SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of April 14, 1998, made by BCAM
INTERNATIONAL, INC., a New York corporation (the "Company"), BCA SERVICES, INC.,
a New York corporation ("BCA"), and BCAM TECHNOLOGIES, INC., a Delaware
corporation ("BT" and collectively with the Company and BCA, the "Pledgors") in
favor of WEXFORD MANAGEMENT LLC, a Connecticut limited liability company, as
agent (the "Agent") for the Noteholders (as herein defined).
W I T N E S S E T H :
WHEREAS, pursuant to that certain Note Purchase Agreement dated as of
September 19, 1997, between the Company and Impleo LLC, as amended by that
certain First Amendment (the "First Amendment") dated as of April 14, 1998 (as
the same may from time to time be further amended, modified or supplemented,
collectively the "Purchase Agreement"), the Purchaser purchased the Notes (as
defined in the Purchase Agreement) from the Company;
WHEREAS, pursuant to that certain Note Purchase Agreement dated as of
September 19, 1997 among the Company, Xxxxx X. Xxxx, Xxxxxx Xxxxxxxxx, X. Xxxx &
Associates, 621 Partners, Strafe & Company for the account of Xxxxx X. Xxxx,
Strafe & Company for the account of Xxxxx X. Xxxxxxx and Strafe & Company for
the account of Xxxxx X. Xxxxxxxxxxx (collectively, the "KM Purchasers"), as
amended by that certain First Amendment (the "KM First Amendment") dated as of
April 14, 1998 (as the same may from time to time be further amended, modified
or supplemented, the "KM Purchase Agreement"), the KM Purchasers purchased the
Other Notes from the Company;
WHEREAS, the Purchaser is willing to enter into the First Amendment, but
only upon the condition, among others, that the Company shall have executed and
delivered to the Agent this Security Agreement; and
WHEREAS, the KM Purchasers are willing to enter into the KM First
Amendment, but only on the condition, among others, that the Company shall have
executed and delivered to the Agent the Security Agreement;
WHEREAS, each of the Pledgors will derive substantial direct and indirect
benefit from the transactions contemplated by the First Amendment and the KM
First Amendment;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Purchase Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Account Debtor" shall mean any "account debtor," as such term is defined
in Section 9-105(1)(a) of the UCC.
"Accounts" shall mean any "account," as such term is defined in Section
9-106 of the UCC, now owned or hereafter acquired by the Pledgors and, in any
event, shall include, without limitation, all accounts receivable, book debts
and other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to the Pledgors (including, without
limitation, under any trade names, styles or divisions thereof) whether arising
out of goods sold or services rendered by the Pledgors or from any other
transaction, whether or not the same involves the sale of goods or services by
the Pledgors (including, without limitation, any such obligation which might be
characterized as an account or contract right under the UCC) and all of the
Pledgors' rights in, to and under all purchase orders or receipts now owned or
hereafter acquired by it for goods or services, and all of the Pledgors' rights
to any goods represented by any of the foregoing (including, without limitation,
unpaid seller's rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), and all moneys
due or to become due to the Pledgors under all contracts for the sale of goods
or the performance of services or both by the Pledgors (whether or not yet
earned by performance on the part of the Pledgors or in connection with any
other transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by any
Person with respect to any of the foregoing.
"Chattel Paper" shall mean any "chattel paper," as such term is defined in
Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by the Pledgors.
"Collateral" shall have the meaning assigned to such term in Section 2 of
this Security Agreement.
"Contracts" shall mean all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in or
under which the Pledgors may now or hereafter have any right, title or interest,
including, without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance thereof.
"Documents" shall mean any "documents," as such term is defined in Section
9-105(1)(f) of the UCC, now owned or hereafter acquired by the Pledgors.
"Equipment" has the meaning set forth in Section 9-109(2) of the UCC.
"hereby," "herein," "hereof," "hereunder" and words of similar import
refer to this Security Agreement as a whole (including, without limitation, any
schedules hereto)
and not merely to the specific section, paragraph or clause in which the
respective word appears.
"Instruments" shall mean any "instrument," as such term is defined in
Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by the Pledgors,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
"Inventory" shall mean all "inventory," as such term is defined in Section
9-109(4) of the UCC, now owned or hereafter acquired by the Pledgors and, in any
event, shall include, without limitation, all inventory, merchandise, goods and
other personal property now owned or hereafter acquired by the Pledgors which
are held for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in any Pledgors' business,
or the processing, packaging, delivery or shipping of the same, and all finished
goods.
"KM Warrant Agreement" shall mean that certain Warrant Agreement dated as
of September 19, 1997 between the Company and the KM Purchasers.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, Lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"Noteholders" shall mean the holders of the Notes and the Other Notes.
"Proceeds" shall mean "proceeds," as such term is defined in Section
9-306(1) of the UCC and, in any event, shall include, without limitation, (i)
any and all proceeds of any insurance, indemnity, warranty or guaranty payable
to the Pledgors from time to time with respect to any of the Collateral, (ii)
any and all payments (in any form whatsoever) made or due and payable to the
Pledgors from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority), and (iii) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.
"Secured Obligations" shall mean (i) all of the unpaid principal amount
of, and accrued interest on, the Notes and the Other Notes, (ii) all other
indebtedness, liabilities and obligations of the Pledgors to the Agent, whether
now existing or hereafter incurred, and whether created under, arising out of or
in connection with the Transaction Documents. This term includes, without
limitation, all fees, charges, expenses, attorneys'
fees and any other sum chargeable to the Company under any of the Transaction
Documents.
"Security Agreement" shall mean this Security Agreement, as the same may
from time to time be amended, modified or supplemented and shall refer to this
Security Agreement as in effect on the date such reference becomes operative.
"Transaction Documents" shall mean, collectively, this Security Agreement,
the Stock Pledge Agreement, the Purchase Agreement, the KM Purchase Agreement,
the Warrant Agreement, the KM Warrant Agreement, the Notes and the Other Notes.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the Agent's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest. (a) As collateral security for the prompt
and complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and to induce the
Purchaser to enter into the First Amendment and the KM Purchasers to enter into
the KM First Amendment, and the transactions contemplated thereby, each of the
Pledgors hereby assigns, conveys, mortgages, pledges, hypothecates and transfers
to the Agent, and hereby grants to the Agent, for the benefit of the
Noteholders, a security interest in, all of such Pledgor's right, title and
interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
(i) all Accounts of such Pledgor;
(ii) all Chattel Paper of such Pledgor;
(iii) all Contracts of such Pledgor;
(iv) all Documents of such Pledgor;
(v) all Equipment of such Pledgor;
(vi) all Instruments of such Pledgor;
(vii) all Inventory of such Pledgor;
(viii) the United States Patents and applications for patent described on
Schedule VI to the First Amendment, and the patents and applications for patent
in other countries described on Schedule VI to the First Amendment, and all
other United States
and foreign patents and applications for patent of the Pledgors now existing or
hereafter filed or acquired;
(ix) the inventions disclosed and/or claimed in all of the said United
States and foreign patents and applications for patents, and all other
inventions now owned by the Pledgors or hereinafter made, created or acquired by
or for the Pledgors whether or not any of said inventions are patentable;
(x) all other applications for patent or like protection on any of said
inventions that have now or may in the future be filed by the Pledgors, or by
the assignor(s) of the rights to said inventions to the Pledgors, whether in the
United States or in any other country or place anywhere in the world;
(xi) all other patents or like protection that have been or may in the
future be granted on any of the aforesaid inventions and/or applications to the
Pledgors, or to any assignor of the rights to any such invention to the
Pledgors, whether in the United States or in any other country or place anywhere
in the world;
(xii) the United States copyrights and applications for copyrights
described on Schedule VI to the First Amendment, and the copyrights and
applications for copyrights in other countries described on Schedule VI to the
First Amendment, and all other copyrights of the Pledgors, now existing or
hereafter acquired, whether or not the underlying works of authorship have been
published and whether said copyrights are statutory or arise under the common
law, all applications of the Pledgors for copyright presently existing or
hereafter filed or acquired and all works of authorship and other intellectual
property rights now owned or hereafter created by or for, or acquired by the
Pledgors;
(xiii) the United States registered trademarks and applications for
registrations of trademarks described on Schedule VI to the First Amendment, and
the trademarks and applications for registrations of trademarks in other
countries described on Schedule VI to the First Amendment, and all other
trademarks, service marks and applications to register the same of the Pledgors,
whether registered or unregistered and wherever registered, now existing or
hereafter arising, created or acquired by the Pledgors;
(xiv) all renewals, reissues, continuations, extensions or the like of any
patents, copyrights, trademarks, service marks and like protection, including
without limitation, those obtained or permissible under past, present and future
laws and statutes;
(xv) all rights of action on account of past, present and future
unauthorized use of any of said inventions, copyrights, trademarks or service
marks and for infringement of said patents, copyrights, trademarks or service
marks and like protection;
(xvi) the right to file and prosecute applications for patents,
copyrights, and for registration of trademarks and service marks on any of said
inventions, copyrights, trademarks, service marks or for similar intellectual
property in the United States or any other country or place anywhere in the
world;
(xvii) the entire goodwill of the businesses of the Pledgors connected
with and symbolized by the trademarks, service marks, trade names and the other
general intangibles of the Pledgors;
(xviii) all of the Pledgors' trade names, customer lists, trade secrets,
corporate and other business records, license rights, advertising materials,
operating manuals, methods, processes, know-how, sales literature, drawings,
specifications, descriptions, inventions, name plates, catalogs, dealer
contracts, supplier contracts, distributor agreements, confidential information,
consulting agreements, engineering contracts, and all other assets which
uniquely reflect the goodwill of the businesses of the Pledgor to which said
general intangibles relate;
(xix) all of the proceeds of any of the foregoing (the intangible assets
enumerated in subparagraphs (vii) through (xvii) being hereinafter collectively
referred to as the "General Intangibles"); and
(xx) to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
(b) If Drew Shoe Corporation ("Drew") repays its loan from Bank One, N.A.
prior to the repayment in full of the Secured obligations, the Company shall
cause Drew to grant to the Agent a Lien on substantially all of the assets of
Drew (whether such assets are real property, personal property or mixed)
pursuant to such mortgages and security agreements as the Agent may require Drew
to execute and deliver. The Company agrees to take, and to cause Drew to take,
any and all acts and to execute and deliver any and all documents necessary, or
in the opinion of the Agent, desirable, to give effect to the foregoing
covenant.
(c) If the Company shall create any subsidiary after the date hereof, the
Company shall cause such Subsidiary to grant to the Agent a Lien on
substantially all of the assets of such subsidiary (whether such assets are real
property, personal property or mixed) pursuant to such mortgages and security
agreements as the Agent may require such Subsidiary to execute and deliver. The
Company agrees to take, and to cause such Subsidiary to take, any and all acts
and to execute and deliver any and all documents necessary, or in the opinion of
the Agent, desirable, to give effect to the foregoing covenant.
3. Rights of the Agent; Limitations on the Agent's Obligations. (a) It is
expressly agreed by each Pledgor that, anything herein to the contrary
notwithstanding, each Pledgor shall remain liable under each of its Contracts to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder and each Pledgor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract. The Agent shall not have any obligation or
liability under any Contract by reason of or arising out of this Security
Agreement or the granting to the Agent of a security interest therein or the
receipt by the Agent of any payment relating to any Contract pursuant hereto,
nor shall the Agent be
required or obligated in any manner to perform or fulfill any of the obligations
of the Pledgors under or pursuant to any Contract, or to make any payment, or to
make any inquiry as to the nature or the sufficiency of any payment received by
it or the sufficiency of any performance by any party under any Contract, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
(b) The Agent authorizes each Pledgor to collect its Accounts, provided
that such collection is performed in a prudent and businesslike manner, and the
Agent may, upon the occurrence and during the continuation of an Event of
Default and without notice, limit or terminate said authority at any time. If
required by the Agent at any time during the continuation of any Event of
Default, any Proceeds, when first collected by any Pledgor, received in payment
of any such Account or in payment for any of its Inventory or on account of any
of its Contracts, shall be promptly deposited by such Pledgor in precisely the
form received (with all necessary endorsements) in a special bank account
maintained by the Agent subject to withdrawal by the Agent only, as hereinafter
provided, and until so turned over shall be deemed to be held in trust by such
Pledgor for and as the Agent's property and shall not be commingled with such
Pledgor's other funds or properties. Such Proceeds, when deposited, shall
continue to be collateral security for all of the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided. The Agent
shall apply all or a part of the funds on deposit in said special account to the
principal of or interest on or both in respect of any of the Secured Obligations
in accordance with the provisions of Section 8(d) hereof and any part of such
funds which the Purchaser elects not so to apply and deems not required as
collateral security for the Secured Obligations shall be paid over from time to
time by the Agent to the Pledgors. If an Event of Default has occurred and is
continuing, at the request of the Agent the Pledgors shall deliver to the Agent
all original and other documents evidencing, and relating to, the sale and
delivery of such Inventory or the performance of labor or service which created
such Accounts, including, without limitation, all original orders, invoices and
shipping receipts.
(c) The Agent may at any time, upon the occurrence and during the
continuation of any Event of Default (whether or not waived), after first
notifying the Pledgors of its intention to do so, notify Account Debtors of the
Pledgors, parties to the Contracts of the Pledgors, obligors of Instruments of
the Pledgors and obligors in respect of Chattel Paper of the Pledgors that the
Accounts and the right, title and interest of the Pledgors in and under such
Contracts, Instruments and Chattel Paper have been assigned to the Agent and
that payments shall be made directly to the Agent. Upon the request of the
Agent, the Pledgors will so notify such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in respect of such Chattel
Paper. Upon the occurrence and during the continuation of or an Event of Default
(whether or not waived) the Agent may in its own name or in the name of others
communicate with such Account Debtors, parties to such Contracts, obligors of
such Instruments and obligors in respect of such Chattel Paper to verify with
such Persons to the Agent's satisfaction the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper.
(d) Upon reasonable prior notice to the Pledgors (unless an Event of
Default has occurred and is continuing, in which case no notice is necessary),
the Agent shall have the right, during normal business hours, to make test
verifications of the Accounts and physical verifications of the Inventory in any
manner and through any medium that it considers advisable, and each Pledgor
agrees to furnish all such assistance and information as the Agent may require
in connection therewith. Each Pledgor at its expense will prepare and deliver to
the Agent at any time and from time to time promptly upon the Agent's request,
the following reports: (i) a reconciliation of all its Accounts, (ii) an aging
of all its Accounts, (iii) trial balances, and (iv) a test verification of such
Accounts as the Agent may request.
(e) The Agent (a) shall have no obligation or responsibility to protect or
defend the General Intangibles or the right to use thereof, and the Pledgors
shall, at their own expense, protect, defend and maintain the General
Intangibles to the full extent advisable for their business, and (b) to use
their best efforts to detect any infringers of the rights described herein and
shall forthwith advise the Agent in writing of material infringements detected,
and (c) if the Pledgors fails to comply with the foregoing, the Agent may do so
in the Pledgors' name to the extent permitted by law, but at the Pledgors'
expense, and the Pledgors hereby agree to reimburse the Agent in full for all
expenses, including reasonable attorney's fees, incurred by the Agent in
protecting, defending and maintaining the General Intangibles.
4. Representations and Warranties. Each Pledgor hereby represents and
warrants that:
(a) Except for the security interest granted to the Agent pursuant to this
Security Agreement, such Pledgor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all Liens. No
material amounts payable under or in connection with any of its Accounts or
Contracts are evidenced by Instruments which have not been delivered to the
Agent.
(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed by such Pledgor in favor of the Agent pursuant to this
Security Agreement.
(c) When appropriate financing statements have been filed in the
jurisdictions listed on Schedule I hereto, this Security Agreement will be
effective to create a valid and continuing lien on and first priority perfected
security interest in the Collateral with respect to which a security interest
may be perfected by filing pursuant to the UCC, prior to all other Liens, and
will be enforceable as such as against creditors of and purchasers from such
Pledgor (other than purchasers of Inventory in the ordinary course of business).
(d) Each Pledgor's principal place of business and the place where its
records concerning the Collateral are kept and the location of its Inventory are
set forth on
Section 11 hereof, and such Pledgor will not change such principal place of
business or remove such records or change the location of its Inventory unless
it has taken such action as is necessary to cause the security interest of the
Agent in the Collateral to continue to be perfected. Each Pledgor will not
change its principal place of business or the place where its records concerning
the Collateral are kept or change the location of its Inventory and Equipment
without giving thirty (30) days' prior written notice thereof to the Agent.
(e) The amount represented by each Pledgor to the Agent from time to time
as owing by each Account Debtor or by all Account Debtors in respect of the
Accounts of the Pledgors will at such time be the correct amount actually and
unconditionally owing by such Account Debtors thereunder.
5. Covenants. Each Pledgor covenants and agrees with the Agent that from
and after the date of this Security Agreement and until the Secured Obligations
are fully satisfied:
(a) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Agent, and at the sole expense of
such Pledgor, such Pledgor will promptly and duly execute and deliver any and
all such further instruments and documents and take such further action as the
Agent may reasonably deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted, including, without
limitation, using its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to the Agent of any Contract held by
such Pledgor or in which such Pledgor has any rights not heretofore assigned,
the filing of any financing or continuation statements under the UCC with
respect to the Liens and security interests granted hereby, and transferring
Collateral to the Agent's possession (if a security interest in such Collateral
can be perfected by possession). Each Pledgor hereby authorizes the Agent to
file any such financing or continuation statement without the signature of such
Pledgor to the extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral shall be or become evidenced by any
Instrument, such Instrument shall be immediately pledged to the Agent hereunder,
and shall be duly endorsed in a manner satisfactory to the Agent and delivered
to the Agent.
(b) Maintenance of Records. Each Pledgor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Collateral and all other dealings with the Collateral. Each
Pledgor will xxxx its books and records pertaining to the Collateral to evidence
this Security Agreement and the security interests granted hereby. All Chattel
Paper will be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
Wexford Management LLC, as Agent". For the Agent's further security, each
Pledgor agrees that the Agent shall have a special property interest in all of
such Pledgor's books and records pertaining to the Collateral and, upon the
occurrence and during the continuation of an Event of Default, each Pledgor
shall deliver and turn over any such books and records to the Agent or to its
representatives at any time on demand of the Agent. Prior to the occurrence of
an Event of Default and upon reasonable notice from
the Agent, each Pledgor shall permit any representative of the Agent to inspect
such books and records and will provide photocopies thereof to the Agent.
(c) Indemnification. In any suit, proceeding or action brought by the
Agent relating to any Account, Chattel Paper, Contract, or Instrument for any
sum owing thereunder, or to enforce any provision of any Account, Chattel Paper,
Contract, or Instrument, each Pledgor will save, indemnify and keep the Agent
harmless from and against all expense, loss or damage suffered by reason of any
defense, setoff, counterclaim, recoupment or reduction of liability whatsoever
of the obligor there-under, arising out of a breach by any Pledgor of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from any Pledgor, and all such obligations of any Pledgor shall be and remain
enforceable against and only against such Pledgor and shall not be enforceable
against the Agent.
(d) Compliance with Laws, etc. The Pledgors will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any govern-mental authority, applicable to the Collateral or any part thereof or
to the operation of such Pledgor's business; provided, however, that the
Pledgors may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not in the sole opinion of the Agent adversely
affect the Agent's rights hereunder or adversely affect the first priority of
its security interest in the Collateral.
(e) Payment of Obligations. Each Pledgor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom and all claims of
any kind (including, without limitation, claims for labor, materials and
supplies), except that no such charge need be paid if (i) such nonpayment does
not involve any danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein, and (ii) such charge is being contested in good faith,
by proper proceedings, and adequate reserves therefor have been established by
such Pledgor in accordance with and to the extent required by GAAP.
(f) Compliance with Terms of Accounts, etc. In all material respects, each
Pledgor will perform and comply with all obligations in respect of Accounts,
Chattel Paper, Contracts and all other agreements to which it is a party or by
which it is bound.
(g) Limitation on Liens on Collateral. Each Pledgor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral, and will
defend the right, title and interest of the Purchaser in and to any of such
Pledgor's rights under the Chattel Paper, Contracts, Documents, and Instruments
and Inventory and in and to the Proceeds thereof against the claims and demands
of all Persons whomsoever. Without limiting the foregoing, each of the Pledgors
acknowledges and agrees that the Agent has not had an opportunity to conduct a
Lien search against the Pledgors. If and to the extent that a Lien search
discloses that there are Liens on any of the Collateral, the Pledgors shall
provide the Agent with satisfactory evidence of the release of such Lien within
ten (10) Business Days. The failure by any Pledgor to deliver evidence of the
release of any such Lien
within ten (10) Business Days shall be an Event of Default under the Notes and
the Other Notes.
(h) Limitations on Modifications of Accounts. Upon the occurrence and
during the continuation of any Event of Default, each Pledgor will not, without
the Agent's prior written consent, grant any extension of the time of payment of
any of the Accounts, Chattel Paper or Instruments, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon other than trade discounts granted in the ordinary
course of business of such Pledgor.
(i) Maintenance of Insurance. Each Pledgor will maintain, with financially
sound and reputable companies, insurance policies (i) insuring its Inventory
against loss by fire, explosion, theft and such other casualties as are usually
insured against by companies engaged in the same or similar businesses and (ii)
insuring each Pledgor and the Agent against liability for personal injury and
property damage relating to such Inventory, and Equipment, such policies to be
in such amounts and against at least such risks as are usually insured against
in the same general area by companies engaged in the same or a similar business,
naming the Agent as an additional insured with losses payable to each Pledgor
and the Agent as their respective interests may appear under a standard Agent
"loss-payable" clause.
(j) Limitations on Disposition. Each Pledgor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except for sales of Inventory or licenses of General Intangibles in the
ordinary course of business.
(k) Further Identification of Collateral. Each Pledgor will, if so
requested by the Agent, furnish to the Agent, as often as the Agent reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
(l) Notices. Each Pledgor will advise the Agent promptly, in reasonable
detail, (i) of any material Lien, security interest, encumbrance or claim made
or asserted against any of the Collateral, (ii) of any material change in the
composition of the Collateral, and (iii) of the occurrence of any other event
which would have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereunder.
(m) Right of Inspection. Upon reasonable notice to each Pledgor (unless an
Event of Default has occurred and is continuing, in which case no notice is
necessary), the Agent shall at all times have full and free access during normal
business hours to all the books and records and correspondence of each Pledgor,
and the Agent or its representatives may examine the same, take extracts
therefrom and make photocopies thereof.
(n) Continuous Perfection. Each Pledgor will not change its name, identity
or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless such Pledgor shall have given the Agent at least
thirty (30) days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially simultaneously with such
change if it is impossible to take such action in advance) necessary or
reasonably requested by the Agent to amend such financing statement or
continuation statement so that it is not seriously misleading.
(o) General Intangibles. (i) The Pledgors shall diligently prosecute all
applications for patents, copyrights and trademarks and shall file and prosecute
any and all continuations, continuations-in-part, applications for reissue,
applications for certificate of correction and like matters as shall be
reasonably indicated to be desirable from facts available to it from time to
time during the term of this Agreement, and the Pledgors shall bear the entire
cost of all such filing and proceedings. The Pledgors agree to retain a licensed
patent attorney if necessary and an experienced copyright and trademark counsel
approved by the Agent for the filing and prosecution of all such applications
and other proceedings.
(ii) The Pledgors agrees to pay when due all fees, including license fees,
taxes and other expenses which shall be incurred or which shall accrue with
respect to any of the patents or patent applications, copyrights and copyright
applications, trademarks and trade xxxx applications and know-how within the
General Intangibles.
(iii) The Pledgors shall not allow any patent, copyright, trademark, trade
name, service xxxx or any application for patent, copyright, trademark or like
protection included within the General Intangibles to become abandoned, nor any
patent, copyright, trademark or like protection to be forfeited or dedicated to
the public without express written approval of the Agent and any license thereof
by the Pledgors shall be legally sufficient to prevent any abandonment,
forfeiture or dedication to public use. In the event any pending or hereafter
filed patent or trademark application, other than trademark renewal
applications, has been finally rejected by the United States Patent and
Trademark Office or any foreign patent or trademark office and the Pledgors have
exhausted their administrative remedies, the Pledgors may abandon the same after
sixty (60) days written notice to the Agent, who may thereafter at its own
expense pursue judicial appeals. The Pledgors shall cooperate in any such
appeal.
(iv) The Agent may, at its option, whether before or after default, but
without obligation to do so, discharge taxes, Liens, or security interests or
other encumbrances at any time levied or placed upon the General Intangibles, or
pay for maintenance or preservation of the General Intangibles, or pay any other
fee, attorneys' fee or other expenses necessary to preserve and protect the
assignment and security interest hereby granted.
6. Agent's Appointment as Attorney-in-Fact. (a) Each Pledgor hereby
irrevocably constitutes and appoints the Agent and any officer or agent thereof,
with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Pledgor and in
the name of such Pledgor or in its own name, from time to time in the Agent's
sole and absolute discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby gives the Agent the power and
right, on behalf of such Pledgor, without notice to or assent by such Pledgor to
do the following:
(i) to ask, demand, collect, receive and give acquittances and receipts
for any and all moneys due and to become due under any Collateral and, in the
name of such Pledgor or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or other Instruments
for the payment of moneys due under any Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever pay-able and to file any claim or to
take any other action or proceeding in any court of law or equity or other-wise
deemed appropriate by the Agent for the purpose of collecting any and all such
moneys due under any Collateral whenever payable;
(ii) to pay or discharge taxes, Liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance called for by the terms of this Security Agreement
and to pay all or any part of the premiums therefor and the costs thereof; and
(iii) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Agent or as the Agent shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and other amounts due, and
to become due at any time, in respect of or arising out of any Collateral; (C)
to sign and indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other Documents
constituting or relating to the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to enforce any
other right in respect of any Collateral; (E) to defend any suit, action or
proceeding brought against any Pledgor with respect to any Collateral; (F) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Purchaser
may deem appropriate; (G) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Purchaser's option and such Pledgors's expense, at
any time, or from time to time, all acts and things which the Agent reasonably
deems necessary to protect, preserve or realize upon the Collateral and the
Agent's Lien therein, in order to effect the intent of this Security Agreement,
all as fully and effectively as such Pledgor might do.
(b) The Agent agrees that, except upon the occurrence and during the
continuation of an Event of Default, it will forebear from exercising the power
of attorney or any rights granted to the Agent pursuant to this Section 6. Each
Pledgor hereby ratifies, to the extent permitted by law, all that said attorneys
shall lawfully do or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6 is a power coupled with an interest and shall
be irrevocable until the Secured Obligations are indefeasibly paid in full.
(c) The powers conferred on the Agent hereunder are solely to protect the
Agent's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Agent shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be responsible to
each Pledgor for any act or failure to act, except for its own gross negligence
or willful misconduct.
(d) Each Pledgor also authorizes the Agent, at any time and from time to
time upon the occurrence and during the continuation of an Event of Default, (i)
to communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of such Pledgor in and under the
Contracts hereunder and other matters relating thereto and (ii) to execute, in
connection with the sale provided for in Section 8 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
7. Performance by the Agent of each Pledgor's Obligations. If any Pledgor
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Agent incurred in connection with such
performance or compliance, together with interest thereon at the rate then in
effect in respect of the Notes and the Other Notes, shall be payable by such
Pledgor to the Agent on demand and shall constitute Secured Obligations secured
hereby.
8. Remedies, Rights Upon Default. (a) If an Event of Default shall occur
and be continuing, in addition to all other rights and remedies granted to it in
this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, the Agent may exercise all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, each Pledgor expressly agrees that in any such
event the Agent, without demand of performance or other demand, advertisement or
notice of any kind (except the notice specified below of time and place of
public or private sale) to or upon such Pledgor or any other person (all and
each of which demands, advertisements and/or notices are hereby expressly waived
to the maximum extent permitted by the UCC and other applicable law), may
forth-with collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange or broker's board or at the Agent's
offices or elsewhere at such prices as it may deem best, for cash or on credit
or for
future delivery without assumption of any credit risk. The Agent shall have the
right upon any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption each Pledgor hereby releases. Each Pledgor further agrees, at the
Agent's request, to assemble the Collateral and make it available to the Agent
at places which the Agent shall reasonably select, whether at such Pledgor's
premises or elsewhere. The Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, as provided
in Section 8(d) hereof, each Pledgor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Agent of any other amount required by any
provision of law, including Section 9-504(1)(c) of the UCC, need the Agent
account for the surplus, if any, to such Pledgor. To the maximum extent
permitted by applicable law, each Pledgor waives all claims, damages, and
demands against the Agent arising out of the repossession, retention or sale of
the Collateral except such as arise out of the gross negligence or willful
misconduct of the Agent. Each Pledgor agrees that the Agent need not give more
than ten (10) days' notice (which notification shall be deemed given when mailed
or delivered on an overnight basis, postage prepaid, addressed to such Pledgor
at its address referred to in Section 11 hereof) of the time and place of any
public sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. Each Pledgor shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all amounts to which the Purchaser is
entitled, such Pledgor also being liable for the fees of any attorneys employed
by the Purchaser to collect such deficiency. In addition to the foregoing,
during the existence of any Event of Default, the Agent shall have the right (x)
to obtain an absolute assignment of any General Intangible, (y) to sell, assign,
transfer, or convey any General Intangible, or (z) to license any Person to use
any General Intangible on terms deemed reasonable by the Agent.
(b) Each Pledgor also agrees to pay all costs of the Agent, including,
without limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
(c) Each Pledgor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon all or
any part of the Collateral shall be distributed by the Agent in the following
order of priorities:
first, to the Agent in an amount sufficient to pay in full the expenses of
the Agent in connection with such sale, disposition or other realization,
including all expenses, liabilities and advances incurred or made by the Agent
in connection therewith, including, without limitation, attorney's fees;
second, to the Agent in an amount equal to the then unpaid principal of
and accrued interest on the Secured Obligations;
third, to the Agent in an amount equal to any other Secured Obligations
which are then unpaid; and
finally, upon payment in full of all of the Secured Obligations, to pay to
each Pledgor, or its representatives or as a court of competent jurisdiction may
direct, any surplus then remaining from such Proceeds.
9. Limitation on the Agent's Duty in Respect of Collateral. The Agent
shall not have any duty as to any Collateral in its possession or control or in
the possession or control of any agent or nominee of it or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto, except that the Purchaser shall use reasonable care with
respect to the Collateral in its possession or under its control. Upon request
of any Pledgor, the Agent shall account for any moneys received by it in respect
of any foreclosure on or disposition of the Collateral.
10. Termination of Security Interests. Upon the payment in full of all
Secured Obligations, the Agent shall release all Liens granted in its favor and
shall file appropriate UCC termination statements.
11. Reinstatement. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against any
Pledgor for liquidation or reorganization, should any Pledgor become insolvent
or make an assignment for the benefit of creditors or should a receiver or
trustee be appointed for all or any significant part of any Pledgor's assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
12. Notices. Except as otherwise provided here-in, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person with receipt acknowledged or
sent by registered or certified mail, return receipt requested, postage prepaid,
or by telecopy and confirmed by telecopy answerback addressed as follows:
If to the Agent, at:
c/o Wexford Management LLC
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Telephone: (000)000-0000
Telecopier: (000)000-0000
With a copy to:
XxXxxxxxx, Will & Xxxxx
00 Xxxxxxxxxxx Xxxxx, 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to either of the Pledgors, at:
c/o BCAM International, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to:
Ruskin, Moscou, Xxxxx & Faltischek, PC
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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.
13. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability with-out
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. No Waiver; Cumulative Remedies. The Agent shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by the Agent,
and then only to the extent therein set forth. A waiver by the Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of the
Agent, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by the Agent and,
where applicable by each Pledgor.
15. Successors and Assigns; Governing Law. (a) This Security Agreement and
all obligations of each Pledgors hereunder shall be binding upon the successors
and assigns of such Pledgor, and shall, together with the rights and remedies of
the Agent hereunder, inure to the benefit of the Agent, all future holders of
the Notes and their respective successors and assigns. No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Obligations or any portion
thereof or interest therein shall in any manner affect the security interest
granted to the Agent hereunder.
(b) THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
16. Waiver of Jury Trial. EACH PLEDGOR WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER, UNDER THE AGREEMENT, THE KM AGREEMENT OR UNDER THE OTHER TRANSACTION
DOCUMENTS OR RELATING TO EACH OF THE FOREGOING.
17. Section Titles. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
18. Counterparts. This Security Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
IN WITNESS WHEREOF, the Agent and each Pledgor have caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
BCAM INTERNATIONAL, INC.
By:
----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
BCAM TECHNOLOGIES, INC.
By:
----------------------------------
Name:
Title:
BCA SERVICES, INC.
By:
----------------------------------
Name:
Title:
WEXFORD MANAGEMENT LLC, as Agent
By:
----------------------------------
Name: Xxxxxx Xxxxxx
Title: President
SCHEDULE I
FILINGS
Jurisdiction Filing Office
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New York Secretary of State
New York Suffolk County Clerk
