 and 1997 and the changes in stock options
outstanding during the years then ended is presented below:
<TABLE>
<CAPTION>
1998 1997
---- ----
Weighted Weighted
Shares Average Shares Average
or Exercise or Exercise
Price Price Price Price
----- ----- ----- -----
<S> <C> <C> <C> <C>
Outstanding, at beginning of year 673,628 $1.03
Granted 300,000 2.20 673,628 $1.03
------- -------
Outstanding, at end of year 973,628 $1.39 673,628 $1.03
======= ===== ======= =====
Options exercisable, at end of
year 594,594 524,328
======= =======
Options available for grant, at
end of year 340,706 640,706
======= =======
Weighted average fair value of
options granted during the year $1.64 $.75
===== ====
</TABLE>
Options to purchase 385,628 shares granted during 1998 and 1997 vested as
of the date of issuance and the remainder will vest at various rates over
periods ranging from three to five years.
Options to purchase 415,628 shares were granted to consultants and other
nonemployees during 1997 at exercise prices ranging from $.001 to $1.36 per
share. The Company valued the options at $60,000 based on their estimated
fair value determined by using methods required by SFAS 123. Accordingly,
the Company charged operating expenses and increased additional paid-in
capital by the $60,000 value attributed to the options.
F-21
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 11- Stock options (concluded):
The following table summarizes information about stock options outstanding
at December 31, 1998, all of which were at fixed prices:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average
Years of Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
$0.001 188,294 7.59 $0.001 133,594 $0.001
1.10 74,000 8.5 1.10 24,666 1.10
1.36 350,334 3.08 1.36 350,334 1.36
2.20 361,000 8.45 2.20 86,000 2.20
------- --------
$.001-$2.20 973,628 63.6 $ 1.39 594,594 $ 1.39
=========== ======= ==== ====== ======= ======
</TABLE>
Since the Company has elected to continue to use the provisions of APB 25
in accounting for stock options granted to employees and the exercise price
of all of the options granted to employees has been equal to or greater
than the fair market value at the date of grant, no earned or unearned
compensation cost was recognized in the accompanying 1998 and 1997
financial statements for options granted to employees. The pro forma
amounts computed as if the Company had elected to recognize compensation
cost for options granted to employees based on the estimated fair value of
the options at the date of grant, computed as described below, and the
related historical amounts reported in the accompanying statements of
operations follow:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net loss - as reported $(2,365,382) $(2,020,695)
=========== ===========
Net loss - pro forma $(2,544,593) $(2,035,823)
=========== ===========
Basic loss per share - as reported $(.79) $(.67)
===== =====
Basic loss per share - pro forma $(.85) $(.68)
===== =====
</TABLE>
The fair value of each option granted was estimated as of the date of grant
using the "minimum value model" described in SFAS 123 with the following
weighted-average assumptions used for 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Expected volatility 0% 0%
Risk-free interest rate 5.85% 5.85%
Expected years of option life 5.0 5.0
Expected dividends 0% 0%
</TABLE>
F-22
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 12- Other subsequent events:
Additional borrowings:
In January 1999, the Company issued senior subordinated secured promissory
notes in the principal amount of $1,000,000 through a private placement
that was exempt from registration under the Securities Act of 1933 and
received net proceeds of $400,000. The notes will be payable on the earlier
of December 31, 1999 or the date, if any, on which there is a change in the
control of the Company. The discount on the notes of $600,000 (60%) will be
amortized to expense over the period from the date of issuance to December
31, 1999. The notes are secured by all of the Company's assets. The rights
to payments and the interests in the pledged assets are subordinated to the
rights of InterEquity.
Shares issued in connection with extensions of loan payments:
During the period January 1, 1999 through July 1999, the Company deferred
the seven principal payments totaling $106,570 due on the note payable to
InterEquity by issuing 159,855 shares of its common stock (see Note 6).
Planned recapitalization and merger:
As explained in Note 2, the Company signed a nonbinding letter of intent on
June 11, 1999 related to a proposed plan for the consummation of a series
of transactions whereby, in effect, the Company would merge with BCAM and
the combined companies would be recapitalized. Pursuant to the plan, BCAM
would spin-off the software, technology and consulting business which
comprises all of its operations and, accordingly, it would become a
nonoperating, publicly held "shell company" immediately prior to the
consummation of the plan. The Company's stockholders would receive shares
of preferred and common stock of BCAM in exchange for all of the shares of
preferred and common stock of the Company outstanding immediately prior to
the consummation of the plan. The Company would then become a wholly-owned
subsidiary of BCAM, its operations would comprise the only operations of
the combined companies and its stockholders would own approximately 80% of
the voting stock of the combined companies. Therefore, if the merger is
consummated, it will be treated as a "purchase business combination" and a
"reverse acquisition" for accounting purposes in which BCAM would be the
legal acquirer and the Company would be the accounting acquirer. As a
result, the assets and liabilities of the Company would continue to be
recorded at their historical carrying values, and the historical financial
statements of the merged companies before and after the effective date of
the Merger would be those of the Company, the accounting acquirer.
The consummation of the plan is subject to numerous conditions including,
among other things, requirements for the Company to obtain agreements
whereby (i) the 10% note and the noninterest bearing loans payable to one
of the Company's stockholders described in Note 6, the senior subordinated
secured promissory notes issued through the private placement in January
1999 described above, the accrued interest on those notes and loans and
certain accounts payable would be converted into shares of the Company's
common stock and (ii) it would receive approximately $750,000 in cash from
new financing through the private placement of shares of common stock.
F-23
<PAGE>
LUNGCHECK INC.
NOTES TO FINANCIAL STATEMENTS
Note 12- Other subsequent events (concluded):
Planned recapitalization and merger (concluded):
Management of the Company believes that if proposed transactions are
completed as planned, the combined companies would have working capital of
approximately $220,000 and total stockholder's equity of approximately
$280,000 as of the date of consummation.
* * *
F-24
AGREEMENT AND PLAN
OF
MERGER
among
BCAM INTERNATIONAL, INC.,
LUNGCHECK HEALTH, INC.
and
LUNGCHECK, INC.
Dated as of September 15, 1999
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of September 15, 1999, among
BCAM INTERNATIONAL, INC., a New York corporation ("BCAM"), LUNGCHECK HEALTH,
INC., a Delaware corporation and a wholly-owned subsidiary of BCAM ("LungCheck
Health"), and LUNGCHECK, INC., a Delaware corporation ("LungCheck")
(collectively, the "Corporations").
PRELIMINARY STATEMENTS
Pursuant to the provisions and subject to the conditions hereof and the
Plan of Merger attached hereto as Exhibit "A" (the "Plan of Merger"), LungCheck
will be merged with and into LungCheck Health (the "Merger"). The terms of the
Plan of Merger provide that each outstanding share of (i) LungCheck common
stock, par value $.001 per share ("LungCheck Common Stock") will be converted
into 0.0032958 share of BCAM Series B convertible preferred stock, par value
$.01 per share ("BCAM Series B Preferred Stock") and (ii) LungCheck preferred
stock, par value $.001 per share ("LungCheck Preferred Stock") will be converted
into 0.098884 share of BCAM Series A Convertible Preferred Stock, par value $.01
per share (the "BCAM Series A Preferred Stock"). The certificate of designation
of the BCAM Series A Preferred Stock and BCAM Series B Preferred Stock is
annexed hereto as Exhibit B. The parties hereto desire to enter into this
Agreement and Plan of Merger for the purpose of setting forth certain
representations, warranties, covenants and further agreements with respect to
the Merger.
In consideration of the mutual benefits to be derived from this
Agreement and of the representations, warranties, covenants and agreements
contained in it, each of the Corporations represent, warrant and agree as
follows:
ARTICLE I
The Merger
Subject to the termination provisions contained herein, as soon as
practicable after the fulfillment of all conditions contained herein (other than
such conditions as shall have been waived), the Certificate of Merger (the
"Certificate of Merger") shall be filed with the Secretary of State of Delaware
and the Merger shall become effective in accordance with the terms of the Plan
of Merger. The time and date of such filing is sometimes hereinafter referred to
as the "Effective Time of Merger", the "Closing" or the "Closing Date."
ARTICLE II
Representations and Warranties of LungCheck
LungCheck hereby represents and warrants to BCAM and LungCheck Health
as follows:
2.1 No Misstatements. The representations of LungCheck and information
supplied by LungCheck contained in this Agreement, the Exhibits attached to it
and the documents incorporated into it by reference do not contain any untrue
statement of a material fact or omit to state any fact necessary to make such
representations or information not materially misleading.
2.2 Validity of Actions. It is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the authority to
carry on its business as currently conducted, and is qualified to do business in
all jurisdictions in which such qualification is necessary. It has full power
and authority to enter into this Agreement and to carry out all acts
contemplated by it. This Agreement and each of the documents provided for in it
to be delivered as part of this transaction, have been duly executed and have or
will be delivered pursuant to all appropriate corporate authorization on its
behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement or creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity. The execution and delivery of this Agreement,
and each of the documents to be executed and delivered by it pursuant to its
terms, and the consummation of the transactions contemplated by them will not
violate any provision of its Certificate of Incorporation, and all amendments
thereto, or Bylaws or, violate, conflict with or result in any breach of any of
the terms, provisions of or conditions of, or constitute a default or cause
acceleration of any indebtedness under, any indenture, agreement or instrument
to which it is a party or by which it or its assets may be bound, or, upon
filing the Plan of Merger with the appropriate governmental instrumentality,
cause a breach of any applicable law or governmental regulation, or any
applicable order, judgment, writ, award, injunction or decree of any court or
governmental instrumentality. The Certificate of Incorporation and Bylaws of
LungCheck, as presently in effect, are attached to as Schedule 2.2 to the
Disclosure Schedule delivered to BCAM and LungCheck Health simultaneously with
the execution and delivery of this Agreement (the "LungCheck Disclosure
Schedule").
2.3 Capitalization. The authorized capital stock of LungCheck consists
of (i) 35,000,000 shares of LungCheck Common Stock of which as of the date of
this Agreement, there were 22,285,990 shares issued and outstanding and no
shares were held in the treasury of LungCheck; and (ii) 10,000,000 shares of
LungCheck Preferred Stock, par value $.001 per share, of which as of the date of
this Agreement, there were 2,658,781 issued and outstanding and no shares were
held in the treasury of LungCheck. All outstanding shares of LungCheck Common
Stock have been validly issued by LungCheck and are fully paid and
nonassessable. Except for the LungCheck warrants and options listed on Schedule
2.3 of the LungCheck Disclosure Schedule, there are no subscriptions, options,
warrants, calls, rights, contracts, convertible securities, commitments,
understandings or arrangements relating to the issuance, sale or transfer by
LungCheck of any shares of its capital stock, including any right of conversion
or exchange under any outstanding security or other instrument.
2.4 LungCheck's Financial Statements
(a) Attached as Schedule 2.4(a)(1) to the LungCheck Disclosure
Schedule is LungCheck's unaudited balance sheet at June 30, 1999, and statements
of income and expense and cash flows for the two years then ending and the notes
thereto ("LungCheck's Unaudited Financial Statements"). Attached as Schedule
2.4(a)(2) to the Disclosure Schedule is LungCheck's unaudited balance sheet at
March 31, 1999 (LungCheck's Most Recent Balance Sheet") and statements of income
and expense and cash flow for the period then ending ("Most Recent Unaudited
Financial Statements"). LungCheck's Unaudited and Most Recent Unaudited
Financial Statements are collectively called the "Seller's Financial
Statements."
(b) LungCheck's Financial Statements: (i) accurately represent
the transactions appearing on the books and records of LungCheck, and (ii)
accurately present LungCheck's financial condition and its results of operations
at the times and for the periods presented, including normal adjustments
consistent with year end adjustments to properly reflect accruals through the
end of the period; provided, however, that LungCheck's Unaudited Financial
Statements do not contain footnotes and the related disclosures. LungCheck's
Unaudited Financial Statements and Most Recent Balance Sheet have been prepared
on the accrual basis in accordance with generally accepted accounting principles
consistently applied ("GAAP"), except as otherwise disclosed in them.
(c) There have been no material adverse changes in the
financial condition or in the operations, properties or assets of LungCheck
since the date of LungCheck's Most Recent Balance Sheets.
(d) LungCheck's Unaudited Financial Statements are in form and
substance ready and appropriate for review by LungCheck's independent public
accountants in order that such accountants may deliver an unqualified audit
opinion (which contains a going concern exception) thereon on or prior to the
closing (the "LungCheck Audit Opinion").
2.5 Liabilities of LungCheck. LungCheck has no liabilities, contingent
or otherwise, including, without limitation, liabilities for state or Federal
income, withholding, sales, or other taxes, except to the extent reflected,
reserved against, or provided for, in LungCheck's Most Recent Unaudited
Financial Statements, except for taxes, trade payables and other obligations
incurred after the date of LungCheck's Most Recent Unaudited Financial
Statements in amounts consistent in all material respects, with those incurred
in prior periods in the ordinary course of business or as disclosed on Schedule
2.5.
2.6 Assets of LungCheck. Except for the liens and encumbrances set
forth in Schedule 2.6 of the LungCheck Disclosure Schedule, LungCheck has good
title to all of its assets. All of its assets are owned free and clear of any
adverse claims, security interests, or other encumbrances or restrictions, and
liens for current taxes not yet due and payable, landlords' liens as provided
for in the relevant leases or by applicable law, or liens or similar security
interests granted as part of personal property financing agreements made in the
ordinary course of business and which in the aggregate are not material.
2.7 Facility and Facility Operations.
(a) Included as Schedule 2.7 of the LungCheck Disclosure
Schedule are copies of all real estate leases (the "Facility Leases") relating
to LungCheck's facilities (the "Facilities"). LungCheck's operations are
conducted solely at the Facilities and all of the tangible assets used in
connection with such operations are located at the Facilities. All of the
improvements located at the Facilities are in good operating condition and
repair, subject only to ordinary wear and tear. There is no pending or, to the
knowledge of LungCheck, threatened condemnation proceeding with respect to the
Facilities.
(b) Except for environmental law compliance (which is
addressed in Section 2.7(c) below) as to which no representation or warranty is
made in this Section 2.7(b), all activities at, and the physical condition of,
the Facilities are in compliance with all legal and regulatory requirements
applicable to the Seller, the conduct of its business, and the use of each
Facility, and LungCheck has not received any notice to the contrary. LungCheck
has paid for and obtained all licenses, permits, and other authorizations
material to the conduct of its business at the Facilities (the "Permits"). All
Permits currently in effect and pertaining to the Facilities or LungCheck's
activities at the Facilities are listed on Schedule 2.7(c) of the Disclosure
Schedule. The representations contained in this subsection 3 shall not apply to
incidental instances of non-compliance occurring in the ordinary course of
business without the actual knowledge of LungCheck, which are immaterial to its
operations and capable of being cured without significantly disrupting its
operations.
(c) To the best of the knowledge of LungCheck, there are no
Hazardous Substances1 in, on or under the Facilities except for those which are
used by LungCheck in compliance, in all material respects, with applicable law,
and LungCheck is not now engaged in any litigation, proceedings or
investigations, nor knows of any pending or threatened litigation, proceedings
or investigations regarding the presence of Hazardous Substances in, on or under
the Facilities. To the best of the LungCheck's knowledge, LungCheck has not
violated any law, statute, rule or regulation relating to the use, handling,
storage or disposition of any Hazardous Substance.
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1 The term "Hazardous Substance" shall include without limitation:
(i) Those substances included within the definitions of
"hazardous substances," "hazardous materials," "toxic substances," or
"solid waste" in CERCLA, RCRA, and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and in the
regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in any
Arizona Statute and in the regulations promulgated pursuant to any
Arizona Statute;
(iii) Those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as
hazardous substances (40 CFR Part 302 and amendments thereto);
(iv) Such other substances, materials and wastes which are or
become regulated under applicable local, state or federal law, or which
are classified as hazardous or toxic under federal, state, or local
laws or regulations; and
(v) Any material, waste or substance which is (A) petroleum,
(B) asbestos, (C) polychlorinated biphenyl, (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act,
33 U.S.C. ss.ss.1251 et seq. or listed pursuant to Section 307 of the
Clean Water Act, (E) flammable explosive, or (F) radioactive materials.
- ---------
2.8 Equipment Leases and Financing Agreements. All of the leases and
financing agreements to which LungCheck is a party are described in Schedule 2.8
(the "Financing and Related Agreements"). Copies of the Financing and Related
Agreements are attached to such Schedule or have been provided to BCAM. Except
as reflected in such LungCheck Disclosure Schedule, there have been no
modifications to any of the Financing and Related Agreements; LungCheck, or any
other party, is not in default in any material respect with respect to them; and
none of the interests of LungCheck in any of them is subject to any restriction
except as stated in the applicable document or as provided by applicable law.
2.9 Compliance with State and Federal Statutory Requirements. Attached
as Schedule 2.9 is a list of all Federal, state or other licenses, permits and
approvals, including, without limitation, all certifications granted to
LungCheck with respect to the conduct of its business (the "Certifications"),
and the governmental body or agency or other entity granting such Certification.
Copies of all such Certifications are attached to Schedule 2.9 of the LungCheck
Disclosure Schedule .
(a) Except for the Certifications, no license or approval is
material to the conduct of LungCheck's business operations as it is now being
operated. LungCheck has received no notice that any other license or approval
other than the Certifications is necessary for its continued operation or that
any of the Certifications will not be renewed.
(b) LungCheck is not aware of any investigation or review, or
any review of any of its Certifications whether by a party to any relevant
agreement, the issuer of such Certifications or otherwise except as described in
Schedule 2.9(b) to the LungCheck Disclosure Schedule .
(c) The transactions contemplated hereby will not cause any of
the Certifications to be modified, limited or terminated.
2.10 Trademarks, etc. Schedule 2.10 to the LungCheck Disclosure
Schedule is a list of all tradenames, trademarks, service marks, copyrights,
patents, trade secrets, other intellectual property and the registrations for
them owned or used by LungCheck in connection with its operations. To the best
knowledge of LungCheck, it has not infringed and is not now infringing, any
trademark, tradename, service mark, copyright, patents, trade secrets, or other
intellectual property belonging to any other person in connection with its
business operations. Except as set forth on such Schedule, LungCheck is not a
party to any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademark, tradename, service mark, copyright,
patents, trade secrets, other intellectual property used by LungCheck in
connection with the operation of its business operations. To LungCheck's best
knowledge, LungCheck's operations may be conducted without license by others for
the use of any tradename, trademark, service mark, copyright, patents, trade
secrets, other intellectual property.
2.11 Material Contracts. Attached as Schedule 2.11 to the LungCheck
Disclosure Schedule is a (i) a schedule identifying all material contracts
relating to LungCheck's operations (the "Contracts"); (ii) a summary of all
material provisions of the Contracts that are oral and not reduced to written
documents; and (iii) a copy of all written Contracts. Except as disclosed in
such Schedule: (i) all of the Contracts remain unmodified and in full force and
effect, and (ii) LungCheck, nor any other party, is not in default of any
material nature (nor, to the best knowledge of LungCheck, does any state of
facts exist which, with the giving of notice, the passing of time, or otherwise,
would constitute a default by LungCheck, or any other party) with respect to any
of the Contracts.
2.12 Maintenance and Employment Agreements. Attached to the LungCheck
Disclosure Schedule as Schedule 2.12 is (i) a schedule of all written agreements
between the LungCheck and independent contractors, employees and agents who are
employed or engaged in the management or operation of LungCheck or the
Facilities; (ii) the names of all parties entitled to payments from LungCheck
under any such agreements or arrangements; (iii) the amounts payable by
LungCheck under the terms of all such agreements and arrangements, including
without limitation, the terms of employment and compensation, including vacation
and other employee benefit provisions and the cost of all employee benefits and
payroll taxes; and (iv) a copy of all written contracts for such services. There
are no material oral agreements in effect for any such services. Except as
disclosed on such Schedule: (x) there are no written agreements between any of
such contractors, employees or agents and LungCheck; (y) there is no party
entitled to compensation or remuneration for any such services arising from
LungCheck's business operations after the Closing; and (z) LungCheck's
agreements and arrangements providing for the services described on such
Schedule may be terminated by LungCheck at any time, with or without cause, and
without any obligation to pay any of said parties any amounts whatsoever except
as may be required by law (including, without limitation, severance pay or
accrued vacation pay or other benefits).
2.13 Employee Benefit Plans. LungCheck maintains employee benefit plans
as listed on Schedule 2.13 to the LungCheck Disclosure Schedule (the "Employee
Benefit Plans") with respect to employees involved in its business operations.
Copies of such plans have been previously delivered to BCAM. Except as listed on
such Schedule, LungCheck does not maintain any profit sharing, pension or other
employee benefit plan related to LungCheck's operations. LungCheck has no
unfunded obligations pursuant to any insurance, retirement, pension, profit
sharing or deferred compensation plan or program relating to LungCheck's
operations.
2.14 Labor. There is no existing labor dispute affecting the operations
of LungCheck. None of LungCheck's employees involved in its business operations
are covered by any union or collective bargaining agreement.
2.15 Insurance. A schedule of all of the policies of insurance
maintained by LungCheck in connection with its business operations of is
attached as Schedule 2.15 to the LungCheck Disclosure Schedule . The insurance
coverage provided by such policies complies in all material respects, with all
agreements to which LungCheck is a party, and applicable legal requirements to
which it is subject. All such policies are currently in effect.
2.16 Taxes. LungCheck has filed all Federal, state and local tax
returns which it is required to file and has no outstanding liability for any
Federal, state or local taxes or interest or penalties thereon, whether disputed
or not, except taxes not yet payable which have been provided for in accordance
with GAAP and are disclosed in LungCheck's Most Recent Balance Sheet or have
subsequently accrued in the normal course of business.
2.17 Actions Pending. Except as disclosed in Schedule 2.17 to the
LungCheck Disclosure Memorandum: (i) there are no actions, suits, proceedings or
claims pending or (to LungCheck's knowledge) threatened against LungCheck; (ii)
LungCheck is not the subject of any pending or threatened investigation relating
to any aspect of LungCheck's business operations, by any Federal, state or local
governmental agency or authority; (iii) LungCheck is not and has not been (to
LungCheck's knowledge) the subject of any formal or informal complaint,
investigation or inspection under the Equal Employment Opportunity Act or the
Occupational Safety and Health Act (or their state or local counterparts) or by
any other Federal, state or local authority.
2.18 No Guaranties. None of LungCheck's obligations or liabilities is
guaranteed by any other person, firm or corporation, nor has LungCheck
guaranteed the obligations or liabilities of any other person, firm or
corporation.
2.19 Bank Accounts and Deposit Boxes. Attached to the LungCheck
Disclosure Schedule as Schedule 2.19 are the names and addresses of all banks or
financial institutions in which LungCheck has an account, deposit or safety
deposit box with the names of all persons authorized to draw on these accounts
or deposits or to have access to the boxes, and an indication of which accounts
or deposits or boxes contain, in each case to the extent such accounts are used
in connection with its business operations.
2.20 Records. The books of account of LungCheck are complete and
correct in all material respects, and there have been no transactions which
properly should have been set forth therein which have not been accurately so
set forth.
2.21 No Appraisal Rights. No stockholder of LungCheck has, as of the
date hereof, any right to seek appraisal for the value of its shares under the
Delaware General Corporation Law, relating to the merge, nor will such rights
arise after the date hereof.
ARTICLE III
Representations and Warranties of BCAM International, Inc.
BCAM International, Inc. hereby represents and warrants to LungCheck as
follows:
3.1 No Misstatements. The representations of BCAM and information
supplied by BCAM contained in this Agreement, the Exhibits attached to it and
the documents incorporated into it by reference do not contain any untrue
statement of a material fact or omit to state any fact necessary to make such
representations or information not materially misleading.
3.2 Validity of Actions. It is duly organized, validly existing and in
good standing under the laws of the State of New York and has the authority to
carry on its business as currently conducted, and is qualified to do business in
all jurisdictions in which such qualification is necessary. It has full power
and authority to enter into this Agreement and to carry out all acts
contemplated by it. This Agreement and each of the documents provided for in it
to be delivered as part of this transaction, have been duly executed and have or
will be delivered pursuant to all appropriate corporate authorization on its
behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, merger, moratorium or
similar laws affecting the enforcement or creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity. The execution and delivery of
this Agreement, and each of the documents to be executed and delivered by it
pursuant to its terms, and the consummation of the transactions contemplated by
them will not violate any provision of its Certificate of Incorporation, and all
amendments thereto, or Bylaws or, violate, conflict with or result in any breach
of any of the terms, provisions of or conditions of, or constitute a default or
cause acceleration of any indebtedness under, any indenture, agreement or
instrument to which it is a party or by which it or its assets may be bound, or,
upon filing the Plan of Merger with the appropriate governmental
instrumentality, cause a breach of any applicable law or governmental
regulation, or any applicable order, judgment, writ, award, injunction or decree
of any court or governmental instrumentality. The Certificate of Incorporation
and Bylaws of BCAM, as presently in effect, are attached as Schedule 3.2 to the
Disclosure Memorandum delivered to BCAM and LungCheck Health simultaneously with
the execution and delivery of this Agreement (the "BCAM Disclosure Schedule").
3.3 Capitalization. The authorized capital stock of BCAM consists of
65,000,000 common shares, 38,904,975 of which are outstanding, and 2,000,000
preferred shares of which 262,844.299 shares of BCAM Series A Preferred Stock
and 79,891.425 shares of BCAM Series B Preferred Stock have been issued to
LungCheck Health and no shares were held in the treasury of BCAM. All
outstanding shares of BCAM Common Stock have been validly issued by BCAM and are
fully paid and nonassessable. Except for the BCAM warrants, listed on Schedule
3.3 of the BCAM Disclosure Schedule, there are no subscriptions, options,
warrants, calls, rights, contracts, commitments, understandings or arrangements
relating to the issuance, sale or transfer by BCAM of any shares of its capital
stock, including any right of conversion or exchange under any outstanding
security or other instrument.
3.4 BCAM's Financial Statements
(a) Attached as Schedule 3.4(a)(1) to the BCAM Disclosure
Schedule are BCAM's audited balance sheets at December 31, 1997 and December 31,
1998, and statements of income and expense and cash flows for the years then
ending ("BCAM's Audited Financial Statements"). Attached as Schedule 3.4(a)(2)
is BCAM's unaudited balance sheet at June 30, 1999 (BCAM's Most Recent Balance
Sheet") and statements of income and expense and cash flow for the period then
ending (collectively, "BCAM's Most Recent Financial Statements"). BCAM's Audited
Financial Statements have been examined by a certified public accountant and
accompanied by a certificate of such accountant describing the scope of such
review. BCAM's Audited and Most Recent Unaudited Financial Statements are
collectively called BCAM's Financial Statements."
(b) BCAM's Financial Statements: (i) accurately represent the
transactions appearing on the books and records of BCAM, and (ii) accurately
present in all material respects BCAM's financial condition and its results of
operations at the times and for the periods presented, including normal
adjustments consistent with year end adjustments to properly reflect accruals
through the end of the period; provided, however, that BCAM's Most Recent
Financial Statements do not contain footnotes and the related disclosures.
BCAM's Most Recent Financial Statements have been prepared on the accrual basis
in accordance with generally accepted accounting principles consistently applied
("GAAP"), except as otherwise disclosed in the reports accompanying them or in
the notes attached to them.
(c) There have been no material adverse changes in the
financial condition or in the operations, properties or assets of BCAM since the
date of BCAM's Most Recent Balance Sheets.
3.5 Liabilities of BCAM. BCAM has no liabilities, contingent or
otherwise, including, without limitation, liabilities for state or Federal
income, withholding, sales, or other taxes, except to the extent reflected,
reserved against, or provided for, in BCAM's Most Recent Balance Sheet, except
for taxes, trade payables and other obligations incurred after the date of
BCAM's Most Recent Balance Sheet in amounts consistent in all material respects,
with those incurred in prior periods in the ordinary course of business.
3.6 Assets of BCAM. Except for the liens and encumbrances set forth in
Schedule 3.6 of the BCAM Disclosure Schedule, BCAM has good title to all of its
assets. All of its assets are owned free and clear of any adverse claims,
security interests, or other encumbrances or restrictions, and liens for current
taxes not yet due and payable, landlords' liens as provided for in the relevant
leases or by applicable law, or liens or similar security interests granted as
part of personal property financing agreements made in the ordinary course of
business and which in the aggregate are not material. BCAM will, prior to
closing, transfer all of its technology assets to a wholly-owned subsidiary, and
distribute all of its interest in such subsidiary to its then stockholders.
3.7 Facility and Facility Operations.
(a) Included as Schedule 3.7 to the BCAM Disclosure Schedule
are copies of the real estate leases (the "BCAM Facility Leases") relating to
BCAM's facilities (the "BCAM Facilities"). BCAM's operations are conducted
solely at the BCAM Facilities and all of the tangible assets used in connection
with such operations are located at the BCAM Facilities. To the best of BCAM's
knowledge and belief, all of the improvements located at the BCAM Facilities are
in good operating condition and repair, subject only to ordinary wear and tear.
There is no pending or, to the knowledge of BCAM, threatened condemnation
proceeding with respect to the BCAM Facilities.
(b) Except for environmental law compliance (which is
addressed in Section 3(c) below) as to which no representation or warranty is
made in this Section 3(b), all activities at, and the physical condition of, the
BCAM Facilities are in compliance with all legal and regulatory requirements
applicable to the Seller, the conduct of its business, and the use of each BCAM
Facility, and BCAM has not received any actual notice to the contrary. BCAM has
paid for and obtained all licenses, permits, and other authorizations material
to the conduct of its business at the Facilities (the "Permits"). All Permits
currently in effect and pertaining to the BCAM Facilities or BCAM's activities
at the BCAM Facilities are listed on Schedule 3.9 of the BCAM Disclosure
Schedule. The representations contained in this subsection 3 shall not apply to
incidental instances of non-compliance occurring in the ordinary course of
business without the actual knowledge of BCAM, which are immaterial to its
operations and capable of being cured without significantly disrupting its
operations.
(c) To the best of the knowledge of BCAM, there are no
Hazardous Substances in, on or under the BCAM Facilities except for those which
are used by BCAM in compliance, in all material respects, with applicable law,
and BCAM is not now engaged in any litigation, proceedings or investigations,
nor knows of any pending or threatened litigation, proceedings or investigations
regarding the presence of Hazardous Substances in, on or under the BCAM
Facilities. To the best of BCAM's knowledge, BCAM has not violated any law,
statute, rule or regulation relating to the use, handling, storage or
disposition of any Hazardous Substance.
3.8 Equipment Leases and Financing Agreements. All of the leases and
financing agreements to which BCAM is a party and which relate to the operations
of BCAM are described in Schedule 3.8 of the BCAM Disclosure Schedule (the
"Financing and Related Agreements"). Copies of the Financing and Related
Agreements are attached to such Schedule or have been provided to BCAM. Except
as reflected in such BCAM Disclosure Schedule, there have been no modifications
to any of the Financing and Related Agreements; BCAM is not in default in any
material respect with respect to them; and none of the interests of BCAM in any
of them is subject to any restriction except as stated in the applicable
document or as provided by applicable law.
3.9 Compliance with State and Federal Statutory Requirements. Attached
as Schedule 3.9 to the BCAM Disclosure Schedule is a list of all Federal, state
or other licenses, permits and approvals, including, without limitation, all
certifications granted to BCAM with respect to the conduct of its business (the
"Certifications"), and the governmental body or agency or other entity granting
such Certification. Copies of all such Certifications are attached to Schedule
3.9 to the BCAM Disclosure Schedule.
(a) Except for the Certifications, no license or approval is
material to the conduct of BCAM's business operations as it is now being
operated. BCAM has received no notice that any other license or approval other
than the Certifications is necessary for its continued operation or that any of
the Certifications will not be renewed.
(b) BCAM is not aware of any investigation or review, or any
review of any of its Certifications whether by a party to any relevant
agreement, the issuer of such Certifications or otherwise except as described in
Schedule 3.9(b) to the BCAM Disclosure Schedule.
3.10 Trademarks, etc. Attached to the BCAM Disclosure Schedule as
Schedule 3(a) is a list of all tradenames, trademarks, service marks,
copyrights, patents, trade secrets and other intellectual property and the
registrations for them owned or used by BCAM in connection with its operations.
To the best knowledge of BCAM, it has not infringed and is not now infringing,
any trademark, tradename, service mark, copyright, patents, trade secrets or
other intellectual property belonging to any other person in connection with its
business operations. Except as set forth on such Schedule, BCAM is a party to
any license, agreement or arrangement, whether as licensor, licensee or
otherwise, with respect to any trademark, tradename, service mark, copyright
patents, trade secrets or other intellectual property used by BCAM in connection
with the operation of its business operations. To BCAM's best knowledge, BCAM's
operations may be conducted without license by others for the use of any
tradename, trademark, service mark, copyright, patents, trade secrets or other
intellectual property.
3.11 Material Contracts. Attached as Schedule 3.10 to the BCAM
Disclosure Schedule is a (i) a schedule identifying all material contracts
relating to BCAM's operations not otherwise specifically identified in the other
Schedules to the BCAM Disclosure Schedule (the "Contracts"); (ii) a summary of
all material provisions of the Contracts that are oral and not reduced to
written documents; and (iii) a copy of all written Contracts. Except as
disclosed in such Schedule: (i) all of the Contracts remain unmodified and in
full force and effect, and (ii) BCAM, nor any other party, is not in default of
any material nature (nor, to the best knowledge of BCAM, does any state of facts
exist which, with the giving of notice, the passing of time, or otherwise, would
constitute a default by BCAM, or any other party) with respect to any of the
Contracts.
3.12 Maintenance and Employment Agreements. Attached to the BCAM
Disclosure Schedule as Schedule 3.12 is (i) a schedule of all written agreements
between the BCAM and independent contractors, employees and agents who are
employed or engaged in the management or operation of BCAM or the Facilities,
including all non-competition, non-disclosure and ownership of intellectual
property agreements; (ii) the names of all parties entitled to payments from
BCAM under any such agreements or arrangements; (iii) the amounts payable by
BCAM under the terms of all such agreements and arrangements, including without
limitation, the terms of employment and compensation, including vacation and
other employee benefit provisions and the cost of all employee benefits and
payroll taxes; and (iv) a copy of all written contracts for such services. There
are no material oral agreements in effect for any such services. Except as
disclosed on such Schedule: (x) there are no written agreements between any of
such contractors, employees or agents and BCAM; (y) there is no party entitled
to compensation or remuneration for any such services arising from BCAM's
business operations after the Closing; and (z) BCAM's agreements and
arrangements providing for the services described on such Schedule may be
terminated by BCAM at any time, with or without cause, and without any
obligation to pay any of said parties any amounts whatsoever except as may be
required by law (including, without limitation, severance pay or accrued
vacation pay or other benefits).
3.13 Employee Benefit Plans. BCAM maintains employee benefit plans as
listed on Schedule 3.13 of the BCAM Disclosure Schedule (the "Employee Benefit
Plans") with respect to employees involved in its business operations. Copies of
such plans have been previously delivered to LungCheck. Except as listed on such
Schedule, BCAM does not maintain any profit sharing, pension or other employee
benefit plan related to BCAM's operations. BCAM has no unfunded obligations
pursuant to any insurance, retirement, pension, profit sharing or deferred
compensation plan or program relating to BCAM's operations.
3.14 Labor. There is no existing labor dispute affecting the operations
of BCAM. None of BCAM's employees involved in its business operations are
covered by any union or collective bargaining agreement.
3.15 Insurance. A schedule of all of the policies of insurance
maintained by BCAM in connection with its business operations of is attached as
Schedule 3.15 to the BCAM Disclosure Schedule. The insurance coverage provided
by such policies complies in all material respects, with all agreements to which
BCAM is a party, and applicable legal requirements to which it is subject. All
such policies are currently in effect.
3.16 Taxes. BCAM has filed all Federal, state and local tax returns
which it is required to file and (to the best of BCAM's knowledge) has no
outstanding liability for any Federal, state or local taxes or interest or
penalties thereon, whether disputed or not, except taxes not yet payable which
have been provided for in accordance with GAAP and are disclosed in BCAM's Most
Recent Balance Sheet or have subsequently accrued in the normal course of
business.
3.17 Actions Pending. Except as disclosed in Schedule 3.17 to the BCAM
Disclosure Schedule: (i) there are no actions, suits, proceedings or claims
pending or (to BCAM's knowledge) threatened against BCAM which, if determined
adversely to BCAM , would (A) have a material adverse effect on BCAM's assets,
or its business operations, or (B) prevent or delay the consummation of any of
the transactions contemplated by this Agreement; (ii) BCAM is not the subject of
any pending or threatened investigation relating to any aspect of BCAM's
business operations, by any Federal, state or local governmental agency or
authority; (iii) BCAM is not and has not been (to BCAM's knowledge) the subject
of any formal or informal complaint, investigation or inspection under the Equal
Employment Opportunity Act or the Occupational Safety and Health Act (or their
state or local counterparts) or by any other Federal, state or local authority.
3.18 No Guaranties. None of BCAM's obligations or liabilities is
guaranteed by any other person, firm or corporation, nor has BCAM guaranteed the
obligations or liabilities of any other person, firm or corporation.
3.19 Bank Accounts and Deposit Boxes. Attached to the BCAM Disclosure
Schedule as Schedule 3.19 are the names and addresses of all banks or financial
institutions in which BCAM has an account, deposit or safety deposit box with
the names of all persons authorized to draw on these accounts or deposits or to
have access to the boxes, and an indication of which accounts or deposits or
boxes contain, in each case to the extent such accounts are used in connection
with its business operations.
3.20 Records. The books of account of BCAM are complete and correct in
all material respects, and there have been no transactions which properly should
have been set forth therein which have not been accurately so set forth.
3.21 SEC Filings. All registration statements, prospectuses, reports,
proxy statements and other documents required to be filed by BCAM with the
Securities and Exchange Commission, other than any filings required by Section
14 of the Securities Exchange Act of 1934, have been so filed including, without
limitation, form 10-K and 10-Q for each of the last three reporting years (the
"BCAM SEC Filings"). The BCAM SEC Filings did not at the time they were filed,
and any other reports or proxy statements hereafter filed prior to the Closing
Date will not at the time they are filed, contain any untrue statements of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.22 Subsidiaries. The BCAM Filings set forth the name of each
subsidiary of BCAM and BCAM owns all of the outstanding capital stock of each
BCAM subsidiary, free and clear of any pledge agreements, except as noted
therein.
3.23 Effect of Spin-Off. Prior to the effectiveness of the Merger, BCAM
shall have transferred substantially all of its assets, including, but not
limited to, trademarks, patents, patent applications and intellectual property,
to ISTX, Inc., its subsidiary ("ISTX") and assigned its license and other
technology agreements, to ISTX, and has distributed its ISTX common stock to the
BCAM shareholders, so that BCAM will not own any of such assets upon the
effectiveness of the Merger (the "Spinoff").
ARTICLE IV
Representations and Warranties of LungCheck Health
LungCheck Health hereby represents and warrants to LungCheck as
follows:
4.1 Validity of Actions. It is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the authority to
carry on its business as currently conducted, and is qualified to do business in
all jurisdictions in which such qualification is necessary. It has full power
and authority to enter into this Agreement and to carry out all acts
contemplated by it. This Agreement and each of the documents provided for in it
to be delivered as part of this transaction, have been duly executed and have or
will be delivered pursuant to all appropriate corporate authorization on its
behalf and is, or will be, its legal, valid and binding obligation and is
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement or creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity. The execution and delivery of this Agreement,
and each of the documents to be executed and delivered by it pursuant to its
terms, and the consummation of the transactions contemplated by them will not
violate any provision of its Articles of Incorporation, and all amendments
thereto, or Bylaws or, violate, conflict with or result in any breach of any of
the terms, provisions of or conditions of, or constitute a default or cause
acceleration of any indebtedness under, any indenture, agreement or instrument
to which it is a party or by which it or its assets may be bound, or, upon
filing the Plan of Merger with the appropriate governmental instrumentality,
cause a breach of any applicable law or governmental regulation, or any
applicable order, judgment, writ, award, injunction or decree of any court or
governmental instrumentality.
4.2 Capitalization.
The authorized capital stock of LungCheck Health consists of
100 shares of Common Stock, $0.01 par value per share, of which as of the date
of this Agreement, there were 100 shares issued and outstanding and no shares
were held in the treasury of LungCheck Health. All outstanding shares of
LungCheck Health Common Stock have been validly issued by LungCheck Health and
are fully paid, nonassessable and free of preemptive rights. There are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings or arrangements relating to the issuance, sale or transfer by
LungCheck Health of any shares of its capital stock, including any right of
conversion or exchange under any outstanding security or other instrument.
4.3 Actions Pending. There are no actions, suits, proceedings,
investigations or claims pending or threatened against it which, if determined
adversely to it would (A) have a material adverse effect on its operations, or
(B) prevent or delay the consummation of any of the transactions contemplated by
this Agreement.
ARTICLE V
Covenants of the Parties
5.1 Confidentiality. Until the effective time the Merger or this
Agreement is terminated, each of the parties will, and will cause its employees
and agents, to hold in strict confidence, unless compelled to disclose by
Judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all Confidential Information (as hereinafter defined) and
will not disclose the same to any person. If this Agreement is terminated, BCAM
will promptly return to LungCheck, and LungCheck will promptly return to BCAM
all Confidential Information. For the purposes hereof, "Confidential
Information" shall mean all information of any kind concerning BCAM or
LungCheck, wherever obtained, except (i) information ascertainable or obtained
from public or published information, (ii) received from a third party not under
an obligation to keep such information confidential, (iii) which is or becomes
known to the public (other than through a breach of this Agreement), (iv) which
BCAM or LungCheck can demonstrate was in its possession prior to the disclosure
thereof in connection with the Merger, or (v) which BCAM or LungCheck can
demonstrate was independently developed by it. This paragraph shall survive
termination of this Agreement.
5.2 Conduct of Each of the Parties Prior to the Closing. Pending
consummation of the Plan of Merger or prior to termination of this Agreement,
each of the Parties to this Agreement agrees, without prior written consent of
the other parties to this Agreement, given in a letter which specifically refers
to this Section of the Agreement:
(a) not to (i) perform any act or omit to take any act that
would make any of the representations made above, inaccurate in any material
respect or materially misleading as of the Effective Date, or (ii) make any
payment or distribution except for the payment of liabilities incurred in the
ordinary course of business.
(b) to conduct its business in the ordinary and regular
course, and keep its books of account, records and files in substantially the
same manner as at present other than as provided for in the reorganizations of
LungCheck and BCAM as described in Schedule 5.2 of the BCAM Disclosure Schedule.
5.3 Notice. Pending the consummation of the transactions contemplated
in this Agreement or prior to termination of this Agreement, each party agrees
that it will promptly advise the others of the occurrence of any condition or
event which would make any of its representations contained in this Agreement
inaccurate, incorrect, or materially misleading.
5.4 Access. Prior to the Closing, Each party shall afford to the other
parties to this Agreement (and their respective officers, attorneys, accountants
and other authorized representatives), upon reasonable notice, free and full
access during usual business hours to its relevant offices, personnel, books and
records and other data, financial or otherwise, so that each such party may have
full opportunity to make such investigation as it shall desire of the assets and
the business and operations of the other parties, provided that such
investigation shall not unreasonably interfere with the operations of such
parties. The scope of the investigation will include, but not be limited to,
verification of the accounts, books and records of each party. Duly authorized
representatives shall also be entitled to discuss with officers of each party,
its counsel, employees and independent public accountants, all of its books,
records and other corporate documents, contracts, pricing and service policies,
commitments and future prospects. Representatives of each party will furnish to
the other parties to this Agreement and such other persons, copies of all
materials relating to the business affairs, operations, assets and liabilities
of each party which may be reasonably requested from time to time and will cause
representatives and employees of each party to assist in such investigation. All
information obtained in connection with the transactions contemplated by this
Agreement or in the course of their investigations, whether obtained before or
after the date of this Agreement (the "Evaluation Material") shall be used only
in connection with this Agreement and the subsequent operation of the combined
entity and the other parties to this Agreement shall assure that all Evaluation
Material will be otherwise kept strictly confidential by each of them and their
respective representatives, as provided in Section 5.1 hereof.
5.5 Additional Documents. At the request of any party, each party will
execute and deliver any additional documents and perform in good faith such acts
as reasonably may be required in order to consummate the transactions
contemplated by this Agreement and to perfect the conveyance and transfer of any
property or rights to be conveyed or transferred or perfect the assumption of
any liabilities assumed under the terms of this Agreement.
5.6 Filing of Returns; Additional Information. Each party will file on
a timely basis all tax returns, notices of sale and other documentation required
by law in connection with the transactions provided for in this Agreement or
otherwise required by law, regulation or pursuant to the terms of any agreement
to which it is a party. Each party will supplement any previous filing made by
it in accordance with legitimate requests made by applicable agencies or parties
to the extent required by the relevant law, regulation or agreement.
5.7 Compliance with Conditions to Closing. Subsequent to the execution
and delivery of this Agreement and prior to the Closing Date, each of the
parties to this Agreement will execute such documents and take such other
actions as reasonably may be appropriate to fulfill the conditions to the
Closing Date provided for in Article V of this Agreement.
5.8 Further Assurances. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments and take
such other action as the other parties hereto may reasonably require in order to
carry out this Agreement and the Plan of Merger and the transactions
contemplated hereby and thereby.
5.9 Securities Exchange Act of 1934. BCAM shall as soon as practicable
distribute to its shareholders all appropriate notifications in accordance with
New York law and in compliance with the Securities Exchange Act of 1934 which
shall be at the sole cost and expense of BCAM.
5.10 Filing of Merger Documents. Subject to the terms and conditions of
this Agreement, as soon as practicable following the approval of the Plan of
Merger by the shareholders of each of LungCheck and LungCheck Health and the
approval of the issuance of the shares of BCAM Common Stock pursuant to this
Agreement and the Plan of Merger by the Board of Directors of BCAM, LungCheck
and LungCheck Health shall cause the Certificate of Merger to be filed with the
Secretary of State of Delaware.
5.11 Stock Dividend. Prior to the Effective Date of the Merger, BCAM
shall cause the organization and incorporation of ISTX to which BCAM shall
transfer its existing technology and which BCAM shall then "spin-out" by
declaring a stock dividend to its existing shareholders prior to the Merger in
accordance with the stock dividend declaration described in Schedule 5.11.
5.12 Further Assurances. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments and such
other action, as the other party hereto may reasonably require in order to carry
out this Agreement and the Plan of Merger and the transactions contemplated
thereby.
5.13 Recapitalization of BCAM. As soon as practicable subsequent to the
Effective Date of the Merger, BCAM shall amend its Articles of Incorporation in
order to effect a combination of its outstanding available authorized common
stock to an amount sufficient to allow for the conversion of BCAM Series A
Convertible Preferred Stock and BCAM Series B Convertible Preferred Stock into
BCAM Common Stock.
5.14 Board of Directors. The persons named on Schedule 5.14 shall be
elected as directors of LungCheck Health's Board of Directors, subject only to
their respective acceptances and the consummation of the transactions provided
for in this Agreement.
5.15 No Transfer. Neither the BCAM Series A Preferred Stock, the BCAM
Series B Preferred Stock, nor the BCAM Common Stock, into which the same may be
converted, shall be transferred on the books of record of BCAM for a period of
one (1) year from the effective date of the Merger. If this provision is waived
or modified for any one or more shareholders, it shall be similarly waived or
modified for all shareholders (i.e., proportionately).
ARTICLE VI
Conditions to the obligations of the parties
The obligation of each of BCAM and LungCheck Health, on the one hand,
and LungCheck on the other hand, to consummate the transactions contemplated by
this Agreement shall be subject to compliance with or satisfaction of the
following conditions by the other, to the extent applicable:
6.1 Bring Down. The representations and warranties set forth in this
Agreement shall be true and correct in all material respects on and at the
Closing as if then made by the relevant party (except for those representations
and warranties made as of a given date, which shall continue to be true and
correct as of such given date).
6.2 Compliance. Each party shall have complied in all material respects
with all of the covenants and agreements in this Agreement on its or their part,
respectively, to be complied with as of or prior to the Closing Date.
6.3 No Material Adverse Changes. Since the date of this Agreement,
there shall not have occurred any material adverse change in the condition or
operations (financial or otherwise) of LungCheck, on the one hand, or of BCAM
and LungCheck, on the other.
6.4 LungCheck Health's Certificates. There shall be delivered to LungCheck:
(a) a certificate executed by the President and Secretary of
LungCheck Health, dated the Effective Date, certifying that the conditions to be
fulfilled by each of them set forth in this Article VI have been fulfilled;
(b) a certificate of incumbency for LungCheck Health executed
by its President and by the Secretary of such entity, listing the officers of
such entity authorized to execute (to the extent applicable) the Agreement and
the other documents, certificates, schedules and instruments to be delivered on
behalf of such entity, and their respective offices, and containing the genuine
signature of each such person set forth opposite his name; and
(c) good standing certificate, certified charter document and
By-Laws of LungCheck Health of recent date, from the Secretary of State of
Delaware.
The certificates described in subsections (a), (b), and (c) above are hereafter
referred to collectively as "LungCheck Health's Certificates."
6.5 BCAM's Certificates. There shall be delivered to LungCheck:
(a) a certificate executed by the President and Secretary of
BCAM, dated the Effective Date, certifying that the conditions to be fulfilled
by each of them set forth in this Article VI have been fulfilled;
(b) a certificate of incumbency for BCAM, executed by its
President and by the Secretary of such entity, listing the officers of such
entity authorized to execute (to the extent applicable) the Agreement and the
other documents, certificates, schedules and instruments to be delivered on
behalf of such entity, and their respective offices, and containing the genuine
signature of each such person set forth opposite his name; and
(c) good standing certificate and certified charter document
of BCAM of recent date, from the Secretary of State of New York.
The certificates described in subsections (a), (b), and (c) above are hereafter
referred to collectively as "BCAM's Certificates."
6.6 LungCheck's Certificates. There shall be delivered to BCAM and
LungCheck Health:
(a) a certificate executed by the President and Secretary of
LungCheck, dated the Closing Date, certifying that the conditions to be
fulfilled by it as set forth in this Article VI have been fulfilled;
(b) a certificate of incumbency for LungCheck executed by its
President and by the Secretary of LungCheck, listing the officers of such entity
authorized to execute (to the extent applicable) the Agreement and the other
documents, certificates, schedules and instruments to be delivered on behalf of
such entity, and their respective offices, and containing the genuine signature
of each such person set forth opposite his name; and
(c) good standing certificate and certified charter document
of LungCheck of recent date, from the Secretary of State of Delaware.
The certificates described in subsections (a), (b), and (c) above, are hereafter
referred to collectively as "LungCheck's Certificates."
6.7 No Suits. No action or proceeding shall have been instituted in any
court or before any Federal, state or local governmental agency against any
party seeking to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or which could have a material adverse effect on
any of the parties, which shall not have been dismissed or withdrawn prior to
the Effective Time of the Merger.
6.8 Documents. All documents required to be delivered to each of the
parties to this Agreement, at or prior to Closing shall have been so delivered.
6.9 Authority. There shall be in full force and effect on the
resolutions of the Boards of Directors of each of the parties to this Agreement
approving this Agreement the other documents executed and delivered by each of
them in connection with this Agreement and the transactions contemplated in it.
At or prior to the Closing, each party will deliver to the other a copy of the
resolutions of its Board of Directors approving the execution and delivery of
this Agreement and the other documents to be delivered pursuant to this
Agreement and the consummation of all of the transactions contemplated hereby,
duly certified by an appropriate officer.
6.10 Bankruptcy, Dissolution, etc. No petition or other commencement of
proceedings in bankruptcy or proceedings for dissolution, termination,
liquidation or an arrangement, merger or readjustment of any party's debts under
any state or Federal law enacted for the relief of debtors or otherwise, whether
instituted by or against a party, has been effected or commenced by or against
any party.
6.11 BCAM Preferred Stock. The certificates hereto as Exhibit B and C
shall have been filed with the Secretary of State of New York.
6.12 Spinoff. The Spinoff shall have been effected.
6.13 Audit Opinion. BCAM shall have received the LungCheck Audit
Opinion.
6.14 Stockholder Approval. All requisite approval shall have
been obtained from the shareholders of LungCheck and LungCheck Health.
6.15 LungCheck Debt. The holders of at least $192,000 of
LungCheck debt shall have agreed to convert the same into shares of LungCheck
Common Stock.
6.16 LungCheck Options and Warrants. The holders of LungCheck options
and warrants shall have agreed to modify the same to remove their
"anti-dilution" provisions.
6.17 Additional Financing. Binding agreements shall have been entered
into and funded relating to an investment of an aggregate of at least $1,100,000
in BCAM, LungCheck, Inc. and LungCheck Health in exchange for shares of
LungCheck Common Stock BCAM Series B Convertible Preferred Stock and BCAM Common
Stock.
6.18 Employment Agreement. An amended employment agreement shall have
been entered into with Michael Strauss providing for options shall have been
issued to Michael Strauss for the purchase of 800,000 shares of BCAM Common
Stock at $0.15 per share, or a memorandum of the same shall be entered into.
6.19 Repricing Rights. Repricing rights as to shares of BCAM
Common Stock shall have been terminated.
6.20 Proxies. The holders of at least a majority of LungCheck's Common
Stock have delivered to Michael Strauss (or his designee) a voting proxy in
favor of amending BCAM's charter to provide for a 1:15 reverse common stock
split.
6.21 Questionnaires. LungCheck shall have delivered to BCAM Investment
Questionnaires executed by each of LungCheck's shareholders pursuant to which
each such shareholder represents that such shareholder qualifies as an
"accredited investor" as such term is defined by the SEC.
ARTICLE VII
Closing
7.1 Time and Place; Effective Date. The closing shall take place
immediately upon satisfaction of the conditions to closing and the certificate
of merger shall be filed immediately at the closing.
7.2 Deliveries at Closing. At the Closing, BCAM and LungCheck Health
shall deliver to LungCheck and LungCheck shall deliver to BCAM and LungCheck
Health the certificates and other documents and instruments provided to be
delivered under the provisions hereof, and LungCheck shall cause the Certificate
of Merger to be filed in accordance with the provisions of the Delaware
Corporation Act (or such other jurisdiction as may be applicable) and shall take
any other lawful actions and do any other lawful things necessary to effect the
Merger and to enable the Merger to become effective.
ARTICLE VIII
Termination and Rights and Remedies on Default
8.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned prior to the Closing: (i) by the mutual consent of
the parties to this Agreement; (ii) by BCAM and LungCheck Health, if LungCheck
is in material default which continues for 10 days notice; (iii) by LungCheck if
either BCAM or LungCheck Health is in material default which continues for 10
days after notice; (iv) by any party (other than a party that is in breach of
its obligations under this Agreement) if the Closing shall not have occurred on
or before the Termination Date. The Termination Date shall be September 15,
1999. If this Agreement is terminated pursuant to clause (i) of this Article
VIII all obligations of the parties hereunder shall terminate without any
further liability or obligation of either party to the other except as limited
by the preceding sentence, the exercise by any party of the right to terminate
this Agreement shall not terminate or limit any remedy that such party may have
pursuant to applicable law, including any rights with respect to damages or
specific performance.
8.2 Nature of Remedies Cumulative. Except as otherwise provided in this
Agreement, all rights and remedies granted in this Agreement or available under
applicable law shall be deemed concurrent and cumulative and not alternative or
exclusive remedies, to the full extent permitted by law and this Agreement, and
any party may proceed with any number of remedies at the same time or in any
order. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and any party, upon the occurrence of an
event of default by another party under this Agreement, may proceed at any time,
under any agreement, in any order and with any available remedy.
ARTICLE IX
Finders Fees
Except as otherwise disclosed in Schedule 9A as to LungCheck, or
Schedule 9B as to BCAM, each of the parties represents and warrants to the other
that such party has not employed any finder or broker in connection with
transactions contemplated by this Agreement. Each party agrees to indemnify and
hold harmless the others from and against any claim, damages, liabilities, and
expenses (including without limitation, attorneys' fees and disbursements)
arising from any claim or demand asserted by any person or entity on the basis
of its employment as a finder or broker by the respective party.
ARTICLE X
Notices
All notices or other communications required or permitted under the
terms of this Agreement shall be made in writing and shall be deemed given upon
(i) hand delivery or (ii) three days after deposit of same in the Certified
Mail, Return Receipt Requested, first class postage and registration fees
prepaid and correctly addressed to the parties at the following addresses:
If to BCAM or LungCheck Health: BCAM International, Inc.
1800 Walt Whitman Road
Melville, New York 11747
Attention: Michael Strauss
With a Copy to: Ruskin, Moscou, Evans &
Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Attention: Stuart M. Sieger, Esq.
If to LungCheck: 8255 East Raintree Drive
Scottsdale, AZ 85260
With a Copy to: Morris C. Brown, Esq.
Greenberg Traurig, P.A.
777 South Flagler Drive,
Suite 300 East
West Palm Beach, Florida 33401
or to such other address as any of the parties hereto may designate by
notice to the others.
ARTICLE XI
Mediation and Arbitration
11.1 Mediation and Arbitration.
(a) Any party may give the other party written notice of any
dispute not resolved in the normal course of business. Within five (5) days
after delivery of the notice, the party receiving the notice shall submit a
written response to the other party. The notice and the response shall include
(i) a statement of each party's position and a summary of arguments supporting
that position and (ii) the name and title of the executive who represents that
party and of any other person who will accompany the executive. Within five (5)
days after delivery of the response, the executives of both parties shall meet
at a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary to attempt to resolve the dispute. All reasonable
requests for information made by one party to the other will be honored. If the
matter has not been resolved within fifteen (15) days of the disputing party's
notice, either party may initiate arbitration of the controversy or claim as
provided hereinafter. All negotiations pursuant to this clause are confidential
and shall be treated as compromise and settlement negotiations for purposes of
the Federal Rules of Evidence.
(b) Any disputes between any of the parties to it with respect
to the agreements contained in it, or as modified in the future, are to be
settled by binding arbitration conducted in New York City, State of New York,
pursuant to the commercial arbitration rules of the American Arbitration
Association. In any such arbitration the scope and timing of any discovery shall
be determined by the arbitrators. Such arbitration is to be the sole remedy for
the settlement of such disputes.
ARTICLE XII
Miscellaneous
12.1 Miscellaneous Provisions
(a) Successors. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned prior to Closing without
the prior written consent of the other parties hereto.
(b) Expenses. Except as otherwise provided in this Agreement,
each of the parties to this Agreement shall be responsible for any and all of
the respective fees, costs and expenses incurred by each, in connection with the
negotiation, preparation or performance of this Agreement.
(c) Entire Agreement. This Agreement incorporates by this
reference the Plan of Merger, all Exhibits and schedules hereto and all
documents executed and/or delivered at Closing. This Agreement and the documents
so incorporated into it contain the parties' entire understanding and agreement
with respect to the subject matter hereof; and any and all conflicting or
inconsistent discussions, agreements, promises, representations and statements,
if any, between the parties or their representatives that are not incorporated
in this Agreement shall be null and void.
(d) Amendments Only in Writing. No amendment, modification,
waiver or discharge of this Agreement or any provision of this Agreement shall
be effective against any party, unless such party shall have consented thereto
in writing.
(e) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original, but all of which
together shall constitute a single agreement.
(f) Cooperation. Each of the parties to this Agreement, when
requested by another party, shall give all reasonable and necessary cooperation
with respect to any reasonable matters relating to the transactions contemplated
by this Agreement.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, exclusive of its
choice of law provisions.
(h) Headings. The various section headings are inserted for
purposes of reference only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
(i) Gender; Number. All references to gender or number in this
Agreement shall be deemed interchangeably to have a masculine, feminine, neuter,
singular or plural meaning, as the sense of the context requires.
(j) Severability. The provisions of this Agreement shall be
severable, and any invalidity, unenforceability or illegality of any provision
or provisions of this Agreement shall not affect any other provision or
provisions of this Agreement, and each term and provision of this Agreement
shall be construed to be valid and enforceable to the full extent permitted by
law.
(k) Survival. Except as otherwise expressly provided in this
Agreement, the liabilities and obligations of each party with respect to any and
all of its representations, warranties, covenants and agreements set forth in
this Agreement and/or in any document incorporated into it shall not be merged
into, affected or impaired by the Closing under this Agreement. All of the
representations, warranties, covenants and agreements set forth in this
Agreement shall survive the Closing for the period thereafter until two (2)
years from the date first above written.
(l) No Third Party Beneficiaries. This Agreement has been
entered into solely for the benefit of the parties that have executed it, and
not to confer any benefit or enforceable right upon any other party or entity.
Accordingly, no party or entity that has not executed this Agreement shall have
any right to enforce any of the provisions of it.
ARTICLE XIII
Securities Law/Corporate Matters
13.1 Legends. The certificates representing the BCAM Series A
Convertible Preferred Stock, the BCAM Series B Convertible Preferred Stock and
the BCAM Common Stock into which the same are convertible shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), IN RELIANCE UPON THE EXEMPTION PROVIDED BY SECTION
4(2) OF THE ACT AND MAY BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF BY A SHAREHOLDER ONLY IN COMPLIANCE WITH BOTH
FEDERAL AND STATE SECURITIES LAWS. THE COMPANY IS UNDER NO
OBLIGATION TO SHAREHOLDERS TO REGISTER THESE SHARES UNDER THE
ACT OR TO CAUSE AN EXEMPTION TO BE AVAILABLE TO SHAREHOLDERS.
BCAM shall place stop transfer orders with its transfer agent with respect to
such certificate in accordance with federal securities laws.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by an officer duly authorized to do so, all as of the day and year
first above written.
BCAM INTERNATIONAL, INC.
By:/s/
----------------------
Authorized Signatory
LUNGCHECK HEALTH, INC.
By:/s/
---------------------
Authorized Signatory
LUNGCHECK, INC.
By:/s/
---------------------
Authorized Signatory
<PAGE>
EXHIBIT "A"
Plan of Merger
PLAN OF MERGER
Plan of Merger (the "Plan"), dated as of September 22, 1999, between
LungCheck, Inc., a Delaware corporation ("LungCheck"), and LungCheck Health,
Inc., a New York corporation ("LungCheck Health"), (LungCheck and LungCheck
Health are sometimes referred to herein as the "Constituent Corporations").
LungCheck is a corporation duly organized and validly existing under
the laws of the State of Delaware with authorized capital stock consisting of
35,000,000 shares of common stock, par value $.001 per share ("LungCheck Common
Stock"), of which as of the date of this Plan of Merger there were 24,240,374
shares issued and outstanding and no shares were held in the treasury of
LungCheck.
LungCheck Health is a corporation duly organized and validly existing
under the laws of the State of Delaware with authorized capital stock consisting
of 200 shares of common stock, $.01 par value per share (the "LungCheck Health
Common Stock"), 100 shares are issued and outstanding and owned by BCAM
International, Inc., a New York corporation ("BCAM").
The respective Boards of Directors of LungCheck and LungCheck Health,
and LungCheck Health's sole shareholder, BCAM, deem it advisable that LungCheck
be merged with and into LungCheck Health (the "Merger") as provided herein and
in the Agreement and Plan of Merger dated as of September 14, 1999 (the
"Agreement and Plan"), which sets forth certain representations, warranties and
agreements in connection with the Merger and related transactions.
LungCheck and LungCheck Health, in order to effectuate the foregoing,
have adopted a plan of merger in accordance with the provisions of Section
368(a) of the Internal Revenue Code, as amended.
In consideration of the mutual benefits to be derived from this Plan,
the Agreement and Plan and the mutual agreements hereinafter contained,
LungCheck and LungCheck Health on the terms and conditions contained herein, and
in connection herewith, agree as follows:
ARTICLE I
SURVIVING CORPORATION
In accordance with the applicable provisions of the business
corporation laws of the State of Delaware ("Corporation Laws"), LungCheck shall
be merged with and into LungCheck Health. LungCheck Health shall be and is
herein sometimes referred to as the "Surviving Corporation."
ARTICLE II
EFFECTIVENESS OF THE MERGER
Section 2.1 Effective Time of the Merger. Subject to the provisions of
this Plan and the Agreement and Plan, as soon as practicable on or after the
Closing Date (as defined in Article I of the Agreement and Plan), a certificate
of merger (the "Certificate of Merger"), together with this Plan, shall be
executed by LungCheck and LungCheck Health and delivered to the Secretary of
State of the State of Delaware for filing as provided in the Corporation Laws.
The Merger shall become effective upon completion of the filing of Certificate
of Merger with the Secretary of State of the State of Delaware (the "Effective
Time of the Merger").
Section 2.2 Effects of the Merger. At the Effective Time of the Merger:
(i) the separate existence of LungCheck shall cease and LungCheck shall be
merged with and into LungCheck Health; and (ii) the Merger shall, from and after
the Effective Time of the Merger, have all the effects provided by applicable
Delaware law.
Section 2.3 Additional Actions. If, at any time after the Effective
Time of the Merger, the Surviving Corporation shall consider or be advised that
any further assignments or assurances or any other acts are necessary or
desirable: (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, title to and possession of any property or right of
LungCheck acquired or to be acquired by reason of, or as a result of, the
Merger; or (b) otherwise to carryout the purposes of this Plan, LungCheck and
its proper officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances and to do all acts necessary
or proper to vest, perfect or confirm title to and possession of such property
or rights in the Surviving Corporation and otherwise to carryout the purposes of
this Plan; and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of LungCheck or otherwise to take any and all
such action.
ARTICLE III
EFFECT OF MERGER ON CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
Section 3.1 Conversion of Stock of LungCheck and LungCheck Health. At the
Effective Time of the Merger:
a. Each share of LungCheck Common Stock then issued and
outstanding shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into 0.0032958 shares of BCAM Series B
convertible preferred stock, $.01 par value ("BCAM Series B Preferred Stock"),
each one of which is convertible into 1,500 shares of Common Stock of BCAM,
subject to certain conditions; and
b. Each share of LungCheck Preferred Stock then issued and
outstanding shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into 0.098884 shares of BCAM Series A
convertible preferred stock ("BCAM Series A Preferred Stock"), each one of which
is convertible into 150 shares of common stock of BCAM, subject to certain
conditions, of the Surviving Corporation.
Section 3.2 Exchange of Certificates. After the Effective Time of the
Merger, each holder of a certificate or certificates theretofore evidencing
outstanding shares of LungCheck Common Stock, upon surrender of the same to
Ruskin, Moscou, Evans & Faltischek, P.C. ("RMEF") as agent for LungCheck or such
other agent or agents as shall be appointed by LungCheck Health shall be
entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of BCAM Series A or B Preferred Stock,
including fractional shares, as the case may be for which the shares of
LungCheck Common Stock or LungCheck Preferred Stock theretofore represented by
the certificate or certificates so surrendered shall have been converted as
provided in this Article III. As soon as practicable after the Effective Time of
the Merger, RMEF or such other agent(s), as the case may be, shall mail to each
holder of record of an outstanding certificate which immediately prior to the
Effective Time of the Merger evidences shares of LungCheck Common Stock or
LungCheck Preferred Stock (a "Certificate"), and which is to be exchanged for
BCAM Series A and Series B Preferred Stock as provided in Section 3.1 hereof, a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to RMEF), advising such shareholder of the terms of
the exchange effected by the Merger and the procedure for surrendering to RMEF
or such other agent(s), as the case may be, such Certificate in exchange for
certificates evidencing the BCAM Series A and Series B Preferred Stock. Until so
surrendered, each outstanding Certificate will be deemed for all corporate
purposes of BCAM to evidence ownership of the number of full shares of BCAM
Series A and Series B Preferred Stock and the right to receive the cash value of
any fraction of a share into which the shares of LungCheck Common Stock or
LungCheck Preferred Stock represented thereby were converted; provided, however,
until such outstanding Certificates are surrendered, no dividend payable to
holders of record of BCAM Series A and Series B Preferred Stock as of any record
date subsequent to the Effective Time of the Merger shall be paid to the holder
of such outstanding Certificates in respect thereof. After the Effective Time of
the Merger, there shall be no further registration of transfers on the records
or stock transfer books of LungCheck of shares of LungCheck Common Stock or
LungCheck Preferred Stock and, if a Certificate representing such shares is
presented, it shall be canceled and exchanged for certificates representing
shares of BCAM Preferred Series A and Series B Stock as herein provided. Subject
to the provisions of this Section 3.2 and to applicable law, upon surrender of
Certificates there shall be paid to the record holder of the certificates of
BCAM Series A and Series B Preferred Stock issued in exchange therefor: (i) at
the time of such surrender, the amount of any dividends or distributions
theretofore paid with respect to such full shares of BCAM Preferred Series A and
Series B Stock as of any record date subsequent to the Effective Time of the
Merger to the extent the same has not yet been paid to a public official
pursuant to abandoned property laws; and (ii) at the appropriate payment date or
as soon as practicable thereafter, the amount of dividends or distributions with
a record date after the Effective Time of the Merger but prior to surrender and
a payment date subsequent to surrender payable with respect to such shares of
BCAM Series A and Series B Preferred Stock. All such dividends or distributions,
if held by RMEF, or such other agent(s), as the case may be, for payment or
delivery to the holders of unsurrendered Certificates and unclaimed at the end
of one year from the Effective Time of the Merger, shall at such time be paid or
redelivered by RMEF or such other agent(s), as the case may be, to LungCheck
Health acting solely in its corporate capacity, and after such time any holder
of a Certificate who has not surrendered such Certificate to RMEF or such other
agent(s), as the case may be, shall, subject to applicable law, look as a
general creditor only to LungCheck Health for payment or delivery of such
dividends or distributions or cash, as the case may be. All shares of BCAM
Series A and Series B Preferred Stock and rights to receive cash, if any, into
and for which shares of LungCheck Common Stock or LungCheck Preferred Stock
shall have been converted and exchanged pursuant to this Section 3.2 shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
converted and exchanged shares of LungCheck Common Stock or LungCheck Preferred
Stock.
Section 3.4 Certificates in Other Names. If any certificate evidencing
shares of BCAM Series A and Series B Preferred Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the Certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to RMEF or such other
agent(s), as the case may be, or LungCheck Health acting solely in its corporate
capacity, as the case may be, any transfer or other taxes required by reason of
the issuance of a certificate for shares of BCAM Series A and Series B Preferred
Stock in any name other than that of the registered holder of the Certificate
surrendered or otherwise required or establish to the satisfaction of RMEF or
such other agent(s), as the case may be, or LungCheck Health acting solely in
its corporate capacity, as the case may be, that such tax has been paid or is
not payable.
ARTICLE IV
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The Certificate of Incorporation of the Surviving Corporation shall
continue to be its Certificate of Incorporation from and after the Effective
Time of the Merger until changed in accordance with applicable law.
ARTICLE V
BOARD OF DIRECTORS OF SURVIVING CORPORATION
The Board of Directors of the Surviving Corporation shall consist of
the following directors from and after the Effective Time of the Merger until
changed in accordance with applicable law:
________________
ARTICLE VI
MISCELLANEOUS
Section 6.1 Termination. This Plan shall terminate in the event of and
upon the termination of the Agreement and Plan.
Section 6.2 Headings. The descriptive headings of the several Articles
and Sections of this Plan are inserted for convenience only and do not
constitute a part of this Plan.
Section 6.3 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by certified or
registered mail, postage prepaid, addressed as follows:
(a) If to LungCheck : 8255 East Raintree Drive
Scottsdale, AZ 85260
(b) If to LungCheck Health: BCAM International, Inc.
1800 Walt Whitman Road
Melville, NY 11747
Attention: Michael Strauss
or such other addresses as shall be furnished in writing by either party, and
any such notice of communication shall be deemed to have been given as of the
date so mailed.
Section 6.4 Assignment. This Plan and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Plan nor any of
the rights, interest, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
Section 6.5 Complete Agreement. This Plan, and the Agreement and Plan,
including the schedules, exhibits or other writings referred to therein or
delivered pursuant thereto, contain the entire understanding of the parties
hereto with respect to the Merger and the related transactions and supersede all
prior arrangements or understandings with respect thereto and all letters and
other agreements relating to the protection of Confidential Information (as
defined in the Agreement and Plan) of LungCheck and LungCheck Health. There are
no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties hereto other than those expressly set forth herein or in the
Agreement and Plan.
Section 6.6 Modifications, Amendments and Waivers. At any time prior to
the Effective Time of the Merger (notwithstanding any shareholder approval), if
authorized by their respective Boards of Directors and to the extent permitted
by law: (i) the parties hereto may, by written agreement, modify, amend or
supplement any term or provision of this Plan and (ii) any term or provision of
this Plan may be waived by the party which is, or whose shareholders are,
entitled to the benefits thereof. Any written instrument or agreement referred
to in this section shall be validly and sufficiently authorized for the purposes
of this Plan if signed on behalf of LungCheck and LungCheck Health by a person
authorized to sign this Plan.
Section 6.7 Counterparts. This Plan may be executed by facsimile in two
or more counterparts all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
Section 6.8 Governing Law. This Plan shall be governed by the laws of
the State of Delaware (regardless of the laws that might be applicable under
principles of conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect and performance.
IN WITNESS WHEREOF, LungCheck and LungCheck Health have caused this
Plan of Merger to be executed by their duly authorized officers, respectively.
LUNGCHECK, INC.
ATTEST:
BY: /s/
Secretary ----------------
Authorized Signatory
LUNGCHECK HEALTH, INC.
ATTEST:
BY:/s/
Secretary ----------------
Authorized Signatory
<PAGE>
EXHIBIT "B"
Certificate of Amendment
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
BCAM INTERNATIONAL, INC.
Under Section 805 of the Business Corporation Law
------------------
The undersigned, being the President and Secretary of BCAM
INTERNATIONAL, INC., hereby certify:
First: The name of the corporation is BCAM INTERNATIONAL, INC. The
corporation was organized under the name BIOMECHANICS CORPORATION OF AMERICA.
Second: The Certificate of Incorporation of the corporation was filed with
the Department of State on February 22, 1984.
Third: The Certificate of Incorporation of the corporation is amended, as
authorized by Section 805 of the Business Corporation Law, to designate Series A
and B Acquisition Preferred Stock. To effectuate such change, Article FOURTH
Paragraph (d) of the Certificate of Incorporation of the corporation is as
follows:
d. Acquisition Preferred Stock. The aggregate number of shares
of Acquisition Preferred Stock the corporation shall have the authority
to issue is seven hundred fifty thousand (750,000) shares of
Acquisition Preferred Stock, par value One ($.01) cent per share,
issuable by the Board of Directors, from time to time, in one or more
series. The Acquisition Preferred Stock shall only be issued as
consideration pursuant to a statutory merger or consolidation as to
which the corporation of substantially all the assets or business of
another entity or the acquisition by the corporation of 50% or more of
the voting securities of another entity. The Board of Directors hereby
designates Series A Acquisition Convertible Preferred Stock and Series
B Acquisition Convertible Preferred Stock with the following rights:
(i) Series A Acquisition Convertible Preferred Stock
1. Dividends. The shares of Series A Acquisition Convertible Preferred
Stock (the "Series A Preferred Stock") shall only be entitled to dividends
(whether in cash or property or securities, other than dividends which are paid
or intended to be paid in connection with distributions of the Corporation's
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation) when declared by the Corporation's Board of Directors on the
Common Stock, on an as converted basis, and before any payment is made to the
holders of the Common Stock. Each share of Series A Preferred Stock with respect
to dividend payments shall be equal in every respect to every other share of
Series A Preferred Stock. All dividends or distributions which are paid or
intended to be paid in connection with a liquidation, dissolution or winding up
of the Corporation shall be preferred, as provided in Sections 3(a) and 3(b)
hereof.
2. Voting Rights; No Preemptive Rights. The holders of Series A
Preferred Stock shall, by virtue of their ownership thereof, be entitled to cast
that number of votes equal to the number of shares of Common Stock into which
the Series A Preferred Stock is convertible on each matter submitted to the
Corporation's shareholders for voting. Such votes shall be cast together with
those cast by the holders of Common Stock as one class, except as required by
law. The Series A Preferred Stock shall not have cumulative voting rights. The
holders of Series A Preferred Stock shall not have any preemptive rights upon
the issuance or sale of any securities.
3. Liquidation Rights.
(a) If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up at any time when any of the Series A Preferred
Stock shall be outstanding, the holders of the then outstanding Series A
Preferred Stock shall have a preference against the assets (including cash,
securities and property) of the Corporation available for distribution to the
holders of the Common Stock equal to the sum of (i) $17.20 per share and (ii) an
amount equal to all declared but unpaid dividends; or, if greater, a portion of
the remaining assets of the Corporation which are distributable to the holders
of the Common Stock equal to an amount which would have been distributed if the
Series A Preferred Stock had been converted into Common Stock immediately prior
to the date of such liquidation or dissolution (the "Preference Amount");
provided, however, that any reduction of the authorized or issued shares of the
stock of the Corporation of any class, whether now or hereafter authorized,
shall not be deemed to be a liquidation of the Corporation within the meaning of
any of the provisions of this Section 3; and provided, further, however, that a
liquidation for the purposes of this Section shall not be deemed to occur upon:
(a) the consolidation or merger of the Corporation into or with any corporation
or corporations wherein the holders of the Series A Preferred Stock are to
receive preferred securities of the merged or consolidated entity having
substantially similar rights, preferences and protections as those of the Series
A Preferred Stock (as contemplated herein); (b) the merger of the Corporation
with another corporation in which the Corporation is the surviving corporation
and which does not result in any reclassification or change -- other than a
change in par value, or from par value to no par value or from no par value to
par value, or as a result of a subdivision or combination -- of outstanding
shares of the Corporation's Common Stock; or (c) the transfer, assignment or
contribution of the Corporation's assets in connection with, or the creation of,
any joint venture or limited liability entity in exchange for an equity interest
shall not be deemed to be a liquidation for the purposes of this Section.
(b) All of the Preference Amount to be paid to the holders of
Series A Preferred Stock as provided in this Section 3 shall be paid or set
apart for payment before the payment or setting apart for payment of any amount
for, or the distribution of any property of the Corporation to, the holders of
any Common Stock, whether now or hereafter authorized, in connection with such
liquidation, dissolution or winding up.
4. Redemption. The Corporation shall not redeem, purchase or otherwise
acquire, directly or indirectly through a subsidiary or otherwise, any of the
Series A Preferred Stock without the consent of all of the then holders of the
Series A Preferred Stock. No shares of Series A Preferred Stock redeemed or
purchased by the Corporation pursuant to this Section 4 shall be reissued by the
Corporation.
5. Conversion.
(a) Optional Conversion. The holder of any shares of Series A
Preferred Stock may at any time after the Corporation effectuates a 1:15 reverse
split of its Common Stock, convert, at such holder's option, all or any portion
of such shares of Series A Preferred Stock into Common Stock at the Conversion
Ratio. At the time of conversion, the Corporation shall pay in cash to each
holder of Series A Preferred Stock so converted an amount equal to all unpaid
dividends, accrued thereon to the date of conversion, if such dividend was
declared by the Board of Directors of the Corporation. In the event of
conversion, the Corporation shall forthwith transmit to each holder of Series A
Preferred Stock a certificate or certificates for the shares of Common Stock
issued as a result thereof dated the date of conversion against delivery of the
certificate or certificates representing the Series A Preferred Stock to be
converted at the principal office of the Corporation (or at such other place as
the Corporation may designate in a written notice sent to the holder by
first-class mail, postage prepaid, at its address shown on the books of the
Corporation), and such holders shall be deemed for all purposes to be the
holders of such Common Stock as of the date of conversion.
(b) Stock Fully Paid; Reservation of Shares. All shares of
Common Stock which may be issued upon conversion of Series A Preferred Stock
will, upon issuance, be duly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof. At all times
that any Series A Preferred Stock is convertible, the Corporation shall have
authorized, and shall have reserved for the purpose of issuance upon such
conversion, a sufficient number of shares Common Stock.
(c) Reclassification, Consolidation or Merger. In the case of
any reclassification or change (a "Reclassification") of outstanding Common
Stock issuable upon conversion of Series A Preferred Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), including any
Reclassification in the case of any consolidation or merger of the Corporation
with or into another corporation which does not constitute a liquidation under
Section 3, the Series A Preferred Stock shall, without payment of additional
consideration therefor, be deemed modified so as to provide that upon the
Optional Conversion provided herein, each share of the Series A Preferred Stock
shall procure, at the time of the Optional Conversion, in lieu of each share of
Common Stock theretofore issuable upon such conversion, the kind and amount of
shares of stock, other securities, options, rights, warrants, money and property
receivable upon such Reclassification, by the holder of one share of Common
Stock. The provisions of this subsection shall similarly apply to successive
Reclassifications.
(d) Subdivision or Combination of Shares. If the Corporation,
at any time or times while any of the Series A Preferred Stock is outstanding,
shall subdivide or combine its Common Stock, the then Conversion Ratio of the
Series A Preferred Stock shall be proportionately reduced or increased, as of
the effective date of such subdivision or combination.
6. No Reissuance of Series A Preferred Stock. No shares of Series A
Preferred Stock which have been converted into Common Stock shall be reissued by
the Corporation; provided, however, that each such share, after being retired
and cancelled, shall be restored to the status of an authorized but unissued
share of preferred stock without designation as to series and may thereafter be
issued as a share of preferred stock not designated Series A Preferred Stock
upon proper authorization.
7. Definitions. As used herein with respect to the Series A Preferred
Stock, the following terms have the following meanings:
(a) "Common Stock" shall mean the Corporation's Common Stock,
$.01 par value, and any stock into which such Common Stock may hereafter be
changed.
(b) "Conversion Ratio" shall mean, initially, one hundred
fifty shares of Common Stock for each share of Series A Preferred Stock (150:1),
which Conversion Ratio shall be subject to adjustment in accordance with Section
5 hereof, including for the 1:15 reverse split referred to in Section 5(a).
(c) "Person" shall mean an individual, a corporation, a
partnership, a limited liability entity, a trust, an unincorporated organization
or a government organization or an agency or political subdivision thereof.
(d) "Securities" shall mean any debt or equity securities of
the Corporation, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security. The term
"Security" shall mean one of the Securities.
(ii) Series B Acquisition Convertible Preferred Stock
1. Dividends. The shares of Series B Acquisition Convertible Preferred
Stock (the "Series B Preferred Stock") shall only be entitled to dividends
(whether in cash or property or securities, other than dividends which are paid
or intended to be paid in connection with distributions of the Corporation's
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation) when declared by the Corporation's Board of Directors on the
Common Stock, on an as converted basis. Each share of Series B Preferred Stock
with respect to dividend payments shall be equal in every respect to every other
share of Series B Preferred Stock. All dividends or distributions which are paid
or intended to be paid in connection with a liquidation, dissolution or winding
up of the Corporation shall be preferred, as provided in Section 3 hereof.
2. Voting Rights; No Preemptive Rights. The holders of Series B
Preferred Stock shall, by virtue of their ownership thereof, be entitled to cast
that number of votes equal to the number of shares of Common Stock into which
the Series B Preferred Stock is convertible on each matter submitted to the
Corporation's shareholders for voting. Such votes shall be cast together with
those cast by the holders of Common Stock as one class, except as required by
law. The Series B Preferred Stock shall not have cumulative voting rights. The
holders of Series B Preferred Stock shall not have any preemptive rights upon
the issuance or sale of any securities.
3. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up at any time when any of the
Series B Preferred Stock shall be outstanding, the holders of the then
outstanding Series B Preferred Stock shall not have a preference against the
assets (including cash, securities and property) of the Corporation available
for distribution to the holders of the Common Stock.
4. Redemption. The Corporation shall not redeem, purchase or otherwise
acquire, directly or indirectly through a subsidiary or otherwise, any of the
Series B Preferred Stock without the consent of all of the then holders of the
Series B Preferred Stock. No shares of Series B Preferred Stock redeemed or
purchased by the Corporation pursuant to this Section 4 shall be reissued by the
Corporation.
5. Conversion.
(a) Mandatory Conversion. All issued and outstanding shares of
Series B Preferred Stock shall automatically convert into Common Stock at the
Conversion Ratio, as adjusted in this Section 5, immediately after the
Corporation effectuates a 1:15 reverse split of its Common Stock, and no action
if any person shall be required to effectuate such conversion. At the time of
conversion, the Corporation shall pay in cash to each holder of Series B
Preferred Stock so converted an amount equal to all unpaid dividends, accrued
thereon to the date of conversion, if such dividend was declared by the Board of
Directors of the Corporation. In the event of conversion, the Corporation shall
forthwith transmit to each holder of Series B Preferred Stock a certificate or
certificates for the shares of Common Stock issued as a result thereof dated the
date of conversion against delivery of the certificate or certificates
representing the Series B Preferred Stock to be converted at the principal
office of the Corporation (or at such other place as the Corporation may
designate in a written notice sent to the holder by first-class mail, postage
prepaid, at its address shown on the books of the Corporation), and such holders
shall be deemed for all purposes to be the holders of such Common Stock as of
the date of conversion.
(b) Stock Fully Paid; Reservation of Shares. All shares of
Common Stock which may be issued upon conversion of Series B Preferred Stock
will, upon issuance, be duly issued, fully paid and non-assessable and free from
all taxes, liens and charges with respect to the issue thereof. At all times
that any Series B Preferred Stock is outstanding, the Corporation shall have
authorized, and shall have reserved for the purpose of issuance upon such
conversion, a sufficient number of shares Common Stock.
(c) Reclassification, Consolidation or Merger. In the case of
any reclassification or change (a "Reclassification") of outstanding Common
Stock issuable upon conversion of Series B Preferred Stock (other than a change
in par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), including any
Reclassification in the case of any consolidation or merger of the Corporation
with or into another corporation which does not constitute a liquidation under
Section 3, the Series B Preferred Stock shall, without payment of additional
consideration therefor, be deemed modified so as to provide that upon the
Mandatory Conversion provided herein, each share of the Series B Preferred Stock
shall procure, at the time of the Mandatory Conversion, in lieu of each share of
Common Stock theretofore issuable upon such conversion, the kind and amount of
shares of stock, other securities, options, rights, warrants, money and property
receivable upon such Reclassification, by the holder of one share of Common
Stock. The provisions of this subsection shall similarly apply to successive
Reclassifications.
(d) Subdivision or Combination of Shares. If the Corporation,
at any time or times while any of the Series B Preferred Stock is outstanding,
shall subdivide or combine its Common Stock, the Conversion Ratio of the Series
B Preferred Stock shall be proportionately reduced or increased, as of the
effective date of such subdivision or combination.
6. No Reissuance of Series B Preferred Stock. No shares of Series B
Preferred Stock which have been converted into Common Stock shall be reissued by
the Corporation; provided, however, that each such share, after being retired
and cancelled, shall be restored to the status of an authorized but unissued
share of preferred stock without designation as to series may thereafter be
issued as a share of preferred stock not designated Series B Preferred Stock
upon proper corporate and shareholder authorization.
7. Definitions. As used herein with respect to the Series B Preferred
Stock, the following terms have the following meanings:
(a) "Common Stock" shall mean the Corporation's Common Stock,
$.01 par value, and any stock into which such Common Stock may hereafter be
changed.
(b) "Conversion Ratio" shall mean, initially, one thousand
five hundred shares of Common Stock for each share of Series B Preferred Stock
(1,500:1), which Conversion Ratio shall be subject to adjustment in accordance
with Section 5 hereof, including for the 1:15 reverse split referred to in
Section 5(a) hereof.
(c) "Person" shall mean an individual, a corporation, a
partnership, a limited liability entity, a trust, an unincorporated organization
or a government organization or an agency or political subdivision thereof.
(d) "Securities" shall mean any debt or equity
securities of the Corporation, whether now or hereafter authorized, and any
instrument convertible into or exchangeable for Securities or a Security. The
term "Security" shall mean one of the Securities.
Fourth: This amendment to the Certificate of Incorporation of the
corporation was authorized by the written consent of the Board of Directors of
the corporation.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to the Certificate of Incorporation and affirm the foregoing as true
under the penalties of perjury, as of this ____ day of September, 1999.
BCAM INTERNATIONAL, INC.
/s/
-----------------------------------
MICHAEL STRAUSS, Chairman and
Chief Executive Officer
/s/
-----------------------------------
KAREN TANTONE, Secretary
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
DATED SEPTEMBER 15, 1999
BY AND AMONG
BCAM INTERNATIONAL, INC., LUNGCHECK HEALTH, INC.
AND LUNGCHECK, INC.
The undersigned agree that, following the consummation of the merger
contemplated by the Agreement and Plan of Merger, the following treatment will
take place with respect to exercisable options and warrants issued by LungCheck,
Inc. for the purchase of LungCheck, Inc. common stock at a purchase price per
share $1.00 or more immediately prior to the merger. Each such option or warrant
shall be replaced with an option or warrant to purchase BCAM Series B
Acquisition Preferred Stock ("BCAM Preferred Stock") based upon the following:
(a) The number of shares of LungCheck, Inc. common stock purchasable under
the option or warrant prior to the merger shall be converted into an option or
warrant to purchase an amount of BCAM Preferred Stock equal to the product of:
the number of shares of Lungcheck, Inc. common stock purchasable pursuant
to warrants or options exercisable immediately prior to the merger
multiplied by .008.
(b) The purchase price per share of BCAM Preferred Stock shall be computed
as follows:
the purchase price per share of Lungcheck, Inc. common stock set forth in
the Lungcheck, Inc. warrant or option multiplied by .75 and further
multiplied by 100.
Dated: October 8, 1999
BCAM INTERNATIONAL, INC.
By:____________________________
LUNGCHECK HEALTH, INC.
By:____________________________
LUNGCHECK, INC.
By:____________________________
