<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )*
---------
PMC INTERNATIONAL, INC.
- ---------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
- ---------------------------------------------------------------------------
(Title of Class of Securities)
693437105
--------------------------------------------------------
(CUSIP Number)
Kenneth S. Phillips
555-17th Street, 14th Floor
Denver, CO 80202
(303) 292-1177
- --------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 28, 1995
--------------------------------------------------------
(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.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Page 1 of 39<PAGE>
CUSIP No. 693437105 Page 2 of 39 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KENNETH STEPHEN PHILLIPS
####-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S. CITIZEN
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7 SOLE VOTING POWER
3,054,267
8 SHARED VOTING POWER
9 SOLE DISPOSITIVE POWER
3,054,267
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,054,267
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
55.13%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
Item 1. Security and Issuer.
-------------------
This statement relates to the common stock, $0.01 par value, of PMC
International, Inc., a Colorado corporation (the "Issuer"). The
principal executive office of the Issuer is 555 17th Street, 14th
Floor, Denver, Colorado 80202.
Item 2. Identity and Background.
-----------------------
This statement is filed by Kenneth S. Phillips ("Phillips"), whose
address is 555 17th Street, 14th Floor, Denver, Colorado 80202.
Phillips is the President, Chief Executive Officer and a Director of
the Issuer. Phillips is also the managing member and has controlling
ownership in Phillips & Andrus, LLC ("LLC"), a Colorado limited
liability company. Phillips is a citizen of the United States.
Phillips has not within the last five years, or at any previous time,
been convicted in a criminal proceeding (excluding traffic violations
and similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result
of which he is the subject of a judgment, decree or final order
enjoining future violation of or prohibiting or mandating activities
subject to federal or state securities laws or the finding of any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The consideration given by LLC for the 1,643,845 shares of common
stock of Issuer was a Promissory Note of the LLC in the principal
amount of $2,015,000 which bears interest at the rate of 9 percent per
annum.
Item 4. Purpose of Transaction.
----------------------
Phillips engaged in the transaction set forth under Item 3 above for
the purpose of increasing his investment in the Issuer.
(a) Phillips does not currently have any plans or proposals that
relate to or would result in any acquisition of additional securities
of Issuer. Regarding any plans or proposals that relate to or would
result in the disposition of securities of Issuer, LLC entered into a
Shareholders' Agreement with Phillips and David Andrus ("Andrus"), a
member and minority shareholder of LLC, wherein Andrus was granted an
option to purchase 654,422 shares of the common stock of Issuer from
LLC. Andrus' option shall vest as to 40 percent of the shares on the
date on which Andrus begins to render his services as an employee of
Issuer and shall vest as to 1/3 of the remaining 60 percent thereof on
each of the first, second and third anniversaries of such date.
Additionally, LLC entered into an Option Agreement with Bedford
Capital Financial Corporation ("Bedford") wherein Bedford was granted
an option to purchase 335,000 shares of the common stock of Issuer
from LLC.
(b) Phillips does not currently have any plans or proposals that
relate to or would result in an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving Issuer or
any of its subsidiaries;
Page 2 of 39 Pages<PAGE>
(c) Phillips does not currently have any plans or proposals that
relate to or would result in a sale or transfer of a material amount
of assets of Issuer or any of its subsidiaries;
(d) Under certain provisions of (1) a Letter Agreement by and between
Bedford Capital Financial Corporation ("Bedford") and Phillips and/or
(2) a Shareholders' Agreement entered into by Bedford, the Issuer,
Phillips, Andrus, and LLC, in the event that certain conditions arise,
including, among others, the bankruptcy, insolvency, or default on
obligations of Issuer (a "financial disaster"), Bedford may gain
control of Issuer's board of directors. Pursuant to the Letter
Agreement, Phillips has agreed to resign under certain circumstances
to permit Bedford to designate additional directors and gain control
of the board of directors of Issuer in the event of a financial
disaster. Pursuant to the Shareholders' Agreement, in the event of a
financial disaster, Issuer shall cause a special meeting of the board
of directors to be called to consider an amendment to the bylaws of
Issuer to expand the board of directors. In addition, if the
financial disaster provisions of the Shareholder Agreement are
triggered, Bedford shall gain control of Issuer's board of directors
at the next annual meeting of shareholders by obtaining the right to
designate four of Issuer's directors;
(e) Phillips does not currently have any plans or proposals that
relate to or would result in any material change in the present
capitalization or dividend policy of Issuer;
(f) Phillips does not currently have any plans or proposals that
relate to or would result in any other material change in Issuer's
business or corporate structure;
(g) Concurrent with the acquisition by LLC, Phillips, Andrus, and
Bedford entered into a Shareholders' Agreement pursuant to which such
shareholders agree to give the shareholders who are parties to the
Shareholders' Agreement a right of first refusal with respect to any
proposed transfer of common stock;
(h) Phillips does not currently have any plans or proposals that
relate to or would result in any class of securities of Issuer to be
delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a
registered national securities association;
(i) Phillips does not currently have any plans or proposals that
relate to or would result in any class of equity securities of Issuer
becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Act; and
(j) except as noted above, Phillips does not currently have any plans
or proposals that relate to or would result in any action similar to
those enumerated above.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) LLC has a beneficial interest in 1,643,845 shares of common stock
of Issuer; such interest represents 29.67% of the common stock of
Issuer. Phillips has a beneficial interest in 3,054,267 shares of
common stock of Issuer, including the 1,643,845 shares of common stock
of Issuer held directly by the LLC; such interest represents 55.13% of
the common stock of
Page 4 of 39 Pages<PAGE>
Issuer.
(b) LLC has the sole voting power and sole dispositive power of the
1,643,845 shares of common stock. As Manager of the LLC, Phillips has
authority to exercise the sole voting power and sole dispositive power
of the LLC with respect to the 1,643,845 shares of common stock.
Additionally, Phillips has the sole voting power and sole dispositive
power of 1,410,422 shares of common stock which he owns individually.
(c) There have been no transactions in the common stock of Issuer
that were effected by Phillips during the past sixty days.
(d) Pursuant to a Stock Pledge Agreement from the LLC to Marc N.
Geman ("Geman"), the LLC's Promissory Note to Geman in the principal
amount of $2,015,000 is secured by the pledge of the 1,643,845 shares
of common stock of Issuer. The proceeds of the sale of any of the
1,643,845 shares will be utilized to discharge the obligation of LLC
under the Note.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
--------------------------------------------------------
with Respect to Securities of the Issuer.
----------------------------------------
LLC and/or Phillips have entered into the following contracts and
agreements which relate to the common stock of Issuer:
(a) A Stock Purchase Agreement between Phillips and Geman dated July
26, 1995 wherein Phillips purchased from Geman 1,643,845 shares of
common stock of Issuer for the aggregate purchase price of $1,815,000.
(b) A Non-Recourse Promissory Note dated July 27, 1995 from Phillips
to Geman in the principal amount of $1,815,000 with interest on the
unpaid balance at the rate of 9 percent per annum.
(c) A Non-Recourse Promissory Note dated July 27, 1995 from Phillips
to Geman in the principal amount of $200,000 with interest on the
unpaid balance at the rate of 9 percent per annum.
(d) A Stock Pledge Agreement dated July 26, 1995 between Phillips and
Geman wherein the 1,643,845 shares of common stock of Issuer purchased
by Phillips from Geman are pledged as security for payment of two Non-
Recourse Promissory Notes dated July 27, 1995 from Phillips to Geman
in the total principal amount of $2,015,000.
(e) A Contribution and Assumption Agreement between LLC and Phillips
dated July 26, 1995 wherein Phillips contributed 1,643,845 shares of
common stock of Issuer to LLC and LLC assumed all liabilities,
obligations and debts of Phillips under two Non-Recourse Promissory
Notes dated July 27, 1995 from Phillips to Geman in the total
principal amount of $2,015,000.
Page 5 of 39 Pages<PAGE>
(f) A Promissory Note dated July 27, 1995 from LLC to Geman in the
principal amount of $2,015,000 with interest on the unpaid balance at
the rate of 9 percent per annum.
(g) A Stock Pledge Agreement dated July 26, 1995 between LLC and
Geman wherein 1,643,845 shares of common stock of Issuer are pledged
as security for payment of a Promissory Note dated July 27, 1995 from
LLC to Geman in the total principal amount of $2,015,000.
(h) A Shareholders' Agreement dated July 26, 1995 between LLC,
Phillips and Andrus wherein Andrus was granted an option to purchase
654,422 shares of the common stock of Issuer from LLC.
(i) An Option Agreement dated July 26, 1995 between the LLC and
Bedford Capital Financial Corporation wherein was granted an option to
purchase 335,000 shares of the common stock of Issuer from LLC.
Item 7. Material to Be Filed as Exhibits.
--------------------------------
Exhibit 1 Stock Purchase Agreement dated July 26, 1995 between
Phillips and Geman.
Exhibit 2 Non-Recourse Promissory Note dated July 27, 1995 for
$1,815,000.
Exhibit 3 Non-Recourse Promissory Note dated July 27, 1995 for
$200,000.
Exhibit 4 Stock Pledge Agreement dated July 26, 1995 between Phillips
and Geman.
Exhibit 5 Contribution and Assumption Agreement dated July 26, 1995.
Exhibit 6 Promissory Note dated July 27, 1995 for $2,015,000.
Exhibit 7 Stock Pledge Agreement dated July 26, 1995 between LLC and
Geman.
Exhibit 8 Shareholders' Agreement dated July 26, 1995 between LLC,
Phillips and Andrus.
Exhibit 9 Bedford Option Agreement dated July 26, 1995 between LCC and
Bedford.
Page 6 of 39 Pages<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true,
complete and correct.
August 10, 1995 Kenneth S. Phillips
- ------------------------- ------------------------------
Date Kenneth S. Phillips
Page 7 of 39
EXHIBIT 1
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is
made and entered into this 26th day of July, 1995, by and between
Kenneth S. Phillips ("Purchaser") and Marc Geman ("Seller").
RECITAL
Seller owns shares of Common Stock of PMC
International, Inc., a Colorado corporation ("PMCI"). Seller
desires to sell to Purchaser, and Purchaser desires to purchase
from Seller, 1,643,845 of such shares (the "Shares") upon the
terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the foregoing and the mutual
covenants and agreements herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale. Purchaser hereby purchases and
-----------------
Seller hereby sells, transfers, conveys, assigns and delivers to
Purchaser the Shares. Concurrent with the execution of this
Agreement, Seller has delivered to Purchaser a certificate or
certificates representing the Shares, duly executed in blank or
accompanied by a duly executed stock power(s) sufficient in form
to transfer to Purchaser all right, title and interest in and to
such Shares.
2. Purchase Price; Payment. The aggregate purchase
-----------------------
price (the "Purchase Price") for the Shares is [One Million Eight
Hundred Fifteen Thousand Dollars ($1,815,000.)]. Concurrently
with the execution and delivery of this Agreement and the
delivery by Seller to Purchaser of the certificates representing
the Shares, in accordance with Paragraph 1, Purchaser has
delivered to Seller his non-recourse promissory note (the "Note")
in the form attached hereto as Exhibit A, together with a Pledge
---------
Agreement (the "Pledge Agreement") pledging the Shares to Seller
as security for the payment of this Note.
3. Warranty of Title. Seller represents and warrants
-----------------
that he holds full marketable title to the Shares, free and clear
of any liens, security agreements or encumbrances and free of any
restrictions or rights of any other party (other than
restrictions imposed by federal and state securities laws to the
transfer of the Shares without registration under such laws), and
Seller further represents and warrants that upon execution and
delivery of the Shares pursuant to this Agreement, Purchaser
shall own such Shares
Page 8 of 39<PAGE>
free and clear of any liens or encumbrances other than the lien
of the Pledge Agreement.
4. Investment Representations of Purchaser.
---------------------------------------
Purchaser represents to the Seller and to PMCI that Purchaser is
purchasing the Shares for investment and with no intention to
distribute the Shares or to transfer them in violation of any
federal or state securities law. Purchaser represents that he
intends to transfer the Shares to Phillips & Andrus, L.L.C., a
Colorado limited liability company (the "LLC"), of which he is
the controlling person, and the representation in the last
preceding sentence is hereby made also on behalf of the LLC.
Purchaser acknowledges that any certificate(s) issued to the
Purchaser or to the LLC to represent the Shares shall bear a
legend calling attention to the fact that the Shares have not
been registered under the Securities Act of 1933 or any state
securities law and restricting their transfer except in
compliance with such laws.
IN WITNESS WHEREOF this Agreement has been executed and
delivered on the day and year first above written.
SELLER:
/s/ Marc Geman
------------------------------
Marc Geman
PURCHASER:
/s/ Kenneth S. Phillips
------------------------------
Kenneth S. Phillips
Page 9 of 39
-2-
EXHIBIT 2
---------
NON-RECOURSE PROMISSORY NOTE
$1,815,000 July 27, 1995
FOR VALUE RECEIVED, the undersigned, KENNETH S.
PHILLIPS ("Maker"), hereby promises to pay to the order of Marc
Geman ("Geman") (Geman, together with any subsequent holder of
this Note, sometimes hereafter, the "Holder") on or before the
Maturity Date (as defined herein) the principal amount of One
Million Eight Hundred Fifteen Thousand Dollars ($1,815,000)
together with interest on the unpaid balance at the rate of nine
percent (9%) per annum.
This Note is the Maker's Note referred to in that
certain Stock Purchase Agreement dated as of July 26, 1995 (the
"Purchase Agreement") between the Maker and Geman, to which
reference is hereby made for a more definitive statement of the
terms and conditions upon which the debt evidenced hereby is to
be repaid. This Note is given in consideration of the Shares
transferred to the Maker pursuant to the Purchase Agreement and
is subject to and entitled to the benefits thereof. Capitalized
terms used, but not defined, herein shall have the meanings given
such terms in the Purchase Agreement.
Subject to the following provisions of this Note, the
entire amount of principal and accrued interest hereunder shall
be due and payable on July 26, 1999 (the "Maturity Date").
From the date hereof until the first anniversary date
hereof, interest shall neither accrue nor be payable hereunder.
Interest shall accrue and be payable monthly on the unpaid
principal hereof, if any, beginning on August 26, 1996, and
continuing on the 26th day of each month thereafter.
The principal hereof shall be due and payable, together
with any due and payable interest, on the 26th day of the month
in which such payment is to be made, in accordance with the
following installment schedule: (a) $225,000 on each of the
dates which occur, respectively, six months and 12 months
following the date (the "Settlement Date") on which the United
States Securities Exchange Commission issues a final resolution
("Final Order") resolving, with respect to both of Kenneth S.
Phillips and PMC International, Inc., a Colorado corporation
("PMCI") (or any subsidiary thereof), its investigation and
allegations in connection with In the matter of Portfolio
--------------------------
Management Consultants, Inc. (D-1968), before the United States
- ---------------------------------------------------------------
Securities Exchange Commission; (b) $225,000 on each of the dates
- ------------------------------
which occur, respectively, 18 months, 24 months, 30 months, 36
months and 42 months following the Settlement Date and (4) the
remaining balance of principal and all accrued and unpaid
Page 10 of 39<PAGE>
interest on the Maturity Date. During the period from the date
on which the first installment of principal is due and payable
under clause (b) above until the date on which the last payment
under such clause is due and payable, Maker shall pay the Holder
monthly an additional $4,500, which additional amount shall be
applied against principal.
The Maker may at any time without penalty prepay this
Note by paying the entire amount of principal, together with
interest accrued thereon but unpaid. Payment of principal and
interest hereunder shall be made in money of the United States of
America, lawful at such times for the satisfaction of public and
private debts.
If any provision of this Note is, for any reason and to
any extent, invalid or unenforceable, then neither the remainder
of this Note, nor the application of the provision to other
persons, entities or circumstances, shall be affected by such
invalidity or unenforceability, and there shall be deemed
substituted for the invalid or unenforceable provision the most
similar provision which would be valid and enforceable under
applicable law.
If a default is made in the payment of this Note, the
Holder shall have no recourse whatsoever against the Maker with
respect to payment of the obligations evidenced hereby. If a
default is made in the payment of this Note and it is placed in
the hands of an attorney for collection, or if it is collected
through any legal proceedings, the Maker agrees to pay reasonable
attorneys' fees and other costs of collection, including without
limitation court costs of the Holder.
This Note is secured by that certain Stock Pledge
Agreement (the "Pledge Agreement") dated the date hereof by and
between Geman and the Maker. If a default is made in the payment
of this Note, the Holder's sole remedy shall be enforcement of
the rights granted in the Pledge Agreement. In such event,
Holder shall have the right to declare all sums of principal and
interest outstanding hereunder immediately due and payable.
Demand, presentment for payment, notice of dishonor and
protest are hereby expressly waived by Maker.
This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
IN WITNESS WHEREOF, the Maker has executed this Non-
Recourse Promissory Note on the 27th day of July, 1995.
MAKER:
/s/ Kenneth S. Phillips
------------------------------
Kenneth S. Phillips
Page 11 of 39
-2-
EXHIBIT 3
---------
NON-RECOURSE PROMISSORY NOTE
$200,000 July 27, 1995
FOR VALUE RECEIVED, the undersigned, KENNETH S.
PHILLIPS ("Maker"), hereby promises to pay to the order of Marc
Geman ("Geman") (Geman, together with any subsequent holder of
this Note, sometimes hereafter, the "Holder") on or before the
Maturity Date (as defined herein) the principal amount of [Two
Hundred Thousand Dollars ($200,000)] together with interest on
the unpaid balance at the rate of nine percent (9%) per annum.
This Note is the Maker's Note referred to in, and is
entitled to the benefits of, that certain Letter Agreement dated
as of July 27, 1995 (the "Letter Agreement") between the Maker
and Geman, to which reference is hereby made for a more
definitive statement of the terms and conditions upon which the
debt evidenced hereby is to be repaid. This Note is given in
consideration of the Purchase Price Reduction agreed upon therein
and is subject to and entitled to the benefits thereof.
Capitalized terms used, but not defined, herein shall have the
meanings given such terms in the Letter Agreement.
Subject to the following provisions of this Note, the
entire amount of principal and accrued interest hereunder shall
be due and payable on July 26, 1999 (the "Maturity Date").
From the date hereof until the first anniversary date
hereof, interest shall neither accrue nor be payable hereunder.
Interest shall accrue and be payable monthly on the unpaid
principal hereof, if any, beginning on August 26, 1996, and
continuing on the 26th day of each month thereafter.
The principal hereof shall be due and payable, together
with any due and payable interest, on the 26th day of the month
in which such payment is to be made, in accordance with the
following installment schedule: (a) $25,000 on each of the dates
which occurs six and 12 months, respectively, following the date
(the "Settlement Date") on which the United States Securities
Exchange Commission issues a final resolution ("Final Order")
resolving, with respect to both of Kenneth S. Phillips and PMC
International, Inc., a Colorado corporation ("PMCI") (or any
subsidiary thereof), its investigation and allegations in
connection with In the matter of Portfolio Management
-------------------------------------
Consultants, Inc. (D-1968), before the United States Securities
- ---------------------------------------------------------------
Exchange Commission; (b) $25,000 on each of the dates which
- -------------------
occur, respectively, 18 months, 24 months, 30 months, 36 months
and 42 months following the Settlement Date and (4) the remaining
balance of principal and all accrued and unpaid interest on the
Maturity Date. During the period from the date on which the
first installment of principal is due and payable under clause
Page 12 of 39
-1-<PAGE>
(b) above until the date on which the last payment under such
clause is due and payable, Maker shall pay the Holder monthly an
additional $500, which additional amount shall be applied against
principal.
The Maker may at any time without penalty prepay this
Note by paying the entire amount of principal, together with
interest accrued thereon but unpaid. Payment of principal and
interest hereunder shall be made in money of the United States of
America, lawful at such times for the satisfaction of public and
private debts.
If any provision of this Note is, for any reason and to
any extent, invalid or unenforceable, then neither the remainder
of this Note, nor the application of the provision to other
persons, entities or circumstances, shall be affected by such
invalidity or unenforceability, and there shall be deemed
substituted for the invalid or unenforceable provision the most
similar provision which would be valid and enforceable under
applicable law.
If a default is made in the payment of this Note, the
Holder shall have no recourse whatsoever against the Maker with
respect to payment of the obligations evidenced hereby. If a
default is made in the payment of this Note and it is placed in
the hands of an attorney for collection, or if it is collected
through any legal proceedings, the Maker agrees to pay reasonable
attorneys' fees and other costs of collection, including without
limitation court costs of the Holder.
This Note is secured by that certain Stock Pledge
Agreement (the "Pledge Agreement") dated the date hereof by and
between Geman and the Maker. If a default is made in the payment
of this Note, the Holder's sole remedy shall be enforcement of
the rights granted in the Pledge Agreement. In such event,
Holder shall have the right to declare all sums of principal and
interest outstanding hereunder immediately due and payable.
Demand, presentment for payment, notice of dishonor and
protest are hereby expressly waived by Maker.
This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
Page 13 of 39
-2-<PAGE>
IN WITNESS WHEREOF, the Maker has executed this Non-
Recourse Promissory Note on the 27th day of July, 1995.
MAKER:
/s/ Kenneth S. Phillips
------------------------------
Kenneth S. Phillips
Page 14 of 39
-3-
EXHIBIT 4
---------
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made
and entered as of this 26 day of July, 1995, by and between
---
Kenneth S. Phillips ("Pledgor") and Marc N. Geman ("Pledgee").
A. Concurrently with the execution of this Agreement,
Pledgor has signed and delivered to Pledgee his Promissory Notes
(the "Notes") in the aggregate principal amount of $2,015,000,
copies of which are attached hereto as Exhibit A.
---------
B. As security for the payment of the Notes, Pledgor
has agreed to pledge to Pledgee 1,643,845 shares (the "Shares")
of the common stock of PMC International, Inc., a Colorado
corporation (the "Corporation").
IT IS THEREFORE AGREED:
1. PLEDGE. As security for payment of the Notes,
------
Pledgor hereby grants a security interest to Pledgee in the
Shares. Concurrently with the execution of this Agreement,
Pledgor shall deliver to Pledgee the certificate(s) for the
Shares, endorsed in blank or accompanied by a stock power(s)
endorsed in blank.
2. DIVIDENDS. During the term of this Agreement and
---------
so long as Pledgor is not in default in the performance of his
obligations under the Notes or this Agreement, all dividends
payable with respect to the Shares will be paid to the Pledgee
and shall be applied to the principal on the Notes.
3. VOTING RIGHTS. During the term of this Agreement
-------------
and so long as Pledgor is not in default in the performance of
his obligations under the Notes or this Agreement, Pledgor shall
have the right to exercise all voting rights with respect to the
Shares. If Pledgor defaults in the performance of his
obligations under the Notes or this Agreement, and such default
is not cured within 30 days of written notice of such default,
then Pledgee shall have the right to exercise all voting rights
with respect to the Shares.
4. REPRESENTATIONS. The Pledgor warrants and
---------------
represents that he is the owner of the Shares and that he has the
right to pledge the Shares under the terms of this Agreement.
5. ADJUSTMENTS. In the event that, during the term
-----------
of this Agreement, any share dividend, reclassification,
readjustment, or other change is declared or made in the capital
structure of the Corporation, all new, substituted, and
additional shares, or other securities, issued with respect to
the Shares by reason of any such change shall be held by the
Page 15 of 39<PAGE>
Pledgee under the terms of this Agreement in the same manner as
the Shares originally pledged hereunder.
6. PAYMENT OF NOTES. Upon payment in full of the
----------------
Notes, the Pledgee shall redeliver to the Pledgor the
certificate(s) for the Shares, and the stock power(s), if any,
delivered to Pledgee herewith, and this Agreement and all rights
of Pledgee in the Shares hereunder shall terminate. Pledgee
shall immediately thereafter take all actions necessary to
release the Shares from the security interest granted hereby.
7. SEVERABILITY OF SECURITY INTEREST. The security
---------------------------------
interest in the Shares granted hereby shall be severable as to
each of such lots of Shares ("Share Lots") as to which Geman
receives a payment against the principal amount of the Notes, as
determined in accordance with this paragraph 7. Upon any payment
of a portion of the principal provided for in the Notes together
with all interest accrued to the date of such payment, (a) the
number of Shares to be included in the corresponding Share Lot
shall be determined by dividing the amount of such payment by
$1.226, (b) the security interest and all other rights and
interests of the Pledgee in and to such Share Lot and all of its
constituent Shares shall terminate and Pledgee shall immediately
thereafter take all actions necessary to release such Share Lot
from the security interest granted hereby, (c) such Share Lot and
all of its constituent Shares shall automatically revest in the
Pledgor, and (d) the Pledgee shall surrender to the Pledgor the
certificate(s) representing the constituent Shares of such Share
Lot and the stock power(s) related thereto.
8. DEFAULT.
-------
(a) In the event that the Pledgor defaults in the
payment of any installment of principal or interest on the Notes
when due, or defaults in the performance of any of the terms of
this Agreement, Pledgee shall give notice of such default to
David L. Andrus and Bedford Capital Financial Corporation and,
for purposes of this Agreement and the Notes, and Pledgee shall
accept a tender of performance in cure of such default by any of
the foregoing persons made within thirty days (the "Cure Period")
after the giving of notice as required in this subparagraph 8(a).
(b) If no tender of performance in cure of such
breach is made within the Cure Period, all principal and interest
with respect to the Notes shall be immediately due and payable
and the Pledgee shall have the rights and remedies provided in
the Uniform Commercial Code in force in the State of Colorado
(the "U.C.C."), and in this connection, the Pledgee may upon 10
days notice to the Pledgor, sent by registered or certified mail,
sell all the Shares in the manner provided in the U.C.C. Pledgor
hereby consents to a private or public sale of the Shares. Out
of the proceeds of any sale the Pledgee may retain an amount
equal to the principal and interest then due on the Notes, plus
reasonable attorney's fees and the amount of the expenses of the
Page 16 of 39
-2-<PAGE>
sale, and shall pay any balance of such proceeds to the Pledgor.
In the alternative, the Pledgee may offer to retain the Shares in
full satisfaction of all amounts due pursuant to the Notes and/or
this Agreement.
9. Pledgor agrees that he will not take or
participate in any action the intent and result of which is the
reduction in the value of the Shares.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first written above.
PLEDGOR:
/s/ Kenneth S. Phillips
-----------------------------------
Kenneth S. Phillips
PLEDGEE:
/s/ Marc N. Geman
-----------------------------------
Marc N. Geman
Page 17 of 39
-3-
EXHIBIT 5
---------
CONTRIBUTION AND ASSUMPTION AGREEMENT
-------------------------------------
This contribution and Assumption Agreement is entered
as of the 26th day of July, 1995, by and between Phillips &
----
Andrus, LLC (the "Company") and Kenneth S. Phillips ("Phillips").
RECITALS
A. Phillips, a member of the Company, and Marc Geman
("Geman") have entered into that certain Stock Purchase Agreement
dated as of July 26, 1995, pursuant to which Phillips has issued
to Geman a non-recourse promissory note in the principal amount
of [$1,815,000] (the "Purchase Note") for the purchase from Geman
of 1,643,845 shares (the "Shares") of the Common Stock of PMC
International, Inc., a Colorado corporation.
B. Phillips and Geman also have agreed by Letter
Agreement dated July 19, 1995, to a reduction in the purchase
price of certain shares of the Common Stock of PMCI purchased by
Phillips from Geman prior to such date. In connection therewith,
Phillips has issued to Geman on such date a non-recourse
promissory note in the principal amount of $200,000 (the
"Reduction Note").
C. Phillips desires to contribute the Shares to the
capital of the Company, as part of his initial capital
contribution to the Company, in exchange for his ownership
interest in the Company and for the Company's assumption (with
full recourse) of the obligations of Phillips under the Purchase
Note and the Reduction Note, and the Company desires to accept
the Shares and to assume such obligations, all pursuant to the
terms and conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
AGREEMENT
1. Contribution of Shares. Phillips hereby sells,
----------------------
conveys, assigns, transfers and delivers to the Company, and the
Company hereby accepts, as a contribution to capital, all of the
Shares, free and clear of all security interests, liens,
encumbrances and claims of any third party whatsoever (other than
the security interest of Geman in the Shares).
2. Assumption of Liabilities. The Company hereby
-------------------------
assumes all liabilities, obligations and debts of Phillips under
the Purchase Note and the Reduction Note and agrees to pay the
same in accordance with the terms and conditions thereof or upon
Page 18 of 39<PAGE>
such different terms and conditions as may be agreed upon between
the Company and Geman.
3. Miscellaneous.
-------------
(a) Notices. Any notice required or permitted to
-------
be given under this Agreement shall be directed to the
appropriate party in writing and mailed or delivered, if to the
Company, to 555-17th Street, 14th Floor, Denver, Colorado 80202 or
---------------------------, ------ -----
to the Company's then principal office, if different, and if to
Phillips to 555 Seventeenth Street, 14th Floor, Denver, Colorado
80202.
D. Binding Effect. This Agreement shall be
--------------
binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns, heirs and legal
representatives.
E. Amendment. This Agreement may not be amended
---------
except by an instrument in writing executed by each of the
parties hereto.
F. Applicable Law. This Agreement is entered
--------------
into in the State of Colorado and for all purposes shall be
governed by the laws of the State of Colorado.
G. Counterparts. This instrument may be
------------
executed in one or more counterparts, each of which shall be
deemed an original.
H. Entire Agreement. This Agreement supersedes
----------------
and replaces all prior agreements or other expressions or
understandings between the parties related to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed
this Contribution and Assumption Agreement on the date first
written above.
PHILLIPS & ANDRUS, LLC
By: /s/ Kenneth S. Phillips
--------------------------------
Title: Manager
----------------------------
/s/ Kenneth S. Philips
-----------------------------------
Kenneth S. Phillips
Page 19 of 39
-2-
EXHIBIT 6
---------
PROMISSORY NOTE
$2,015,000 July 27, 1995
FOR VALUE RECEIVED, the undersigned, PHILLIPS & ANDRUS,
LLC, a Colorado limited liability company ("Maker"), hereby
promises to pay to the order of Marc Geman ("Geman") (Geman,
together with any subsequent holder of this Note, sometimes
hereafter, the "Holder") on or before the Maturity Date (as
defined herein) the principal amount of Two Million Fifteen
Thousand Dollars ($2,015,000) together with interest on the
unpaid balance at the rate of nine percent (9%) per annum.
Subject to the following provisions of this Note, the
entire amount of principal and accrued interest hereunder shall
be due and payable on July 26, 1999 (the "Maturity Date").
From the date hereof until the first anniversary date
hereof, interest shall neither accrue nor be payable hereunder.
Interest shall accrue and be payable monthly on the unpaid
principal hereof, if any, beginning on August 26, 1996, and
continuing on the 26th day of each month thereafter.
The principal hereof shall be due and payable, together
with any due and payable interest, on the 26th day of the month
in which such payment is to be made, in accordance with the
following installment schedule: (a) $250,000 on each of the
dates which occur, respectively, six months and 12 months
following the date (the "Settlement Date") on which the United
States Securities Exchange Commission issues a final resolution
("Final Order") resolving, with respect to both of Kenneth S.
Phillips and PMC International, Inc., a Colorado corporation
("PMCI") (or any subsidiary thereof), its investigation and
allegations in connection with In the matter of Portfolio
--------------------------
Management Consultants, Inc. (D-1968), before the United States
- ---------------------------------------------------------------
Securities Exchange Commission; (b) $250,000 on each of the dates
- ------------------------------
which occur, respectively, 18 months, 24 months, 30 months, 36
months and 42 months following the Settlement Date and (c) the
remaining balance of principal and all accrued and unpaid
interest on the Maturity Date. During the period from the date
on which the first installment of principal is due and payable
under clause (b) above until the date on which the last payment
under such clause is due and payable, Maker shall pay the Holder
monthly an additional $5,000, which additional amount shall be
applied against principal.
Page 20 of 39<PAGE>
The Maker may at any time without penalty prepay this
Note by paying the entire amount of principal, together with
interest accrued thereon but unpaid. Payment of principal and
interest hereunder shall be made in money of the United States of
America, lawful at such times for the satisfaction of public and
private debts.
If any provision of this Note is, for any reason and to
any extent, invalid or unenforceable, then neither the remainder
of this Note, nor the application of the provision to other
persons, entities or circumstances, shall be affected by such
invalidity or unenforceability, and there shall be deemed
substituted for the invalid or unenforceable provision the most
similar provision which would be valid and enforceable under
applicable law.
If a default is made in the payment of this Note and it
is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, the Maker agrees to pay
reasonable attorneys' fees and other costs of collection,
including without limitation court costs of the holder hereof, in
addition to all other amounts owning under this Note.
This Note is secured by that certain Stock Pledge
Agreement (the "Pledge Agreement") dated the date hereof by and
between Geman and the Maker. If a default is made in the payment
of this Note, the Holder shall, in addition to the enforcement of
the rights granted in the Pledge Agreement, have full recourse
against the Maker with respect to payment of the obligations
evidenced hereby and shall have the right to declare all sums of
principal and interest outstanding hereunder immediately due and
payable.
The failure of PMCI to pay to Geman any monthly payment
of severance pay pursuant to that certain Supplemental Agreement
dated the date hereof by and between PMCI, Maker and Geman shall
constitute an event of default hereunder and under the Pledge
Agreement.
Demand, presentment for payment, notice of dishonor and
protest are hereby expressly waived by Maker.
This Note is given by the Maker and accepted by Geman
in exchange and substitution for, and in replacement of, those
certain promissory notes, copies of which are attached hereto
collectively as Exhibit A, in the principal amounts of $1,815,000
---------
and $200,000, respectively, dated the date hereof and issued by
Kenneth S. Phillips to Geman, which notes shall be cancelled
forthwith.
This Note shall be governed by and construed in
accordance with the laws of the State of Colorado.
Page 21 of 39
-2-<PAGE>
IN WITNESS WHEREOF, the Maker has executed this Non-
Recourse Promissory Note on the 27th day of July, 1995.
MAKER:
PHILLIPS & ANDREWS, LLC
/s/ Kenneth S. Phillips
-----------------------------------
Kenneth S. Phillips
Page 22 of 39
-3-
EXHIBIT 7
---------
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made
and entered as of this 26 day of July, 1995, by and between
---
Phillips & Andrus, LLC ("Pledgor") and Marc N. Geman ("Pledgee").
A. Concurrently with the execution of this Agreement,
Pledgor has signed and delivered to Pledgee its Promissory note
(the "Note") in the aggregate principal amount of $2,015,000, a
copy of which is attached hereto as Exhibit A.
---------
B. As security for the payment of the Note, Pledgor
has agreed to pledge to Pledgee 1,643,845 shares (the "Shares")
of the common stock of PMC International, Inc., a Colorado
corporation (the "Corporation").
IT IS THEREFORE AGREED:
1. PLEDGE. As security for payment of the Note,
------
Pledgor hereby grants a security interest to Pledgee in the
Shares. Concurrently with the execution of this Agreement,
Pledgor shall deliver to Pledgee the certificate(s) for the
Shares, endorsed in blank or accompanied by a stock power(s)
endorsed in blank.
2. DIVIDENDS. During the term of this Agreement and
---------
so long as Pledgor is not in default in the performance of its
obligations under the Note or this Agreement, all dividends
payable with respect to the Shares will be paid to the Pledgee
and shall be applied to the principal on the Note.
3. VOTING RIGHTS. During the term of this Agreement
-------------
and so long as Pledgor is not in default in the performance of
its obligations under the Note or this Agreement, Pledgor shall
have the right to exercise all voting rights with respect to the
Shares. If Pledgor defaults in the performance of its
obligations under the Note or this Agreement, and such default is
not cured within 30 days of written notice of such default, then
Pledgee shall have the right to exercise all voting rights with
respect to the Shares.
4. REPRESENTATIONS. The Pledgor warrants and
---------------
represents that it is the owner of the Shares and that it has the
right to pledge the Shares under the terms of this Agreement.
5. ADJUSTMENTS. In the event that, during the term
-----------
of this Agreement, any share dividend, reclassification,
readjustment, or other change is declared or made in the capital
structure of the Corporation, all new, substituted, and
additional shares, or other securities, issued with respect to
the Shares by reason of any such change shall be held by the
Page 23 of 39<PAGE>
Pledgee under the terms of this Agreement in the same manner as
the Shares originally pledged hereunder.
6. PAYMENT OF NOTE. Upon payment in full of the
---------------
Note, the Pledgee shall redeliver to the Pledgor the
certificate(s) for the Shares, and the stock power(s), if any,
delivered to Pledgee herewith, and this Agreement and all rights
of Pledgee in the Shares hereunder shall terminate. Pledgee
shall immediately thereafter take all actions necessary to
release the Shares from the security interest granted hereby.
7. SEVERABILITY OF SECURITY INTEREST. The security
---------------------------------
interest in the Shares granted hereby shall be severable as to
each of such lots of Shares ("Share Lots") as to which Geman
receives a payment against the principal amount of the Note, as
determined in accordance with this paragraph 7. Upon any payment
of a portion of the principal provided for in the Note together
with all interest accrued to the date of such payment, (a) the
number of Shares to be included in the corresponding Share Lot
shall be determined by dividing the amount of such payment by
$1.226, (b) the security interest and all other rights and
interests of the Pledgee in and to such Share Lot and all of its
constituent Shares shall terminate and Pledgee shall immediately
thereafter take all actions necessary to release such Share Lot
from the security interest granted hereby, (c) such Share Lot and
all of its constituent Shares shall automatically revest in the
Pledgor, and (d) the Pledgee shall surrender to the Pledgor the
certificate(s) representing the constituent Shares of such Share
Lot and the stock power(s) related thereto.
8. DEFAULT.
-------
(a) In the event that the Pledgor defaults in the
payment of any installment of principal or interest on the Note
when due, or defaults in the performance of any of the terms of
this Agreement, Pledgee shall give notice of such default to each
of the Pledgor, Kenneth S. Phillips, David L. Andrus and Bedford
Capital Financial Corporation and, for purposes of this Agreement
and the Note, and Pledgee shall accept a tender of performance in
cure of such default by any of the foregoing persons made within
thirty days (the "Cure Period") after the giving of notice as
required in this subparagraph 8(a).
(b) If no tender of performance in cure of such
breach is made within the Cure Period, the Pledgee shall have the
rights and remedies provided in the Uniform Commercial Code in
force in the State of Colorado (the "U.C.C."), and in this
connection, the Pledgee may upon 10 days notice to the Pledgor,
sent by registered or certified mail, sell all the Shares in the
manner provided in the U.C.C. Pledgor hereby consents to a
private or public sale of the Shares. Out of the proceeds of any
sale the Pledgee may retain an amount equal to the principal and
interest then due on the Note, plus reasonable attorney's fees
and the amount of the expenses of the sale, and shall pay any
Page 24 of 39
-2-<PAGE>
balance of such proceeds to the Pledgor. In the alternative, the
Pledgee may offer to retain the Shares in full satisfaction of
all amounts due pursuant to the Note and/or this Agreement.
9. Pledgor agrees that it will not take or
participate in any action the intent and result of which is the
reduction in the value of the Shares.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date first written above.
PLEDGOR:
PHILLIPS & ANDRUS, LLC
/s/ Kenneth S. Phillips
-----------------------------------
By: Kenneth S. Phillips,
Manager
PLEDGEE:
/s/ Marc N. Geman
-----------------------------------
Marc N. Geman
Page 25 of 39
-3-
EXHIBIT 8
---------
PHILLIPS & ANDRUS, LLC
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "Agreement") is made
and entered as of the 26 day of July, 1995, by and among Kenneth
S. Phillips ("Phillips"), David L. Andrus ("Andrus") (Phillips
and Andrus, sometimes hereafter, collectively, the "Shareholders"
or, individually, a "Shareholder") and Phillips & Andrus, LLC, a
Colorado limited liability company (the "Company").
RECITALS
A. The principal assets of the Company are
1,643,845 shares (the "PMCI Stock") of the capital stock of PMC
International, Inc., a Colorado corporation ("PMCI"), which PMCI
Stock was contributed to the Company by Phillips upon the
assumption by the Company of promissory notes (the "Phillips
Notes") in the aggregate principal amount of $2,000,000.
Phillips purchased the PMCI Stock from Marc Geman ("Geman")
pursuant to a Stock Purchase Agreement between Phillips and Geman
dated as of July 19, 1995. The Company issued its $2,000,000
promissory note (the "Geman Note") to Geman in exchange for the
Phillips Notes. The Geman Note fully matures on July 26, 1999.
B. Phillips and Andrus are the holders of all of the
outstanding Company Shares (as defined in the "Operating
Agreement of Phillips & Andrus, LLC" (the "LLC Agreement")) of
the Company. Phillips holds 939,423 Company Shares and Andrus
holds one Company Share. Andrus is being granted hereby a
convertible option to purchase Company Shares from Phillips and
Page 26 of 39<PAGE>
the parties desire to ensure that such Company Shares remain
subject to this Agreement.
C. The Shareholders desire to assure (i) the
Company's timely payment of the Geman Note, (ii) the continuity
of interest in the business of the Company among the
Shareholders, (iii) that the aggregate number of Company Shares
outstanding at any time shall equal the number of shares of PMCI
Stock held by the Company and (iv) that the number of shares of
PMCI Stock issuable to either Shareholder upon the dissolution of
the Company shall equal the number of Company Shares held by such
Shareholder at such time.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants
and promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Shareholders and the Company agree as follows:
1. Restrictions on Transfer. Neither Shareholder
------------------------
shall transfer any of his Company Shares now owned or hereafter
acquired, except in accordance with the terms of this Agreement
or unless such transfer is agreed to in writing by the Company
and the Shareholder(s) holding, in the aggregate, a majority of
the outstanding Company Shares. The term "transfer" shall
include any sale, assignment, gift, bequest, pledge, grant of a
security interest in or lien upon, or other disposition of the
Company Shares or any right or interest therein, whether
voluntary or by operation of law.
Page 27 of 39
-2-<PAGE>
2. Restrictions on Issuance. The Company shall not
------------------------
issue or sell any Company Shares, unless agreed to in writing by
the Company and all of the Shareholders who, as of the date such
writing is executed, are not in default of their obligations
under this Agreement or the LLC Agreement.
3. Andrus Option. Phillips hereby grants to Andrus
-------------
an option (the "Andrus Option") to purchase 654,421 of the
Company Shares held by him (the "Option Shares") at the purchase
price specified in paragraph (b) below.
(a) The Andrus Option shall vest as to forty
percent (40%) of the Option Shares on the date on which Andrus
begins to render his services as an employee of PMCI pursuant to
that certain Employment Agreement dated July 26, 1995, by and
between Andrus and PMCI, and shall vest as to one-third (1/3) of
the remaining sixty percent (60%) thereof on each of the first,
second and third anniversaries of such date. Subject to the
foregoing vesting schedule, the Andrus Option shall be
exercisable, in whole or in part, at any time on or prior to the
date on which Andrus' status as an employee of PMCI and any
subsidiary of PMCI is terminated for any reason. Notwithstanding
the foregoing provision, the Andrus Option shall vest immediately
as to all of the Option Shares upon either a Change in Control
(as defined herein) in PMCI or the due authorization of actions
to cause the common stock of PMCI to become unregistered and
privately traded.
(b) The purchase price per share of the Option
Shares upon any exercise of the Option (the "Per Share Price")
Page 28 of 39
-3-<PAGE>
shall be $1.21 per share plus the pro rata share of the interest
accrued (whether or not paid) by the Company on the Geman Note
and on any borrowing by the Company from PMCI, allocated on the
basis the number of shares of PMCI stock owned by the Company
from time to time when such interest was accruing. The Purchase
Price of the Option Shares being purchased upon an exercise of
the Option shall be the Per Share Price multiplied by the number
of Option Shares on which the Options then being exercised.
(c) Andrus shall, not later than ten (10) days
prior to the Exercise Date, give Phillips notice of his intent to
exercise the Option, such notice to state the date the Option
will be exercised (the "Exercise Date") and the number of Company
Shares to be purchased upon such exercise. The Option may be
exercised only by the payment to Phillips of cash or immediately
available funds on the Exercise Date.
(d) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred on the date on which
(a) any person or entity other than Bedford or Phillips becomes
the record or beneficial owner, directly or indirectly, of more
than fifty percent (50%) of the then outstanding voting stock of
PMCI (b) the shareholders of PMCI approve a merger or
consolidation of PMCI with any other entity, other than a merger
or consolidation which would result in the voting securities of
PMCI outstanding immediately prior thereto continuing to
represent at least 80% of the combined voting power of the voting
securities of PMCI or such surviving entity outstanding
immediately after such merger or consolidation; or (c) the
Page 29 of 39
-4-<PAGE>
shareholders approve an agreement for the sale or disposition by
PMCI of all or substantially all of its assets.
4. Capital Accounts. On any Exercise Date of the
----------------
Option, or as soon thereafter as practicable, Phillips shall give
notice to the Company of such exercise, whereupon the Company
shall cause the Capital Accounts (as defined in the LLC
Agreement) of Phillips and Andrus to be adjusted appropriately to
reflect such exercise. The Company Shares purchased pursuant to
the Option shall remain subject to this Agreement in all respects
following the exercise of the Option.
5. Conversion Rights. Andrus shall have the right,
-----------------
at his sole election, to wholly convert the Option to an option
("Converted Option") to purchase from the Company such number of
shares of PMCI Stock as would be distributable to him upon
dissolution of the Company if the Option were fully exercised
prior to dissolution. In the event Andrus desires to exercise
the foregoing right of conversion, (a) he shall give notice of
such conversion and concurrent or subsequent notice of exercise
of the Converted Option to the Company (b) the provisions of
Section 3 shall be as fully applicable as they are to exercise of
the Options with respect to Company Shares and (c) there shall be
no adjustment to the Capital Accounts on account of the exercise
of a Converted Option.
6. Bedford Option. Phillips hereby acknowledges that
--------------
the Company has, as of the date hereof, granted to Bedford
Capital Financial Corporation, a corporation organized under the
laws of Liberia ("Bedford") an option (the "Bedford Option") to
Page 30 of 39
-5-<PAGE>
purchase 335,000 of the shares of the PMCI Stock held by the
Company. Phillips hereby agrees that when and if Bedford
exercises the Bedford Option in accordance with the terms and
conditions applicable thereto, his Capital Account shall be
adjusted to reflect a reduction by 335,000 in the number of
Company Shares held by him.
7. Payment of Geman Note. Immediately upon the
---------------------
exercise by Bedford of the Bedford Option or the exercise by
Andrus, in whole or in part, of the Option, Phillips or the
Company (as appropriate) shall cause the funds representing the
purchase price thereof to be applied to payment of the Geman
Note. If at any time prior to the date on which the Geman Note
is paid in full, the Company defaults in the payment of the
monthly installments of principal and/or interest thereon, each
of Phillips and Andrus shall have the right and option, but not
the obligation, to pay one-half of the amount of such payments
then due but unpaid (such option, the "Monthly Cure Option"), or,
in the event either of them elects not to exercise his Monthly
Cure Option, then the same shall be exercisable by the other as
to the entire amount then due on the Geman Note. Any such
payments shall be deemed additional capital contributions under
the LLC Agreement for all purposes including, without limitation,
maintenance of the Capital Accounts, distributions of Company
assets and for tax purposes.
8. Term and Termination. The term of this Agreement
--------------------
shall begin on the date first referenced above and shall
Page 31 of 39
-6-<PAGE>
terminate on the date on which the Geman Note has been paid in
full.
9. Modification. No change, modification or
------------
amendment to this Agreement shall be valid unless the same is in
a writing signed by the Shareholders and the Company.
10. Benefits and Obligations. All provisions of this
------------------------
Agreement shall be binding upon, inure to the benefit of and be
enforceable by and against the Company, the Shareholders and
their heirs, successors, representatives and permitted assigns.
11. Counterparts. This Agreement may be executed in
------------
several counterparts, each of which when so executed shall be
considered as an original and all of which together shall
constitute one and the same agreement.
12. Captions. The captions at the beginning of the
--------
sections of this Agreement are not a part of this Agreement, but
are intended only to assist in the locating and reading of those
sections and shall be ignored in construing this Agreement.
13. Further Performance. The Company and the
-------------------
Shareholders covenant and agree to execute any further
instruments and documents and perform any acts which are or may
become necessary to carry out the purposes of this Agreement.
14. Governing Law. This Agreement shall be governed
-------------
by the laws of the State of Colorado.
15. Notices. Any notices, consents, approvals,
-------
statements, authorizations, documents, or other communications
(collectively "Notices") required or permitted to be given
hereunder shall be in writing and shall be hand delivered or sent
Page 32 of 39
-7-<PAGE>
by registered mail, postage prepaid, express courier, telecopy or
telex to the other Shareholder at his address set forth below or
at any such other address, addresses or facsimile numbers as may
be given by either of them to the other in writing from time to
time.
(a) If to Phillips:
Kenneth S. Phillips
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
(b) If to Andrus:
David L. Andrus
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
(c) If to the Company:
Phillips & Andrus, LLC
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
Attn: Kenneth S. Phillips, Manager
All notices and other communications shall be effective (i) if
sent by registered mail, when received or three (3) days after
mailing, whichever is earlier; (ii) if hand delivered or sent by
express courier, when delivered or (iii) if telecopied or
telexed, when received by the machine to which it was transmitted
(a machine-generated transaction report produced by the sender
bearing the recipient's telecopier number being prima facie proof
of receipt).
Page 33 of 39
-8-<PAGE>
16. Severability. Each provision of this Agreement
------------
shall be considered severable and if for any reason any provision
of this Agreement is determined to be invalid, such invalidity
shall not impair the operation or effect of other provisions of
this Agreement. The Shareholders further agree that, if a court
of competent jurisdiction declares any provision hereof to be
invalid or unenforceable, the Shareholders shall in good faith
renegotiate such provisions to carry out the intent of the
Shareholders at the time of the execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Shareholders' Agreement as of the date first set forth
above.
/s/ Kenneth S. Phillips
-----------------------------------
Kenneth S. Phillips
/s/ David L. Andrus
-----------------------------------
David L. Andrus
Phillips & Andrus, LLC
By: /s/ Kenneth S. Phillips
--------------------------------
Kenneth S. Phillips, Manager
Page 34 of 39
-9-
EXHIBIT 9
---------
PHILLIPS & ANDRUS, LLC
BEDFORD OPTION AGREEMENT
This Option Agreement (this "Agreement") is made and
entered as of the 26th day of July, 1995, by and between
Phillips & Andrus, LLC, a Colorado limited liability company (the
"Company") and Bedford Capital Financial Corporation, a
corporation organized under the laws of Liberia ("Bedford").
RECITALS
A. The Company is the holder of 1,643,845 shares of
the capital stock (the "PMCI Stock") of PMC International, Inc.,
a Colorado corporation ("PMCI").
B. The PMCI Stock was contributed to the Company by
Kenneth S. Phillips ("Phillips") upon the assumption by the
Company of the obligations evidenced by promissory notes (the
"Phillips Notes") in the aggregate principal amount of
$2,015,000. Phillips purchased the PMCI Stock from Marc Geman
("Geman") pursuant to a Stock Purchase Agreement between Phillips
and Geman dated as of July 26, 1995. The Company issued its
$2,015,000 promissory note (the "Geman Note") to Geman in
exchange for cancellation of the Phillips Notes. The Geman Note
fully matures on July 26, 1999. The Geman Note is secured by a
pledge of all of the PMCI Stock under the terms of that certain
Pledge Agreement (the "Pledge Agreement") dated the date hereof
by and between the Company and Geman.
C. The Company desires to grant to Bedford an option
to purchase certain shares of the PMCI Stock, and Bedford desires
to accept such option, upon the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the mutual covenants
and promises set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Option Grant.
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(a) The Company hereby grants to Bedford an
option (the "Option") to purchase 335,000 shares (the "Option
Shares") of the PMCI Stock for an aggregate purchase price (the
"Purchase Price") of $410,637.85 plus an amount equal to nine
percent (9%) per annum from the date on which the Company begins
paying interest on the Geman Note until the date that the Option
is exercised and the Purchase Price is paid.
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(b) The Option is exercisable as to all, but not
less than all, of the Option Shares immediately upon the
execution of this Agreement and shall be exercisable thereafter
at any time on or prior to (i) July 26, 2000, or (ii) the date on
which Bedford exercises its rights under a warrant issued to
Bedford by PMCI pursuant to that certain Investment Agreement
dated the date hereof by and between PMCI and Bedford.
(c) Bedford shall, on or prior to such date, give
the Company notice of its intent to exercise the Option, such
notice to state the date the Option will be exercised (the
"Exercise Date") and if Bedford fails timely to give such notice,
the Option shall terminate automatically and shall not be
exercisable thereafter. The closing (the "Closing") of the
purchase of the Option Shares shall take place at such time and
place as the parties shall mutually agree. At the Closing, the
Company shall deliver to Bedford (i) a stock assignment
transferring the Option Shares to Bedford free and clear of all
liens, encumbrances and other restrictions except for the
Shareholder Agreement among PMCI and certain of its Shareholders,
of even date herewith; (ii) an instrument satisfactory in form to
evidence full release of the lien of the Pledge Agreement (or any
substitute lien permitted by paragraph 4 hereof) upon the Option
Shares; and (iii) a stock certificate evidencing the Option
Shares. At the Closing, Bedford shall deliver to the Company the
full amount of the Purchase Price in cash, check or other readily
available funds.
2. Payment of Geman Note. Immediately upon the
---------------------
exercise by Bedford of the Option, the Company shall cause the
funds representing the Purchase Price to be applied to payment of
the Geman Note or the substitute indebtedness permitted by
paragraph 4 hereof.
3. Default in Payment of Geman Note. In the event
--------------------------------
that the Company shall default in its obligations under the Geman
Note and the holder of the Geman Note gives notice of such
default and the right to cure, Phillips and David Andrus
("Andrus"), the members of the Company shall have the first right
to cure such default by payment of any defaulted amount of
principal and interest or the performance of any other
obligation, at any time within the first fifteen days after
notice of default is received. If neither the Company nor
Phillips or Andrus cures the default within such fifteen-day
period, PMCI shall have the right within the next seven days to
cure such default, and if PMCI also does not cure such default
within twenty-two days after such notice, Bedford shall have the
right to cure such default at any time within thirty days after
the notice of default. Any party electing to cure the default
shall give notice of the intent to cure to all other parties on
or before the date that his or its right to cure expires, and
shall cause the funds to be provided, or such other action as was
required to be performed, on or before such date. The party
which provides funds with which to cure a default in the payment
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of principal and interest shall be entitled to receive any shares
of PMCI Stock which are released from the Pledge Agreement by
reason of such payment or performance, or shall be deemed to have
loaned the amount of such payment to the Company in the event
that no PMCI Stock is released from the Pledge Agreement as a
result of such payment, as in the case of the payment of an
installment of interest.
4. Restrictions on Business Activities. The Company
-----------------------------------
hereby represents and warrants that its sole business activity is
to its holding of the PMCI Stock for transfer to Bedford upon its
exercise of the Option and for sale or distribution to the
members of the Company. The Company hereby covenants and agrees
that unless and until the Option is exercised and closed, it
shall not engage in any other business activity or acquire any
assets other than the PMCI Stock (or such assets as are necessary
to administer and consummate the transactions described above
with respect to the PMCI Stock).
5. Restrictions on Borrowing. While the Option is
-------------------------
outstanding, the Company shall not incur any indebtedness except
as necessary to facilitate payment of the Geman Note. Any
substitute of the Geman Note shall provide for release of the
Option Shares from any pledge relating thereto upon Closing of
the Option and delivery by Bedford of the Purchase Price.
6. Legend of Shares. The Company shall use its best
----------------
efforts to cause PMCI to issue a separate certificate to the
Company for the Option Shares and to require an appropriate
legend reflecting this Agreement to be placed on the certificate.
7. Modification. No change, modification or
------------
amendment to this Agreement shall be valid unless the same is in
a writing signed by the parties hereto.
8. Benefits and Obligations. All provisions of this
------------------------
Agreement shall be binding upon, inure to the benefit of and be
enforceable by and against the Company and Bedford and their
heirs, successors, representatives and permitted assigns.
9. Counterparts. This Agreement may be executed in
------------
several counterparts, each of which when so executed shall be
considered as an original and all of which together shall
constitute one and the same agreement.
10. Captions. The captions at the beginning of the
--------
sections of this Agreement are not a part of this Agreement, but
are intended only to assist in the locating and reading of those
sections and shall be ignored in construing this Agreement.
11. Further Performance. The parties covenant and
-------------------
agree to execute any further instruments and documents and
perform any acts which are or may become necessary to carry out
the purposes of this Agreement.
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12. Governing Law. This Agreement shall be governed
-------------
by the laws of the State of Colorado.
13. Notices. Any notices, consents, approvals,
-------
statements, authorizations, documents, or other communications
(collectively "Notices") required or permitted to be given
hereunder shall be in writing and shall be hand delivered or sent
by registered mail, postage prepaid, express courier, telecopy or
telex to the other Shareholder at his address set forth below or
at any such other address, addresses or facsimile numbers as may
be given by either of them to the other in writing from time to
time.
(a) If to the Company:
Phillips & Andrus, LLC
c/o PMC International, Inc.
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
Attn: Kenneth S. Phillips, Manager
(b) If to Bedford:
Bedford Capital Financial Corporation
2nd Floor, Charlotte HS
Shirly Street, Box N964
Nassau, Bahamas
Attn: Richard C. W. Mauran
Chairman and CEO, and
Suzanne J. Black, Treasurer and CFO
All notices and other communications shall be effective (i) if
sent by registered mail, when received or three (3) days after
mailing, whichever is earlier; (ii) if hand delivered or sent by
express courier, when delivered or (iii) if telecopied or
telexed, when received by the machine to which it was transmitted
(a machine-generated transaction report produced by the sender
bearing the recipient's telecopier number being prima facie proof
of receipt).
14. Severability. Each provision of this Agreement
------------
shall be considered severable and if for any reason any provision
of this Agreement is determined to be invalid, such invalidity
shall not impair the operation or effect of other provisions of
this Agreement. The parties further agree that, if a court of
competent jurisdiction declares any provision hereof to be
invalid or unenforceable, the parties shall in good faith
renegotiate such provisions to carry out the intent of the
parties at the time of the execution of this Agreement.
This Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their successors,
assigns, heirs and legal representations.
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IN WITNESS WHEREOF, the parties hereto have executed
this Bedford Option Agreement as of the date first set forth
above.
PHILLIPS & ANDRUS, LLC
By: /s/ Kenneth S. Phillips
--------------------------------
Kenneth S. Phillips, Manager
BEDFORD CAPITAL FINANCIAL
CORPORATION
By: [Signature illegible]
--------------------------------
Title: Agent
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