-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ak2UfJNmIdYx9vovlcjsQZo/0dl1KQsebwZyciFDuVVcDIc4WoYZzxUroHha8Qfb l1QaUTCjW5QCnxcOyfatXw== 0000889812-97-002285.txt : 19971031 0000889812-97-002285.hdr.sgml : 19971031 ACCESSION NUMBER: 0000889812-97-002285 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19971030 SROS: BSE SROS: NASD GROUP MEMBERS: CHARLES E. DAVIDSON GROUP MEMBERS: IMPLEO LLC GROUP MEMBERS: JOSEPH M. JACOBS GROUP MEMBERS: WEXFORD MANAGEMENT LLC GROUP MEMBERS: WEXFORD SPECIAL SITUATIONS 1997 INSTITUTIONAL, LP GROUP MEMBERS: WEXFORD SPECIAL SITUATIONS 1997, LP GROUP MEMBERS: WEXFORD SPECTRUM INVESTORS LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BCAM INTERNATIONAL INC CENTRAL INDEX KEY: 0000856143 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 133228375 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-41847 FILM NUMBER: 97703593 BUSINESS ADDRESS: STREET 1: 1800 WALT WHITMAN RD CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5167523550 MAIL ADDRESS: STREET 1: 1800 WALT WHITMAN RD CITY: MELVILLE STATE: NY ZIP: 11747 FORMER COMPANY: FORMER CONFORMED NAME: BIOMECHANICS CORP OF AMERICA DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IMPLEO LLC CENTRAL INDEX KEY: 0001047695 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 061486932 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 0 STREET 2: 411 WEST PUTNAM AVE CITY: GREEWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2127040100263 MAIL ADDRESS: STREET 2: 411 WEST PUTNAM AVE CITY: GREEWICH STATE: CT ZIP: 06830 SC 13D 1 GENERAL STATEMENT OF BENEFICIAL OWNERSHIP UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 BCAM International, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, Par Value $.01 Per Share - -------------------------------------------------------------------------------- (Title of Class of Securities) 055293104 - -------------------------------------------------------------------------------- (CUSIP Number) Howard Sullivan, Esquire WEXFORD MANAGEMENT LLC 411 W. Putnam Avenue, Greenwich, Connecticut 06830 (203) 862-7000 and Stephen B. Selbst, Esquire Berlack, Israels & Liberman LLP, 120 West 45th Street, New York, N.Y. 10036, (212) 704-0100 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications) September 22, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement / / (A fee is not required only if the reporting person (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) (1 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 2 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: IMPLEO LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES BENEFICIALLY None OWNED BY EACH REPORTING 8 SHARED VOTING POWER PERSON WITH 2,000,000 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 2,000,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.79% 14 TYPE OF REPORTING PERSON OO (Page 2 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 3 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Wexford Management LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION Connecticut 7 SOLE VOTING POWER NUMBER OF None SHARES BENEFICIALLY OWNED BY 8 SHARED VOTING POWER EACH REPORTING PERSON WITH 2,000,000 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 2,000,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.79% 14 TYPE OF REPORTING PERSON OO (Page 3 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 4 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Wexford Special Situations 1997, LP S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 1,250,600 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 1,250,600 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,250,600 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.12% 14 TYPE OF REPORTING PERSON PN (Page 4 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 5 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Wexford Special Situations 1997 Institutional, LP S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 349,400 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 349,400 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 349,400 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.71%% 14 TYPE OF REPORTING PERSON PN (Page 5 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 6 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Wexford Spectrum Investors LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 400,000 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 400,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 400,000 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.96% 14 TYPE OF REPORTING PERSON OO (Page 6 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 7 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Charles E. Davidson S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States of America 7 SOLE VOTING POWER NUMBER OF SHARES BENEFICIALLY None OWNED BY EACH REPORTING PERSON WITH 8 SHARED VOTING POWER 2,000,000 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 2,000,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.79% 14 TYPE OF REPORTING PERSON IN (Page 7 of 13 Pages) SCHEDULE 13D - ---------------------- --------------------------------- CUSIP No. 055293104 Page 8 of 13 Pages - ---------------------- --------------------------------- 1 NAME OF REPORTING PERSON: Joseph M. Jacobs S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally Omitted) 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS (2)(d) or (e) / / 6 CITIZENSHIP OR PLACE OR ORGANIZATION United States of America 7 SOLE VOTING POWER NUMBER OF SHARES None BENEFICIALLY OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON WITH 2,000,000 9 SOLE DISPOSITIVE POWER None 10 SHARED DISPOSITIVE POWER 2,000,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,000,000 shares 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 9.79% 14 TYPE OF REPORTING PERSON IN (Page 8 of 13 Pages) SCHEDULE 13D Item 1. Security and Issuer. This statement relates to shares of the common stock, par value $.01 per share, of BCAM International, Inc. (the "Issuer"). The Issuer's principal executive offices are located at 1800 Walt Whitman Road, Melville, New York 11747. Item 2. Identity and Background. This statement is being filed by: (a) IMPLEO LLC, a limited liability company formed under the laws of the State of Delaware ("Impleo"). (b) WEXFORD MANAGEMENT LLC, a limited liability company formed under the laws of the State of Connecticut ("Wexford Management"), the manager of Impleo and Wexford Spectrum Investors, LLC, and the investment manager of Wexford Special Situations 1997, LP and Wexford Special Situations 1997 Institutional, LP. (c) WEXFORD SPECIAL SITUATIONS 1997, LP, a limited partnership formed under the laws of Delaware ("Wexford Special Situations 1997"). (d) WEXFORD SPECIAL SITUATIONS 1997 INSTITUTIONAL, LP, a limited partnership formed under the laws of Delaware ("Wexford Special Situations 1997 Institutional"). (e) WEXFORD SPECTRUM INVESTORS LLC, a limited liability company organized under the laws of Delaware ("Spectrum Investors"), the manager of which is Wexford Management. (f) Charles E. Davidson (g) Joseph M. Jacobs (the individuals and entities in (a) - (g) individually a "Reporting Person" and collectively, the "Reporting Persons") with respect to the Notes and the Warrants beneficially owned by the Reporting Persons. Impleo was organized for the purpose of investing in the Issuer, and the address of its principal offices is c/o Wexford Management LLC, 411 West Putnam Avenue, Greenwich, Connecticut 06830. The members of Impleo are: Wexford Special Situations 1997, Wexford Special Situations 1997 Institutional and Wexford Spectrum Investors. Wexford Management is manager of Impleo and Wexford Spectrum Investors, LLC, and the investment manager of Wexford Special Situations 1997, LP and Wexford Special Situations 1997 Institutional, LP. Its principal business and office address is 411 West Putnam Avenue, Greenwich, CT 06830. (Page 9 of 13 Pages) Charles E. Davidson is: Chairman and a controlling member of Wexford Management. Mr. Davidson is also a controlling member or an investor in a number of private companies, including certain members of Impleo and their investors. His principal business and office address is c/o Wexford Management LLC, 411 West Putnam Avenue, Greenwich, CT 06830. He is a citizen of the United States of America. Joseph M. Jacobs is: President, managing member and a controlling member of Wexford Management. Mr. Jacobs is also a controlling member or an investor in a number of private companies, including certain members of Impleo and their investors. His principal business and office address is c/o Wexford Management LLC, 411 West Putnam Avenue, Greenwich, CT 06830. He is a citizen of the United States of America. None of the Reporting Persons has during the last five years been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violations with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. The Warrants for shares of common stock of the Issuer were issued to Impleo in connection with the purchase by Impleo at par of the Issuer's 10%/13% Convertible Notes in the principal amount of $5,000,000 (the cash price paid was $5,000,000, including commissions). The initial exercise price of each Warrant is $1.75 per share. The cash was provided from the working capital of Impleo. Item 4. Purpose of Transaction. Impleo obtained Warrants of the Issuer in connection with purchasing $5,000,000 in principal amount of the Issuer's 10%/13% Convertible Notes. The Warrants by their terms may be exercised immediately; the Notes become convertible after September 19, 1998. Impleo acquired both the Warrants and the Notes for investment purposes. Item 5. Interest in Securities of the Issuer. Impleo is registered holder of warrants for 2,000,000 shares of the common stock of the Issuer, which by their terms are currently exercisable. Such shares of common stock represent approximately 9.79% of the common stock of the Issuer outstanding as of September 19, 1997, based on the Issuer's written representation to Impleo as at September 19, 1997. This calculation includes shares issuable upon exercise of such Warrants, but does not include approximately 6,250,000 shares issuable upon conversion of the Note at the initial conversion price. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Impleo and the Issuer are parties to a Note Purchase Agreement, a Warrant Agreement and a Registration Agreement, each dated as of September 19, 1997, under which Impleo as registered holder of Warrants and the Notes has the benefit of certain covenants, events of default and certain registration rights, all as more fully stated in such agreements. Without limitation, under Section 4.1(n) of the Note Purchase Agreement, a nominee of Impleo was appointed to Issuer's Board of Directors, and Issuer agreed to use its best efforts to replace such nominee with another nominee of Impleo should such a nominee cease to serve as a director of Issuer. Except as described in the prior paragraph, Impleo has no contracts, arrangements, understandings or relationships (legal or otherwise) with respect to the common stock of the Issuer. Except as disclosed in this Item 6 or in Item 5, none of the Securities is pledged or otherwise subject to a (Page 10 of 13 Pages) contingency, the occurrence of which would give another person voting or investment power over the common stock of the Issuer. Item 7. Material to be Filed as Exhibits. I. Agreement pursuant to Rule 13d(f)(1)(iii), filed herewith II. Note Purchase Agreement dated as of September 19, 1997, between the Issuer and Impleo, filed by Impleo III. Registration Rights Agreement dated as of September 19, 1997, between the Issuer and Impleo, filed by Impleo IV. Warrant Agreement dated as of September 19, 1997 between the Issuer and Impleo, filed by Impleo. (Page 11 of 13 Pages) SIGNATURE After reasonable inquiry and to the best of each of the undersigned's knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. October 29, 1997 IMPLEO LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD MANAGEMENT LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Senior Vice President WEXFORD SPECIAL SITUATIONS 1997, LP By Wexford '97 Advisors, LLC, General Partner By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD SPECIAL SITUATIONS 1997 INSTITUTIONAL, LP By Wexford '97 Advisors, LLC, General Partner By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD SPECTRUM INVESTORS LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President /s/ Charles E. Davidson ------------------------------------------- Charles E. Davidson /s/ Joseph M. Jacobs ------------------------------------------- Joseph M. Jacobs (Page 12 of 13 Pages) EX-99.1 2 RULE 13(D) AGREEMENT EXHIBIT I Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the general Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agree that the statement to which this Exhibit is attached is filed on behalf of each of them in the capacities set forth below. October 29, 1997 IMPLEO LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD MANAGEMENT LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Senior Vice President WEXFORD SPECIAL SITUATIONS 1997, LP By Wexford '97 Advisors, LLC, General Partner By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD SPECIAL SITUATIONS 1997 INSTITUTIONAL, LP By Wexford '97 Advisors, LLC, General Partner By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President WEXFORD SPECTRUM INVESTORS LLC By: /s/ Arthur Amron ---------------------------------------------- Arthur Amron, Vice President /s/ Charles E. Davidson ------------------------------------------- Charles E. Davidson /s/ Joseph M. Jacobs ------------------------------------------- Joseph M. Jacobs (Page 13 of 13 Pages) EX-99.2 3 NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT NOTE PURCHASE AGREEMENT ("Agreement") dated as of September 19, 1997 between BCAM INTERNATIONAL, INC., a New York corporation (the "Company"), and IMPLEO LLC, a Delaware limited liability company (the "Purchaser"). W I T N E S S E T H WHEREAS, the Company has authorized the issuance of its 10%/13% convertible subordinated promissory notes (the "Notes") in the aggregate principal amount of $5,000,000; WHEREAS, concurrently herewith, the Company is entering into a Note Purchase Agreement (the "Other Note Agreement"), on terms substantially identical to the terms contained in this Agreement, providing for the issuance of $1,000,000 principal amount of 10%/13% convertible subordinated promissory notes (the "Other Notes"); and NOW, THEREFORE, in consideration of and subject to each of the covenants, terms and conditions in this Agreement, the parties hereby agree as follows: 1. THE NOTES AND THE WARRANTS 1.1. Purchase and Sale of Notes. The Company hereby agrees to sell to the Purchaser and, subject to the terms and conditions herein set forth, the Purchaser agrees to purchase from the Company the Notes and the Warrants, for an aggregate purchase price of $5,000,000. The Company will deliver to the Purchaser, at the offices of Ruskin, Moscou, Evans & Faltischek, P.C., 170 Old Country Road, Mineola, New York 11501, one or more Notes, evidencing the aggregate principal amount of the Notes and the aggregate number of Warrants, each registered in the Purchaser's name or in its nominee's name as it shall request and each in such denominations or numbers as it shall request, against payment of the purchase price therefor by wire transfer of immediately available funds to an account designated by the Company prior to the date of the closing (the "Closing"). The Notes shall be dated the date of issue thereof, shall mature as set forth therein with a final maturity date of September 19, 2002 and shall bear interest on the unpaid balance thereof from the date thereof until the principal thereof shall become due at the rates, and payable semi-annually on the dates specified in the Notes, which shall be substantially in the form of Exhibit A hereto attached; provided, however, that in lieu of making interest payments in cash, the Company may elect (the "Interest Election"), by giving written notice of such election, to pay interest in kind at the rate of 13% per annum, in which event such interest shall be capitalized and added to the outstanding principal balance of the Notes on the date of each such Interest Election. If the Company shall default in the payment of the principal of or interest on any Note or any other amount due hereunder, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to the date of actual payment (after as well as before judgment) at a rate per annum equal to 15%. The notes are subordinated to prior payment in full of Senior Debt to the extent provided in the Subordination Agreement. The term "Note" or "Notes" as used herein shall include each of the Notes delivered pursuant to any provision of this Agreement and each Note delivered in substitution of or exchange for any such Note pursuant to any such provision. 2. CONDITIONS OF CLOSING 2.1. Conditions of Closing. The Purchaser's obligation to purchase and pay for the Notes and the Warrants is subject to the satisfaction of the following conditions: (a) Opinion of Counsel. The Purchaser shall have received from Ruskin, Moscou, Evans & Faltischek, P.C., counsel to the Company, an opinion dated the date of the Closing substantially in the form of Exhibit B attached hereto. (b) Warrant Agreement. The Purchaser and the Company shall have executed and delivered the Warrant Agreement in the form of Exhibit C attached hereto, and the Company shall have executed and delivered the Warrants to the Purchaser. (c) Registration Agreement. The Purchaser and the Company shall have executed and delivered the Registration Agreement substantially in the form of Exhibit D attached hereto. (d) License Confirmations. The Company shall have used its good faith best efforts to have obtained written confirmation, satisfactory in form and substance to the Purchaser, that the license agreements between the Company and each of Reebok International Ltd. and McCord Winn Textron Inc. are in full force and effect. (e) Purchase Agreement. Concurrently with the consummation of the transactions contemplated by this Agreement, the Registration Agreement and the Warrant Agreement, the Company shall have consummated the transactions by the Purchase Agreement on terms satisfactory to the Purchaser. (f) Bank One Agreement. Concurrently with the consummation of the transactions contemplated by this Agreement, the Registration Agreement and the Warrant Agreement, the Company shall have consummated the transactions by the Bank One Agreement on terms satisfactory to the Purchaser. (g) Purchase and Sale of Other Notes. Concurrently with the consummation of the transactions contemplated by this Agreement, the Company shall have sold the Other Notes pursuant to the Other Note Agreement on terms satisfactory to the Purchaser. (h) Representations and Warranties; No Default. The representations and warranties of the Company contained in the Agreement, the Registration Agreement and the -2- Warrant Agreement shall be true in all material respects on and as of the date of Closing (except to the extent that such representation is made as of a date other than the Closing); the Company shall have complied with all of its agreements and satisfied all conditions to be complied with or satisfied on or prior to the Closing; and the Company shall have delivered to the Purchaser a certificate of its chairman of the board or president, dated the date of Closing, to all such effects. (i) Purchase Permitted by Applicable Laws. The purchase and payment for the Notes to be purchased by the Purchaser on the date of Closing on the terms and conditions herein provided (including the use by the Company of the proceeds of the sale of the Notes) shall not violate any applicable law or governmental regulation (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System) and shall not subject the Purchaser to any penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation. (j) Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in substance and form to the Purchaser, and the Purchaser shall have received (i) copies of all corporate action taken to authorize this Agreement and the issuance of the Notes and the Warrants certified as of the date of Closing by the secretary or assistant secretary of the Company, and (ii) all such counterpart originals or certified or other copies of such other documents as it or they may reasonably request. (k) Charter Documents. The Purchaser shall have received copies of the Certificate of Incorporation, a long-form good standing certificate and By-laws of the Company, certified in each case as being true and complete as of the date of Closing. (l) Insurance. The Purchaser shall have received evidence that the insurance required to be carried by the Company and its Subsidiaries pursuant to Section 4.1(d) hereof shall be in full force and effect. 3. CONVERSION 3.1. Right to Convert. At any time or from time to time after September 19, 1998, a holder of Notes may, at any time at its option, convert all or any portion of the principal amount of Notes, together with accrued interest thereon, into such number of fully paid and nonassessable Shares as is determined by dividing (i) the principal amount of Notes surrendered for conversion together with the amount of interest accrued thereon to the date notice of conversion is given, by (ii) the Conversion Price determined as hereinafter provided in effect on said date. The initial Conversion Price shall be $0.80 per Share, subject to adjustment as hereinafter provided. 3.2. Mechanics of Conversion. To convert any Note or any portion thereof into Shares, the holder shall give written notice to the Company in the form attached to the Note as Exhibit 1 (which notice may be given by facsimile transmission) that the holder elects to convert the same. Promptly thereafter such holder shall surrender the Note, with the conversion -3- endorsement duly completed, at the office of the Company or of any transfer agent for such stock. The Company shall, as soon as practicable after receipt of such notice, issue and deliver to or upon the order of such holder a certificate or certificates for the number of Shares to which the holder shall be entitled, and a new Note (or the former Note duly annotated) representing the remaining principal amount (if any) not converted. The Company shall use its reasonable best efforts to effectuate any such issuance within 72 hours and to transmit the Shares by messenger or overnight delivery service to the address designated by such holder. Such conversion shall be deemed to have been made immediately prior to the close of business on the date such notice of conversion is received by the Company. The person or persons entitled to receive the Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Shares at the close of business on such date. 3.3. Adjustment of Conversion Price. (a) The applicable Conversion Price for the Notes shall be subject to adjustment from time to time as hereinafter provided for in this 3.3. No adjustment of the Conversion Price, however, shall be made in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment, which together with any subsequent adjustments so carried forward shall amount to $.01 per share or more. (b) Adjustment of Conversion Price upon Certain Issuances of Common Stock. If at any time after the date hereof, the Company shall issue or sell any shares of Common Stock for a consideration per share less than the "current market price" (as hereinafter defined) in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the applicable Conversion Price shall be reduced to the price (calculated to the nearest cent) determined by multiplying the applicable Conversion Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the current market price immediately prior to such issue or sale, plus (ii) the consideration received by the Company upon such issue or sale, and the denominator of which shall be the product of (i) the total number of shares of Common Stock outstanding immediately after such issue or sale, multiplied by (ii) the current market price immediately prior to such issue or sale. (c) Constructive Issuances of Stock, Convertible Securities, Rights and Options. For purposes of subsection (b) of this Section 3.3, the following clauses shall also be applicable: (i) Issuance of Warrants, Rights or Options. In case at any time the Company shall in any manner grant any warrants, rights or options to subscribe for or to purchase, or any options for the purchase of, Common Stock or stock or securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being hereinafter called "Convertible Securities"), whether or not such warrants, rights or options or the right to convert -4- or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such warrants, rights or options or upon conversion or exchange of such Convertible Securities (determined as provided below) shall be less than the current market price determined as of the date of granting such warrants, rights or options, then the total maximum number of shares of Common Stock issuable upon the exercise of such warrants, rights or options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such warrants, rights or options shall (as of the date of granting of such warrants, rights or options) be deemed to be outstanding and to have been issued for such price per share. For the purposes of calculations under this clause (i), the price per share for which Common Stock is issuable upon the exercise of any such warrants, rights or options or upon conversion or exchange of any such Convertible Securities shall be determined by dividing (a) the total amount, if any, received or receivable by the Company as consideration for the granting of such warrants, rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such warrants, rights or options, plus, in the case of such warrants, rights or options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by the maximum number of shares of Common Stock issuable upon the exercise of such warrants, rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such warrants, rights or options. Except as provided in clause (iii) of this subsection (c), no further adjustments of the Conversion Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such warrants, rights or options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) Issuance of Convertible Securities. In case at any time the Company shall in any manner issue or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon conversion or exchange of such Convertible Securities (determined as provided below) shall be less than the current market price in effect immediately prior to the date of such issue or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share, provided that if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Conversion Price have been or are to be made pursuant to other provisions of this subsection (c), no further adjustment of the Conversion Price shall be made by -5- reason of such issue or sale. For the purposes of calculations under this clause (ii), the price per share for which Common Stock is issuable upon conversion or exchange of Convertible Securities shall be determined by dividing (a) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as provided in clause (iii) of this subsection, no further adjustments of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (iii) Change in Option Price or Conversion Rate; Expiration or Termination of Warrants, Rights or Convertible Securities. If the purchase price provided for in any warrants, rights or options referred to in clause (i) above, or the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in clause (i) or (ii) above, or the rate at which any Convertible Securities referred to in clause (i) or (ii) above are convertible into or exchangeable for Common Stock, shall change (other than under or by reason of provisions designed to protect against dilution), then the Conversion Price then in effect shall forthwith be readjusted to the Conversion Price which would have then been in effect had such then outstanding warrants, rights, options or Convertible Securities provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price or Conversion Price provided for in any such warrant, right or option referred to in clause (i) above or the rate at which any Convertible Securities referred to in clause (i) or (ii) above are convertible into or exchangeable for Common Stock, shall decrease at any time under or by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise of any such warrant, right or option or upon conversion or exchange of any such Convertible Security, the Conversion Price then in effect hereunder shall forthwith be decreased to such Conversion Price as would have been obtained had the adjustments made upon issuance of such warrant, right or option or such Convertible Securities been made upon the basis of the actual issuance of (and the total consideration received for) the shares of Common Stock delivered upon such exercise, conversion or exchange. Upon the expiration of any warrants, rights, options or Convertible Securities, if any thereof shall not have been exercised, converted or exchanged, as the case may be, the Conversion Price shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise, conversion or exchange, as the case may be, of such warrants, rights, options or Convertible Securities and (b) such shares of Common Stock, if any, were issued or sold for the consideration -6- actually received by the Company upon such exercise, conversion or exchange, as the case may be, plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such warrants, rights, options or Convertible Securities, whether or not exercised, converted or exchanged. (iv) Stock Dividends. In case at any time the Company shall declare a dividend or make any other distribution upon any stock of the Company which is payable in Common Stock or Convertible Securities, any Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (v) Consideration for Stock. In case any shares of Common Stock or Convertible Securities or any warrants, rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the issuance or sales price therefor, without deducting therefrom any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any warrants, rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined reasonably and in good faith by the Board of Directors of the Company, without deducting any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith. In case any Common Stock or Convertible Securities or any warrants, rights or options to purchase any shares of Common Stock or Convertible Securities shall be issued in connection with any merger of another corporation with and into the Company, the amount of consideration therefor shall be deemed to be the fair value as determined reasonably and in good faith by the Board of Directors of the Company of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such Common Stock, Convertible Securities, warrants, rights or options, as the case may be. (vi) Definition of "Current Market Price". For the purpose of any computation hereunder, the "current market price" shall mean (1) if the Common Stock is listed on one or more stock exchanges or is quoted on the NASDAQ National Market (the "National Market"), the average of the closing sales prices of a share of Common Stock on the primary national or regional stock exchange on which such shares are listed or on the National Market if quoted thereon or (2) if the Common Stock is not so listed or quoted but is traded in the over the counter market (other than the National Market), the average of the closing bid and asked prices of a share of Common Stock, in the case of clauses (1) and (2), for the 30 trading days (or such lesser number of trading days as the Common Stock shall have been so listed, quoted or traded) next preceding the date of measurement; -7- provided, however, that if no such sale prices or bid and asked prices have been quoted during the preceding 30 day period, "current market price" means the value as determined reasonably and in good faith by the Board of Directors of the Company; and provided, further, however, that in the event the current market price of a share of Common Stock is determined during a period following the announcement by the Company of (i) a dividend or distribution on the Common Stock payable in shares of Common Stock or Convertible Securities, (ii) a dividend of the type referred to in subsection (d) of this Section 3.3, or (iii) any subdivision, combination or reclassification of the Common Stock, and prior to the expiration of 30 trading days after the ex dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be appropriately adjusted to take into account ex dividend trading. (d) Adjustment for Certain Special Dividends. In case the Company shall declare a dividend upon the Common Stock payable otherwise than out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, proper provision shall be made so that each holder of Notes shall receive (at the Conversion Price in effect immediately prior to such distribution), the distribution payable per share of Common Stock, whether in cash, or if the distribution is of property other than cash, such other property, to which such holder would have been entitled upon such distribution if such holder had converted the entire unpaid principal amount of his or its Note immediately prior thereto. (e) Subdivision or Combination of Stock. In case the Company shall at any time subdivide the outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares issuable upon conversion of the Notes immediately prior to such subdivision shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock shall be combined at any time into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased and the number of shares issuable upon conversion of the Notes immediately prior to such combination shall be proportionately reduced. (f) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company (i) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation or merger, or (ii) permits any other corporation to consolidate with or merge into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (iii) transfers all or substantially all of its properties and assets to any other corporation, or (iv) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this subsection (f), upon the conversion of the Notes at any time after the -8- consummation of such consolidation, merger, transfer, reorganization or reclassification, each holder of Notes shall be entitled to receive (at the Conversion Price in effect for shares issuable upon such conversion of the Notes immediately prior to such consummation), in lieu of shares issuable upon such conversion of the Notes prior to such consummation, the stock and other securities, cash and assets to which such holder of the Notes would have been entitled upon such consummation if such holder of the Notes had so converted such Notes immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section 3.3). (g) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company. The disposition of any shares of Common Stock owned or held by or for the account of the Company shall be considered an issue of Common Stock for the purposes of this Section 3.3. (h) Certain Adjustment Rules. (i) The provisions of this Section 3.3 shall similarly apply to successive transactions. (ii) If the Company shall declare any dividend referred to in paragraph (iv) of subsection (c) of this Section 3.3 or subsection (d) of this Section 3.3 and if any holder of Notes converts all or any part of the Notes after such declaration but before the payment of such dividend, the Company may elect to defer, until the payment of such dividend, issuing to such Holder the shares issuable upon such conversion of the Notes over and above the shares issuable upon such conversion of the Notes on the basis of the Conversion Price in effect prior to such adjustment; provided, however, that the Company shall deliver to each such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the payment of such dividend. (iii) If the Company shall declare any dividend referred to in paragraph (iv) of subsection (c) of this Section 3.3 or subsection (d) of this Section 3.3 and shall legally abandon such dividend prior to payment, then no adjustment shall be made pursuant to this Section 3.3 in respect of such declaration. (i) Exceptions to Adjustment to Conversion Price. Notwithstanding anything herein to the contrary, no adjustment to any Conversion Price or the number of shares issuable upon exercise of the Warrants shall be made in the case of the following: (i) the issuance of any Warrant or the issuance of any shares upon any exercise of any Warrant or any adjustment of the Conversion Price with respect thereto; (ii) the grant of up to 3,167,500 options to purchase Common Stock to employees, officers or directors of the Company, or the adjustment of the -9- Conversion Price thereof pursuant to the Existing Option Plans; (iii) the issuance of up to 3,167,500 shares of Common Stock to any employees, officers or directors of the Company upon the exercise of any options to purchase Common Stock granted pursuant to the Existing Option Plans: (iv) the grant of up to 4,500,000 options to purchase Common Stock to employees, officers or directors of the Company, or the adjustment of the Conversion Price thereof pursuant to the New Option Plan: (v) the issuance of up to 4,500,000 shares of Common Stock to any employees, officers or directors of the Company upon the exercise of any options to purchase Common Stock granted pursuant to the New Option Plan; and (vi) the conversion of the Notes; (vii) the conversion of the Other Notes issues pursuant to the Other Note Agreement; and (viii) the issuance of Common Stock of the Company upon conversion of the shares of Convertible Preferred Stock. (ix) any change in the par value of the Common Stock; (j) Other Conversion Price Reductions. Anything in this Section 3.3 to the contrary notwithstanding, the Company shall be entitled to reduce the Conversion Price, in addition to those adjustments required by this Section 3.3, to the extent necessary so that any consolidation or subdivision of the Common Stock, issuance wholly for cash of any Common Stock at less than the current market price, issuance wholly for cash of Common Stock or Convertible Securities or dividends on Common Stock payable in Common Stock or other assets, hereafter made by the Company to the holders of its Common Stock shall not be taxable to them. (k) Whenever the Conversion Price shall be adjusted as provided in this Section 3.3, the Company shall deliver, by first-class mail, to each holder of Notes at such holder's address appearing on the Company's records, a statement, signed by an officer of the Company, showing in detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment. 3.4. Certificates as to Adjustments. Annually, on or before the first Business Day following the ninetieth day after the end of the Company's preceding fiscal year, the Company at its expense shall promptly compute any adjustment or readjustment required pursuant to Section 3.3 in accordance with the terms hereof and prepare and furnish to the holders of Notes a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based; provided, that if the holder converts this Note, in whole or in part, prior to the issuance of such certificate but after an event or events giving rise to a previously undisclosed adjustment or readjustment pursuant to Section -10- 3.3, simultaneously with the delivery of certificates of shares of Common Stock the Company shall deliver to the holder a certificate setting forth all previously undisclosed adjustments or readjustments. The Company shall, upon the written request at any time of the holder of Notes, furnish or cause to be furnished to such holder a like certificate prepared by the Company setting forth such adjustments and readjustments. 3.5. Notice of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any security or right convertible into or entitling the holder thereof to receive additional shares of Common Stock, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company shall mail to the holders of Notes at least 30 days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution, security or right and the amount and character of such dividend, distribution, security or right. 3.6. Issue Taxes. The Company shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Notes pursuant hereto; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with such conversion. 3.7. Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of Notes hereunder such number of its Shares as shall from time to time be sufficient to effect the conversion of the Notes based upon a Conversion Price of $0.80 per Share, as such amount may be adjusted in accordance with the provisions of Section 3.3. The Company agrees not to take any corporate action, including without limitation, (i) reducing the number of authorized Shares, (ii) subdividing the number of outstanding Shares into a greater number of Shares, or (iii) reducing the number of Shares by combining such shares into a smaller number of Shares, if, in any such case, the effect would be to reduce the number of authorized but unissued Shares to a number that is not sufficient to permit full conversion of the Notes. Notwithstanding the foregoing, if at any time the number of authorized by unissued Shares theretofore reserved by the Company shall not be sufficient to effect the conversion of the Notes, the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of Shares as shall be sufficient for such purpose, including without limitation, engaging in best efforts to obtain the requisite shareholder approval. All Shares issued upon conversion of the Notes shall be fully paid and non-assessable. 3.8. Fractional Shares. No fractional Shares shall be issued upon the conversion of Notes. The Company shall pay to any holder who has converted all or any portion of the Notes cash in an amount equal to any fractional shares, such amount of cash to be determined by multiplying the Closing Trading Price on the Business Day prior to the date of -11- conversion by the amount of the fractional Share. All Shares (including fractions thereof) issuable upon conversion of more than one Note by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional Share. 3.9. Reorganization or Merger. In case of any reorganization or any reclassification of the Capital Stock of the Company or any consolidation or merger of the Company with or into any other corporation or corporations or a sale of all or substantially all of the assets of the Company to any other person, then as part of such reorganization, consolidation, merger or sale, provision shall be made so that the Notes shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which a holder of the number of Shares deliverable upon conversion of the Notes would have been entitled upon the record date (or date of, if no record date is fixed) such event and, in any case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of Notes, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as equivalent as is practicable, in relation to any shares of stock or the securities or property (including cash) thereafter deliverable upon the conversion of the Notes. The corporation or other Person surviving such transaction, if not the Company, shall assume in writing the obligations of the Company hereunder. 3.10. Issuance of Securities. In case the Company shall propose, whether in connection with a public offering, a private placement, an acquisition, or otherwise, to (a) issue or sell any shares of Common Stock, or (b) issue options, rights or warrants to subscribe for shares of Common Stock or (c) issue any securities convertible into or exchangeable for shares of Common Stock, the Company shall give the Purchaser notice (the "Issue Notice") at least 30 days prior to the proposed date of such issuance (the "Issue Date"), specifying the security to be issued, the price thereof (if such price is known on such date, and if not, promptly following the time such price is determined) and all other relevant terms and conditions, including the terms of any proposed exchange or conversion feature. Following receipt of the Issue Notice from the Company, the Purchaser may, at any time prior to five (5) days prior to the Issue Date, elect to purchase its Proportionate Share (as hereinafter defined) of the securities described in the Issue Notice by giving the Company written notice of such election. For purposes hereof, the Purchaser's "Proportionate Share" shall be a fraction calculated as follows: (i) the numerator shall be the sum of (x) the number of Shares issuable to all holders of Notes issued hereunder upon conversion in full of such Notes into Shares (including any Shares theretofore issued upon conversion of the Notes), plus (y) the number of Shares issuable upon exercise of the Warrants (including any Shares theretofore issued upon exercise of the Warrants), and (ii) the denominator shall be the sum of (x) the number of Shares outstanding at the time of the Issue Notice plus (y) the number of Shares issuable to all holders of Notes issued hereunder upon conversion in full of such Notes plus (z) the number of shares issuable upon exercise of the Warrants. The foregoing rights of the Purchaser shall not apply to (i) the conversion of the Notes by any Holder hereof or the exercise of any Warrants; (ii) the issuance or sale of up to 3,167,500 shares of the Common Stock upon exercise of any stock options outstanding as of the date hereof granted pursuant to any Existing Option Plans; (iii) the issuance or sale of up to 4,500,000 shares of Common Stock -12- upon the exercise of any options granted pursuant to the New Option Plan; (iv) the issuance of shares of Common Stock upon conversion of the Convertible Preferred Stock; (v) the issuance of shares of Common Stock pursuant to the terms of any Convertible Securities so long as the Purchaser shall have been afforded an opportunity to purchase its Proportionate Share of such Convertible Securities in accordance with the provisions of this Section 3.10. In case the Company shall issue or sell any equity securities in an underwritten public offering, and the Purchaser shall elect to purchase its Proportionate Share of such equity securities, the Purchaser shall, if so requested by the managing underwriter, sign an underwriting agreement containing customary terms and conditions. The Purchaser's right to purchase its Proportionate Share shall terminate and be of no further force or effect if the Purchaser shall decline to exercise its rights hereunder on five (5) consecutive occasions. 4. COVENANTS OF THE COMPANY 4.1. Affirmative Covenants. The Company covenants and agrees that until the Notes, together with interest and all other obligations incurred hereunder, are paid or converted in full, the Company shall, unless first having procured the written consent of the Purchaser: (a) Financial Data. Furnish to the Purchaser (i) as soon as practicable and in any event within 45 days after the end of the first three fiscal quarters of each year, commencing with the fiscal quarter ending September 30, 1997, an unaudited consolidated and consolidating balance sheet of the Company and its Subsidiaries and unaudited consolidated and consolidating statements of operations and cash flow for the Company and its Subsidiaries reflecting results of operations from the beginning of the Company's fiscal year to the end of such quarter and for such quarter, fairly presenting the financial condition and results of operations of the Company and its Subsidiaries as of the applicable dates and for the applicable periods and prepared in accordance with GAAP applied on a consistent basis with prior practices (except as otherwise stated therein and except that such statements need not contain all footnotes), subject to changes resulting from normal year-end and audit adjustments, setting forth in each case in comparative form consolidated and consolidating figures for such periods and for the corresponding periods in the preceding fiscal year and certified by the chief financial officer of the Company, subject to changes for year-end and audit adjustments; (ii) as soon as practicable, and in any event upon the earlier of (A) the filing by the Company of its report on Form 10-K with the Commission or (B) 90 days after the end of each fiscal year, audited consolidated and unaudited consolidating balance sheets of the Company and each of its Subsidiaries as at the end of such year, setting forth in each case in comparative form corresponding figures from the budget referred to in clause (iii) hereof and from the preceding annual audit, all in reasonable detail, and, in the case of such consolidated financial statements, examined by independent public accountants of recognized national standing selected by the Company, whose report shall state that the scope of the examination was made in accordance with GAAP; (iii) (A) not later than March 31, 1998, for the fiscal year commencing January 1, 1998, and (B) not later than 60 days prior to the commencement of each upcoming fiscal year of the Company, beginning with the fiscal year commencing January 1, 1999, the annual budget of the Company presenting monthly and annual information on a consolidated and consolidating basis and showing the separate budgets for each operating Subsidiary; (iv) at the time of the delivery of the financial statements required by -13- clauses (i) and (ii) of this Section 4.1(a), a certificate of the chief financial officer of the Company (A) to the effect that to the best knowledge of the Company there exists no Default or Event of Default, or if such Default or Event of Default exists, specifying the nature thereof, the period of existence thereof and the action the Company proposes to take with respect thereto, and (B) also setting forth the calculations required to establish whether the Company is in compliance with Sections 4.1(l) and 4.1(m); (v) promptly upon transmission thereof, copies of all financial statements, proxy statements, notices and reports which the Company or any of its Subsidiaries shall send to its stockholders generally and copies of all registration statements filed by the Company with the Commission or with any securities exchange on which any of its securities are listed, and copies of all press releases and other statements made available generally by the Company or its Subsidiaries to the public concerning material developments and the business of the Company or any of its Subsidiaries; (vi) as soon as available, any written report pertaining to material deficiencies in respect of the Company's internal control matters submitted to the Company by the Company's independent accountants in connection with each annual or interim special audit of the financial condition of the Company made by such independent public accountants and a written statement prepared by the chief financial officer of the Company summarizing the actions that the Company proposes to take in response thereto; (vii) with reasonable promptness, such other financial information, or information respecting results of operations, business or prospects of the Company or any of its Subsidiaries, as the Purchaser may reasonably request. The Company shall maintain a fiscal year of January 1 to December 31 until December 31, 2002. (b) Payment of Charges. Pay and discharge, and cause each Subsidiary to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon such entities or its property or assets, or upon properties leased by it, prior to the date on which penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien or charge upon its property or assets, provided that the Company and its Subsidiaries shall not be required to pay such tax, assessment, charge, levy or claim the payment of which is being contested in good faith and diligently pursued by proper proceedings if appropriate reserves with respect thereto have been set up by the Company or such Subsidiary, as the case may be, in accordance with GAAP. (c) Proceeds. The Company shall apply the proceeds of the purchase price of the Notes (i) for the payment of (A) the purchase price under the Purchase Agreement and (B) the reasonable fees and expenses of the Company in connection with the consummation of the transactions contemplated by this Agreement, the Bank One Agreement and the Purchase Agreement, and (ii) for working capital and general corporate purposes. (d) Insurance. (i) Maintain or cause to be maintained, on its behalf and on behalf of each Subsidiary, in effect at all times insurance with insurance companies rated "A-" or better, with a minimum size rating of "VIII", by Best's Insurance Guide and Key Ratings, (or an equivalent rating by another nationally recognized insurance rating agency of similar standing if Best's Insurance Guide and Key Ratings shall no longer be published) or other insurance companies of recognized responsibility reasonably satisfactory to Purchaser; and (ii) on or before March 31 of each year, commencing March 31, 1998, furnish to Purchaser, a certificate signed -14- by a duly authorized representative of the Company showing the insurance then maintained by or on behalf of the Company pursuant hereto, together with evidence of payment of the premiums thereon. (e) Inspection of Books and Assets. Allow during normal business hours any representative of the Purchaser to visit and inspect any of the properties of the Company and any Subsidiary, to examine the books and records of any such entity and make copies and extracts thereof and to discuss any such entity's affairs, finances and accounts with its officers, directors and employees, all at such reasonable times and as often as the Purchaser may reasonably request upon no less than three Business Days' prior written notice. (f) Notices. Deliver to the Purchaser as soon as possible, and in any event within five (5) days after any director of officer of the Company acquires actual knowledge of the following, written notice of (i) any material proceedings(s) being instituted or threatened to be instituted by or against the Company or any Subsidiary in any federal, state, local or foreign court or before any commission or other regulatory body (federal, state, local or foreign), (ii) any Material Adverse Change, (iii) the existence of any Default or Event of Default, the period of existence thereof and what action the Company proposes to take with respect thereto, (iv) any casualty, damage or loss, whether or not insured, through fire, theft, other hazard or casualty, or any act or omission of the Company, its employees, agents, contractors, consultants or representatives, or of any other Person if such casualty, damage or loss affects or could reasonably be expected to affect the Company or any Subsidiary in excess of $100,000 for any one casualty or loss, or an aggregate of $250,000, (v) any cancellation or material change in the terms, coverages or amounts of any insurance described in Section 4.1(d), (vi) initiation of any condemnation proceedings involving any of real property owned or leased by the Company, (vii) any fact, circumstance, condition or occurrence at, on, or arising from, any real property owned or leased by the Company that results in material noncompliance with any Hazardous Substance Law or any Release of Hazardous Substances at or from any real property owned or leased by the Company or any Subsidiary, and (viii) any and pending or, to the Company's knowledge, threatened, Environmental Claim against the Company or any Subsidiary to the Company's knowledge any of its Affiliates, contractors, lessees or any other Persons, arising in connection with their occupying or conducting operations at any real property owned or leased by the Company. (g) Preservation of Existence. (i) Maintain and preserve, and cause each Subsidiary of the Company to maintain and preserve, its existence and right to carry on its business and all material rights, powers, privileges and franchises which are advantageous to it; and (ii) duly procure, and cause each Subsidiary of the Company to procure all necessary renewals and extensions thereof. (h) Maintenance of Properties. Ensure that the property and equipment of the Company and each Subsidiary are used or useful in its business, and are kept in good repair, working order and condition (ordinary wear and tear excepted), except property which in the aggregate is not material, and that from time to time there are made to such properties and equipment all needful repairs, renewals, replacements, extensions, additions, and improvements -15- to the extent and in the manner customary for companies in similar businesses. (i) ERISA. The Company and each member of the Controlled Group shall at all times fulfill their obligations under the minimum funding standards of ERISA and the Code for each Plan, shall at all times be in compliance in all material respects with applicable provisions of ERISA and the Code, shall not incur any liability (except for regular premium payments) to the PBGC or any Plan under Title IV of ERISA, and within 30 days after (A) the occurrence of any reportable event (as defined in Section 4043(b) of ERISA) with respect to any Plan, (B) the complete or partial withdrawal by the Company or any member of the Controlled Group from any Multiemployer Plan, or (C) any Multiemployer Plan enters reorganization status, becomes insolvent, or terminates (or notifies the Company or any member of the Controlled Group of its intent to terminate under Section 4041A of ERISA) the Company shall report such occurrence to the Purchaser and furnish such information as the Purchase may reasonably request with respect thereto. (j) Compliance with Law. Comply, and cause each Subsidiary to comply, in all material respects with the requirements of all applicable laws, rules, regulations, court orders, decrees, and orders of any governmental agency (including but not limited to laws, rules, regulations, court orders and decrees, and orders of any governmental agency with respect to the environment, employee benefits and fair labor standards and wages), whether or not compliance therewith requires structural changes to any of the Projects or any part thereof or requires major changes in operational practices or interferes with the use and enjoyment of any of the Projects or any part thereof; provided, however, that the Company and each Subsidiary shall have the right to contest the imposition of any laws, rules, regulations, court orders, decrees, and governmental agency orders if such contest is made in good faith and diligently pursued by proper proceedings and appropriate reserves with respect thereto have been established in accordance with GAAP. (k) Conduct of Business. Continue to engage in, and cause such of its Subsidiaries to continue to engage in, the business currently conducted by it, and not engage to any material extent in any other business. (l) Debt Service Coverage. The ratio of the Company's Consolidated Cash Flow to Consolidated Debt Service shall equal or exceed the ratios set forth below for the periods indicated: - .45 : 1:00 for the calendar quarter ending December 31, 1997 - .65 : 1.00 for the two calendar quarters ending March 31, 1998 - .7 : 1.00 for the three calendar quarters ending June 30, 1998 - .5 : 1.00 for the four calendar quarters ending September 30, 1998 .5 : 1.00 for the four calendar quarters ending December 31, 1998 1.5 : 1.00 for the four calendar quarters ending March 31, 1999 2.0 : 1.00 for the four calendar quarters ending June 30, 1999, and for each four calendar quarters thereafter (m) Leverage Ratio. The ratio of the Company's Consolidated Indebtedness to -16- Consolidated Tangible Net Worth shall not exceed the ratios set forth below for the periods indicated: Calendar Quarter ending December 31. 1997 3.5 : 1.00 Calendar Quarter Ending March 31, 1998 4.25 : 1.00 Calendar Quarter Ending June 30, 1998 5.75 : 1.00 Calendar Quarter Ending September 30, 1998 6.5 : 1.00 Calendar Quarter Ending December 31, 1998 5.0 : 1.00 Calendar Quarter Ending March 31, 1999 5.0 : 1.00 Calendar Quarter Ending June 30, 1999 4.5 : 1.00 Calendar Quarter Ending September 30, 1999 4.0 : 1.00 Calendar Quarter Ending December 31, 1999 3.0 : 1.00 Calendar Quarter Ending March 31, 2000 2.5 : 1.00 Calendar Quarter Ending June 30, 2000 and for each quarter thereafter 2.0 : 1.00 (n) Board of Directors. Concurrently with the Closing, the Company shall appoint to its board of directors Mark L. Plaumann as the nominee of IMPLEO LLC. In the event that Mark L. Plaumann ceases to serve as a director of the Company for any reason, the Company agrees that, so long as the Notes are outstanding, it will nominate to its board of directors one nominee designated by IMPLEO LLC and shall use its best efforts to cause such nominee to be elected. 4.2. Negative Covenants. The Company covenants and agrees that until the Notes, together with interest and all other obligations incurred hereunder, are paid in full, without the prior written consent of the Purchaser: (a) Dividends, Etc. The Company shall not declare or pay any dividends, purchase or otherwise acquire for value any of its Capital Stock or warrants now or hereafter outstanding, or make any distribution of assets to its stockholders, or permit any Subsidiary to purchase or otherwise acquire for value any of the Capital Stock of the Company. (b) Transactions with Affiliates. Except for transactions previously disclosed by the Company in its filings with the Commission as of the date hereof, the Company will not, and will not permit any of its Subsidiaries to, enter into or carry out any transaction with (including, without limitation, purchasing property or services from or selling property or services to) any Affiliates except upon terms reasonably found by the board of directors of the Company after due inquiry and as set forth in a resolution of the board of directors of the Company to be fair and reasonable and no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction. (c) Regulation G. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, apply any part of the proceeds of the Notes to purchase or carry any Margin Stock (as defined in Regulation G of the Board of Governors of the Federal Reserve System), to extend credit to others for the purpose of purchasing or carrying any Margin -17- Stock, or to retire Indebtedness which was incurred to purchase or carry any Margin Stock. (d) Acquisition of Notes. The Company will not, nor will it permit any of its Subsidiaries or Affiliates to, directly or indirectly, repurchase or otherwise acquire or make any offer to repurchase or otherwise acquire any Notes unless the Company shall have offered to purchase or otherwise acquire from all of the holders of the Notes the same proportion of the aggregate principal amount of Notes, at the time outstanding, and upon the same terms and conditions. (e) Limitation on Additional Indebtedness. The Company shall not, and shall not permit any of its Subsidiaries to, create, incur, assume, make any Guarantee of or in any other manner become directly or indirectly liable for the payment of, any Debt except Permitted Debt, unless, at the time thereof, and after giving effect thereto and to any concurrent transactions no Default or Event of Default has occurred and is continuing. Permitted Debt shall include Indebtedness of the Company and its Subsidiaries in aggregate amounts not to exceed the limitations for each year set forth below: 1997 $ 50,000 1998 $250,000 1999 and thereafter $300,000 (f) Limitation on Liens. The Company shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so, except: (i) The Liens existing on the date hereof (and extension, renewal and replacement Liens upon the same property theretofore subject to any such Lien, provided the amount secured by each Lien constituting such an extension, renewal or replacement Lien shall not exceed the amount secured by the Lien theretofore existing); and (ii) Liens on property securing all or part of the purchase price thereof to the Company and Liens (whether or not assumed) existing on property at the time of purchase thereof by the Company, as the case may be (and extension, renewal and replacement Liens upon the same property theretofore subject to a Lien described in this Section 4.2(f), provided the amount secured by each Lien constituting such extension, renewal or replacement shall not exceed the amount secured by the Lien theretofore existing and reasonable transaction costs relating to such extension, renewal or replacement Lien), provided, in each case (A) each such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof, and (B) the aggregate amount secured by all such Liens on any -18- particular property at the time purchased by the Company, shall not exceed 80% of the lesser of the fair market value of such property at such time and the purchase price of such property ("purchase price" for this purpose including the amount secured by each such Lien thereon whether or not assumed); and (C) The Company is permitted to incur such debt pursuant to Section 4.2(e) hereof. (iii) Liens arising from taxes, assessments, charges, levies or claims described in Section 4.1(b) that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the proviso of such Section 4.1(b); (iv) Deposits or pledges to secure workmen's compensation, unemployment insurance compensation, unemployment insurance, old age benefits or other social security obligations, or in connection with or to secure the performance of bids, tenders, trade contracts or leases, or to secure statutory obligations, or stay, surety or appeal bonds, or other pledges or deposits of like nature and all in the ordinary course of business; and (v) Liens that are not incurred in connection with the obtaining of any loan, advance or credit and that do not in the aggregate materially impair the use of the property or assets of the Company or the value of such property or assets for the purpose of such business. (g) Sale or Lease of Assets. The Company shall not, and shall not permit any of its Subsidiaries to, sell, lease, assign, transfer or otherwise dispose of assets, whether now owned or hereafter acquired, whether in one transaction or a series of transactions, except (i) in the ordinary course of its business and (ii) except for obsolete, worn out or replaced property not used or useful in its business; and in each case at fair market value, except that the Company or any Subsidiary may sell assets, in one transaction or a series of related transactions so long as (A) each such sale is at a price at least equal to the fair market value of such assets, and (B) the aggregate sale proceeds from all such related transactions within any twelve month period do not exceed $500,000. (h) Merger, etc. The Company shall not, and shall not permit any of its Subsidiaries to, merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of related transactions) all or any material part of its business or assets (whether now owned or hereafter acquired) to any person, or acquire all or any material part of the business or assets of any Person. (i) Investments. Make or permit to remain outstanding any advances or loans or extensions of credit to, or purchase or own any stocks, bonds, notes, debentures or other securities of any Person, except Permitted Investments. -19- (j) Hazardous Substance. Release, emit or discharge into the environment any Hazardous Substances in violation of any Hazardous Substance Laws, Legal Requirements or Applicable Permits. 5. EVENTS OF DEFAULT 5.1. Events of Default. Upon the occurrence of any of the following specified Events of Default (each herein called an "Event of Default"): (a) Principal. The Company shall default in the due and punctual payment of any principal amount of any the Notes; or (b) Interest. The Company shall default in the due and punctual payment of any interest on any of the Notes; or (c) Representations and Warranties. Any representation, warranty or statement made by the Company contained in this Agreement, or otherwise made in connection herewith, or in any certificate or statement furnished pursuant to or in connection herewith, shall in any material respect be breached or prove to be untrue or incorrect on the date as of which made; or (d) Covenants. The Company shall default in the due performance or observance of any term, covenant or agreement contained in this Agreement (other than those specified in clauses (a) or (b) above) and such default shall continue unremedied for a period of 30 days after notice by any holder of Notes to the Company thereof; or (e) Other Obligations. Any obligation of the company or any Subsidiary having an aggregate principal amount of $50,000 or more shall be declared to be or shall become due and payable prior to the stated maturity thereof or there shall have been or exercised any right of set-off in respect thereof in an amount exceeding $50,000 or any such obligation shall not be paid as and when the same becomes due and payable (taking into account any applicable grace periods); or (f) Insolvency. The Company or any Subsidiary, which during the prior four fiscal quarters represented five percent (5%) of (i) the revenues or (ii) the assets of the Company and its Consolidated Subsidiaries (a "Material Subsidiary"), shall commence a voluntary case concerning the Company or such Material Subsidiary under the Bankruptcy Code; or an involuntary case is commenced against the Company or any Material Subsidiary under the Bankruptcy Code and relief is ordered against the Company or any Material Subsidiary or the petition is controverted, but is not dismissed within 30 days after the commencement of the case; or the Company or any Material Subsidiary is not generally paying, or is unable to pay or admits in writing its inability to pay, its debts as such debts become due; or a custodian, receiver, trustee, or liquidation is appointed for, or takes charge of, all or any substantial portion of the property of the Company or any Material Subsidiary; or the Company or any Material Subsidiary -20- shall commence any other proceeding under any reorganization, arrangement, readjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any Material Subsidiary or there is commenced against the Company or any Material Subsidiary any such proceeding which remains undismissed for a period of 30 days or the Company or any Material Subsidiary is adjudicated insolvent or bankrupt; or the Company or any Material Subsidiary shall fail to controvert in a timely manner any such case under the Bankruptcy Code or any such proceeding, or any order of relief or other order approving any such case or proceeding is entered; or the Company or any Material Subsidiary by any act or failure to act shall indicate its consent to, approval of or acquiescence in any such case or proceeding or in the appointment of any custodian or the like of or for it or any substantial part of its property or suffers any such appointment to continue undischarged or unstayed for a period of 30 days; or the Company or any Material Subsidiary shall make a general assignment for the benefit of creditors; or any action is taken by the Company or any Material Subsidiary for the purpose of effecting any of the foregoing; or (g) Judgments. A judgment or judgments (excluding money judgments covered by insurance issued by a solvent insurer as to which the insurer has admitted liability as to the full amount of such judgment) for the payment of money in excess of $50,000 in the aggregate shall be rendered against the Company or any Subsidiary and any such judgments or judgments shall, if unsatisfied, remain unstayed for a period in excess of 30 days; or (h) ERISA. If (1) a Reportable Event shall have occurred with respect to any Plan, and within 30 days after the reporting of such Reportable Event to the Purchaser by the Company (or the Purchaser otherwise obtaining knowledge of such event) and the furnishing of such information as the Purchaser may reasonably request with respect thereto, the Purchaser shall have notified the Company that (A) Purchaser has made a determination that, on the basis of such Reportable Event, there are reasonable grounds for the termination of such Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Plan and (B) as a result thereof, an Event of Default exists hereunder; or (2) a trustee shall be appointed by a United States District Court to administer any Plan; or (3) the PBGC shall institute proceedings to terminate any Plan; or (4) a complete or partial withdrawal by the Company or any member of the Controlled Group from any Multiemployer Plan shall have occurred, or any Multiemployer Plan shall enter reorganization status, become insolvent, or terminate (or notify the Company or any member of the Controlled Group of its intent to terminate) under Section 4041A of ERISA and, within 30 days after the reporting of any such occurrence to the Purchaser by the Company (or the Purchaser otherwise obtaining knowledge of such event) and the furnishing of such information as the Purchaser may reasonably request with respect thereto, the Purchaser shall have notified the Company that the Purchaser has made a determination that, on the basis of such occurrence, an Event of Default exists hereunder; provided that any of the events described in this Section 5.1(h) shall involve (x) one or more ERISA Plans that are single-employer plans (as defined in Section 4001(a)(15) of ERISA) and under which the aggregate gross amount of unfunded benefit liabilities (as defined in Section 4001(a)(16) of ERISA), including vested unfunded liabilities which arise or might arise as the result of the termination of such ERISA Plan or Plans shall exceed $50,000, and/or (y) one or more Multiemployer Plans to which the aggregate liabilities of the Company and all members of -21- the Controlled Group, shall exceed $50,000; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the holder or holders of a majority in principal amount of the Notes then outstanding (exclusive of Notes then owned by the Company or any of its Subsidiaries or any Affiliate thereof) may declare the principal of and accrued interest on the Notes to be due and payable, whereupon the same shall forthwith become, due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company; provided, that if an Event of Default specified in Section 5.1(f) shall occur, the principal of, and accrued interest on, the Notes shall automatically and immediately become due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company. 6. REPRESENTATIONS AND WARRANTIES 6.1. Representations, Warranties and Agreements of the Company. The Company represents and warrants to and agrees with the Purchaser: (a) Corporate Existence and Standing. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of New York. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The Company and each Subsidiary thereof has all requisite corporate authority to own its property and to conduct its business in each jurisdiction in which the character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary or is subject to no material liability or disability by reason of the failure to be so qualified. The Company has delivered to the Purchaser true and correct copies of the certificate of incorporation and by-laws of the Company and each Subsidiary. (b) Capitalization. (i) As of the date hereof, the total authorized capitalization of the Company consists of (A) 15,000 shares of 8% preferred stock, none of which has been issued, (B) 750,000 shares of acquisition preferred stock, none of which are issued or outstanding, and (C) 40,000,000 Shares (par value $.01 per share) authorized, of which 19,181,878 Shares were issued, 18,418,696 Shares were outstanding, and 763,182 Shares were held as treasury stock, and with the exception of 2,488,963 Shares which have been authorized for issuance but for which certificates have not yet been delivered by the Company's transfer agent, all such outstanding Shares of the Company have been duly and validly issued and are fully paid and non-assessable. (ii) Except as set forth on Schedule I attached hereto, there are no outstanding subscriptions, warrants, options, calls or commitments of any character relating to or entitling any person to purchase or otherwise acquire any of the Capital Stock or equity securities of the Company or any Subsidiary thereof or any security that is convertible into or exchangeable for such Capital Stock or equity securities. Except as set forth on Schedule I, there are no -22- preemptive or similar rights to subscribe for or to purchase any Capital Stock of the Company, and, except as set forth on Schedule I, the Company has not entered into any presently outstanding agreement to register its equity or debt securities under the Securities Act. The Company has no stock option plans other than the Existing Option Plans. (c) Authorization and Validity. The Company has the power and authority and legal right to execute and deliver this Agreement, the Registration Agreement, the Warrant Agreement, the Notes and the Warrants and to perform its obligations hereunder and thereunder. The execution and delivery by the Company of this Agreement, the Registration Agreement, the Warrant Agreement, the Notes and the Warrants and the performance of its obligations hereunder and thereunder have been duly authorized by the Company, and this Agreement, the Registration Agreement, the Warrant Agreement, the Notes and the Warrants constitute legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. (d) No Violation. Neither the execution and delivery by the Company of Agreement, the Registration Agreement, the Warrant Agreement, the Notes and the Warrants nor the consummation of the transactions herein or therein contemplated, nor compliance with the provisions hereof or thereof will (i) violate the Company's or any Subsidiary's certificate of incorporation or by-laws; (ii) violate any judgment, decree, order, statute, law, regulation or rule of any court or governmental authority to which the Company or any of its Subsidiaries or any of their respective properties may be subject; or (iii) (A) cause the acceleration of the maturity of any Debt or obligation of the Company or any of its Subsidiaries or (B) violate, or be in conflict with, or constitute a default under, or permit the termination of, or result in the creation of, any Lien upon any property of the Company or any of its Subsidiaries under any agreement or instrument to which such Person is a party or by which such Person (or its properties) may be bound. Neither the Company nor any of its Subsidiaries is (1) in violation of any term of its respective certificates of incorporation or by-laws, or (2) in default of or non-compliance with any material instrument, contract or agreement to which it is a party or of any judgment, decree, order, statute, rule or governmental regulation which is applicable to it or its business or properties. (e) Financial Information; No Adverse Change. The balance sheet of the Company (i) as of December 31, 1996 and the related statements of operations and cash flow for the fiscal year then ended, and (ii) as of June 30, 1997 and the related statements of operations and cash flow for the year and the six months then ended (collectively, the "Financial Statements") (A) fairly present the financial condition and results of operations of the Company and its Subsidiaries reported on therein on the dates and for the fiscal periods shown therein, and (B) have been prepared in accordance with GAAP applied on a basis consistent with prior periods except as stated therein, subject, in the case of the financial statements as of June 30, 1997 and for the six months then ended, to normal audit adjustments, and that such financial statements do not contain all footnotes. Since June 30, 1997, there has been no Material Adverse Change in the assets, liabilities, properties, business, operations or financial condition of the Company and its Subsidiaries. Except as set forth on Schedule V attached hereto, neither the Company nor any of its Subsidiaries had as of June 30, 1997 any debts, liabilities or obligations, -23- whether accrued, absolute, contingent or otherwise due or to become due, except to the extent set forth or provided in the Company's balance sheet as of June 30, 1997. Except as set forth on Schedule V attached hereto, neither the Company nor any Subsidiary thereof has incurred since June 30, 1997, any debts, liabilities or obligations other than those incurred in the ordinary course of business. (f) Projections. As an inducement to the Purchaser to enter into this Agreement, the Company has provided to the Purchaser certain financial projections, including financing and capitalization assumptions and pro forma financial information (collectively, the "Projections"). The assumptions underlying the Projections are reasonable and the Projections are based upon good faith and reasonable estimates of the anticipated operating results and financial condition of the Company and its Subsidiaries. To the knowledge of the Company, no event has occurred and no circumstance has arisen since the date of such Projections which would render such Projections or the assumptions underlying the same no longer reasonable. (g) Compliance with Applicable Laws and Regulations; Consents. (i) The Company and each of its Subsidiaries is in material compliance with all federal, state and local laws, orders and regulations (including without limitation all laws, orders and regulations relating to environmental and pollution control, employee and public health and safety, zoning and land use, and fair wage and labor standards) and all requirements of all governmental bodies or agencies having jurisdiction over it, the conduct of its business, or the use of its properties and assets (including all premises occupied by it). (ii) The Company and each of its Subsidiaries has all franchises, licenses, Permits, certificates and authorizations from all federal, state, local and foreign governmental authorities, which are necessary for the operation of its businesses, as now conducted, owned and used and all such franchises, licenses, Permits, certificates and authorizations are now in full force and effect. Neither the Company nor any of its Subsidiaries has received any notice, not heretofore complied with, from any federal, state or local authority or any insurance company or inspecting body that any of its properties, facilities, equipment or business procedures or practices fails to comply with any applicable law, ordinance, regulation, license, permit, authorization, or any other requirement of any such authority or body. Nothing has come to the attention of the Company or its Subsidiaries to the effect that (A) any product, process, method, substance, part or other material presently contemplated to be sold by or employed by the Company or its Subsidiaries in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (B) there is pending or to the best of the Company's knowledge threatened any claim or litigation against or affecting the Company and its Subsidiaries contesting its right to sell and use any such product, process, method, substance, part or other material or (C) there is, or there is pending or to the best of the Company's knowledge proposed, any patent, invention, device, application or principle or any statue, law, rule, regulation, standard or code, the introduction, use or application of which would result in a Material Adverse Change. -24- (iii) Neither the nature of the Company or its Subsidiaries, or of its or their business or properties, nor any relationship between any of them and any other Person, nor any circumstance in connection with the transactions contemplated hereby and in the Notes, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Person or any governmental authority on the part of the Company or its Subsidiaries as a condition to the execution and delivery of this Agreement and the Notes, or the offer, issuance, sale or delivery of the Notes. (h) Tax Returns and Payments. All tax returns required to be filed by the Company and each of its Subsidiaries have been properly prepared, executed and filed. All taxes, assessments, fees and other governmental charges as to the Company and its Subsidiaries or any of their respective properties, income or sales which are due and payable have been paid. The reserves and provisions for taxes on the books of the Company and its Subsidiaries are adequate for all open years and for the current fiscal period and, to the knowledge of the Company, there is no additional assessment or basis for any material assessment for additional taxes (whether or not reserved against). (i) Subsidiaries. The Subsidiaries of the Company are listed on Schedule II attached hereto. (j) ERISA. The Company and each member of the Controlled Group are in substantial compliance with ERISA; except as set forth on Schedule VII attached hereto, there is no accumulated funding deficiency (whether or not waived) with respect to any Plan that is a pension plan as defined in Section 3(2) of ERISA; under each Plan subject to Title IV of ERISA, the present value of all accrued benefits and all benefit liabilities (as determined on the basis of the actuarial assumptions contained in the Plan's most recent actuarial valuation) does not exceed the current value of the assets of such Plan; and neither the Company nor any member of the Controlled Group has incurred or expects to incur any material liability to the PBGC (except for regular premium payments) in connection with any Plan. The Company and each member of the Controlled Group have made all contributions required in connection with any Multiemployer Plan on or before the applicable due date for such contributions. None of the Company or any member of the Controlled Group has terminated or withdrawn from (in a complete withdrawal as defined in Section 4203 of ERISA or a partial withdrawal as defined in Section 4204 of ERISA), or is aware of any withdrawal liability (as defined in Section 4201 of ERISA) assessed or reasonably likely to be assessed against the Company or any member of the Controlled Group with respect to, any Multiemployer Plan. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will involve a "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which is not exempt under Section 408 of ERISA or under Section 4975 of the Code. (k) Transactions with Interested Persons. Except as set forth in the Company's report on Form 10-K filed with the Commission for the year ended December 31, 1996, to the knowledge of the Company, as of the date hereof, no officer or director of the Company, or their respective spouses or children, owns directly or indirectly on an individual or joint basis, any material interest in, or serves as an officer or director of, any customer, -25- competitor or supplier of the Company, or any organization other than a Subsidiary or Affiliate of the Company which has a contract or arrangement with the Company. (l) Securities Act. Neither the Company nor any of its Subsidiaries, nor any agent acting on its behalf has, directly or indirectly, taken or will take any action which would subject the issuance of the Notes to the registration and prospectus delivery requirements of the Securities Act, or any securities or Blue Sky law of any applicable jurisdiction. (m) Regulation G, Etc. Neither the Company nor any of its Subsidiaries owns any "margin security" as defined in Regulation G (12 C.F.R. Part 207) of the Board of Governors of the Federal Reserve System (herein called a "margin security"). The proceeds of the sale of the Notes hereunder will be used solely for the purposes set forth in Section 6.1(c) hereof. The stock of each Subsidiary is not a margin security and none of the proceeds of this transaction will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin security or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of said Regulation G. Neither the Company, nor any of its Subsidiaries, nor any agent acting on behalf of the foregoing has taken or will take any action which might cause this Agreement, the Notes or the Warrants to violate Regulation G, T, U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934. (n) Solvency. With respect and after giving effect to the transactions contemplated hereby (1) the aggregate fair value of all of the assets and properties of the Company is greater than the total amount of its liability on claims, including contingent claims, and the aggregate present fair salable value of its assets as a going concern is greater than the amount that will be required to pay its probable liability on its Debts, including contingent liabilities, as they become absolute and matured, (2) the Company does not have, and has no reason to believe it will have, unreasonably small capital with which to conduct its business, and the Company does not intend to incur, and does not believe that it is incurring, debts beyond its ability to pay as they mature, and (3) no transfer or conveyance has been or will be made, or obligation incurred, by the Company (A) with intent to hinder, delay or defraud any present or future creditor or (B) to delay or defraud any present or future creditor or (C) in contemplation of insolvency and with a design to prefer one or more creditors to the exclusion in whole or in part of others. (o) Hazardous Substance. (i) The Purchaser has previously received environmental reports dated February 4, 1997 prepared by Dames & Moore (the "Environmental Reports") for premises operated by Drew Shoe Corporation located at 30 Forest Rose Avenue, Lancaster, Ohio, and 252 Quarry Road, Lancaster, Ohio. Except as set forth in the Environmental Reports: (A) neither the Company nor any of its Subsidiaries (the "Subject Companies") is or has in the past been in violation of any Hazardous Substance Law, which violation could result in a material liability to any of the Subject Companies or could reasonably be expected to have a Material Adverse -26- Effect: (B) none of the Subject Companies nor, to the best knowledge of the Company, any third party has used, released, discharged, generated, manufactured, produced, stored, or disposed of in, on, under, or about any real property owned or leased by the Subject Companies, or transported thereto or therefrom, any Hazardous Substances that could reasonably be expected to subject the Subject Companies to any material liability under any Hazardous Substance Law; (C) there are no underground tanks, whether operative or temporarily or permanently closed, located on the real property owned or leased by any of the Subject Companies; (D) except for Hazardous Substances used (i) in the normal course of operations of the Company or any Subsidiary, and (ii) in compliance with all applicable Hazardous Substance Laws, there are no Hazardous Substances used, stored or present at, on or near any real property owned or leased by any of the Subject Companies except as disclosed in the Environmental Reports; and (E) to the best knowledge of the Company, there is or has been no condition, circumstance, action, activity or event that could form the basis of any violation of, or material liability to the Subject Companies under, any Hazardous Substance Law. (ii) Except as set forth in the Environmental Reports, to the best knowledge of the Company, there is no proceeding, investigation or inquiry by any Governmental Authority or any non-governmental third party with respect to the presence or release of Hazardous Substances in, on, from or to any of the real property owned or leased by any of the Subject Companies and no such proceedings are contemplated by any such Governmental Authorities or non-governmental third parties. (iii) Except as set forth in the Environmental Reports, the Company has no knowledge of any past or existing material violations of any Hazardous Substance Laws by any Person relating in any way to any of the real property owned or leased by any of the Subject Companies. (p) Litigation. Except as set forth on Schedule III attached hereto, there are no pending or, to the best of the Company's knowledge, threatened actions or proceedings of any kind, including actions or proceedings of or before any Governmental Authority, to which the Company or any Subsidiary is a party or is subject, or by which any of them or any of their properties are bound that, if adversely determined to or against the Company or any such Subsidiary could or could reasonably be expected to result in a Material Adverse Change, nor, to the best of the Company's knowledge, is there any basis for any such action or proceeding. (q) Labor Disputes and Acts of God. Neither the business nor the properties of the Company or any Subsidiary are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy, or other casualty (whether or not covered by insurance), materially and adversely affecting the business and properties or the operations of the Company or materially and adversely affecting the ability of any Subsidiary to perform it obligations. (r) Intellectual Property. The Company owns or has the right to use all patents, trademarks, service marks, trade names, copyrights, licenses and other rights, which are necessary for the operation of its business. All of the patents, trademarks, service marks and -27- copyright registrations and applications currently being used by the Company or any Subsidiary are listed on Schedule VI attached hereto. Nothing has come to the attention of the Company to the effect that (i) any material product, process, method, substance, part or other material presently contemplated to be sold by or employed by the Company in connection with its business will infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (ii) there is pending or threatened any claim or litigation against or affecting the Company contesting its right to sell or use any such product, process, method, substance, part or other material or (iii) there is, or there is pending or proposed, any patent, invention, device, application or principle or any statute, law, rule, regulation, standard or code which would prevent or inhibit or substantially reduce the projected revenues of, or otherwise materially adversely affect the business, condition or operations of, the Company. (s) Purchase Agreement. The Company has delivered to the Purchaser a true and correct copy of the Purchase Agreement and all exhibits, schedules, agreements and other documents executed and/or delivered in connection with the consummation of the transactions contemplated thereby. The representations and warranties of the Company set forth therein are hereby incorporated by reference, and the Purchaser may rely on such representations and warranties as if made directly to the Purchaser herein. (t) Bank One Agreement. The Company has delivered to the Purchaser a true and correct copy of the Bank One Agreement and all exhibits, schedules, agreements and other documents executed and/or delivered in connection with the consummation of the transactions contemplated thereby. The representations and warranties of the Company set forth therein are hereby incorporated by reference, and the Purchaser may rely on such representations and warranties as if made directly to the Purchaser herein. (u) Brokers, Finders. Except for Josephberg Grosz & Co. Inc., whose fees and expenses shall be paid solely by the Company, the Company has not retained any broker or finder in connection with the transactions contemplated by this Agreement so as to give rise to any claim for any brokerage or finder's commission, fee or similar compensation (v) Disclosure. Neither this Agreement, the Projections, nor any other document, financial statement or certificate furnished to the Purchaser, by or, to the knowledge of the Company, on behalf of the Company in connection with the transactions contemplated by this Agreement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein not misleading under the circumstances in which they were made at the time such statements are made. There is no fact known to the Company which the Company has not disclosed to the Purchaser which materially adversely affects or, so far as the Company can now reasonably foresee, will materially adversely affect the properties, business or financial or other condition of the Company or the ability of the Company or its Subsidiaries to perform its obligations hereunder. 6.2. Representations, Warranties and Covenants of the Purchaser. The Purchaser represents and warrants: (a) Brokers, Finders. The Purchaser has not retained any broker or finder in -28- connection with the transactions contemplated by this Agreement so as to give rise to any claim for any brokerage or finder's commission, fee or similar compensation. (b) Purchase for Investment. The Purchaser is an "Accredited Investor" and has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and the risks of this investment. The Purchaser is acquiring the Notes and the Warrants for its own account for investment purposes only and not with a view to the distribution or resale thereof. The Purchaser will not sell or transfer any of the Notes or the Warrants in violation of applicable federal, state or foreign securities laws. (c) Organization. The Purchaser is a limited liability company organized and existing under the laws of the State of Delaware. (d) Access to Information. Prior to the purchase of the Notes and the Warrants, the Purchaser had the opportunity to ask questions and receive answers from the Company and its representatives concerning the Company and the terms and conditions of the sale of the Notes and the Warrants. (e) Legend on Shares. The Purchaser acknowledges that the Shares issuable upon conversion of the Notes and exercise of the Warrants will not have been registered under the Securities Act and will bear a legend restricting their transferability in accordance with the Securities Act. 7. DEFINITIONS 7.1. Definitions. For the purpose of this Agreement, the following terms shall have the following meanings: "Accredited Investor" shall have the meaning assigned to such term in Rule 501(a) under the Securities Act. "Affiliate" means any Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company or any Subsidiary, and for each individual who is an Affiliate within the meaning of the foregoing, any other individual related to such Affiliate by consanguinity within the third degree or in a step or adoptive relationship within such third degree or related by affinity with such Affiliate or any such individual. A Person shall be deemed to control another person if the controlling Person owns 10% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Bank One" means Bank One, National Association. "Bank One Agreement" means that certain Loan and Security Agreement dated as of September 19, 1997 between Bank One and Drew Shoe Corporation. -29- "Bankruptcy Code" means Title 11 of the United States Code as now or hereinafter in effect, or any successor thereto. "Business Day" means a day other than Saturday or Sunday on which banks are open for business generally in New York. "Capitalized Lease Obligation" shall mean any lease obligation of a lessee which, in accordance with generally accepted accounting principles (including without limitation Statement of Financial Accounting Standards No. 13), is or should be capitalized on the books of the lessee. For purposes hereof, the amount of such obligation is the capitalized amount thereof determined in accordance with such principles. "Capital Stock" shall mean any class or series of capital stock of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any success statue, and the rules and regulations promulgated thereunder. "Commission" means the Securities and Exchange Commission, or any governmental body succeeding to the functions of the Commission. "Common Stock" means the common stock of the Company, $.01 par value per share. "Consolidated or consolidated", with reference to any term defined herein, shall mean that term as applied to the accounts of the Company and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. "Consolidated Cash Flow" shall mean, with respect to the Company and its consolidated Subsidiaries, for any accounting period, the sum of the following (each determined on a consolidated basis): (i) Consolidated Net Income (or net deficit, as the case may be) for such period, plus (ii) the aggregate depreciation of fixed assets for such period, plus (iii) the aggregate of deferred taxes for such period, plus (iv) interest expense for such period and (v) amortization of goodwill, franchises, covenants not to compete and all other Intangible Assets for such period. "Consolidated Debt Service" shall mean for the Company and its consolidated Subsidiaries, for any accounting period, the sum of (i) interest payable on, and amortization of debt discount in respect of, all Debt of the Company and its consolidated Subsidiaries during such fiscal quarter(s), plus (ii) the principal amounts of all such Debt payable during such fiscal quarters; provided, however, that for purposes of making computations under Section 4.1(l), there shall be excluded any non-cash interest expense otherwise required to be charged pursuant to Topic D-60 of the Emerging Issues Task Force of the American Institute of Certified Public Accountants. "Consolidated Indebtedness" means all Indebtedness of the Company and its Consolidated Subsidiaries then outstanding, determined on a consolidated basis; provided, -30- however, that for purposes hereof, (1) the aggregate principal amount of the Notes and the Other Notes as of the date hereof shall be deemed to be Debt in the amount of $4,800,000; and (2) for the purposes of making computations under Section 4.1(m), the warrants issued as of the date hereof to the holders of Notes and Other Notes shall be recorded on the balance sheet of the Company as equity at an aggregate value of $1,200,000, which amount shall be amortized on a straight-line basis over a period of sixty (60) months. "Consolidated Net Income" means net income of the Company and its Consolidated Subsidiaries, determined in accordance with generally accepted accounting principles; provided, however, that in computing Consolidated Net Income there shall be excluded any charge to income resulting from the issuance of 3,780,500 options to purchase Common Stock of the Company listed on Schedule I-A-2 attached hereto pursant to the New Option Plan. "Consolidated Subsidiary" shall mean at any time any Subsidiary of the Company which is or should be consolidated with the Company at such time for purposes of Company consolidated financial statements, in accordance with generally accepted accounting principles as in effect on September 1, 1997. "Consolidated Tangible Net Worth" means at any date the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries, less their consolidated Intangible Assets, all determined as of such date; provided, however, that for purposes hereof, (1) the aggregate principal amount of the Notes and the Other Notes as of the date hereof shall be deemed to be Debt in the amount of $4,800,000; (2) for the purposes of making computations under Section 4.1(m), the warrants issued as of the date hereof to the holders of Notes and Other Notes shall be recorded on the balance sheet of the Company as equity at an aggregate value of $1,200,000, which amount shall be amortized on a straight-line basis over a period of sixty (60) months; and (3) in computing Consolidated Tangible Net Worth there shall be excluded any charge tostockholders' equity resulting from the issuance of 3,780,500 options to purchase Common Stock of the Company listed on Schedule I-A-2 attached hereto pursant to the New Option Plan "Controlled Group" means a controlled group of entities of which the Company or any Subsidiary is a member within the meaning of Section 41(b) of the Code, any group of entities under common control with the Company or any Subsidiary within the meaning of Section 414(c) of the Code or any affiliated service group of which the Company or any Subsidiary is a member within the meaning of Section 414(m) of the Code. "Convertible Preferred Stock" shall mean up to 175 shares of convertible preferred stock issued by BCA Services, Inc., a Subsidiary of the Company, which shares are convertible into up to 7,000,000 shares of Common Stock of the Company. "Convertible Securities" means all options, right to subscribe for, or warrants to acquire common stock of the Company, and any securities exchangeable for or convertible into Common Stock. -31- "Debt" of any Person shall mean at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all Debt of others guaranteed by such Person and (v) all obligations of such Person to reimburse issuers of letters of credit, surety bonds or similar obligations for payments made to repay, purchase or otherwise retire any Debt referred to in the foregoing clauses (i) through (iv). "Default" means any event, act or condition which with notice, or lapse of time, or both, would constitute an Event of Default. "Environmental Claim" means any and all material obligations, liabilities, losses, administrative, regulatory or judicial actions, suits, demands, decrees, claims, liens, judgments, warning notices, notices of noncompliance or violation, investigations, proceedings, removal or remedial actions or orders, or damages (foreseeable and unforeseeable, including consequential and punitive damages) and penalties, relating in any way to any Hazardous Substance Law or any Permit issued under any such Hazardous Substance Law (hereafter "Claims"), including (a) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable hazardous Substance Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting form Hazardous Substances or arising from alleged injury or threat of injury to health, safety or the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means (a) each trade or business (whether or not incorporated) which together with the Company or a Subsidiary would be deemed to be a "single employer" within the meaning of Section 4001 of ERISA and (b) any member (whether or not incorporated) of (i) a group of which the Company or any of its Subsidiaries is a member or which is under common control with the Company or any of its Subsidiaries within the meaning of Sections 414(b) or (c) of the Code or (ii) of any affiliated service group within the meaning of Section 414(m) of the Code which includes the Company or any Subsidiary. "Existing Option Plans" means, collectively (a) the Company's 1995 Stock Option Plan, (b) the Company's 1989 Option Plan, and (c) the Company's 1989 Non-Statutory Plan, in each case as in effect as of the date hereof. "GAAP" means generally accepted accounting principles, as in effect from time to time, consistently applied except for changes required by changes in such generally accepted accounted principles. "Governmental Authority" means any national, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including any arbitrator with authority to bind a party at law). -32- "Governmental Rule" means any law, treaty, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Guarantee" means any agreement, except for endorsements of negotiable instruments for deposit or collection in the ordinary course of business, by which any Person directly or indirectly assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assure any creditor of such other Person against loss. "Hazardous Substances" means all substances, chemicals (including petroleum products), materials, wastes, pollutants or contaminants that are listed, characterized or deemed in or under any Governmental Rule as harmful to human health or the environment, including (statutory acronyms and abbreviations having the meaning given them in the definition of "Hazardous Substances Laws") substances defined as "hazardous substances," "pollutants" or "contaminants" in Section 101 of the CERCLA; those substances defined as "hazardous waste, " "hazardous materials" or "regulated substances" by the RCRA; those substances designated as a "hazardous substance" pursuant to Section 311 of the CWA; those substances defined as "hazardous materials" in Section 103 of the HMTA; those substances regulated as a hazardous chemical substance or mixture or as an imminently hazardous chemical substance or mixture pursuant to Sections 6 or 7 of the TSCA; those substances defined as "contaminants" by Section 1401 of the SDWA, if present in excess of permissible levels; those substances regulated by the Oil Pollution Act; those substances defined as a pesticide pursuant to Section 2(u) of the FIFRA; those substances defined as a source, special nuclear or by-product material by Section 11 of the AEA; those substances defined as "residual radioactive material" by Section 101 of the UMTRCA; those substances defined as "toxic materials" or "harmful physical agents" pursuant to Section 6 of the OSHA); those substances defined as hazardous wastes in 40 C.F.R. Part 261.3; those substances defined as hazardous waste constituents in 40 C.F.R. Part 260.10, specifically including Appendix VII and VIII of Subpart D of 40 C.F.R. Part 261; those substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and 302.4; those substances defined as hazardous substances or hazardous materials in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials, hazardous substances, or toxic substances in 29 C.F.R. Part 1910; those substances falling within any of the above-quoted definitions in any other applicable federal or state environmental law; and in each case in the regulations adopted and publications promulgated pursuant to said laws, whether or not such regulations or publications are specifically referenced herein. "Hazardous Substances Law" means any Governmental Rule relating to the protection of human health or the environment, including: (i) the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA"); (ii) the Federal Water Pollution control Act (33 U.S.C. Section 1251 et -33- seq.) ("Clean Water Act" or "CWA"); (iii) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"); (iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.) ("AEA"); (v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) ("CAA"); (vi) the Emergency Planning and Community Right to Know Act (42 U.S.C. Section 11001 et seq.) ("EPCRA"); (vii) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.) ("FIFRA"); (viii) the Oil Pollution Act of 1990 (P.L. 101-380. 104 Stat. 486); (ix) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.) ("SDWA"); (x) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C. Section 1201 et seq.) ("SMCRA"); (xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.) ("TSCA"); (xii) the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.) ("HMTA"); (xiii) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. Section 7901 et seq.) ("UMTRCA"); (xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) ("OSHA"); (xv) all other Federal, state and local Governmental Rules which govern hazardous Substances, and the regulations adopted and publications promulgated pursuant to all such foregoing laws. "Indebtedness" means, as to any Person, without duplication: (a) any liability of such Person (i) for borrowed money, or under any reimbursement obligation relating to a letter of credit, surety bond or similar arrangement, or (ii) evidenced by a bond, note, debenture or similar instrument (including a purchase money obligation), including given in connection with the acquisition of any businesses, properties or assets of any kind (other than a trade payable or other current liability arising in the ordinary course of business which is not 90 days overdue (unless being contested by the Company in good faith)), or (iii) for the payment of money relating to a -34- Capitalized Lease Obligation; or (iv) in respect of indebtedness, obligations and liabilities secured by any lien on property owned by such Person, whether or not such indebtedness, obligations or liabilities have been assumed by such Person; (b) any liability of others described in the preceding clause (a) in respect of which such Person has made a Guarantee; and (c) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clauses (a) and (b) above. "Intangible Assets" means the amount (to the extent reflected in determining such consolidated stockholders' equity) of (i) all investments in unconsolidated Subsidiaries, (ii) all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible items. "Legal Requirements" means, as to any Person, the certificate or articles of incorporation, bylaws or other organizational or governing documents of such Person, any Governmental Rule and any requirement under a Permit, in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Material Adverse Change" means any circumstance or event (including but not limited to any change or proposed change in laws, rules, regulations, court orders and decrees, and orders of any governmental agency with respect to the environment, employee benefits and fair labor standards and wages) which (i) has had or could reasonably be anticipated to have any adverse effect on the validity or enforceability of this Agreement, the Notes or the Warrants in any material respect (ii) has had or could reasonably be anticipated to have an adverse effect on the financial condition, business, results of operations or properties of the Company in any material respect or (iii) has impaired or could reasonably be anticipated to impair the ability of the Company to fulfill its obligations under any such agreement or instrument in any material respect. "Multiemployer Plan" means any employee benefit plan that is a "multiemployer plan" within the meaning of Section 3(37) of ERISA and to which the Company, any subsidiary or any Controlled Group member has or had any obligation to contribute. "Net Worth" shall mean the stockholders' equity of the Company, except that there shall be deducted any amount of treasury stock (to the extent included therein). "New Option Plan" shall mean a stock option plan containing customary terms and conditions and reasonably acceptable to the Purchaser, which is approved by the Board of Directors of the Company and the shareholders of the Company, pursuant to which the Company shall be authorized to issue options to purchase up to an aggregate of 4,500,000 shares of Common Stock. -35- "Note" has the meaning specified in Section 1.1. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "Permit" means any action, approval, consent, waiver, exemption, variance, franchise, order, permit, authorization, right or license of or from a Governmental Authority. "Permitted Debt" means (i) the Indebtedness evidenced by the Notes, (ii) Indebtedness of the Company in principal amount not to exceed $1,000,000 on terms substantially identical to the Notes, (iii) Indebtedness of Drew Shoe Corporation ("Drew"), a subsidiary of the Company, in principal amount not to exceed $6,000,000, to Bank One pursuant to the Bank One Agreement, (iv) Debt listed on Schedule IV attached hereto, (v) Debt of Drew permitted to be incurred pursuant to the Bank One Agreement; and (vi) any additional Indebtedness of the Company and in Subsidiaries in the amounts permitted to be incurred pursuant to Section 4.2(e) hereof. "Permitted Investments" means (a) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of or interest on which are fully guaranteed by the United States of America: (b) obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Export-Import Bank of the United States, Federal Housing Administration or other agency or instrumentality of the United States; (c) repurchase agreements with financial institutions or savings and loan associations having a combined capital surplus of at least $500,000,000 fully secured by collateral security described in clauses (a) or (b) of this definition and continuously having a market value of at least equal to the amount so invested; (d) interest-bearing demand or time deposits (including certificates of deposit) which are either (i) insured by the Federal Deposit Insurance Corporation, or (ii) held in banks and savings and loan associations, having general obligations rated at least "AA" or equivalent by S&P or Moody's, or if not so rated, secured at all times, in the manner and to the extent provided by law, by collateral security described in clauses (a) or (b) of this definition, of a market value of no less than the amount of moneys so invested; (e) commercial paper rated (on the date of acquisition thereof) at least A-1 or P-1 or equivalent by S&P or Moody's, respectively (or an equivalent rating by another nationally recognized credit rating agency of similar standing if neither of such corporations is then in the business of rating commercial paper), maturing not more than 90 days from the date of creation thereof; (f) any corporate evidence of indebtedness rated at least "A-" or equivalent by S&P or Moody's, maturing not more than 90 days from the date of creation thereof; (g) any advances, loans or extensions of credit or any stock, bonds, notes, debentures or other securities as the Purchaser may from time to time approve in its sole and absolute discretion; and (h) investments of debt or equity in any Subsidiary. "Person" means any corporation, natural person, firm, joint venture, partnership, trust, unincorporated organization, enterprise, government or any department or agency of any government. -36- "Plan" shall mean each employee benefit plan, as defined in Section 3(3) of ERISA (other than a Multiemployer Plan and including terminated Plans) which currently: (1) is or has been maintained for employees of the Company, any subsidiary or of any Controlled Group member or (2) to which the Company, any Subsidiary or any Controlled Group member made or was required to make contributions. "Purchase Agreement" means that certain Stock Purchase Agreement dated March 20, 1997 among the Company, Charles Schuyler and Frank Shyjka. "Release" means disposing, discharging, injecting, spilling, leaking, leaching, dumping, pumping, pouring, emitting, escaping, emptying, seeping, placing and the like, into or upon any land or water or air, or otherwise entering into the environment. "Reportable Event" means any event set forth in Section 4043(b) of ERISA or the regulations issued thereunder for which the reporting requirement has not been waived. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" shall have the meaning assigned to that term in the Subordination Agreement. "Share" means a share of Common Stock. "Subordination Agreement" means that certain Subordination Agreement dated as of September 19, 1997 between the Purchaser and Bank One. "Subsidiary" shall mean any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by the Company, by the Company and one or more other Subsidiaries, or by one or more other Subsidiaries. "Termination Event" means the occurrence of any one or more of the following events: (1) a Reportable Event occurs with respect to any Title IV Plan which could reasonably be expected to result in liability of the Company in excess of $250,000; (2) there occurs any action causing the termination of any Plan under section 4041(c) or of any Multiemployer Plan under Section 4041A of ERISA for which the Company or any ERISA Affiliate incurs liability to the PBGC in excess of $250,000; (3) as of the last of any plan year, the present value of the benefit liabilities under any Title IV Plan, as determined by such Plan's independent actuaries in accordance with such Plan's most recent actuarial valuation, exceeds the value as of such date, as determined by such actuaries, of all assets of such Plan by $1,000,000; (4) the Company or any other ERISA Affiliate incurs a complete or partial withdrawal from any Multiemployer Plan; or (5) a Lien arises or security is required to be provided to any Plan maintained by the Company or any ERISA Affiliate. -37- "Trading Day" means (i) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed, (ii) if the Common Stock is not listed on a stock exchange but sale prices or bid and asked quotations of the Common stock are reported on an automated quotation system, a day on which such prices or quotations are reported on the principal automated quotation system on which sale of the Common Stock are reported, or (iii) if the foregoing provisions are inapplicable, a day on which quotations are reported by National Quotation Bureau Incorporated. "Warrant Agreement" means that certain Warrant Agreement of even date herewith between the Purchaser and the Company in the form attached as Exhibit C hereto. "Warrants" means the warrants issued to the Purchaser or its nominee pursuant to the Warrant Agreement. 7.2. Accounting Definitions and Calculations; Change in Asset Allocations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. Calculations and determinations of financial terms hereunder and the preparation of financial terms hereunder and the preparation of financial statements to be furnished to the Purchaser pursuant hereto shall be made and prepared, both as to classification of items and as to amount, in accordance with GAAP except as otherwise specified herein. If any changes in accounting principles or practices from those used in the preparation of the audited financial statements referred to in Section 6.1(a) are hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or any successor thereto or agencies with similar functions), which results in a change in the method of accounting in the financial statements required to be furnished to the Purchaser hereunder or in the calculation of financial covenants, standards or terms contained herein, which change in any such case adversely affects the Purchaser hereunder, the parties hereto agree to enter into negotiations to amend such provisions so as equitably to reflect such changes to the end that the criteria for evaluating the Company's financial condition and performance will be the same after such changes as they were before such changes; and if the parties fail to agree on the amendment of such provisions, the Company will continue to furnish financial statements in accordance with applicable accounting principles and practices or allocations or methods, as the case may be, in effect immediately prior to such changes and to perform all financial covenants and observe all financial standards and terms in accordance with applicable accounting principles and practices in effect immediately prior to such changes. 8. MISCELLANEOUS 8.1. Note Payments. The Company agrees that, as long as the Purchaser shall hold any Note, it will make payments of principal thereof and, unless the Company shall have made an Interest Election, interest thereon, which comply with the terms of this Agreement, by transfer of immediately available funds for credit to such account or in such other manner as the Purchaser may designate in writing, notwithstanding any contrary provision herein or in any Note with respect to the place of payment. The Purchaser agrees that, before disposing of any -38- Note, it will make a notation thereon of all principal payments previously made thereon and of the date to which interest thereon has been paid, and will notify the Company of the name and address of the transferee of such Note. The Company agrees to afford the benefits of this Section 8.1 to any Person which is the direct or indirect transferee of any Note purchased by the Purchaser hereunder. 8.2. Expenses. The Company agrees to pay, and save the Purchaser harmless against liability for the payment of, (a) the cost of (i) any taxes (including any interest and penalties in respect thereof) or filing fees payable by the Purchaser (other than taxes based upon the Purchaser's net income or profits) on or with respect to the transactions contemplated by this Agreement; and (ii) the reasonable fees, expenses and disbursements of the Purchaser's counsel, accountants and other advisors and consultants incurred in connection with the preparation of this Agreement, the other agreements described herein and the Closing hereunder; (b) all reasonable out-of-pocket expenses (including reasonable attorneys' fees and costs) incurred by the Purchaser in connection with (i) amendments, modifications, approvals, consents or waivers hereto or hereunder and the enforcement of this Agreement and the Notes against the Company, or (ii) the administration thereof after the occurrence of an Event of Default or the occurrence of any event which after the giving of notice or lapse of time or both could constitute an Event of Default. The Company further agrees to indemnify and hold harmless the Purchaser as well as its members, shareholders, directors, partners, agents, officers, subsidiaries and affiliates, from and against all damages, losses, judgments, settlement payments, obligations, liabilities, claims, actions or causes of action, and reasonable costs and expenses incurred or required to be paid by an indemnified party by reason of or resulting from the transactions contemplated hereby. In any investigation, proceeding or litigation, or the preparation therefor, the Purchaser shall be entitled to select its own counsel and, in addition to the foregoing indemnity, the Company agrees to pay promptly the reasonable fees and expenses of such counsel (but not more than one law firm in any one such case). The covenants of this Section 8.2 shall survive payment or satisfaction of payment of amounts owing with respect to the Notes. 8.3. Consent to Amendments. Any provision of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if the Company shall obtain the written consent to such amendment, action or omission to act given by the holder or holders of in excess of 66 2/3% of the then outstanding principal amount of the Notes, except that, without the written consent of the holder or holders of all the Notes at the time outstanding and affected thereby, no amendment to this Agreement shall change the maturity of any Note, or change the principal of, or the rate or time of payment of interest or any premium payable with respect to, any Note, or reduce the proportion of the principal amount of the Notes required with respect to any consent, or alter or amend this Section 8.3 No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such note. For purposes of the foregoing, Notes which are "outstanding" do not include Notes owned by the Company or any of its Subsidiaries or any Affiliate thereof. As used herein and in the Notes, the term "this Agreement" and references thereto shall mean this Agreement as it may, from time to time, be amended or supplemented. -39- 8.4. Form, Registration, Transfer and Exchange of Notes; Lost Notes. The Company shall keep at its principal office a register in which the Company shall provide for the registration of the Notes and of transfers of the Notes. Upon surrender for registration of transfer of any Note at the office of the Company, the Company shall, at its expense, execute and deliver one or more new Notes of like tenor and of a like aggregate remaining principal amount, which Notes will be registered in the name of the designated transferee or transferees. Whenever any Notes are so surrendered for exchange, the Company shall, at its expense, execute and deliver the Notes which the Noteholder making the exchange is entitled to receive. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer duly executed, by the holder of such Note or his attorney duly authorized in writing. Any Note or Notes issued in exchange for any Note or upon transfer thereof shall carry the rights to unpaid interest and interest to accrue which were carried by the Note so exchanged or transferred, so that neither gain nor loss of interest shall result from any such transfer or exchange. Upon receipt of written notice from the Purchaser or other evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Note held by the Purchaser and, in the case of any such loss, theft or destruction, upon receipt of the Purchaser's indemnity agreement, or other indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Note, the Company will make and deliver a new Note, of like tenor, in lieu of the lost, stolen destroyed or mutilated Note. 8.5. Provisions Applicable if Any Note Sold. The Purchaser shall not sell or otherwise transfer any Note or any part thereof in violation of the Securities Act or the Blue Sky laws of any applicable jurisdiction. In the event that the Purchaser shall otherwise sell or transfer any Note or any part thereof to any Person other than the Company, the following provisions shall apply: (a) If any Note shall have been transferred to another holder pursuant to Section 8.5 and such holder shall have designated in writing the address to which communications with respect to such Note shall be mailed, all notices, certificates, requests, statements and other documents required or permitted to be delivered to the Purchaser by any provision hereof shall also be delivered to each such holder. (b) All interest payments and payments of principal shall be made and applied pro rata on all Notes outstanding including, for the purpose of this Section 8.5(b) only, all Notes acquired by the Company or any Subsidiary or Affiliate other than by prepayment in accordance with the terms of this Agreement. 8.6. Persons Deemed Owners. Prior to due presentment for registration of transfer, the Company may treat the Person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. 8.7. Survival of Representations, Warranties, Agreements and Statements. All -40- representations, warranties, agreements and statements contained herein or made in writing by the Company in connection herewith shall survive the execution and delivery of this Agreement and of the Notes, regardless of any investigation made by the Purchaser or on its behalf. 8.8. Successors and Assigns. All covenants and agreements in this Agreement contained by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 8.9. Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon any other communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and either shall be delivered in (i) person with receipt acknowledged, (ii) by a nationally registered overnight delivery service, (iii) by registered or certified mail, return receipt requested, postage prepaid, or (iv) by telecopy and confirmed by telecopy answerback addressed as follows: If to the Purchaser, at: IMPLEO LLC c/o Wexford Management LLC 411 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Mark L. Plaumann Telephone: (203) 862-7000 Telecopier: (203) 862-7490 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, New York 10036 Attention: Stephen B. Selbst, Esq. Telephone: (212) 704-0100 Telecopier: (212) 704-0196 -41- If to the Company, at: BCAM International, Inc. 1800 Walt Whitman Road Melville, New York 11747 Attention: Michael Strauss, President Telephone: (516) 752-7530 Telecopier: (516) 752-3558 With a copy to: Ruskin, Moscou, Evans & Faltischek, PC 170 Old Country Road Mineola, New York 11501 Attn: Norman Friedland, Esq. Telephone: (516) 663-6600 Telecopier: (516) 663-6642 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 8.10. Headings. The headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 8.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT MAY NOT BE CHANGED ORALLY BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT OF ANY WAIVER, CHANGE, MODIFICATION OR DISCHARGE IS SOUGHT. 8.12. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original. -42- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above. BCAM INTERNATIONAL, INC. By /s/ Michael Strauss ------------------------- Title: President IMPLEO LLC By /s/ Mark L. Plaumann ------------------------- Title: Vice President -43- SCHEDULE I A. Outstanding Subscriptions, Warrants, Options, Calls, etc.
Date of Agreement Number of Shares of Conversion Price or Instrument Holder or Holders Expiration Date Common Stock Covered or Warrant Price, Etc. ------------- ----------------- --------------- -------------------- ----------------------
B. Registration Agreements
Number of Demand Date of Agreement Holder or Holders Expiration Date Securities Covered Registrations ----------------- ----------------- --------------- ------------------ -------------
SCHEDULE II SUBSIDIARIES
Name and Ownership Jurisdiction of Company's Percentage Percentage of Name Organization Form of Entity Ownership Other Owners ---- ------------ -------------- --------- ------------
SCHEDULE III LITIGATION 1. Pending Litigation ------------------ Court Nature of Claim Asserted Status of Case ----- ------------------------ -------------- 2. Threatened Litigation --------------------- Nature of Claim Asserted ------------------------ SCHEDULE IV PERMITTED INDEBTEDNESS Creditor Amount of Debt Interest Rate Maturity Date - -------- -------------- ------------- ------------- SCHEDULE V CONTINGENT LIABILITIES NONE SCHEDULE VI INTELLECTUAL PROPERTY SCHEDULE VII ERISA Accumulated Funding Deficiencies EX-99.3 4 REGISTRATION AGREEMENT REGISTRATION AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into as of September 19, 1997, between BCAM INTERNATIONAL, INC., a New York corporation (the "Company"), and IMPLEO LLC (the "Purchaser"). WHEREAS, concurrently herewith the Company and the Purchaser are entering into that certain Note Purchase Agreement (the "Note Purchase Agreement"), pursuant to which the Purchaser is purchasing $5,000,000 of the Company's 10%/13% convertible notes; and WHEREAS, to induce the Purchaser to enter into the Note Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. NOW, THEREFORE, in consideration of the premises, and subject to the terms and conditions hereof, the parties hereby agree as follows: 1. DEFINITIONS Unless the context otherwise requires, (i) the following terms shall have the following meanings when used in this Agreement, (ii) any capitalized terms used in this Agreement and not defined in this Article 1 but which is defined in the Note Purchase Agreement shall have the meaning set forth therein, (iii) terms stated in the singular shall include the plural and vice versa, (iv) pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter, and (v) all section, article and exhibit references in this Agreement, unless otherwise stated, are to the respective section of, or exhibit to this Agreement. 1.1. "Business Day" means any day other than a day on which commercial banks are permitted or required to close for business in New York, New York. 1.2. "Commission" means the Securities & Exchange Commission and any successor agency thereto. 1.3. "Common Stock" means the Company's Common Stock, par value $.01 per share. 1.4. "Equity Securities" means the Company's Common Stock and any options, rights or warrants to subscribe for shares of Common Stock, and any securities convertible into or exchangeable for shares of Common Stock. 1.5. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.6. "Holder" means any Person who owns at least $100,000 principal amount of the Notes or owns at least that number of shares of Common Stock received upon the conversion of $100,000 principal amount of the Notes where such shares were received upon conversion of the Notes. 1.7. "NASD" means the National Association of Securities Dealers, Inc. 1.8. "Other Holder" means a Person who has the right to require the Company to effect registration of Equity Securities under the Securities Act pursuant a written agreement in effect as of the date hereof. 1.9. "Person" means an individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. 1.10. "Registrable Securities" means, collectively, the shares of Common Stock issuable upon (a) conversion of the Notes, and (b) the exercise of the Warrants. 1.11. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, (a) all registration and filing fees, (b) fees and expenses associated with filings required to be made with the NASD, (c) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters or selling Holders in connection with blue sky qualifications of the Equity Securities and determination of their eligibility for investment under the laws of such jurisdictions designated by the managing underwriter or underwriters, if any), (d) printing expenses (including expenses of printing certificates for the Equity Securities in a form eligible for deposit with Depository Trust Company and of printing prospectuses), (e) messenger, telephone and delivery expenses, (f) fees and expenses of the Company's accountants, (g) fees and disbursements of counsel for the Company and for the selling Holders (subject to the provisions of Section 5.1 hereof), and (h) out-of-pocket fees and expenses of underwriters (excluding discounts, commissions or fees of underwriters relating to the distribution of Equity Securities of the selling Holders). 1.12. "SEC" means the Securities and Exchange Commission. 1.13. "Securities Act" means the Securities Act of 1933, as amended. 1.14. "Underwritten Offering" means a registration in which Equity Securities of the Company are sold to an underwriter for reoffering to the public. 2. DEMAND AND INCIDENTAL REGISTRATION RIGHTS 2.1. Registration on Request. (a) At any time after the date hereof (the "Registration Date"), upon the written request of any Holder or Holders holding an aggregate of at least 625,000 shares of Common Stock or 500,000 Warrants (625,000 shares of Common Stock or 500,000 Warrants being hereinafter referred to as "Minimum Securities"), that the Company effect the registration under the Securities Act of all or part of the Registrable Securities held by such Holder or Holders, and specifying the intended method or methods of disposition of such Registrable Securities, the Company will promptly give written notice of such requested registration by registered mail to all Holders; provided, however, that the number of Minimum Securities shall be increased or decreased, proportionately, if the Company shall (x) subdivide the number of outstanding shares of Common Stock or Warrants into a greater number of shares or warrants, or (y) if the Company shall reduce the number of outstanding shares of -2- Common Stock or Warrants by combining such number into a small number of shares or warrants. Thereupon, the Company will use its best efforts to effect (at the earliest possible date and if possible within 60 days after the giving of such written notice by the Company) the registration, under the Securities Act, of: (i) the Registrable Securities which the Company has been so requested to register by such Holder or Holders, for disposition in accordance with the intended method of disposition stated in such request, and (ii) all other Registrable Securities which the Company has been requested to register by a Holder or Holders by written request delivered to the Company within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities), all to the extent required to permit the disposition in accordance with the intended methods thereof as aforesaid of the Common stock so to be registered, provided, however, that the Company shall not be required under this Section 2.1 to effect an Underwritten Offering. 2.2. The Company will pay all Registration Expenses in connection with all demand registrations of Registrable Securities effected by the Company pursuant to this Section 2.1. 2.3. Incidental Registration. (a) If the Company at any time proposes to register any of its Equity Securities under the Securities Act, whether for sale for its own account or otherwise, on a form and in a manner which would permit registration of Common Stock for sale to the public under the Securities Act, it will at such time give prompt written notice to all Holders of its intention to do so, describing such Equity Securities and specifying the form and manner and the other relevant facts involved in such proposed registration, and upon the written request of any Holders delivered to the Company within thirty (30) days after the giving of any such notice (which request shall specify the Common Stock intended to be disposed of by such Holders and the intended method of disposition thereof), the Company will use its best efforts to effect the registration under the Securities Act of all Common Stock which the Company has been so requested to register by Holders, to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Common Stock so to be registered; provided, however, that: (i) if, at any time after giving such written notice of its intention to register any of its Equity Securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such Equity Securities, at its sole election, the Company may give written notice of such determination to each Holder and thereupon shall be relieved of its obligation to register any Common Stock in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith as provided in paragraph (c) of this Section 2.2), without prejudice, however, to the rights of any one or more Holders to request that such registration be effected as a registration under Section 2.1; -3- (ii) if (A) the registration so proposed by the Company involves an Underwritten Offering of the Equity Securities so being registered, whether for sale for the account of the Company or otherwise, and (B) the managing underwriter of such Underwritten Offering shall advise the Company in writing that, in its opinion, the distribution of all or a specified portion of such Holders' Common Stock by such underwriters will materially and adversely affect the distribution of such Equity Securities by such underwriters (which opinion shall state the reasons therefor), then the Company will promptly furnish each such Holder with a copy of such opinion and shall include Equity Securities in such registration to the extent of the number which the Company is so advised can be sold in such offering, determined as follows: (1) if such registration as proposed by the Company is in response to a request from a Holder as provided in Section 2.1, (x) first, the Equity Securities proposed to be sold in such registration by Holders making such request under Section 2.1, and (y) second, the Equity Securities requested to be included in such registration by Other Holders and the Company (allocated among such Other Holders and the Company as they may agree); (2) if such registration as proposed by the Company is solely a primary registration of its Equity Securities, (x) first, the securities the Company proposes to sell, and (y) second, Equity Securities requested to be included in such registration, pro rata among the Holders and the Other Holders requesting such registration; and (3) if such registration was requested by Other Holders, (x) first, the Equity Securities held by the Other Holders initiating such registration, allocated among the Other Holders, on such basis as shall have been agreed upon by such Other Holders, (y) second, Equity Securities requested to be included in such registration by Holders pursuant to Section 2.2, and (z) third Equity Securities proposed to be included by the Company; (iii) the Company shall not be obligated to effect any registration of Common Stock under this Section 2.2 incidental to the registration of any of its Equity Securities in connection with mergers, acquisitions, exchange offers, dividend reinvestment plans, employee stock ownership plans or stock option plans, thrift plans, pension plans or other employee benefit plans. (b) No registration of Common Stock effected under this Section 2.2 shall relieve the Company of its obligation to effect registrations of Common Stock pursuant to Section 2.1. (c) The Company will pay all Registration Expenses in connection with each registration of Common Stock requested pursuant to this Section 2.2. 3. HOLD-BACK AGREEMENTS 3.1. Restrictions on Public Sale by Holders of Securities. (a) Each Holder agrees, if requested by the Company and the managing underwriter or underwriters of an Underwritten Offering, not to effect any public sale or -4- distribution of any Registrable Securities of the Company without the prior written consent of the Company, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the 10-day period prior to, and during the 90 day period (the "Standstill Period") beginning on the effectiveness of the Registration Statement relating to such Underwritten Offering, in each case to the extent timely notified in writing by the Company or by the managing underwriter or underwriters; provided, however, that the restriction contained herein shall apply only to an Underwritten Offering of the Company to become effective after the date hereof (1) which includes securities to be sold on the Company's behalf to the public in an Underwritten Offering and (2) with respect to which the Company has complied with its obligations under Section 2.2 hereof. The Company may impose stop-transfer instructions with respect to Equity Securities subject to the restrictions provided for in this Section 3.1 until the end of the Standstill Period, (b) If the distribution restrictions described in Section 3.1(a) are in effect, the Company agrees not to effect any public sale or distribution of its Equity Securities during the one hundred eighty (180) day period following the effective date of a registration statement covering any Registrable Securities, except as part of such registration and except pursuant to a registration on Form S-8 or any successor or similar form thereto. 4. REGISTRATION PROCEDURES 4.1. Filing of Registration Statement. If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2.1 or use its reasonable best efforts to effect any such registration under Section 2.2., as expeditiously as possible the Company will: (a) prepare and (in any event within 60 days after the end of the period within which requests for registration may be delivered to the Company) file with the SEC a registration statement on the appropriate form with respect to such Registrable Securities and use reasonable efforts to cause such registration statement to become effective; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until all such shares of Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such registration statement or prospectus, and such other documents, as such seller may reasonably request; -5- (d) use reasonable efforts to register or qualify all Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and to any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdiction of its shares of Registrable Securities covered by such registration statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in any such jurisdiction; (e) furnish to each Holder selling Registrable Securities a signed counterpart, addressed to such Holder, of (i) an opinion of counsel for the Company in the form accompanying the registration statement and in the form delivered to underwriters, if any, dated the effective date of such registration statement (or if such registration includes an Underwritten Offering, dated the date of the closing under the underwriting agreement), and (ii) a "cold comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in such registration statement; in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in Underwritten Offerings of securities and, in the case of the accountants' letter, such other financial matters as such sellers may reasonably request; (f) immediately notify each Holder selling Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which it becomes aware as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such Holder prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and (g) otherwise use reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its Registrable Securities holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first month of the first fiscal quarter after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. 4.2. Underwriting Agreement. If requested by the underwriters for any Underwritten Offering of Registrable Securities on behalf of a Holder or pursuant to a registration requested under Section 2.1, the Company will enter into an underwriting agreement -6- with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities to the effect and to the extent provided in Section 6. The Holder or Holders on whose behalf Registrable Securities are to be distributed by underwriters pursuant to Section 2.1 or 2.2 shall be parties to any related underwriting agreement and shall provide customary representations, warranties and other agreements; the representations and warranties made by, and the other agreements made or opinions given on the part of or on behalf of, the Company to and for the benefit of such underwriters, also shall be made to and for the benefit of such Holder. 4.3. Selection of Underwriter. Whenever a registration requested pursuant to Section 2.1 is for an Underwritten Offering, the Holders holding a majority of the Registrable Securities included in such registration shall have the right to select the managing underwriter to administer the offering. 4.4. Postponement of Registration. In the event of any registration of any Registrable Securities under the Securities Act pursuant to Section 2.1, the Company shall have the right to postpone or delay such registration if the Company reasonably believes that such registration at such time would have a material adverse effect on the operations or financial conditions of the Company; provided, however, that the Company may exercise its rights under this Section 4.4 only one time in any 12-month period. The Company shall immediately give notice of such delay or postponement to each Holder proposing to sell Registrable Securities in such underwritten offering, explaining the reasons for each such postponement or delay. In the event the Company has not filed a registration statement within three months of a notice of delay or postponement, the Holders shall be entitled again to demand such registration (in accordance with the requirements of Section 2.1) without any further delay or postponement and without prejudice to any other rights accorded such Holders in this Agreement. In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act, the Company will give the Holders on whose behalf Registrable Securities are to be so registered and their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such Holders and such underwriter or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 4.5. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of Registrable Securities subject to this Agreement to the public without registration, the Company agrees to: (a) use its best efforts to make and keep public information available, as those terms are understood and defined in Rule 144 at all times after the date of this Agreement; -7- (b) use its best efforts to then file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act for so long as it is subject to such reporting requirements; and (c) so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any Registrable Securities without registration. 4.6. No Conflicting Agreements. The Company represents and warrants to each Holder that it is not a party to any agreement that conflicts in any manner with such Holder's rights to cause the Company to register Registrable Securities pursuant to this Section 4.6. 5. REGISTRATION EXPENSES 5.1. Payment of Registration Expenses. All Registration Expenses will be borne by the Company, regardless of whether the Registration Statement becomes effective. In connection with the registration statements to be filed pursuant to Sections 2.1 and 2.2 hereunder, the Company will reimburse the selling Holders of shares of Common Stock being registered in such registration for the reasonable fees and disbursements of one counsel chosen by the Holders of a majority of Registrable Securities participating in the offering. 6. INDEMNIFICATION 6.1. Indemnification by Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its officers, directors and employees and each Person who controls such Holder (within the meaning of the Securities Act) or acts on behalf of such Holder against all losses, claims, damages, liabilities and reasonable expenses caused by any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such Holder expressly for use therein; provided, however, that (i) the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in the final prospectus, if such untrue statement or allege untrue statement, omission or alleged omission is corrected in an amendment or supplement to the final prospectus and the Holder thereafter fails to deliver such prospectus as so amended or supplemented prior to or concurrently with the sale of the Common Stock to the Person asserting such loss, claim, damage, liability or expense after the Company and furnished such Holder with a copy of such amended or supplemented prospectus; and (ii) the Company shall not be liable if any Person uses a prospectus (or an amendment or supplement thereto) following the giving of -8- notice by the Company pursuant to Section 4.1(d)). The Company will also indemnify the underwrites participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders, if so requested. 6.2. Indemnification by Holders. In connection with each registration hereunder, each Holder participating in the offering will furnish to the Company in writing such information as the Company reasonably requests for use in connection with any registration statement or prospectus and agrees to indemnify and hold harmless, to the full extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any loses, claims, damages, liabilities and expenses resulting form any untrue statement of a material fact or any omission of a material fact required to be stated in the registration statement or prospectus or preliminary prospectus or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such registration statement or prospectus. The indemnification provided by any Holder pursuant to this Section 6.2 shall be limited to the total proceeds received by such Holder from such offering. The Company shall be entitled to receive indemnities from the underwriters participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such persons specifically for inclusion in any prospectus or registration statement. 6.3. Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (a) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (b) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (i) the indemnifying party has agreed in writing to pay such fees or expenses, or (ii) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person. Whether or not such defense is assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but if such settlement only involves the payment of money, such consent will not be unreasonably withheld). No indemnifying party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party and indemnifying party of a release form all liability in respect to such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. 6.4. Contribution. If for any reason the indemnification provided for in Sections 6.1 and 6.2 is unavailable to an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits -9- received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations, including the amount of the proceeds received by the Company or any Holder, as the case may be. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 7. MISCELLANEOUS 7.1. Amendments and Waiver. The Provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures form the provisions hereof may not be given unless the Company has obtained the prior written consent of the Holders of a majority of all Notes. 7.2. Notices. All notices and other communications provided for or permitted hereunder shall be delivered (a) in person with receipt acknowledged, (b) by a nationally registered overnight delivery service, (c) by registered or certified mail, return receipt requested, postage prepaid, or (d) by telecopy and confirmed by telecopy answerback addressed as follows: If to the Purchaser, at: IMPLEO LLC c/o Wexford Management LLC 411 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Mark L. Plaumann Telephone: (203) 862-7000 Telecopier: (203) 862-7490 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, New York 10036 Attention: Stephen B. Selbst, Esq. Telephone: (212) 704-0100 Telecopier: (212) 704-0196 If to the Company, at: BCAM International, Inc. 1800 Walt Whitman Road Melville, New York 11747 Attention: Michael Strauss, President Telephone: (516) 752-7530 Telecopier: (516) 752-3558 -10- With a copy to: Ruskin, Moscou, Evans & Faltischek, PC 170 Old Country Road Mineola, New York 11501 Attn: Norman Friedland, Esq. Telephone: (516) 663-6600 Telecopier: (516) 663-6642 or at such other address as may be substituted by notice given as herein provided. Every notice, hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback or five Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 7.3. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. Any Person who acquires at least $250,000 principal amount of the Notes may become a party to this Agreement by executing and delivering a supplemental agreement agreeing to be bound by all of the terms and conditions hereof. 7.4. Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts (including by the execution of a letter of transmittal expressly referring to this Agreement), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 7.5. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PROVISION. 7.7. Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There is no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect -11- to the Common Stock. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 7.8. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, the successful party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written above. BCAM INTERNATIONAL, INC. By: /s/ Michael Strauss ---------------------------------- Title: President ------------------------------- IMPLEO LLC By: /s/ Mark L. Plaumann ---------------------------------- Title: Vice President ------------------------------- -12- EX-99.4 5 WARRANT AGREEMENT AND FORM OF WARRANTS EXECUTION COPY WARRANT AGREEMENT AND FORM OF WARRANT WARRANT AGREEMENT (the "Agreement"), dated as of September 19, 1997, between BCAM INTERNATIONAL, INC., a New York corporation (the "Company"), and IMPLEO LLC, a Delaware limited liability company ("Wexford"). WHEREAS, Wexford has agreed to purchase from the Company $5,000,000 principal amount of 10%/13% Convertible Notes (the "Notes") due September 15, 2002 pursuant to a Note Purchase Agreement (the "Note Purchase Agreement") of even date herewith; and WHEREAS, in connection with the issuance of the Notes, the Company has agreed to issue to Wexford or its designee (each, a "Holder") 2,000,000 warrants (individually, a "Warrant" and collectively, the "Warrants"), each of which entitles the Holder thereof to purchase, upon the terms and subject to the conditions contained in this Agreement and the Warrant Certificates (as defined below), one share of the common stock of the Company, par value $.01 per share (the "Common Stock"), subject to adjustment as provided in Section 10 hereof; and WHEREAS, the Company will issue certificates evidencing the Warrants (the "Warrant Certificates") and other matters as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Warrant Certificates. The Warrant Certificate (and the Forms of Exercise, Assignment and Partial Assignment) shall be substantially in the forms set forth in Exhibits A through D, respectively, attached hereto, and may have such letters, numbers or other marks of identification and such legends printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement. SECTION 2. Execution and Countersignature of Warrant Certificates. The Warrant Certificates shall be executed on behalf of the Company by its Chief Executive Officer, President, Chief Financial Officer or Treasurer (each, a "Company Officer") under its corporate seal reproduced thereon attested by its Secretary or Assistant Secretary. The signature of any of these Company Officers on any Warrant Certificate may be manual or facsimile. The name, incumbency and specimen signature of each Company Officer authorized to act and give instructions and notices under this Agreement shall be certified by the Secretary or Assistant Secretary of the Company. Warrant Certificates bearing the manual or facsimile signatures of individuals who were at any time Company Officers shall bind the Company even if any such individual ceased to be a Company Officer prior to the execution and delivery of such Warrant Certificate or was not a Company Officer at the date of this Agreement. Each Warrant Certificate shall be countersigned by the manual signature of each Holder and shall not be valid for any purpose unless so countersigned. Each Warrant Certificate shall be dated the date of issuance. SECTION 3. Transfers; Exchanges and Purchases by the Company. Subject to Section 13, each Warrant shall be transferable, in whole or in part, upon surrender of the Warrant Certificate to the Company together with a written assignment of the Warrant Certificate, on the Form of Assignment or Partial Assignment, as the case may be, set forth on the reverse thereof or in other form satisfactory to the Company, duly executed by Holder, and together with funds to pay any transfer taxes payable in connection with such transfer. Upon such surrender and payment, a new Warrant Certificate, in the name of the assignee and in the denomination or denominations specified in such instrument of assignment, shall be issued and delivered. If less than all of a Warrant Certificate is being transferred, a new Warrant Certificate or Certificates shall be issued for the portion of the Warrant not being transferred. The Warrant Certificate surrendered shall be canceled by the Company. A Warrant Certificate may be divided or combined with other Warrant Certificates upon surrender thereof to the Company, together with a written notice specifying the names and denominations in which new Warrant Certificates are to be issued, signed by Holder, and together with the funds to pay any transfer taxes payable in connection with such transfer. Upon such surrender and payment, a new Warrant Certificate or certificates shall be issued and delivered in accordance with such notice. The Warrant Certificate surrendered shall be canceled by the Company. The Company shall make no service or other charge in connection with any such transfer or exchange of Warrant Certificates, except for any transfer taxes or other governmental charges payable in connection therewith. Warrant Certificates canceled pursuant to any provisions of this Agreement shall not be reissued, and shall be returned to the Company. SECTION 4. Duration and Exercise of Warrants. The Warrants shall expire at 5:00 p.m. New York City time on September 30, 2002, provided, that if such date falls on a day other than a Business Day, then the Warrants shall expire at 5:00 p.m. New York City time on the next succeeding Business Day (such date of expiration being herein referred to as the "Expiration Date"). A "Business Day" shall mean a day other than a Saturday, Sunday or a public or national bank holiday or the equivalent for banks generally under the laws of the State of New York. The Warrants represented by each Warrant Certificate shall only be exercisable for Common Stock from the Exercise Date with respect to such Warrants through and including the Expiration Date with respect to such Warrants. Each Warrant may be exercised on any Business Day on or prior to 5:00 p.m. New York City time on the Expiration Date. After 5:00 p.m. New York City time on the Expiration Date, unexercised Warrants will become wholly void and of no value. Subject to the provisions of this Agreement, each Holder shall have the right to purchase from the Company (and the Company shall issue and sell to such Holder) one fully paid and nonassessable share of Common Stock at the exercise price (the "Exercise Price") at the time in effect hereunder, upon surrender the Company of the Warrant Certificate evidencing such Warrant, -2- with the Form of Exercise duly completed and signed, and upon payment of the Exercise Price in lawful money of the United States of America by certified or official bank check payable to the order of the Company. The Exercise Price shall be as provided in Section 6. The Exercise Price and the number of shares of Common Stock purchasable upon exercise of a Warrant shall be subject to adjustment as provided in Section 10. Except as provided in Section 10, no adjustment shall be made for any cash dividends or other distributions on or in respect of the Common Stock or other securities purchasable upon the exercise of a Warrant. Subject to Section 6, upon surrender of a Warrant Certificate and payment of the Exercise Price at the time in effect hereunder and an amount equal to any applicable transfer tax in cash or by certified check or bank draft payable to the order of the Company, the Company shall thereupon promptly cause to be issued and shall deliver to or upon such Holder, within a reasonable time, not exceeding ten (10) days after each Warrant represented by the Warrant Certificate shall have been exercised, a certificate for the Common Stock issuable upon the exercise of each Warrant evidenced by such Warrant Certificate. Such certificate shall be deemed to have been issued and such Holder shall be deemed to have become a holder of record of such shares of Common Stock (a "Shareholder") as of the date of the surrender of such Warrant Certificate and payment of the Exercise Price. The Warrants evidenced by a Warrant Certificate shall be exercisable, at the election of any Holder, either as an entirety or from time to time for part only of the number of Warrants evidenced by the Warrant Certificate. In the event that less than all of the Warrants evidenced by a Warrant Certificate surrendered upon the exercise of Warrants are exercised, a new Warrant Certificate or Certificates shall be issued for the remaining number of Warrants evidenced by the Warrant Certificate so surrendered. All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Company. The Company shall deposit to the account of the Company all monies received in payment of the Exercise Price of any Warrant and any applicable transfer taxes. SECTION 5. Exercise Price. The initial Exercise Price for Warrants to be issued hereunder shall $1.75 per share of Common Stock, and such initial exercise price shall be subject to adjustment as provided in Section 10 hereof. SECTION 6. Payment of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the issuance of Warrants and the issuance of Common Stock upon the exercise of any Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance of any certificates for Common Stock in a name other than that of a Holder of a Warrant Certificate surrendered upon the exercise of a Warrant and the Company shall not be required to issue or deliver such certificates unless or until the persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue, in -3- exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and in substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity, if requested, also satisfactory to the Company. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable requirements and pay such other reasonable charges as the Company may prescribe. SECTION 8. Reservation of Common Stock. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Common Stock upon the exercise of Warrants, the maximum number of shares of Common Stock which are required to be delivered upon the exercise of all outstanding Warrants. The Company covenants that all Common Stock which may be issued upon the exercise of Warrants will, upon issuance, be duly issued and outstanding, fully paid and nonassessable and free from all taxes, liens, charges and security interests with respect to the issuance thereof. The Company is authorized to requisition from time to time from the transfer agent for its Common Stock stock certificates required to honor the exercise of outstanding Warrants. The Company hereby authorizes its present and any future such transfer agent to comply with all such requests. The Company will supply such transfer agent with duly executed Common Stock certificates for such purposes and will itself provide or otherwise make available any cash which may be payable as provided in Section 11. SECTION 9. Obtaining of Governmental Approvals and Stock Exchange Listings. The Company will in good faith and as expeditiously as possible take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities, and will make any and all filings under federal and state securities laws necessary in connection with the issuance, distribution and transfer of Warrant Certificates, the exercise of the Warrants and the issuance, sale, transfer and delivery of Common Stock upon the exercise of Warrants, provided, that the foregoing provisions of this sentence shall not be deemed to require the registration under the Securities Act of 1933, as amended (the "Securities Act"), or similar state securities laws of the Warrants or the Common Stock issuable upon the exercise of the Warrants. SECTION 10. Adjustment of Exercise Price and Number and Kind of Securities Purchasable upon Exercise of Warrants. (a) Adjustment of Exercise Price and Number of Warrants. The applicable Exercise Price for any Warrants shall be subject to adjustment from time to time as hereinafter provided for in this Section 10. No adjustment of the Exercise Price for any Warrants, however, shall be made in an amount less than $.01 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment, which -4- together with any subsequent adjustments so carried forward shall amount to $.01 per share or more. Upon each adjustment of the Exercise Price for any Warrants, except pursuant to subsection (f) of this Section 10, each Holder shall thereafter, at or prior to the Expiration Date, be entitled to purchase, at the Exercise Price for the applicable Warrants resulting from such adjustment, the number of shares issuable upon exercise of such Warrants (calculated to the nearest whole share) obtained by multiplying the applicable Exercise Price in effect immediately prior to such adjustment by the number of shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the applicable Exercise Price resulting from such adjustment. (b) Adjustment of Exercise Price upon Certain Issuances of Common Stock. If at any time after the date hereof, the Company shall issue or sell any shares of Common Stock for a consideration per share less than the "current market price" (as hereinafter defined) in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the applicable Exercise Price for all Warrants shall be reduced to the price (calculated to the nearest cent) determined by multiplying the applicable Exercise Price in effect immediately prior to the time of such issue or sale by a fraction, the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale multiplied by the current market price immediately prior to such issue or sale, plus (ii) the consideration received by the Company upon such issue or sale, and the denominator of which shall be the product of (i) the total number of shares of Common Stock outstanding immediately after such issue or sale, multiplied by (ii) the current market price immediately prior to such issue or sale. (c) Constructive Issuances of Stock, Convertible Securities, Rights and Options. For purposes of subsection (b) of this Section 10, the following clauses shall also be applicable: (i) Issuance of Rights or Options. In case at any time the Company shall in any manner grant any rights or options to subscribe for or to purchase, or any options for the purchase of, Common Stock or stock or securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being hereinafter called "Convertible Securities"), whether or not such rights or options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights or options or upon conversion or exchange of such Convertible Securities (determined as provided below) shall be less than the current market price determined as of the date of granting such rights or options, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such rights or options shall (as of the date of granting of such rights or options) be deemed to be outstanding and to have been issued for such price per share. For the purposes of calculations under this clause (i), the price per share for which Common Stock is issuable upon the exercise of any such rights or options or upon conversion or exchange of any such Convertible Securities shall be determined by dividing (a) the total amount, if any, received or receivable by the Company as consideration for the granting of such rights or options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such rights or options, plus, in the case of such rights or options which relate to Convertible -5- Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by the maximum number of shares of Common Stock issuable upon the exercise of such rights or options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such rights or options. Except as provided in clause (iii) of this subsection (c), no further adjustments of any Exercise Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such rights or options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) Issuance of Convertible Securities. In case at any time the Company shall in any manner issue or sell any Convertible Securities, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon conversion or exchange of such Convertible Securities (determined as provided below) shall be less than the current market price in effect immediately prior to the date of such issue or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share, provided that if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of any Exercise Price have been or are to be made pursuant to other provisions of this subsection (c), no further adjustment of any Exercise Price shall be made by reason of such issue or sale. For the purposes of calculations under this clause (ii), the price per share for which Common Stock is issuable upon conversion or exchange of Convertible Securities shall be determined by dividing (a) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (b) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as provided in clause (iii) of this subsection, no further adjustments of any Exercise Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. (iii) Change in Option Price or Conversion Rate; Expiration or Termination of Rights or Convertible Securities. If the purchase price provided for in any rights or options referred to in clause (i) above, or the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in clause (i) or (ii) above, or the rate at which any Convertible Securities referred to in clause (i) or (ii) above are convertible into or exchangeable for Common Stock, shall change (other than under or by reason of provisions designed to protect against dilution), then the Exercise Price for all Warrants then in effect shall forthwith be readjusted to the Exercise Price which would have then been in effect had such then outstanding rights, options or Convertible Securities provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. If the purchase price or exercise price provided for in any such right or option referred to in clause (i) above or the rate at which any Convertible Securities referred to in clause (i) or (ii) above are convertible into or exchangeable for Common Stock, shall decrease at any time under or -6- by reason of provisions with respect thereto designed to protect against dilution, then in case of the delivery of Common Stock upon the exercise of any such right or option or upon conversion or exchange of any such Convertible Security, the Exercise Price for all Warrants then in effect hereunder shall forthwith be decreased to such Exercise Price as would have been obtained had the adjustments made upon issuance of such right or option or such Convertible Securities been made upon the basis of the actual issuance of (and the total consideration received for) the shares of Common Stock delivered upon such exercise, conversion or exchange. Upon the expiration of any rights, options or Convertible Securities, if any thereof shall not have been exercised, converted or exchanged, as the case may be, each applicable Exercise Price and the number of shares issuable upon exercise of the Warrants shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if the only shares of Common Stock so issued were the shares of Common Stock, if any, actually issued or sold upon the exercise, conversion or exchange, as the case may be, of such rights, options or Convertible Securities and (b) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, conversion or exchange, as the case may be, plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all of such rights, options or Convertible Securities, whether or not exercised, converted or exchanged. (iv) Stock Dividends. In case at any time the Company shall declare a dividend or make any other distribution upon any stock of the Company which is payable in Common Stock or Convertible Securities, any Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (v) Consideration for Stock. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the issuance or sales price therefor, without deducting therefrom any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith. In case any shares of Common Stock or Convertible Securities or any rights or options to purchase any such Common Stock or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined reasonably and in good faith by the Board of Directors of the Company, without deducting any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith. In case any Common Stock or Convertible Securities or any rights or options to purchase any shares of Common Stock or Convertible Securities shall be issued in connection with any merger of another corporation with and into the Company, the amount of consideration therefor shall be deemed to be the fair value as determined reasonably and in good faith by the Board of Directors of the Company of such portion of the assets of such merged corporation as the Board shall determine to be attributable to such Common Stock, Convertible Securities, rights or options, as the case may be. -7- (vi) Definition of "Current Market Price". For the purpose of any computation hereunder, the "current market price" shall mean (1) if the Common Stock is listed on one or more stock exchanges or is quoted on the NASDAQ National Market (the "National Market"), the average of the closing sales prices of a share of Common Stock on the primary national or regional stock exchange on which such shares are listed or on the National Market if quoted thereon or (2) if the Common Stock is not so listed or quoted but is traded in the over-the-counter market (other than the National Market), the average of the closing bid and asked prices of a share of Common Stock, in the case of clauses (1) and (2), for the 30 trading days (or such lesser number of trading days as the Common Stock shall have been so listed, quoted or traded) next preceding the date of measurement; provided, however, that if no such sale prices or bid and asked prices have been quoted during the preceding 30-day period, "current market price" means the value as determined reasonably and in good faith by the Board of Directors of the Company; and provided, further, however, that in the event the current market price of a share of Common Stock is determined during a period following the announcement by the Company of (i) a dividend or distribution on the Common Stock payable in shares of Common Stock or Convertible Securities, (ii) a dividend of the type referred to in subsection (d) of this Section 10, or (iii) any subdivision, combination or reclassification of the Common Stock, and prior to the expiration of 30 trading days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be appropriately adjusted to take into account ex-dividend trading. (d) Adjustment for Certain Special Dividends. In case the Company shall declare a dividend upon the Common Stock payable otherwise than out of earnings or earned surplus, determined in accordance with generally accepted accounting principles, proper provision shall be made so that each Holder shall receive (at the Exercise Price in effect immediately prior to such distribution), the distribution payable per share of Common Stock, whether in cash, or if the distribution is of property other than cash, such other property, to which such holder would have been entitled upon such distribution if such holder had exercised the Warrant held by such Holder immediately prior thereto. (e) Subdivision or Combination of Stock. In case the Company shall at any time subdivide the outstanding shares of Common Stock into a greater number of shares, each Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares issuable upon exercise of the Warrants immediately prior to such subdivision shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock shall be combined at any time into a smaller number of shares, each Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares issuable upon exercise of the Warrants immediately prior to such combination shall be proportionately reduced. (f) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company (i) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation or merger, or (ii) permits any other corporation to consolidate with or merge into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is -8- changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (iii) transfers all or substantially all of its properties and assets to any other corporation, or (iv) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this subsection (f), upon the exercise of the Warrants at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, each Holder shall be entitled to receive (at the aggregate Exercise Price in effect for shares issuable upon such exercise of the Warrants immediately prior to such consummation), in lieu of shares issuable upon such exercise of the Warrants prior to such consummation, the stock and other securities, cash and assets to which such Holder would have been entitled upon such consummation if such Holder had so exercised such Warrants immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section 10). (g) Notice of Adjustment. Whenever the number of shares issuable upon the exercise of the Warrants or any Exercise Price is adjusted, as provided in this Section 10, the Company shall prepare and mail to each Holder a certificate setting forth (i) the Exercise Price and the number of shares issuable upon the exercise of the Warrants after such adjustment, (ii) a brief statement of the facts requiring such adjustment and (iii) the computation by which such adjustment was made. (h) No Change of Warrant Necessary. Irrespective of any adjustment in any Exercise Price or in the number or kind of shares issuable upon exercise of the Warrants, unless the Holders of a majority of Warrants otherwise request, the Warrants may continue to express the same price and number and kind of shares as are stated in the Warrants as initially issued. (i) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares of Common Stock owned or held by or for the account of the Company. The disposition of any shares of Common Stock owned or held by or for the account of the Company shall be considered an issue of Common Stock for the purposes of this Section 10. (j) Certain Adjustment Rules. (i) The provisions of this Section 10 shall similarly apply to successive transactions. (ii) If the Company shall declare any dividend referred to in paragraph (iv) of subsection (c) of this Section 10 or subsection (d) of this Section 10 and if any Holder exercises all or any part of the Warrants after such declaration but before the payment of such dividend, the Company may elect to defer, until the payment of such dividend, issuing to such Holder the shares issuable upon such exercise of the Warrants over and above the shares issuable upon such exercise of the Warrants on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to each such Holder a due bill or -9- other appropriate instrument evidencing such Holder's right to receive such additional shares upon the payment of such dividend. (iii) If the Company shall declare any dividend referred to in paragraph (iv) of subsection (c) of this Section 10 or subsection (d) of this Section 10 and shall legally abandon such dividend prior to payment, then no adjustment shall be made pursuant to this Section 10 in respect of such declaration. (k) Exceptions to Adjustment to Purchase Price. Notwithstanding anything herein to the contrary, no adjustment to any Exercise Price or the number of shares issuable upon exercise of the Warrants shall be made in the case of the following: (i) the issuance of any Warrant or the issuance of any shares upon any exercise of any Warrant or any adjustment of the Conversion Price with respect thereto; (ii) the grant of up to 3,167,500 options to purchase Common Stock to employees, officers or directors of the Company, or the adjustment of the exercise price thereof pursuant to the Existing Option Plans; (iii) the issuance of up to 3,167,500 shares of Common Stock to any employees, officers or directors of the Company upon the exercise of any options to purchase Common Stock granted pursuant to the Existing Option Plans: (iv) the grant of up to 4,500,000 options to purchase Common Stock to employees, officers or directors of the Company, or the adjustment of the exercise price thereof pursuant to the New Option Plan: (v) the issuance of up to 4,500,000 shares of Common Stock to any employees, officers or directors of the Company upon the exercise of any options to purchase Common Stock granted pursuant to the New Option Plan; and (vi) the conversion of the Notes; (vii) the conversion of the Other Notes issues pursuant to the Other Note Agreement; (viii) the issuance of Common Stock of the Company upon conversion of the shares of Convertible Preferred Stock; and (ix) any change in the par value of the Common Stock. (l) Other Exercise Price Reductions. Anything in this Section 10 to the contrary notwithstanding, the Company shall be entitled to reduce any Exercise Price, in addition to those adjustments required by this Section 10, to the extent necessary so that any consolidation or subdivision of the Common Stock, issuance wholly for cash of any Common Stock at less than the current market price, issuance wholly for cash of Common Stock or Convertible Securities or -10- dividends on Common Stock payable in Common Stock or other assets, hereafter made by the Company to the holders of its Common Stock shall not be taxable to them. SECTION 11. Fractional Shares of Common Stock. The Company may, but will not be required to, issue fractions of shares of Common Stock or to distribute Common Stock certificates which evidence fractions of shares upon the exercise of the Warrants; provided, however, that in lieu of fractional shares of Common Stock the Company shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the "current market price" then in effect. SECTION 12. Notices of Certain Events. In the event that the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of shares of Common Stock or to make any other distribution to the holders of shares of Common Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), (b) to offer to the holders of shares of Common Stock rights or warrants to subscribe for or to purchase any additional shares of Common Stock or shares of stock of any class or any other securities, rights or options, (c) to effect any reclassification of its Common Stock, (d) to effect any consolidation or merger into or with, or to effect any sale or other transfer (or to permit one or more of its subsidiaries to effect any sale or other transfer) in one or more transactions, of more than fifty percent (50%) of the assets or earning power of the Company and its subsidiaries (taken as a whole) to, any other person or entity, or (e) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each Holder, in accordance with this Section 12, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of the Common Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least thirty (30) days prior to the record date for determining holders of the shares of Common Stock for purposes of such action, and in the case of any such other action, at least thirty (30) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock whichever shall be the earlier. Notices authorized or required by this Agreement to be given by the Company to each Holder shall be sufficiently given if sent by first-class mail, postage prepaid, addressed to each Holder. SECTION 13. Restrictions on Transferability. The Warrant Certificates and the shares of capital stock of the Company issuable upon exercise of the Warrants shall not be transferable except upon the conditions specified in this Section 13, which conditions are intended to insure compliance with the provisions of the Securities Act in respect of the transfer of any Warrant Certificate or any shares of capital stock issuable upon exercise of the Warrants. (a) Restrictive Legend; Holder's Representation. Unless and until otherwise permitted by this Section 13, each certificate representing shares of capital stock issuable upon exercise of the Warrants, and any certificate issued at any time upon transfer of, or in exchange for -11- or replacement of, any certificate bearing the legend set forth below shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS AND, ACCORDINGLY, THE TRANSFER, RESALE OR OTHER DISPOSITION OF SUCH SECURITIES MAY ONLY BE MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR A VALID EXEMPTION THEREFROM AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS, AND BY DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY TO COUNSEL FOR THE COMPANY THAT THERE IS SUCH AN EXEMPTION. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT AGREEMENT DATED AS OF SEPTEMBER 19, 1997, BY AND BETWEEN IMPLEO LLC AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY." So long as the Warrants or the shares of Capital Stock issuable upon exercise of the Warrants are "restricted securities" within the meaning of the Securities Act and the regulations promulgated thereunder, each Holder represents to the Company that he or it is acquiring the Warrants and will acquire the shares of capital stock issuable upon exercise of the Warrants for his or its own account and not with a view to any public distribution thereof, subject to any requirement of law that the disposition of such securities shall at all times be within the control of the owner thereof. The acquisition of any Warrants or shares of capital stock issuable upon exercise of the Warrants by any Holder shall constitute such Holder's reaffirmation of such representation. Each Holder further represents to the Company that he or it is an "accredited investor" as defined in Regulation D of the Securities Act. Each Holder understands that the Warrants and the shares of capital stock issuable upon exercise of the Warrants have not been registered under the Securities Act and may only be sold or otherwise disposed of in compliance with the Securities Act. Each Holder by its acceptance of such security further understands that such security may bear a legend as contemplated by this Section 13. (b) Termination of Restrictions. Notwithstanding the foregoing provisions of this Section 13, the restrictions imposed by this Section 13 upon the transferability of the Warrant Certificates and the shares of capital stock issuable upon exercise of the Warrants shall cease and terminate as to any particular Warrant Certificate or shares of capital stock when, (i) such Warrant Certificate or shares of capital stock shall have been effectively registered under the Securities Act and sold by any Holder in accordance with such registration or (ii) in the opinion of counsel for such Holder, if such opinion is satisfactory in form and substance to the Company, such restrictions are no longer required in order to insure compliance with the Securities Act. If and whenever the restrictions imposed by this Section 13 shall terminate as to a Warrant Certificate (or to any shares of capital stock) as hereinabove provided, such Holder may and the Company shall, as promptly as practicable upon the request of such Holder and at the Company's expense, cause to be stamped or otherwise imprinted upon such Warrant Certificate or such shares of capital stock a legend in substantially the following form: -12- "The restrictions on transferability of this [these] [Warrant Certificate/securities] terminated on _____________, and are of no further force or effect." All Warrant Certificates issued upon transfer, division or combination of, or in substitution for, any Warrant Certificate or Warrant Certificates entitled to bear such legend shall have a similar legend endorsed thereon. Whenever restrictions imposed by this Section 13 shall terminate as to any Warrant Certificate or as to any shares of capital stock, as hereinabove provided, each Holder shall be entitled to receive from the Company without expense, a new Warrant Certificate or new shares of capital stock not bearing the restrictive legend set forth in subsection (a) of this Section 13. SECTION 14. Representations and Warranties. The Company represents and warrants that: (a) Organization, Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York. The Company has all requisite power and authority to own or lease and operate properties and to carry on its business as now conducted. (b) Authority. The Company has all requisite power and authority to enter into and perform all of its obligations under this Agreement, to issue the Warrants and to carry out the transactions contemplated hereby. The Company has taken all corporate or stockholder actions necessary to authorize enter into and perform all of its obligations under this Agreement and to consummate the transactions contemplated hereby. (c) Validity. This Agreement and the Warrants are the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms. (d) Capitalization. (i) As of the date hereof, the total authorized capitalization of the Company consists of (A) 750,000 shares of preferred stock, none of which are issued or outstanding, and (B) 40,000,000 Shares (par value $.01 per share), of which 15,954,733 shares were issued and outstanding and 763,182 Shares were held as treasury shares. All such outstanding shares of the Company have been duly and validly issued and are fully paid and non-assessable. (ii) Except as set forth on Schedule I attached hereto, there are no outstanding subscriptions, warrants, options, calls or commitments of any character relating to or entitling any person to purchase or otherwise acquire any of the capital stock or equity securities of the Company or any Subsidiary thereof or any security that is convertible into or exchangeable for such capital stock or equity securities. Except as set forth in this Agreement, there are no preemptive or similar rights to subscribe for or to purchase any capital stock of the Company, and, except as set forth on Schedule I, the Company has not entered into any presently outstanding agreement to register its equity or debt securities under the Securities Act. The Company has no stock option plans other than the Existing Option Plans (as such term is defined in the Note Purchase Agreement). -13- SECTION 15. Notice. Any notice, demand, request, instruction or other communication which any party hereto may be required or may desire to give shall be deemed to have been properly given (a) if by hand delivery, telecopy, telex or other facsimile transmission, upon delivery to such party at the address, telecopier or telex number specified below; (b) if by registered or certified mail, on the fifth Business Day after the day deposited with the United States Postal Service, postage prepaid, return receipt requested, addressed to such party at the address specified below; or (c) if by Federal Express or other reputable express mail service, on the next Business Day after delivery to such express mail service, addressed to such party at the following address: To the Company, at: BCAM International, Inc. 1800 Walt Whitman Road Melville, New York 11747 Attention: Michael Strauss, President Telephone: (516) 752-7530 Telecopier: (516) 752-3558 To Wexford, at: IMPLEO LLC 411 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Mark L. Plaumann Telephone: (203) 862-7000 Telecopier: (203) 862-7490 or to such other address, telex, telecopier, or other facsimile transmission number as the party to be served with notice may have furnished in writing to the party seeking or desiring to serve notice as a place or number for the service of notice. SECTION 16. Identity of Transfer Agent. Forthwith upon the appointment of any subsequent transfer agent for the Common Stock, or any other shares of the Company's capital stock issuable upon the exercise of the Warrants, the Company will provide to each Holder a statement setting forth the name and address of such subsequent transfer agent. -14- SECTION 17. Supplements and Amendments. (a) The Company may from time to time supplement or amend this Agreement without the approval of any Holder in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions with regard to matters or questions arising hereunder which the Company may deem necessary or desirable and which shall not adversely affect the interests of any Holder. (b) Any term, covenant, agreement or condition contained in this Agreement may be amended, or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by a written instrument signed by the Company and each Holder. SECTION 18. No Rights as Shareholders. Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed as conferring upon any Holder any rights of a Shareholder, including without limitation, the right to vote, to receive dividends or to consent to, or receive notice as a Shareholder in respect of, any meeting of Shareholders for the election of directors of the Company or for any other matter. SECTION 19. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company and each Holder shall bind and inure to the benefit of their respective successors and assigns hereunder. SECTION 20. Termination. This Agreement shall terminate and be of no further force and effect at, and no Warrant may be exercised after, 5:00 p.m. New York City time on the Expiration Date provided for in Section 4 of this Agreement. Notwithstanding the foregoing, this Agreement will terminate on any earlier date when all Warrants have been exercised and no Warrants remain outstanding. SECTION 21. Governing Law. This Agreement and each Warrant issued hereunder shall be deemed to be a contract made under the laws of the State of New York, without regard to the conflict of law principles thereof, and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state. SECTION 22. Benefits of this Agreement; Rights of Action. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and each Holder any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of the Company and each Holder. SECTION 23. Damages. The Company recognizes and agrees that each Holder will not have an adequate remedy if the Company fails to comply with the terms of this Agreement and the Warrant Certificates and that damages will not readily be ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by any Holder requiring specific performance of any and all provisions of the Warrant or this Agreement or -15- enjoining the Company from continuing to commit any such breach of the terms of the Warrant or this Agreement. SECTION 24. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. SECTION 25. Headings. The headings used in this Agreement are inserted for convenience only and neither constitute a portion of this Agreement nor in any manner affect the construction of the provisions of this Agreement. SECTION 26. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. Attest: BCAM INTERNATIONAL, INC. By: /s/ Michael Strauss ----------------------------------------- Name: Michael Strauss --------------------------------- Title: President -------------------------------- IMPLEO LLC By: /s/ Mark L. Plaumann ----------------------------------------- Name: Mark L. Plaumann --------------------------------- Title: Vice President -------------------------------- -16- SCHEDULE I A. Outstanding Subscriptions, Warrants, Options, Calls, etc.
Date of Number of Shares of Conversion Price Agreement or Holder or Common Stock or Warrant Price Instrument Holders Expiration Date Covered Etc. - ---------- --------- --------------- ------- ----
B. Registration Agreements
Number of Date of Holder or Demand Agreement Holders Expiration Date Securities Covered Registrations - --------- ------- --------------- ------------------ -------------
EXHIBIT A TO THE WARRANT AGREEMENT [FORM OF WARRANT CERTIFICATE] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAWS AND, ACCORDINGLY, THE TRANSFER, RESALE OR OTHER DISPOSITION OF SUCH SECURITIES MAY ONLY BE MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR A VALID EXEMPTION THEREFROM AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS, AND BY DELIVERY OF AN OPINION OF COUNSEL SATISFACTORY TO COUNSEL FOR THE COMPANY THAT THERE IS SUCH AN EXEMPTION. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN WARRANT AGREEMENT DATED AS OF SEPTEMBER 19, 1997, BETWEEN IMPLEO LLC AND THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY. EXERCISABLE ONLY ON OR BEFORE 5:00 P.M. NEW YORK CITY TIME September 19, 2002 No. W-___ __________ Warrants WARRANT CERTIFICATE BCAM INTERNATIONAL, INC. This Warrant Certificate certifies that __________________, or registered assigns, is the registered holder (the "Holder") of ____________ Warrants (the "Warrants") expiring September 19, 2002 to purchase common stock of BCAM International, Inc., a New York corporation (the "Company"). Each Warrant entitles the Holder to purchase from the Company, on or after the issuance hereof, and on or before 5:00 p.m. New York City time on September 19, 2002 one fully paid and nonassessable share of common stock of the Company, par value $.01 per share ("Common Stock"), at the exercise price (the "Exercise Price") at the time in effect under the Warrant Agreement (as hereinafter defined), payable in lawful money of the United States of America, upon surrender of this Warrant Certificate and payment of such Exercise Price to the Company in New York, New York, but only subject to the conditions set forth herein and in the Warrant Agreement; provided, however, that the number or kinds of shares of Common Stock or other securities (or in certain events other property) purchasable upon exercise of the Warrants and the Exercise Price referred to herein may as of the date of this Warrant Certificate have been, or may after such date be, adjusted as a result of the occurrence of certain events, as more fully provided in the Warrant Agreement. Payment of the Exercise Price shall be made by certified or official bank check payable to the order of the Company. No Warrant may be exercised after 5:00 p.m. New York City time on September 19, 2002 (the "Expiration Date"). The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to a Warrant Agreement, dated as of September 19, 1997 (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and Holder. initially capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Warrant Agreement. A copy of the Warrant Agreement is available for inspection at the Company, located 1800 Walt Whitman Road, Melville, New York 11747 during regular business hours. Warrants may be exercised to purchase shares of Common Stock from the Company at any time, or from time to time on or after the date hereof and on or before the Expiration Date, at the Exercise Price then in effect. The Holder may exercise the Warrants represented by this Warrant Certificate by surrendering the Warrant Certificate with the Form of Exercise set forth hereon properly completed and executed, together with payment of the Exercise Price at the time in effect, to the Company. In the event that an exercise of Warrants evidenced hereby shall be an exercise of less than the total number of Warrants evidenced hereby, there shall be issued to Holder or Holder's assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment will be made for any dividends on any shares of Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price may, subject to certain conditions, be adjusted and under certain circumstances the Warrant may become exercisable for securities or other assets other than the shares of Common Stock referred to on the face hereof. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be adjusted. The Company may, but shall not be required to, issue fractions of shares of Common Stock or any certificates that evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company shall make a cash payment therefor equal in amount to the product of the applicable fraction multiplied by the current market price then in effect. Subject to the terms and conditions contained in the Warrant Agreement, the Warrants represented by this Warrant Certificate are transferable, in whole or in part, upon surrender of this Warrant Certificate to the Company, together with a written assignment of the Warrant on the Form of Assignment or Partial Assignment, as the case may be, set forth hereon or in other form satisfactory to the Company, duly executed by Holder or Holder's duly appointed legal representative, and together with funds to pay any transfer taxes payable in connection with such transfer. Upon such surrender and payment, a new Warrant Certificate shall be issued and delivered in the name of the assignee and in the denomination or denominations specified in such -2- instrument of assignment. If less than all of the Warrants represented by this Warrant Certificate are being transferred, a new Warrant Certificate or Certificates shall be issued for the portion of this Warrant Certificate not being transferred. This Warrant Certificate may be divided or combined with other Warrant Certificates upon surrender hereof to the Company, together with a written notice specifying the names and denominations in which new Warrant Certificates are to be issued, signed by Holder or Holder's duly appointed legal representative, and together with the funds to pay any transfer taxes payable in connection with such transfer. Upon such surrender and payment, a new Warrant Certificate or Certificates shall be issued and delivered in accordance with such notice. The Company shall make no service or other charge in connection with any such transfer or exchange of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, any distribution to Holder hereof, and for all other purposes. This Warrant Certificate shall not be valid unless countersigned by Holder by the manual signature of one of its authorized officers. IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. BCAM INTERNATIONAL, INC.. By: /s/ Michael Strauss ---------------------------------------- Michael Strauss President Dated: September 22, 1997 Countersigned: BCAM INTERNATIONAL, INC. By: /s/ Mark L. Plaumann ------------------------------ Name: Mark L. Plaumann Title: Vice President EXHIBIT B TO THE WARRANT AGREEMENT [FORM OF EXERCISE] [To be executed upon exercise of Warrant] The undersigned (the "Holder") hereby irrevocably elects to exercise the right, represented by BCAM International, Inc. Warrant Certificate No. W-______, to purchase ________ shares of BCAM International, Inc., in the amount of $_______ in accordance with the terms hereof. The undersigned requests that a certificate for such Common Stock be registered in the name of (insert social security or other identifying number) whose address is . If said number of ____ shares of Common Stock is less than all of the shares of Common Stock purchasable under BCAM International, Inc. Warrant Certificate No. W-____, Holder requests that a new Warrant Certificate representing the remaining balance of the shares of Common Stock be registered in the name of Holder and that such Warrant Certificate be delivered to ___________ whose address is _____________________________________________________________________________. Dated:______________, _____ Signature: --------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.) - --------------------------------- (insert Social Security or Taxpayer Identification Number of Holder) Signature Guaranteed: - --------------------------------- EXHIBIT C TO THE WARRANT AGREEMENT [FORM OF ASSIGNMENT] (To be executed to transfer the Warrant Certificate) FOR VALUE RECEIVED ___________________________________________ hereby sells, assigns and transfers unto _______________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ___________________ (print name and address of transferee) the Warrants represented by BCAM International, Inc. Warrant Certificate No. W-________ together with all right, title and interest evidenced thereby, and does hereby irrevocably constitute and appoint _____________________, attorney, to transfer the said Warrants on the books of BCAM International, Inc., with full power of substitution. Dated:___________, _____ Signature: -------------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.) - ---------------------------------- (Insert Social Security or Taxpayer Identification Number of Holder) Signature Guaranteed: - ---------------------------------- EXHIBIT D TO THE WARRANT AGREEMENT [FORM OF PARTIAL ASSIGNMENT] (To be executed to transfer the Warrant Certificate) FOR VALUE RECEIVED ___________________________________________ (the "Holder") hereby sells, assigns and transfers unto ________________________ ____________________ (print name and address of transferee) _________ Warrants represented by BCAM International, Inc. Warrant Certificate No. W-_______, together with all right, title and interest evidenced thereby, and does hereby irrevocably constitute and appoint _____________, attorney, to transfer said Warrants on the books of BCAM International, Inc., with full power of substitution. Holder requests that a new Warrant Certificate representing the remaining balance of Warrants represented by BCAM International, Inc. Warrant Certificate No. W-________ be registered in the name of Holder and that such Warrant Certificate be delivered to ____________________________________________ __________________ whose address is ____________________________________________ Dated: ____________, _____ Signature: ----------------------------- (Signature must conform in all respects to name of Holder as specified on the face of the Warrant Certificate.) - ------------------------------- (Insert Social Security or Taxpayer Identification Number of Holder) Signature Guaranteed: - ------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----