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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
PMC International, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
693437105
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(CUSIP Number)
Karen L. Barsch
950 17th Street, Suite 1600
Denver, Colorado 80202
(303) 825-8400
(Name, Address, Telephone Number of Person Authorized to
Receive Notices and Communications)
July 27, 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: /X/ (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).
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).
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CUSIP No. 693437105 Page 2 of 89 Pages
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1) Name of Reporting Person: Bedford Capital Financial Corporation
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I.R.S. Identification No.:
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2) Check the Appropriate Box if a Member of a Group: (a) / /
(b) / /
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3) SEC Use Only
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4) Source of Funds: WC
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5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
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6) Citizenship or Place of Organization: Liberia
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Number of Shares Beneficially 7) Sole Voting Power: 4,335,000
Owned by Each Reporting Person -------------------------------------------
With: 8) Shared Voting Power: 0
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9) Sole Dispositive Power: 4,335,000
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10) Shared Dispositive Power: 0
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11) Aggregate Amount Beneficially Owned by Each Reporting Person: 4,335,000
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12) Check Box if the Aggregate Amount in Row 11) Excludes Certain Shares: / /
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13) Percent of Class Represented by Amount in Row 11): 50.8%
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14) Type of Reporting Person: CO
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Page 3 of 89 Pages
ITEM 1. SECURITY AND ISSUER
This Statement relates to the shares of common stock, $.01 par value
("Common Stock"), of PMC International, Inc., a Colorado corporation (the
"Issuer"). The address of the principal executive offices of the Issuer is
555 Seventeenth Street, 14th Floor, Denver, Colorado 80202.
ITEM 2. IDENTITY AND BACKGROUND
This statement is being filed by Bedford Capital Financial Corporation,
a Liberian corporation ("Bedford"). Bedford is sometimes also referred to
herein individually as a "Reporting Person."
Bedford is a merchant banking firm organized under the laws of Liberia.
The address of Bedford's principal business is:
2nd Floor, Charlotte Hs.
Shirley Street, Box N964
Nassau, Bahamas
Bedford has never been convicted in a criminal proceeding nor has it
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction which resulted in a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to federal or state securities laws, or finding any violation with respect to
such laws.
Set forth below is information regarding the executive officers and
directors of Bedford (collectively, the "Bedford Officers and Directors").
RICHARD C.W. MAURAN. Richard C.W. Mauran is the Chief Executive Officer and
Chairman of the Board of Bedford. Aside from his duties to Bedford, Mr. Mauran
is a private investor; his address is 47 Eaton Place, London SW1, England. Mr.
Mauran has never been convicted in a criminal proceeding nor has he been a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to federal
or state securities laws, or finding any violation with respect to such laws.
J.W. NEVIL THOMAS. J.W. Nevil Thomas is a Director of Bedford. Mr. Thomas is
the Chairman of Bedford Capital Corporation, a subsidiary of Bedford, whose
principal business is merchant banking, with its principal office located at
Scotia Plaza, 40 King Street West, Suite 4712, Toronto, Ontario, M5H 3Y2 Canada.
Mr. Thomas's address is 110 Sandringham Drive, Downsview, Ontario M3H IC9
Canada. Mr. Thomas has never been convicted in a criminal proceeding nor has he
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction which
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Page 4 of 89 Pages
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to federal or state securities laws,
or finding any violation with respect to such laws.
J. MURRAY ARMITAGE. J. Murray Armitage is a Director of Bedford. Mr. Armitage
is the President of Bedford Capital Corporation, whose principal business is
merchant banking, with its principal office located at Scotia Plaza, 40 King
Street West, Suite 4712, Toronto, Ontario, M5H 3Y2 Canada. Mr. Armitage's
address is 4 Donino Avenue, Toronto, Ontario M4N 2W5 Canada. Mr. Armitage has
never been convicted in a criminal proceeding nor has he been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to federal or state securities laws,
or finding any violation with respect to such laws.
JOHN C. STRADWICK. John C. Stradwick is a Director of Bedford. Until the
spring of 1995, Mr. Stradwick was the Chairman and Chief Executive Officer of
GAN Canada, whose principal business is general insurance, with its principal
office located at 649 North Service Road West, P.O. Box 5012, Burlington,
Ontario L7R 4L5 Canada. In the spring of 1995, Mr. Stradwick retired and is
currently a director of GAN Canada. Mr. Stradwick has never been convicted in a
criminal proceeding nor has he been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction which resulted in a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to federal or state securities laws, or finding any
violation with respect to such laws.
LYNN HOLOWESKO. Lynn Holowesko is the Secretary and a Director of Bedford. Ms.
Holowesko is a partner in the law firm of Higgs & Kelly, whose office is located
at P.O. Box N1113, 384 Bay Street, Nassau, Bahamas. Ms. Holowesko has never
been convicted in a criminal proceeding nor has she been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to federal or state securities laws,
or finding any violation with respect to such laws.
SUZANNE J. BLACK. Suzanne J. Black is the Treasurer and Chief Financial Officer
and a Director of Bedford. Ms. Black's occupation is the Managing Director of
Black and Associates, whose principal business is providing financial advisory
services. Bedford and Ms. Black's address is 2nd Floor, Charlotte House,
Shirley Street, PO Box N964, Nassau, N.P. Bahamas. Ms. Black has never been
convicted in a criminal proceeding nor has she been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or
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Page 5 of 89 Pages
mandating activities subject to federal or state securities laws, or finding any
violation with respect to such laws.
PETER SCHLESINGER. Peter Schlesinger is a Director of Bedford. Aside from his
duties to Bedford, Mr. Schlesinger is a private investor; his address is Suite
502, 520 East Hyman Avenue, Aspen, Colorado 81611. Mr. Schlesinger has never
been convicted in a criminal proceeding nor has he been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to federal or state securities laws,
or finding any violation with respect to such laws.
SIR JOHN M. CUNINGHAME BART. Sir John M. Cuninghame Bart. is a Director of
Bedford. Mr. Cuninghame's occupation is the Chairman of Ryobi Lawn & Garden
Limited, whose principal business is providing lawn and garden services, with
its principal office located at 17 Laxford House, Edbury Street, London, England
SW1. His address is 17 Laxford House, Edbury Street, London, England SW1. Mr.
Cuninghame has never been convicted in a criminal proceeding nor has he been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to federal
or state securities laws, or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Common Stock herein reported as being beneficially owned by the
Reporting Person was acquired as follows:
(1) STOCK PURCHASE AGREEMENT FOR 1,000,000 SHARES. Pursuant to a Stock
Purchase Agreement dated as of July 26, 1995, which closed on
July 27, 1995, Bedford purchased 1,000,000 shares of Common Stock
from Marc Geman, an individual, for $1,000,000. The funds used in
such purchase were solely from Bedford's existing available working
capital.
(2) COMMON STOCK WARRANT FOR 1,200,000 SHARES. In consideration for a
loan made by Bedford to the Issuer in the amount of $1,200,000
pursuant to an Investment Agreement (the "Investment Agreement")
dated as of July 26, 1995, which closed on July 27, 1995, the
Issuer granted to Bedford a Warrant to purchase 1,200,000 shares of
Common Stock for an aggregate price of $1,200,000. The loan funds
advanced in consideration for such warrant were solely from
Bedford's existing working capital.
(3) INVESTMENT AGREEMENT OPTION FOR 1,800,000 SHARES. Also pursuant to
the Investment Agreement, Bedford
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Page 6 of 89 Pages
acquired the option to make an additional loan to the Issuer in the
amount of $1,800,000, in return for which the Issuer would grant
Bedford a second warrant for the purchase of 1,800,000 shares of
Common Stock for an aggregate purchase price of $1,800,000. If and
when Bedford makes such a loan and acquires such a warrant, Bedford
anticipates that the funds used for such loan will be solely from
Bedford's working capital.
(4) OPTION TO ACQUIRE 335,000 SHARES. Pursuant to a Bedford Option
Agreement dated as of July 26, 1995, which closed on July 27, 1995,
Bedford acquired an option from Phillips & Andrus, LLC, a Colorado
limited liability company, to purchase 335,000 shares of Common
Stock for an aggregate purchase price of $410,637.85 plus an amount
equal to nine percent (9%) per annum from the date on which the
Issuer begins to pay interest on certain of the Issuer's debt,
until the option is exercised (the "Option"). If and when the
Option is exercised, Bedford anticipates that the funds used in
such purchase will be solely from Bedford's existing working
capital.
None of the Bedford Officers or Directors acquired any of the Issuer's
securities.
ITEM 4. PURPOSE OF TRANSACTION.
(a) At such time as the SEC investigation of the Issuer and its
president and director Kenneth S. Phillips ("Phillips") is resolved, Bedford
intends to make an additional loan to the Issuer of $1,800,000 as provided in
the Investment Agreement between Bedford and the Issuer dated as of July 26,
1995, pursuant to which Bedford would obtain a warrant to acquire an additional
1,800,000 shares of Common Stock. If and when the Issuer achieves a profit for
two consecutive fiscal years, Bedford will be obligated to exercise all warrants
and options currently held by Bedford;
(b) Bedford 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 the Issuer or any of its subsidiaries;
(c) Bedford 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 the
Issuer or any of its subsidiaries;
(d) 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 the Issuer's board of
directors under certain provisions of (1) a Letter Agreement by and between
Bedford and Phillips and/or (2) a Shareholders Agreement (the "Shareholders
Agreement") entered into
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Page 7 of 89 Pages
by Bedford, the Issuer, Kenneth S. Phillips, an individual, David L. Andrus, an
individual, and Phillips & Andrus, LLC, a Colorado limited liability company.
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 the Issuer in the event of a financial
disaster. Pursuant to the Shareholders Agreement, in the event of a financial
disaster, the Issuer shall cause a special meeting of the board of directors to
be called to consider an amendment to the bylaws of the 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 the Issuer's
board of directors at the next annual meeting of shareholders by obtaining the
right to designate four of the Issuer's directors;
(e) Bedford 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 the Issuer;
(f) Bedford does not currently have any plans or proposals that relate
to or would result in any other material change in the Issuer's business or
corporate structure;
(g) Bedford and the Issuer have entered into the following agreements
that may impede the acquisition of control of the Issuer by any person other
than Bedford and Phillips:
(1) In connection with the Investment Agreement Bedford, Phillips
and certain other shareholders of the Issuer entered into the
Shareholders Agreement pursuant to which such shareholders agreed 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;
(2) Pursuant to the terms of the Investment Agreement, upon (i)
the exercise of any presently outstanding options and warrants to
purchase Common Stock by an optionee or grantee other than Bedford, or
the exercise of option under the Issuer's incentive stock option plan;
and (ii) any exchange of any presently outstanding preferred stock of
the Issuer for Common Stock, at any time that the Issuer has loans from
Bedford under the Investment Agreement outstanding and/or Bedford owns
any Common Stock, whichever is later, Bedford shall have an option to
purchase an equal number of shares of Common Stock at the same price as
such exercised option or, in the case of a preferred exchange, at the
lower of the price designated in the transaction or the average daily
closing prices for the Common Stock for the 30 consecutive trading days
immediately preceding the date of such preferred exchange. As a
result, Bedford will have
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Page 8 of 89 Pages
the right to acquire or maintain an ownership of 51% of the issued and
outstanding Common Stock.
(h) Bedford does not currently have any plans or proposals that relate
to or would result in any class of securities of the 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) Bedford does not currently have any plans or proposals that relate
to or would result in any class of equity securities of the issuer becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Act; and
(j) except as noted above, Bedford does not currently have any plans or
proposals that relate to or would result in any action similar to those
enumerated above.
Except as set forth above with respect to Bedford, none of the Officers
or Directors 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.
Bedford has obtained a beneficial interest in 4,335,000 shares of
Common Stock, of which Bedford may exercise the sole voting power and sole
dispositive power. Such interest represents 50.8% of the Common Stock. Bedford
has not engaged in any previous transactions involving the Common Stock. Aside
from Bedford, no other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of, the
Common Stock.
None of Bedford's Officers and Directors have obtained any beneficial
interest in any Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Bedford has entered into the following contracts and agreements which
relate to the Common Stock:
(1) A Bedford Option Agreement dated as of July 26, 1995, by which
Bedford obtained the option to purchase 335,000 shares of Common
Stock from Phillips & Andrus, LLC, a Colorado limited liability
company, exercisable until July 26, 2000, for the aggregate
purchase price of $410,637.85 plus nine percent (9%) per annum from
the date on which Issuer begins paying interest on certain debt,
until exercised.
(2) An Investment Agreement dated as of July 26, 1995, whereby Bedford
obtained a warrant to purchase
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Page 9 of 89 Pages
1,200,000 shares of Common Stock exercisable at an aggregate
purchase price of $1,200,000. In addition, the Investment
Agreement provides that Bedford may make an additional loan to the
Issuer in the amount of $1,800,000, in exchange for which, Bedford
will receive an additional warrant to purchase 1,800,000 shares of
Common Stock for the aggregate purchase price of $1,800,000.
(3) A Stock Purchase Agreement dated as of July 26, 1995, whereby
Bedford purchased 1,000,000 shares of Common Stock from Marc Geman
for the aggregate purchase price of $1,000,000.
(4) A Shareholders Agreement dated as of July 26, 1995, between the
Issuer, Bedford, Kenneth S. Phillips, an individual, David L.
Andrus, an individual, and Phillips & Andrus, LLC, a Colorado
limited liability company, whereby Bedford obtained the right to
designate two of the Issuer's directors, and, in the event of
defined financial disasters, the right to gain control of the
Issuer's board of directors (either by expanding the Issuer's board
of directors or by the resignation of one of the Issuer's current
directors). In addition, the Shareholders Agreement restricts the
parties' ability to transfer or encumber their Common Stock;
specifically, the party who wishes to sell Common Stock must offer
the other shareholders a right of first refusal for such Common
Stock, and/or obtain the written permission of the other
shareholders.
(5) A Registration Rights Agreement dated as of July 26, 1995, which
gives Bedford the right to (i) cause up to two times the Issuer to
register Bedford's Common Stock within sixty (60) days of its
demand; and/or (ii) if the Issuer is registering other Common
Stock, to cause the Issuer to register Bedford's Common Stock at
the same time, such that Bedford's Common Stock constitutes at
least 25% of the total Common Stock registered.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT 1 Shareholders Agreement dated as of July 26, 1995.
EXHIBIT 2 Registration Rights Agreement dated as of July 26, 1995.
EXHIBIT 3 Letter Agreement dated as of July 26, 1995.
EXHIBIT 4 Investment Agreement dated as of July 26, 1995.
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Page 10 of 89 Pages
EXHIBIT 5 Bedford Option Agreement dated as of July 26, 1995.
EXHIBIT 6 Stock Purchase Agreement dated as of July 26, 1995.
EXHIBIT 7 Warrant dated as of July 26, 1995.
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Page 11 of 89 Pages
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.
8/2/95 /s/ Richard C.W. Mauran
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Date Signature
Richard C.W. Mauran, Chief Executive Officer
Name/Title
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EXHIBIT 1
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "AGREEMENT") is entered into
effective as of July 26, 1995, by PMC INTERNATIONAL, INC., a Colorado
corporation (the "COMPANY"), BEDFORD CAPITAL FINANCIAL CORPORATION, a
corporation organized under the laws of Liberia ("BEDFORD"),
Kenneth S. Phillips, an individual ("PHILLIPS"), David L. Andrus, an individual
("ANDRUS") and Phillips & Andrus, LLC, a Colorado limited liability company
("HOLDCO").
RECITALS
Bedford, Phillips and HoldCo have acquired a majority of the issued
and outstanding shares of common stock, $.01 par value (the "COMMON STOCK") of
the Company, and desire to provide for the continuity and stability of ownership
and management of the Company by imposing certain restrictions on the transfer
of Common Stock. Each person who now owns or hereafter acquires shares of
Common Stock subject to the provisions of this Agreement, including initially
Bedford, Phillips and HoldCo, is sometimes referred to hereinafter as a
"SHAREHOLDER" and Phillips, Andrus and HoldCo are collectively referred to
hereinafter as "HOLDCO SHAREHOLDERS".
AGREEMENT
1. BOARD OF DIRECTORS.
(a) COMPOSITION; ELECTION. From the date of this Agreement and
so long as each of Bedford and the HoldCo Shareholders own and/or have the right
to acquire at least 20% of the issued and outstanding Common Stock, on a fully-
diluted basis (which for this determination Bedford shall be deemed to have the
right to acquire all of the shares of Common Stock issuable pursuant to the
Mirror Options (as such term is defined in that certain Investment Agreement by
and among the Company and its subsidiaries and Bedford of even date herewith)
without regard as to whether such Mirror Options are vested), but subject to
Section 1(b) below, the Company shall have five directors (the "BOARD"), two of
whom shall be nominees of Bedford, two of whom shall be nominees of the HoldCo
Shareholders and one who shall be acceptable and mutually agreed upon by both
Bedford and the HoldCo Shareholders. At every annual meeting of shareholders of
the Company and at every special meeting of the shareholders of the Company held
for the purpose of electing directors of the Company, or in connection with the
taking of any written consent to action in respect of the election of directors
of the Company, each Shareholder shall vote his or its shares of Common Stock in
favor of the election of the nominees of Bedford and the HoldCo Shareholders as
directors of the Company.
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(b) COMPOSITION SUBSEQUENT TO A BOARD EVENT. Notwithstanding
the foregoing, in the event:
(i) The Company and Portfolio Technology Services, Inc.
("TECHNOLOGY") are in default in the payment of any sum on that
certain Promissory Note (Commercial) dated effective as of July 26,
1995, made by the Company and Technology payable to the order of
Bedford when due;
(ii) The Company or any of its subsidiaries makes a default
in payment of any material sum with any of its bankers or other lenders or
otherwise is in default under its agreements with such lenders and such
default continues for a period of ten (10) days; or
(iii) With respect to the Company or any of its subsidiaries:
(1) an order is made or resolution passed to wind-up
or liquidate it;
(2) a general assignment for the benefit of its
creditors is made;
(3) any proposal is made under bankruptcy, insolvency,
reorganization or similar legislation;
(4) a receiver or similar organization is appointed to
operate the Company or any of its subsidiaries or liquidate any of
their assets or any material part of their assets; or
(5) any similar event relating to financial distress
or insolvency occurs;
(iv) a loss is incurred by the Company, on a consolidated
basis, for fiscal 1996 or any fiscal year thereafter in excess of
$1,000,000, excluding any extraordinary items of income or expense,
the Company shall cause a special meeting of the Board to be called for the
purpose of expanding the number of directors and, thereafter, whether or not the
Board has been expanded, at each annual meeting of shareholders of the Company
and at every special meeting of the shareholders of the Company held for the
purpose of electing directors of the Company or in connection with the taking of
any written consent to action in respect of the election of directors of the
Company, each Shareholder shall vote his or its shares of Common Stock in favor
of the election of four directors designated by Bedford and the remainder of the
directors designated by the HoldCo Shareholders as the directors of the Company.
Page 13 of 89 pages
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(c) QUORUM AND VOTING REQUIREMENTS. The presence in person of
no less than a majority of the directors at any meeting of the Board shall be
required to constitute a quorum. The vote of no less than a majority of the
directors at a meeting at which a quorum is present shall be required for the
Board to take action with respect to any matter, except with respect to any
action which would result in the termination of the Company's status as a
"public company" which action shall require a unanimous vote of the directors.
Bedford and the HoldCo Shareholders shall cause the bylaws of the Company to
reflect at all times the provisions of this Section 1.
(d) DIRECTOR COMPENSATION. Directors of the Company who are not
employees of the Company shall receive a $5,000 annual retainer fee and fees of
$500 for each Board meeting attended. Fees shall be payable quarterly as of the
last day of each calendar quarter. All directors shall be reimbursed for their
expenses of attending meetings of the Board, including travel, lodging and
incidentals. Directors who are employees of the Company shall not receive
additional compensation for their services as directors, but shall be entitled
to be reimbursed for their expenses as provided in the preceding sentence.
Notwithstanding the foregoing, so long as that certain Advisory Agreement by and
between the Company and Nevcorp, Inc. of even date herewith is in effect, the
two directors designated hereunder by Bedford shall not be paid the annual
retainer fee or meeting fee set forth above, but shall be entitled to
reimbursement of expenses.
2. RESTRICTIONS ON TRANSFER OF COMMON STOCK. No Shareholder may
sell, assign, pledge or otherwise transfer or encumber in any manner or by any
means whatsoever (collectively, a "TRANSFER") any shares of Common Stock which
he or it may now own or may hereafter acquire, except in accordance with the
terms of this Agreement or with the prior written consent of the other
Shareholders. Bedford hereby expressly acknowledges and consents to that
certain Stock Pledge Agreement of even date herewith by and between HoldCo and
Marc Geman. Unless all Shareholders agree otherwise in writing, any permitted
transferee shall be bound by the provisions of this Agreement with respect to
shares of Common Stock such transferee acquires, and as a condition of such
Transfer shall be required to execute a written instrument acknowledging and
agreeing to be bound by the provisions of this Agreement.
3. RIGHT OF FIRST REFUSAL.
(a) EVENTS TRIGGERING RIGHT. The HoldCo Shareholders and
Bedford shall each have the right and option, exercisable in accordance with the
terms and conditions of this Agreement, to purchase shares of Common Stock (the
"OFFERED SHARES") owned by the other (the "OFFERING SHAREHOLDER") who proposes
to make a Transfer of the Offered Shares or who voluntarily files a petition in
bankruptcy seeking liquidation or reorganization under the United States
Bankruptcy Code of
Page 14 of 89 pages
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comparable provisions of the laws of any other jurisdiction, or against whom a
petition in bankruptcy is filed which is not dismissed within 30 days of filing
(in each case, an "OPTION EVENT"). Any Option Event which occurs with respect
to any HoldCo Shareholder shall be deemed an Option Event with respect to the
HoldCo Shareholders to the extent of such HoldCo Shareholder's Common Stock.
(b) OFFER NOTICE. Upon the occurrence of an Option Event, the
Offering Shareholder shall promptly deliver written notice (the "OFFER NOTICE")
of the Option Event to the other Shareholder (the "ELECTING SHAREHOLDER") as
follows:
(i) If the Offering Shareholder proposes to make a Transfer
of the Offered Shares, the Offer Notice shall state the number of Offered
Shares proposed to be transferred, the price per share at which the Offered
Shares are proposed to be transferred and the other terms and conditions of
the Transfer, the name and address of the proposed acquiring party and all
information with respect to such party's business experience and financial
condition available to the Offering Shareholder. The Offer Notice shall
include a copy of all bona fide, written, third party offers for the
Offered Shares.
(ii) A Shareholder who voluntarily files a petition in
bankruptcy shall notify the other Shareholders thereof within three days
after such filing is made. A Shareholder against whom a petition in
bankruptcy is filed which is not dismissed within 30 days shall notify the
other Shareholders thereof within three days after the expiration of such
30-day period. Each such notice shall be considered an Offer Notice.
(c) EXERCISE OF RIGHT OF FIRST REFUSAL.
(i) The Electing Shareholder shall have the option to
purchase the Offered Shares by delivering to the Offering Shareholder,
within 45 days after receipt of the Offer Notice, a written notice (a
"PURCHASE NOTICE") committing the Electing Shareholder to purchase the
Offered Shares from the Offering Shareholder. If the HoldCo Shareholders
are the Electing Shareholder, the HoldCo Shareholders shall determine among
themselves the manner of allocation of the Offered Shares among them.
(ii) If the Offering Shareholder receives a Purchase Notice
from the Electing Shareholder, it shall be obligated to sell to the
Electing Shareholder, and the Electing Shareholder who delivers a Purchase
Notice shall be obligated to purchase from the Offering Shareholder, all of
the Offered Shares. Subject to the first sentence of the following
paragraph, if the Option Event is a proposed Transfer of Offered Shares,
the Offering Shareholder shall terminate its arrangements to make a
Transfer of the Offered
Page 15 of 89 pages
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Shares which the Electing Shareholder has become obligated to purchase.
The closing of the purchase by the Electing Shareholder of the
Offered Shares shall be held as provided in Section 3(g), except that if the
closing has not taken place, through no fault of the Offering Shareholder, on or
before the 75th day after delivery of the Offer Notice, the Offering Shareholder
may treat the failure as a decision on the part of the Electing Shareholder not
to purchase the Offered Shares and if a Transfer of Offered Shares was proposed,
the Offering Shareholder may make a Transfer of the Offered Shares on the terms
and conditions specified in the Offer Notice. Notwithstanding the foregoing,
any Transfer to a third party as provided above shall not be deemed a waiver of
any right the Offering Shareholder may have against the Electing Shareholder for
failure to complete the purchase of any of the Offered Shares.
(d) NON-EXERCISE OF RIGHT OF FIRST REFUSAL. If the Offering
Shareholder proposes to make a Transfer of the Offered Shares and he or it does
not receive a Purchase Notice within the applicable period, then the Offering
Shareholder may Transfer the Offered Shares on the terms specified in the Offer
Notice, but not otherwise, provided that the Transfer is consummated within 90
days after delivery of the Offer Notice. If the Transfer is not made within the
90-day period and pursuant to the terms of the Offer Notice, or if the Offering
Shareholder reacquires any or all of the transferred shares, the shares shall
remain subject to this Agreement. If the Option Event is the bankruptcy of a
Shareholder, and a Purchase Notice is not received within the applicable period,
the Offered Shares shall nevertheless remain subject to this Agreement, and any
proposed Transfer of the Offered Shares by the trustee of a Shareholder in
bankruptcy shall be treated as a Transfer for purposes of this Agreement and
shall be subject to the provisions of this Section 3.
(e) DEATH OF SHAREHOLDER PRIOR TO CLOSING. If a Shareholder
dies prior to the closing of the sale and purchase contemplated by this
Section 3, the Offered Shares shall continue to be subject to sale and purchase
pursuant to the Offer Notice.
(f) PRICE AND TERMS OF SALE. The price for any Offered Shares
purchased pursuant to the rights of first refusal set forth in this Section 3
shall be determined and paid as follows:
(i) If the Option Event is a proposed Transfer by sale or
exchange or other transfer pursuant to a bona fide written offer by a third
party, the Offered Shares shall be purchased at a dollar price equal to the
price specified in the offer or for a dollar price equal to the fair market
value of the other consideration offered, which, if the parties are unable
to agree thereon, shall be determined by the appraisal procedures provided
for in (ii) below.
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<PAGE>
(ii) For all Option Events, other than as specified in (i)
above, the Offered Shares shall be purchased for their appraised value (as
determined by an independent appraiser selected by the Company's
independent certified public accountants or by mutual agreement of the
Shareholders (an "INDEPENDENT APPRAISER")) as of the date of the Option
Event. In the event consideration other than cash is to be paid for the
Offered Shares pursuant to the Offer, unless otherwise agreed by the
parties, only the value of such consideration shall be determined by an
Independent Appraiser.
(iii) At the closing of a purchase of Offered Shares, the
purchasing Shareholder shall deliver to the Offering Shareholder a
certified or official bank cashier's check payable to the order of the
Offering Shareholder in an amount equal to the cash portion of the purchase
price for the Offered Shares, together with such other documents and
instruments as may be necessary to satisfy the other terms and conditions
of the sale, as specified in the Offer Notice.
(g) CLOSING. Unless otherwise agreed to by the Shareholders,
the closing of the purchase of Offered Shares under this Section 3 shall take
place at the principal executive offices of the Company within 75 days after the
date of delivery of the Offer Notice. At the closing, the Offering Shareholder
shall deliver to the purchasing Shareholder all of the certificates evidencing
the Offered Shares being purchased, duly endorsed and with separate stockpowers
executed in blank, in such case with signature guaranteed, with any required
documentary tax stamps affixed thereto. The purchasing Shareholder shall
promptly submit the certificates to the Company, together with any other
required documents, so that the Company may issue new certificates in the
appropriate denominations, registered in the appropriate name(s).
(h) CERTAIN TRANSFERS EXEMPT. The following transfers of Common
Stock shall not require the consent of the other Shareholders and shall not be
subject to the right of first refusal described in this Section 3: (i) shares
of Common Stock constituting in the aggregate with all other sales of Common
Stock by such Shareholder since the date hereof up to 5% of the shares of Common
Stock which such Shareholder, directly or indirectly, owned or had a right to
acquire as of the date hereof, (ii) transfers of shares of Common Stock to any
affiliate of Bedford, (iii) transfers among spouses or members of a
Shareholder's immediate family, or (iii) transfers from a Shareholder to a
corporation or other entity of which the Shareholder controls a majority of the
voting equity interests. Except with respect to transferees under (i) above,
any transferee of shares of Common Stock exempt under this Subsection 3(h) shall
take such shares subject to and be bound by all of the provisions hereof as if a
signatory hereto and as applicable to the transferor of such shares.
4. RIGHT OF FIRST REFUSAL ON NEW ISSUANCES BY THE COMPANY. If the
Company proposes to issue or transfer additional
Page 17 of 89 pages
<PAGE>
shares of Common Stock other than issuances or transfers by reason of a stock
dividend, split or other similar event, it shall notify each of the Shareholders
in writing of its intention, stating the number of shares proposed to be issued
or transferred, the parties to which the Company proposes to issue or transfer
shares, the consideration to be received by the Company and all other terms and
conditions of the proposed issuance or transfer.
(a) EXERCISE OF RIGHT OF FIRST REFUSAL.
(i) For a period of 30 days after the Shareholders receive
the Company's notice, each Shareholder shall have the right to purchase the
shares proposed to be issued or transferred for the same consideration per
share at which the Company proposes to issue or transfer the shares,
exercisable by delivering a written notice to the Company within the 30-day
period following the Shareholder's receipt of the Company's notice
committing the Shareholder to purchase from the Company at least a pro rata
share of the shares proposed to be issued or transferred. A Shareholder's
pro rata share will be equal to the number of shares proposed to be issued
or transferred multiplied by a fraction, the numerator of which is the
number of shares of Common Stock owned by the Shareholder plus the number
of shares of Common Stock which the Shareholder has the right to acquire
(whether or not such rights have vested) and the denominator of which is
the total number of shares of Common Stock owned or subject to a right to
acquire (whether or not such rights are vested) by all Shareholders
electing to purchase shares. Each Shareholder who delivers a notice to the
Company pursuant to this paragraph shall indicate the number of shares, if
any, in excess of his pro rata share which he is willing to purchase.
(ii) If the Company receives one or more notices from
Shareholders pursuant to the preceding paragraph, it shall be obligated to
sell to each such Shareholder, and each such Shareholder shall be obligated
to purchase from the Company a number of the shares which the Company
proposes to issue or sell determined in the following manner:
A. Each Shareholder who delivers a notice shall
purchase at least his pro rata share of the shares;
B. If fewer than all Shareholders deliver a notice, the
Shareholders who delivered a notice and who indicated a willingness to
purchase shares in excess of their pro rata share, shall each be
obligated to purchase additional shares, pro rata among all such
Shareholders, up to the number of additional shares indicated in their
respective notices to the Company.
The Company shall terminate its arrangements to issue or transfer
those shares which the Shareholders have become obligated to purchase. The
closing of the purchase by the
Page 18 of 89 pages
<PAGE>
Shareholders shall be held not later than 90 days after the end of the 30-day
notice period, except that if the closing has not taken place, through no fault
of the Company, by such time, the Company may treat the failure to close as a
decision on the part of the Shareholders not to purchase shares and may issue or
transfer shares on the terms and conditions specified in the Company's initial
notice. Notwithstanding the foregoing, any issuance or transfer to a third
party shall not be deemed a waiver by the Company of any right it may have
against any Shareholder for failure to complete the purchase of any shares which
the Shareholder committed to purchase.
(b) NON-EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
proposes to issue or transfer shares and does not receive any notices from
Shareholders or receives commitments to purchase fewer than all of the shares
proposed to be issued or transferred, the Company may issue or transfer the
number of shares as to which no purchase commitments have been received from
Shareholders on the terms specified in the Company's initial notice, but not
otherwise, provided the issuance or transfer is consummated within 90 days after
delivery of the Company's initial notice. If the shares are not issued or
transferred within the 90 day period and pursuant to the terms specified in the
Company's initial notice to the Shareholders, the shares shall remain subject to
this Agreement.
(c) PAYMENT OF PURCHASE PRICE; CLOSING. At the closing of a
purchase of shares, each of the purchasing Shareholders shall deliver to the
Company a certified or cashier's check payable to the order of the Company in an
amount equal to the purchase price of the shares being purchased by the
Shareholder. The Company shall deliver to each Shareholder purchasing shares a
certificate evidencing the shares being purchased, registered in the name of the
purchasing Shareholder and with all necessary documentary tax stamps affixed.
5. RIGHT TO PARTICIPATE IN SALES OF COMMON STOCK. If a Shareholder
proposes to sell shares of Common Stock constituting in the aggregate with all
other sales of Common Stock by such Shareholder since the date hereof in excess
of 5% or more of the shares of Common Stock which such Shareholder, directly or
indirectly, owned or had a right to acquire as of the date hereof, to a person
which is not a party to this Agreement, and provided the non-selling
Shareholders fail to exercise their right of first refusal set forth in
Section 3 of this Agreement with respect to such shares, the Shareholder or
Shareholders proposing to sell shall notify the other Shareholders of the
proposed sale, which notice shall contain the price, terms and conditions of the
proposed sale and the number of shares proposed to be sold, and shall offer the
other Shareholders the right to participate in such proposed sale and to sell a
number of shares of Common Stock equal to the percentage of the selling
Shareholder's aggregate holdings of Common Stock which is proposed to be sold.
Page 19 of 89 pages
<PAGE>
6. PURPORTED TRANSFERS VOID. Any purported transfer or pledge in
violation of this Agreement shall be void and ineffective and shall not operate
to transfer any interest or title to the purported transferee.
7. INDEMNIFICATION. A Shareholder who takes action in violation of
this Agreement shall indemnify and hold the other Shareholders harmless from all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred by the other Shareholders as a result of a breach of this Agreement.
8. RESTRICTIVE LEGEND. The following legend shall be placed on each
certificate representing a Shareholder's shares of Common Stock, including any
certificate(s) hereafter acquired by a Shareholder:
The shares represented by this certificate are subject to
certain restrictions on transfer and other agreements as set
forth in a Shareholders Agreement, dated effective as of
July 26, 1995, among PMC International, Inc., Bedford
Capital Financial Corporation, Kenneth S. Phillips, David L.
Andrus and Phillips & Andrus, LLC, copies of which are on
file in the office of the corporation.
9. RESIGNATIONS. Upon the transfer of all of the shares of Common
Stock owned by a Shareholder, the Shareholder shall, as a condition to the
effectiveness of the transfer, execute and deliver his resignation from all
offices and positions he holds as an officer or director of the Company and its
subsidiaries.
10. BYLAW AMENDMENTS. No Shareholder shall vote in favor of an
amendment to Section 8 of Article III of the Bylaws of the Company, unless such
amendment has been approved by the Board.
11. TERMINATION. This Agreement shall terminate upon the earliest of
(i) written consent of Bedford and the HoldCo Shareholders, or their successors;
(ii) at any time at which there are fewer than two Shareholders; or (iii) the
tenth (10) anniversary date of this Agreement.
12. CONFIDENTIALITY. The Shareholders acknowledge that all
confidential or proprietary information with respect to the business and
operations of the Company is and shall remain the exclusive property of the
Company, including without limitation, information as to the customers,
suppliers, products, sources, leads or methods of obtaining new products or
business, pricing methods or formulas, intellectual property rights, rights
under license, distribution or other agreements, marketing strategies and all
other information which could reasonably be regarded as confidential, but not
including information which is or becomes generally available to the public
other than as a result of a breach of this Section. The Shareholders shall, and
shall cause
Page 20 of 89 pages
<PAGE>
their respective officers, directors, employees, agents, and others under their
control to, keep all such confidential or proprietary information confidential,
and shall not disclose any of such information to any person except to
responsible officers and employees of the Company and other responsible persons
in a contractual or fiduciary relationship with the Company who have a need to
know such information for purposes in the best interests of the Company.
13. MISCELLANEOUS.
(a) FURTHER ASSURANCES. From time to time after the date of
this Agreement, each party shall execute and deliver such other instruments and
documents and shall take such other actions as the other party may reasonably
request to effectuate the transactions contemplated by this Agreement.
(b) MODIFICATION. This Agreement may be modified only by
written instrument properly executed by or on behalf of the parties.
(c) GOVERNING LAW. This Agreement is a contract entered into in
the State of Colorado, and shall be construed and enforced in accordance with
the laws of the State of Colorado without reference to Colorado's conflicts of
laws principles.
(d) JURISDICTION AND VENUE. This Agreement shall be subject to
the exclusive jurisdiction of the courts of the City and County of Denver,
Colorado or the federal district courts located in the City and County of
Denver. The parties to this Agreement agree that any breach of any term or
condition of this Agreement shall be deemed to be breach occurring in the State
of Colorado by virtue of a failure to perform any act required to be performed
in the State of Colorado and irrevocably and expressly agree to submit to the
jurisdiction of the courts of the City and County of Denver, Colorado and the
federal district courts located in the City and County of Denver, State of
Colorado for the purpose of resolving any disputes among the parties relating to
this Agreement or the transactions contemplated hereby. The parties irrevocably
waive, to the fullest extent permitted by law, any objection which they may now
or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, or any judgment entered by any
court in respect hereof brought in the City and County of Denver, Colorado, and
further irrevocably waive any claim that any suit, action or proceeding brought
in the City and County of Denver, Colorado has been brought in an inconvenient
forum.
(e) WAIVER. No waiver by any party, whether express or implied,
of its rights under any provision of this Agreement shall constitute a waiver of
the party's rights under such provisions at any other time or a waiver of the
party's rights under any other provision of this Agreement. No failure by any
party to take any action against any breach of this Agreement or
Page 21 of 89 pages
<PAGE>
default by another party shall constitute a waiver of the former party's right
to enforce any provision of this Agreement or to take action against such breach
or default or any subsequent breach or default by the other party.
(f) SEVERABILITY. If any one or more of the provisions
contained in this Agreement shall be declared invalid, illegal or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and the provision held to be invalid, illegal or unenforceable shall be
enforced as nearly as possible according to its original terms and intent to
eliminate such invalidity, illegality or unenforceability.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) SECTION HEADINGS. The section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
(i) LITIGATION; PREVAILING PARTY, In the event of any
litigation with regard to this Agreement, the prevailing party shall be entitled
to receive from the non-prevailing party, and the non-prevailing party shall
immediately pay upon demand, all reasonable fees and expenses of counsel for the
prevailing party.
(j) NOTICES. Any claim, demand, notice or other communication
under this Agreement shall be in writing and shall be deemed sufficiently given
if delivered personally or sent by prepaid overnight courier, certified mail,
postage prepaid and return receipt requested, or sent by facsimile transmission
to the parties at the addresses set forth below.
If to Bedford, to:
Bedford Capital Financial Corporation
2nd Floor
Charlotte Hs.
Shirly Street
Box N964
Nassau, Bahamas
Attention: Richard C. Mauran, Chairman and CEO
and Suzanne J. Black, Treasurer and CFO
With a copy to:
Karen L. Barsch, Esq.
Otten, Johnson, Robinson,
Neff & Ragonetti, P.C.
950 Seventeenth Street, Suite 1600
Denver, Colorado 80202
Page 22 of 89 pages
<PAGE>
If to Phillips, to:
Kenneth S. Phillips
c/o PMC International, Inc.
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
If to Andrus, to:
David L. Andrus
c/o PMC International, Inc.
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
If to Phillips & Andrus, LLC
c/o PMC International, Inc.
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips
With a copy to:
Lester R. Woodward, Esq.
Davis, Graham & Stubbs, L.L.C.
370 17th Street, Suite 4700
Denver, Colorado 80202
Each party may change the address set forth above or the name of the person to
whom such notices are to be delivered at any time by written notice to the other
party. Any notice shall be deemed to have been served or given as of the date
the notice is received.
(k) REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the
provisions of this Agreement is intended to be exclusive of any other remedy.
The election of any one remedy by a party shall not constitute a waiver of the
right to pursue other available remedies.
(l) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties and their successors,
assigns, transferees, heirs and legal representatives, including all persons who
acquire shares of Common Stock from a party subject to this Agreement.
Page 23 of 89 pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
PMC INTERNATIONAL, INC., a
Colorado corporation
By: /s/ Kenneth S. Phillips
-------------------------------
Title: President
----------------------------
BEDFORD CAPITAL FINANCIAL
CORPORATION, a Liberia corporation
By: /s/ W. L. Atkinson
-------------------------------
Title: Agent
----------------------------
/s/ Kenneth S. Phillips
-----------------------------------
Kenneth S. Phillips
/s/ David L. Andrus
-----------------------------------
David L. Andrus
PHILLIPS & ANDRUS, LLC, a Colorado
limited liability company
By: /s/ Kenneth S. Phillips
-------------------------------
Manager
Page 24 of 89 pages
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EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT) is made and
entered into effective as of the 26th day of July, 1995, by and between PMC
International, Inc., a Colorado corporation (the "COMPANY") and Bedford Capital
Financial Corporation, a corporation organized under the laws of Liberia
("BEDFORD").
RECITALS
Bedford has loaned certain funds to the Company pursuant to that
certain Investment Agreement of even date herewith by and between the Company
and its subsidiaries and Bedford, and, in connection with such loan, the Company
has granted Bedford a warrant and certain other rights to acquire common stock,
$1.00 par value of the Company (the "COMMON STOCK"). In addition, Bedford has
acquired shares of Common Stock from a shareholder of the Company. As an
integral part of such transactions, the Company desires to grant to Bedford the
rights set forth in this Agreement with respect to registrations of Common
Stock.
AGREEMENT
1. DEMAND REGISTRATION RIGHTS. At any time at which Bedford owns
Common Stock, Bedford may request that the Company effect the registration under
the Securities Act of 1933, as amended (the "ACT") of Bedford's Common Stock.
The Company shall file as soon as practicable, and in any event within sixty
(60) days of the receipt of such request, and use its best efforts to cause to
become effective as soon as practicable, the registration under the Act of all
Common Stock for which Bedford has requested registration. The registration
requested pursuant to this paragraph 1 shall be referred to herein as "DEMAND
REGISTRATION." Bedford shall have two rights to request Demand Registrations.
The Company will not include in any Demand Registration any securities other
than Bedford's Common Stock without the prior written consent of Bedford. In
the case of any underwritten public offering being effected pursuant to a Demand
Registration, the underwriter or underwriters with respect to such offering
shall be selected by Bedford. If at any time of any request to register Common
Stock pursuant to this Section 1, the Company is engaged or has firm plans to
engage within 60 days of the time of the request in a registered public offering
as to which Bedford may seek to include Common Stock pursuant to piggyback
rights under Section 2, then Company may, at its option, direct that such
request may be delayed for a period not in excess of 6 months from the effective
date of such offering, such right to delay a request to be exercised by the
Company not more than once in any 12 month period.
2. PIGGYBACK REGISTRATION RIGHTS. Whenever the Company proposes to
register any of its securities under the Act (other
Page 25 of 89 pages
<PAGE>
than pursuant to a Demand Registration and other than a registration on Form S-8
of securities issuable pursuant to employee benefit plans) and the registration
form to be used may be used for the registration of the Common Stock (a
"PIGGYBACK REGISTRATION"), the Company will give prompt written notice to
Bedford of its intention to effect such a registration and will include in such
registration all of Bedford's Common Stock with respect to which the Company has
received a written request for inclusion therein within fifteen (15) days after
the receipt of the Company's notice. In the event that any negotiation pursuant
to a Piggyback Registration shall be, in whole or in part, an underwritten
public offering, Bedford shall have the right to elect that its Common Stock be
included in the underwriting on the same terms and conditions as the shares of
the Company otherwise being sold through underwriters under such registration.
If a Piggyback Registration is an underwritten primary registration by the
Company, and Bedford's Common Stock requested for inclusion pursuant to this
paragraph 2 would constitute more than 25% of the total number of shares to be
included in a proposed underwritten public offering, and the managing
underwriter advises the Company in writing that in its reasonable opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration, in order of priority, the following (i) first, the securities the
Company proposes to sell, (ii) second, the Common Stock requested by Bedford to
be included in such registration, and (iii) third, other securities requested to
be included in such registration by persons other than Bedford, provided,
however, that the shares of Bedford's Common Stock to be included in such
offering shall constitute at least 25% of the total number of shares to be
included in such offering.
3. REGISTRATION PROCEDURES. If and whenever the Company is required
by the provisions of this Agreement to register any of Bedford's Common Stock
under the Act, the Company will, as expeditiously as possible:
(a) Prepare and file with the Securities and Exchange Commission
(the "COMMISSION") a registration statement with respect to such securities and
cause or use its best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby,
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to Bedford's counsel
copies of all documents proposed to be filed;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of distribution contemplated and to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement in accordance with Bedford's intended
Page 26 of 89 pages
<PAGE>
method of disposition set forth in such registration statement for such period;
(c) furnish to Bedford and to each underwriter such number of
copies of the registration statement, the prospectus included therein (including
each preliminary prospectus), all post-effective amendments and such other
documents as such persons may reasonably request in order to facilitate the
public sale or other disposition of the securities covered by such registration
statement;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as Bedford, or in the case of an underwritten public
offering, the managing underwriter, shall reasonably request, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business in any jurisdiction where it is not so qualified or to
take any action which would subject it to taxation or general service of process
in any jurisdiction where it is not otherwise subject to such taxation or
general service of process;
(e) notify Bedford promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statements has
been filed;
(f) notify Bedford promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(g) prepare and file with the Commission, promptly upon the
request of Bedford, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for Bedford is required under the
Act or the rules and regulations thereunder in connection with the distribution
of the Common Stock by Bedford;
(h) advise Bedford promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of a registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or obtain its withdrawal if a stop
order should be issued;
(i) not file any amendment or supplement to a registration
statement or prospectus to which Bedford shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least three
business days prior to the filing thereof;
Page 27 of 89 pages
<PAGE>
(j) immediately notify Bedford at any time when a prospectus
relating thereto is required to be delivered under the Act, of the happening of
any event as a result of which the prospectus contained in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and, as expeditiously as possible, amend or supplement such
prospectus to eliminate the untrue statement or the omission;
(k) use its best efforts (if the offering is underwritten) to
furnish, at the request of Bedford, on the date that securities are delivered to
the underwriters for sale pursuant to such registration; (i) an opinion dated
such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to Bedford, stating that such
registration statement has become effective under the Act and that (A) to the
best knowledge of such counsel, no stop order suspending the effectiveness
thereof has been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the Securities Act, and (B) the
registration statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements of the
Act (except that such counsel need express no opinion as to financial statements
and financial and statistical data contained therein) and (ii) a letter dated
such date from the independent public accountants retained by the Company,
addressed to the underwriters and to Bedford, stating that they are independent
public accountants within the meaning of the Act, and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Act;
(l) make available for inspection by Bedford, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by Bedford or such underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company and its subsidiaries, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by Bedford or such underwriter, attorney, accountant or
agent in connection with such registration statement;
(m) use its best efforts to cause all such securities to be
listed on such securities exchange on which similar securities issued by the
Company are then listed;
(n) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
Page 28 of 89 pages
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4. REGISTRATION EXPENSES AND INDEMNIFICATION.
(a) EXPENSES. All Registration Expenses incurred in connection
with (i) a Demand Registration or (ii) a Piggyback Registration will be borne by
the Company. As used herein, "REGISTRATION EXPENSES" means all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with federal and state securities or blue sky laws,
securities laws of any foreign jurisdictions, printing expenses, messenger and
delivery expenses and fees and disbursements of counsel for Bedford and all
independent certified public accountants, underwriters (excluding discounts and
commissions attributable to the sale of Common Stock) and other persons retained
by Bedford or the Company.
(b) The Company agrees to indemnify, to the extent permitted by
law, Bedford against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by Bedford expressly for use
therein or by Bedford's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto in conformity with
applicable federal and state securities laws after the Company has furnished
Bedford with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each person who controls such underwriters (within
the meaning of the Act) to the same extent as provided above with respect to the
indemnification of Bedford.
(c) In connection with any registration statement in which
Bedford is participating, Bedford shall furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its directors and officers and
each person who controls the Company (within the meaning of the Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by Bedford;
provided that the liability of Bedford will be in proportion to and limited to
the net amount
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<PAGE>
received by Bedford from the sale of the Common Stock pursuant to such
registration statement.
(d) Any party entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party and its legal counsel a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(e) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and will survive the offering of any registrable
securities of the Company in a registration statement, and otherwise.
(f) If the indemnification provided for in this paragraph 4 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(g) Notwithstanding the foregoing, to the extent that the
provisions of indemnification and contribution contained in an underwriting
agreement entered into in connection with an
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<PAGE>
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
5. MISCELLANEOUS.
(a) This Agreement may be modified or amended only by a written
instrument executed by the parties hereto.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado, without regard to
conflicts of law principles thereof.
(c) Each provision of this Agreement shall be interpreted in
such a manner as to be effective, valid and enforceable under applicable law,
but if any provision hereof is held to be invalid, illegal or unenforceable
under any applicable law or rule in any jurisdiction, such provision will be
ineffective only to the extent of such invalidity, illegality or
unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.
(d) No course of dealing or delay or failure to exercise any
right hereunder on the part of any party shall operate as a waiver of such right
or otherwise prejudice such party's rights, powers or remedies.
(e) Any notice, demand or delivery to be made pursuant to this
Agreement shall be sufficiently given or made if sent by first class mail,
postage prepaid, addressed to (i) Bedford at 2nd Floor, Charlotte Hs., Shirly
Street, Box N964, Nassau, Bahamas, or (ii) the Company at its principal office.
Bedford and the Company may each designate a different address by written notice
to the other pursuant to this Paragraph 5(e).
(f) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties thereto and their respective successors and
assigns.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed and delivered by its duly authorized officer as of the date first
written above.
PMC INTERNATIONAL, INC., a Colorado
corporation
By: /s/ Kenneth S. Phillips
-------------------------------
Title: President
----------------------------
BEDFORD FINANCIAL CAPITAL
CORPORATION, a corporation organized
under the laws of Liberia
By: /s/ W. L. Atkinson
-------------------------------
Title: Authorized Agent
----------------------------
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<PAGE>
EXHIBIT 3
Kenneth S. Phillips
President, Director
PMC International, Inc.
555 17th Street
14th Floor
Denver, Colorado 80202
July 26, 1995
Bedford Capital Financial Corporation
2nd Floor, Charlotte Hs
Shirly Street
Box N964
Nassau, Bahamas
Attn: Richard C.W. Mauran, Chairman and CEO
Suzanne J. Black, Treasurer and CFO
Re: BEDFORD INVESTMENT IN PMC INTERNATIONAL, INC.
---------------------------------------------
Ladies and Gentlemen:
This letter is written in connection with that certain Investment
Agreement (the "AGREEMENT") by and between Bedford Capital Financial Corporation
("BEDFORD"), PMC International, Inc. ("PMCI"), Portfolio Management Consultants,
Inc., Portfolio Brokerage Services, Inc. and Portfolio Technology Services, Inc.
("TECHNOLOGY") of even date herewith, whereby Bedford will loan $1.2 million to
PMCI and Technology (the "LOAN"). Unless otherwise defined herein, all
capitalized terms shall have the same meaning as set forth in the Agreement.
PMCI recognizes that there are certain risks incident to the Loan and
the Second Loan, if made, and that as a condition to entering into the Loan,
Bedford requires certain safeguards in the event that the risks materialize.
Specifically, in the event of a Disaster, as defined below, Bedford requires the
emergency ability to control the PMCI board of directors the ("BOARD OF
DIRECTORS"; an individual member of the Board of Directors is referred to
hereinafter as a "DIRECTOR") in order to take the actions that Bedford deems
necessary to avert or mitigate the Disaster. PMCI expressly acknowledges that
without such emergency powers to control a majority of Directors, Bedford would
be unwilling to make the Loan or the Second Loan to the Borrowers.
Therefore, in consideration of the Loan and the Second Loan, if made,
and in consideration of and as a condition to Bedford's agreement to loan funds
to the Borrowers, as a Director, I hereby agree as follows:
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<PAGE>
1. In the event (i) a Disaster occurs, (ii) the Board of Directors
fails to expand the number of members of the Board of Directors within two days
of the occurrence of such Disaster and (iii) Bedford so requests, I agree to
immediately resign my position as a Director. My resignation will allow the
remaining Directors, which will include two Directors appointed by Bedford and
one independent Director, to appoint a successor Director as provided in PMCI's
Bylaws, and thereby attain control of the Board of Directors so as to take such
actions as Bedford deems advisable or necessary to avert or mitigate the
Disaster.
2. A "DISASTER" shall be defined as any of the following:
a. Borrowers are in default in payment of any sum on the Loan
or the Second Loan, if made, when due;
b. PMCI or any of its subsidiaries makes a default in payment
of any material sum with any of its bankers or other lenders or otherwise
is in default under its agreements with such lenders and such default
continues for a period of ten (10) days; or
c. With respect to PMCI or any of its subsidiaries:
(1) an order is made or resolution passed to wind-up or
liquidate it;
(2) a general assignment for the benefit of its creditors
is made;
(3) any proposal is made under bankruptcy, insolvency,
reorganization or similar legislation;
(4) a receiver or similar organization is appointed to
operate or liquidate its assets or any material part of its assets; or
(5) any similar event relating to financial distress or
insolvency occurs.
I affirm that my agreement to resign under the conditions set forth
above is made in consideration only of the Loan and the Second Loan, if made,
and Bedford's obligations thereunder. No consideration or benefit of any type
will pass to me personally, directly or indirectly, as a result of my agreement
to resign pursuant to the terms of this letter.
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<PAGE>
If you accept the terms of this letter, please sign your
acknowledgement below and return one copy to PMCI.
Very truly yours,
/s/ Kenneth S. Phillips
Kenneth S. Phillips
ACKNOWLEDGED and agreed to effective
as of the 26th day of July, 1995
BEDFORD CAPITAL FINANCIAL CORPORATION
By:/s/ W. L. Atkinson
------------------------------
Title: Agent
---------------------------
Page 35 of 89 pages
<PAGE>
EXHIBIT 4
INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (the "AGREEMENT") is entered into effective
as of the 26th day of July, 1995 by and between BEDFORD CAPITAL FINANCIAL
CORPORATION, a corporation organized under the laws of Liberia ("BEDFORD") and
PMC INTERNATIONAL, INC., a Colorado corporation ("PMCI"), PORTFOLIO MANAGEMENT
CONSULTANTS, INC., a Colorado corporation ("CONSULTANTS"), PORTFOLIO BROKERAGE
SERVICES, INC., a Colorado corporation ("BROKERAGE") and PORTFOLIO TECHNOLOGY
SERVICES, INC., a Colorado corporation ("TECHNOLOGY"). PMCI and Technology are
collectively referred to herein as the "BORROWERS" and each individually as a
"BORROWER." Consultants and Brokerage are collectively referred to herein as
the "SUBSIDIARIES" and each individually as a "SUBSIDIARY."
RECITALS
A. The Borrowers desire to borrow an aggregate principal amount of
$1,200,000 from Bedford and Bedford has agreed to loan such funds to the
Borrowers, subject to the terms and conditions set forth in this Agreement.
B. A significant portion of the amounts loaned to the Borrowers by
Bedford will be utilized by (i) Technology to fund the development of certain
computer software and (ii) by Brokerage to satisfy certain indebtedness.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrowers, Subsidiaries, and
Bedford agree as follows:
ARTICLE I
THE LOAN
Section 1.1 THE LOAN. Subject to all of the terms and provisions of
this Agreement, including but not limited to the conditions precedent set forth
in Article III, Bedford shall loan to the Borrowers at the Closing (as
hereinafter defined) an aggregate principal amount of One Million Two Hundred
Thousand Dollars ($1,200,000) (the "LOAN").
Section 1.2 PROMISSORY NOTE.
(a) The Loan shall be evidenced by a promissory note (the
"NOTE") in form and substance acceptable to Borrowers and Bedford. The Note
shall be payable in full on July 31, 2000 (the "MATURITY DATE"), except to the
extent that the rights of
Page 36 of 89 pages
<PAGE>
conversion set forth in the Note have theretofore been exercised and as
otherwise hereinafter provided. Interest shall accrue without interest payment
being required for one year following the date of the Note and such accrued
interest shall thereafter be amortized and paid on a monthly basis over the
following two-year period. The accrued interest shall not accrue additional
interest thereon.
(b) The Loan shall be secured by a security interest in all
of the Borrowers' assets, which security interest shall be subordinate to any
bank financings for ordinary operating lines of credit for the Borrowers and the
Subsidiaries which are approved by PMCI's board of directors, except that
Bedford shall be granted a first priority security interest in that certain
promissory note currently owned by Brokerage in the original principal amount of
$1,807,350 with Schield, Colehour Inc., a Colorado corporation ("SCHIELD"), as
maker and payable to the order of Schield Management Company, a Colorado
corporation (the "SCHIELD NOTE") which shall be assigned by Brokerage to PMCI
free and clear of all liens and encumbrances as provided in Section 6.11 below.
Until such assignment is completed, the Loan shall be secured by the Schield
Note pursuant to a non-recourse Guaranty and Pledge Agreement executed and
delivered by Brokerage to Bedford at Closing, in form and substance acceptable
to Bedford and Brokerage (the "BROKERAGE PLEDGE") . Each Borrower shall execute
and deliver a security agreement in form and substance acceptable to Bedford and
PMCI, and such other documents as may be required to perfect Bedford's security
interest in all of the Borrowers' assets and the Schield Note (collectively, the
"SECURITY DOCUMENTS") at the Closing.
(c) WARRANT. As additional consideration for the Loan, PMCI
shall grant Bedford the option to purchase 1,200,000 shares of common stock,
$.01 par value of PMCI ("COMMON STOCK") pursuant to the terms of a warrant in
form and substance acceptable to Bedford and PMCI (the "WARRANT"). PMCI shall
execute and deliver the Warrant to Bedford at the Closing.
(d) REGISTRATION RIGHTS. As additional consideration for
the Loan, PMCI shall grant Bedford rights to register shares of Common Stock
owned and acquired by Bedford pursuant to the terms of a registration rights
agreement in form and substance acceptable to Bedford and PMCI (the
"REGISTRATION RIGHTS AGREEMENT"). PMCI shall execute and deliver the
Registration Rights Agreement to Bedford at Closing.
ARTICLE II
CLOSING DATE; DELIVERY; DUE DILIGENCE
Section 2.1 CLOSING. The closing with respect to the transactions
contemplated hereunder will be held at the offices of Otten, Johnson, Robinson,
Neff & Ragonetti, P.C. on July 27, 1995,
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<PAGE>
at 10:00 a.m. local time in Denver, Colorado, or at such other time as the
Borrowers and Bedford may agree (the "CLOSING").
Section 2.2 DELIVERY. At the Closing, subject to the terms of this
Agreement, the Borrowers will deliver to Bedford this Agreement, the Note, the
Warrant, the Registration Rights Agreement, the Security Documents and such
other documents as may be necessary to effect the transactions contemplated
hereby duly executed and Brokerage will deliver to Bedford the Brokerage Pledge
duly executed. Bedford will deliver to PMCI at the Closing a check payable to
the order of PMCI, or evidence of such other form of payment as the parties
shall agree upon, in the amount of $1,200,000.
Section 2.3 DUE DILIGENCE. In connection with the Loan, upon
reasonable advance notice from Bedford, the Borrowers shall furnish Bedford with
full access to all books, contracts, documents and records of the Borrowers and
the Subsidiaries, and Bedford shall be allowed to inspect and copy any such
materials. Further, Bedford shall be afforded reasonable opportunities to make
such inquiries of management and/or other employees of the Borrowers and the
Subsidiaries to the extent Bedford reasonably deems necessary. All information
provided to Bedford that is identified by the Borrowers and the Subsidiaries as
confidential information of the Borrowers and the Subsidiaries shall be held in
confidence and treated by Bedford with at least as much care as if such
information were confidential information of Bedford. The materials provided by
the Borrowers and the Subsidiaries to Bedford pursuant to this Section 2.3, and
all copies thereof, shall be used by Bedford only to conduct a due diligence
examination of the Borrowers and the Subsidiaries for the purpose of determining
whether Bedford should consummate the transactions contemplated hereby, and all
such materials shall promptly be returned to the Borrowers and the Subsidiaries
in the event the transactions contemplated hereby are not consummated.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO BEDFORD'S OBLIGATION. Bedford's
obligation to make the Loan hereunder is subject to the satisfaction at or
before the Closing of the following conditions precedent, any of which may be
waived by Bedford in writing:
(a) Bedford shall be satisfied with the results of its due
diligence examination of the Borrowers and the Subsidiaries.
(b) The Borrowers' Boards of Directors shall, as applicable,
each have approved and authorized the execution, delivery and performance of
this Agreement, the Note, the Warrant,
Page 38 of 89 pages
<PAGE>
the Registration Rights Agreement, the Security Documents, the Advisory
Agreement (as hereinafter defined), and all other actions to be taken and all
other documents and instruments to be executed and delivered by the Borrowers
hereunder and shall have provided Bedford a certified copy of the resolutions
approving and authorizing such matters.
(c) The Borrowers and the Subsidiaries shall each have
executed and delivered to Bedford this Agreement, the Note, the Warrant, the
Registration Rights Agreement, the Advisory Agreement, the Brokerage Pledge and
the Security Documents to which such Borrower or Subsidiary is a party.
(d) The representations and warranties of the Borrowers and
the Subsidiaries contained in Article IV of this Agreement shall be true and
correct on and as of the date hereof, and, in the event this Agreement shall
have been executed as of a date prior to the Closing, Bedford shall have
received a certificate, executed by the President of each Borrower and each
Subsidiary, certifying that the representations and warranties contained in
Article IV of this Agreement are true and correct on and as of the Closing.
(e) Bedford shall have received an opinion of counsel to the
Borrowers in substantially the form of EXHIBIT A hereto.
(f) Bedford shall have received an agreement respecting the
Schield Note in form and substance acceptable to Bedford executed by an
executive officer of Schield.
(g) PMCI and each of Kenneth S. Phillips ("PHILLIPS") and
David L. Andrus ("ANDRUS") shall have entered into a three-year employment
agreement in form and substance acceptable to Bedford and PMCI (collectively,
the "EMPLOYMENT AGREEMENTS").
(h) PMCI shall have entered into an advisory agreement with
Nevcorp Inc. (the "ADVISORY AGREEMENT") in form and substance acceptable to
Bedford and PMCI.
(i) The Board of Directors and PMCI shall have adopted the
amendments to the bylaws of PMCI in the form attached hereto as EXHIBIT B;
(j) The Board of Directors of PMCI shall have elected two
individuals designated by Bedford to fill the vacancies on PMCI's Board of
Directors created by the amendment to the bylaws referenced in subsection (i)
above;
(k) PMCI shall have resolved any and all disputes related to
amounts to be paid to Ladenburg, Thalmann & Co. Inc. ("LADENBURG") to the
satisfaction of Bedford;
Page 39 of 89 pages
<PAGE>
(l) Bedford shall be satisfied as to the status of the
settlement of IN THE MATTER OF PORTFOLIO MANAGEMENT CONSULTANTS, INC. (D-1968),
BEFORE THE UNITED STATES SECURITIES EXCHANGE COMMISSION.
(m) Simultaneous with the Closing, Bedford shall purchase
1,000,000 shares of Common Stock for $1.00 per share from Marc Geman and PMCI,
Bedford, Phillips, Andrus and Phillips & Andrus, LLC, a Colorado limited
liability company, shall have entered into a shareholders agreement in form and
substance acceptable to Bedford.
(n) All legal and other matters incident to or in connection
with the transactions contemplated hereby shall be satisfactory to Bedford.
Section 3.2 CONDITIONS PRECEDENT TO BORROWERS' OBLIGATIONS. The
Borrowers' obligation to accept the Loan and issue the Note hereunder is subject
to the satisfaction at or before the Closing of the following conditions
precedent, any of which may be waived by the Borrowers in writing:
(a) Bedford shall have executed and delivered this
Agreement.
(b) The representations and warranties of Bedford contained
in Article V of this Agreement shall be true and correct on and as of the
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
AND THE SUBSIDIARIES
The Borrowers and the Subsidiaries hereby represent and warrant to
Bedford as follows:
Section 4.1 CORPORATE STATUS. Each Borrower and each Subsidiary
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (ii) has duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified would
have a material adverse effect on the business or financial condition of any
Borrower or Subsidiary.
Section 4.2 CAPITALIZATION. On and as of the Closing the authorized
capital of PMCI will consist of Fifty Million (50,000,000) shares of Common
Stock, 5,540,501 shares of Common Stock of which are issued and outstanding as
of the date hereof,
Page 40 of 89 pages
<PAGE>
and Five Million (5,000,000) shares of Preferred Stock without par value
("PREFERRED STOCK"), 349,017 shares of Preferred Stock of which are issued and
outstanding as of the date hereof. On the Closing, 349,017 shares of Common
Stock will be issued and outstanding. Except for the Warrant and as set forth
on SCHEDULE 4.2 attached hereto and incorporated herein, there is no right,
subscription, warrant, call, option or other agreement of any kind to purchase
or otherwise receive or to be issued any of the authorized but unissued shares
of PMCI's capital stock and no securities or obligations of any kind convertible
into shares of PMCI's capital stock exist in favor of any person.
Section 4.3 CORPORATE POWER AND AUTHORIZATION. Each Borrower and
each Subsidiary has all requisite legal and corporate power to enter into this
Agreement, the Note, the Warrant, the Registration Rights Agreement, the
Security Documents, the Brokerage Pledge and all related documents to which it
is a party, to accept the Loan hereunder, and to carry out and perform its
obligations under the terms of this Agreement, the Note, the Warrant, the
Registration Rights Agreement, the Security Documents, the Brokerage Pledge and
all related documents to which it is a party. All corporate actions on the part
of each Borrower and each Subsidiary, its officers, directors and shareholders
necessary for the execution and delivery by each Borrower and each Subsidiary of
this Agreement, the Note, the Warrant, the Registration Rights Agreement, the
Security Documents, the Brokerage Pledge and any related documents to which it
is a party and the performance of the Borrowers' and the Subsidiaries
obligations hereunder and thereunder have been taken or will be taken prior to
the Closing and the execution, delivery and performance by each Borrower and
each Subsidiary of this Agreement, the Note, the Warrant, the Registration
Rights Agreement, the Security Documents, the Brokerage Pledge and the related
documents to which it is a party will not violate any provision of law, rule,
regulation, order, writ, judgment or decree applicable to each Borrower and each
Subsidiary, or the Articles of Incorporation or Bylaws of any of the Borrowers
or the Subsidiaries, nor result in the breach of or constitute a default under
any other agreement or instrument to which a Borrower or a Subsidiary is a party
or to which any of its property is subject. This Agreement, the Note, the
Warrant, the Registration Rights Agreement, the Security Documents, the
Brokerage Pledge and the related documents to which it is a party are (or, when
executed and delivered, will be) each a legal, valid and binding obligation of
Borrowers and the Subsidiaries, enforceable in accordance with its respective
terms.
Section 4.4 SUBSIDIARIES. PMCI owns all of the issued and
outstanding stock of Consultants, Brokerage and Technology and does not own or
control, directly or indirectly, any other corporation, association or business
entity. Neither Consultants, Brokerage nor Technology own or control, directly
or indirectly, any other corporation, association or business entity.
Page 41 of 89 pages
<PAGE>
Section 4.5 FINANCIAL REPORTS. PMCI's financial statements which
have been filed by PMCI with the Securities and Exchange Commission (the "SEC")
are in accordance with the books and records of PMCI and have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods indicated (except as indicated therein), reflect all
assets and liabilities of the Borrowers and the Subsidiaries, including all
contingent liabilities, present truly and completely the financial condition of
PMCI at such dates and results of its operations for the periods then ended, and
since the end of the last quarter for which financial statements have been filed
with the SEC, nothing has occurred which could have a material adverse effect on
the financial position of PMCI.
Section 4.6 LITIGATION. Except as set forth in SCHEDULE 4.6
attached hereto and incorporated herein, there are no actions, proceedings or
investigations pending against any of the Borrowers or the Subsidiaries or their
officers, directors or employees or any basis therefor or threat thereof, which,
either individually or in the aggregate, might result in any material adverse
change in the business prospects, conditions, affairs or operations of the
Borrowers or the Subsidiaries or in any of their properties or assets, or in any
impairment of the right or ability of any Borrower or Subsidiary to carry on
their business as now conducted or as proposed to be conducted, or in any
material liability on the part of a Borrower or Subsidiary, or which questions
the validity of this Agreement, the Note, the Warrant, the Registration Rights
Agreement, the Security Documents, the Brokerage Pledge or any related document
or any action taken or to be taken in connection herewith or therewith.
Section 4.7 TAXES. Each Borrower and each Subsidiary has timely
filed with the appropriate governmental authorities all tax returns and reports
required to be filed and has paid all taxes shown to be due thereon or claimed
to be due with respect thereto and there are no pending or threatened audits,
investigations or other examinations related to the Borrowers' or the
Subsidiaries' tax filings.
Section 4.8 EMPLOYEES. Except as shown on SCHEDULE 4.8 attached
hereto and incorporated herein, none of the Borrowers or the Subsidiaries are a
party to any employment agreements. No employee of any of the Borrowers or the
Subsidiaries is in violation of any term of any employment contract or any other
contract or agreement relating to the relationship of such employee with the
Borrowers or the Subsidiaries. None of the Borrowers or the Subsidiaries is a
party to any deferred compensation agreement or retirement or profit sharing
plan.
Section 4.9 REGISTRATION RIGHTS. Except as set forth in
SCHEDULE 4.9 attached hereto and incorporated herein and the Registration Rights
Agreement, PMCI is not under any obligation to register under the Act any of its
securities not so registered prior to the date hereof.
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<PAGE>
Section 4.10 DISCLOSURE. PMCI has provided to Bedford accurate and
complete copies of the following reports and documents filed by PMCI with the
SEC ("SEC FILINGS"): (a) PMCI's Annual Report on Form 10-KSB for the year ended
December 31, 1994; (b) PMCI's 1994 Annual Report to Shareholders; and (c) PMCI's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 1995. As of
their respective date, none of the SEC Filings contained any untrue statement of
any material fact or omitted any material fact required to be stated therein or
necessary to make the statements therein not misleading, except as set forth on
SCHEDULE 4.6 attached hereto and to the extent that any such statement or
omission has been modified or superseded in an SEC Filing subsequently filed
with the SEC and delivered to Bedford prior to Closing.
Section 4.11 GOVERNMENTAL CONSENT, ETC. Except for the NASD consent
required to transfer the Schield Note from Brokerage to PMCI, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental authority is required on the part of any Borrower or Subsidiary in
connection with the execution, delivery and performance by the Borrowers and
Subsidiaries of this Agreement and the consummation of the transactions
contemplated hereby.
Section 4.12 COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 4.6 attached hereto, the Borrowers and Subsidiaries have complied with
all federal, state, local and foreign laws, ordinances, requirements,
regulations, decrees and orders applicable to their businesses and property,
including but not limited to making all required federal, state and NASD filings
and complying with all licensing, net capital and other requirements. No
Borrower or Subsidiary has received any notice of noncompliance of any such law,
ordinance, requirement, regulation, decree or order.
Section 4.13 OTHER AGREEMENTS. None of the Borrowers or the
Subsidiaries are in default in the performance, observance or fulfillment of any
of the material obligations, covenants or conditions contained in any other
agreement to which a Borrower or Subsidiary is a party or to which any of its
assets or properties are subject.
Section 4.14 BROKER'S FEES. Neither the Borrowers nor the
Subsidiaries have incurred any obligation or liability for brokerage or finders'
fees or agents' commissions or like payment in connection with the transactions
contemplated herein, except a $96,000 fee payable to Ladenburg which shall
be paid by PMCI upon closing of the Loan and a $144,000 fee payable to
Ladenburg which shall be paid by PMCI upon closing of the Second Loan (as
hereinafter defined) if such Second Loan is made.
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Section 4.15 TITLE TO ASSETS. Except as disclosed in PMCI's most
recent financial statements, title to all of the Borrowers' and Subsidiaries'
assets is vested solely in the Borrowers and Subsidiaries, and free and clear of
all liens, encumbrances, security interest and other claims whatsoever.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BEDFORD
Section 5.1 CORPORATE STATUS. Bedford (i) is a duly organized and
validly existing corporation in good standing under the laws of Liberia and has
the corporate power and authority to own its property and assets and to transact
the business in which it is engaged and presently proposes to engage and
(ii) has duly qualified and is authorized to do business and is in good standing
in all jurisdictions where it is required to be so qualified and where the
failure to be so qualified would have a material adverse effect on the business
or financial condition of Bedford.
Section 5.2 CORPORATE POWER AND AUTHORIZATION. Bedford has all
requisite legal and corporate power to enter into this Agreement and all related
documents to which it is a party, to make the Loan hereunder, and to carry out
and perform its obligations under the terms of this Agreement and all related
documents to which it is a party. All corporate actions on the part of Bedford,
its officers, directors and shareholders necessary for the execution and
delivery by Bedford of this Agreement and any related documents to which it is a
party and the performance of Bedford's obligations hereunder and thereunder have
been taken or will be taken prior to the Closing and the execution, delivery and
performance by Bedford of this Agreement and the related documents to which it
is a party will not violate any provision of law, rule, regulation, order, writ,
judgment or decree applicable to Bedford, or the Articles of Incorporation or
Bylaws of Bedford, nor result in the breach of or constitute a default under any
other agreement or instrument to which Bedford is a party or to which any of its
property is subject. This Agreement and the related documents to which it is a
party are (or, when executed and delivered, will be) each a legal, valid and
binding obligation of Bedford, enforceable in accordance with its respective
terms.
ARTICLE VI
COVENANTS OF THE BORROWERS
The Borrowers and Subsidiaries covenant and agree that until all
amounts due under the Loan and the Second Loan, if made, have been paid in full
and/or Bedford owns and/or has the right to acquire at least ten percent (10%)
of the issued and outstanding Common Stock, on a fully-diluted basis (which for
this determination, Bedford shall be deemed to have the right to acquire
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<PAGE>
all of the shares of Common Stock issuable pursuant to the Mirror Options (as
hereinafter defined) without regard as to whether such Mirror Options are
vested), unless Bedford waives compliance in writing, the Borrowers and
Subsidiaries shall:
Section 6.1 NOTICE OF DEFAULT. Give prompt written notice to
Bedford of any Event of Default as defined in Article VII of this Agreement or
of any event of default arising under any other agreement or indenture entered
into by a Borrower or Subsidiary, or of any other matter which has resulted in,
or could reasonably be expected to result in, a materially adverse change in the
business, assets, prospects, financial condition or operations of any Borrower
or Subsidiary.
Section 6.2 COMPLIANCE WITH LAWS. Comply with all applicable laws,
rules, regulations and orders, including but not limited to making all required
federal, state, and NASD filings required to reflect the ownership changes to
PMCI and complying with all licensing, net capital and other requirements.
Section 6.3 REPORTING REQUIREMENTS. Furnish or cause to be
furnished to Bedford, the following:
(a) Not later than ninety (90) days after the close of each
fiscal year of PMCI, the consolidated balance sheet of PMCI as of the end of
such fiscal year, and the related consolidated statement of operations,
statement of cash flows and statement of changes in stockholders' equity of PMCI
for such fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable detail,
prepared in conformance with generally accepted accounting principles and
certified by an executive officer of PMCI;
(b) Not later than fifteen (15) business days after the end
of each calendar month, the internally prepared reports of PMCI, as of the end
of such month, setting forth the consolidated balance sheet and the related
consolidated statement of operations, statement of cash flows and statement of
changes in stockholders' equity of PMCI as of the end of such month, and the
consolidated statement of operations of PMCI for the period from the beginning
of such fiscal year to the end of such month, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, all in reasonable detail and all certified by an
executive officer of PMCI;
Section 6.4 NOTICE OF LITIGATION. Give prompt notice to Bedford of
any claim, action or proceeding, or threat thereof, which, in the event of any
unfavorable outcome, would or could reasonably be expected to have a material
adverse effect on the business, assets, financial condition or prospects of any
Borrower or Subsidiary.
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Section 6.5 INSURANCE. Maintain insurance with financially sound
and responsible insurance carriers of the kinds, against the risks and in the
relative proportions and amounts which are necessary and appropriate to the
business conducted by the Borrowers and Subsidiaries, including director and
officer liability insurance.
Section 6.6 EXECUTION OF OTHER INSTRUMENTS. Do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, all and every such further acts, covenants, assurances or further
instruments and documents as Bedford may reasonably request in order to carry
out the intent and purpose hereof.
Section 6.7 RESERVATION OF STOCK. PMCI shall reserve and keep
available out of its authorized but unissued Common Stock, for the purpose of
effecting the exercise of the Warrant, the Second Warrant, if issued, any Mirror
Options and any other rights to acquire shares of Common Stock held and
hereafter acquired by Bedford, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the full
exercise thereof. All shares of Common Stock which are so issuable will, when
issued, be duly and validly issued, fully paid and nonassessable.
Section 6.8 KEY-MAN INSURANCE. PMCI shall obtain on or before
August 31, 1995 and maintain during the term of this Agreement key-man insurance
on the life of Phillips in the amount of at least $1,200,000 for so long as any
principal under the Loan is outstanding and an additional $1,800,000, if, when
and for so long as any principal under the Second Loan (as hereinafter defined)
is outstanding, which names PMCI as a 100% beneficiary thereof. At Bedford's
election, PMCI shall use any and all proceeds received from the key-man
insurance to pay any and all amounts outstanding under the Loan and the Second
Loan, if made.
Section 6.9 REPLACEMENT OF NOTE. Upon receipt by the Borrowers of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of the Note or the Second Note, if issued, and
(a) in the case of loss, theft or destruction, upon receipt
of an agreement of indemnity reasonably satisfactory to it, or
(b) in the case of mutilation, upon surrender and
cancellation of the Note or the Second Note, so mutilated,
Borrowers at their expense will execute and deliver a new Note or Second Note,
whichever is applicable, dated and bearing interest from the date to which
interest has been paid on the lost, stolen, destroyed or mutilated Note or
Second Note or dated the date of the lost, stolen, destroyed or mutilated Note
or Second Note if no interest had been paid thereon.
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Section 6.10 EXTRAORDINARY CORPORATE TRANSACTIONS. None of the
Borrowers or Subsidiaries shall, without the prior written consent of Bedford:
(a) Transfer any assets of a Borrower or Subsidiary outside
of the ordinary course of business.
(b) Take any action which under applicable corporate law
requires the approval of the shareholders of any Borrower or Subsidiary.
(c) Amend, modify, assign or transfer the Employment
Agreements.
(d) Approve or adopt (i) an incentive stock option plan or
(ii) an employee bonus fund, except as provided in Sections 8.1 and 8.2.
(e) Issue any new options to purchase capital stock of a
Borrower or Subsidiary under currently existing stock option plans.
Section 6.11 TRANSFER OF SCHIELD NOTE. Immediately after the
execution of this Agreement, Brokerage shall file with the NASD any and all
documents necessary to obtain the approval of the NASD to transfer the Schield
Note to PMCI, and PMCI and Brokerage shall each use their best efforts to cause
the NASD to approve such transfer as soon as possible. Upon receipt of approval
from the NASD, PMCI shall immediately (i) cause Brokerage to assign and transfer
the Schield Note, free and clear of any and all liens and encumbrances, to PMCI,
(ii) deliver a fully-executed assignment to Bedford evidencing the transfer of
the Schield Note, and (iii) execute such other documents and take such other
actions necessary to give Bedford a perfected first priority security interest
in the Schield Note.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT. If one or more of the following
described events of default ("EVENTS OF DEFAULT") shall occur:
(a) The Borrowers shall default in the payment of principal
or interest on the Note or the Second Note, if issued,; or
(b) Any of the representations or warranties made by the
Borrowers or the Subsidiaries herein or in any certificate or financial or other
statements heretofore or hereafter furnished by or on behalf of the Borrowers or
the Subsidiaries in connection with the execution and delivery of this
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Agreement or the granting of the Loan or the Second Loan hereunder or pursuant
to this Agreement shall be false or misleading at the time made; or
(c) The Borrowers or the Subsidiaries shall fail to perform
or observe any other covenant, term, provision, condition, agreement or
obligation of the Borrowers or the Subsidiaries under this Agreement, the Note,
or the Second Note, if issued, the Warrant, the Second Warrant, if issued, the
Registration Rights Agreement, the Brokerage Pledge or the Security Documents
and such failure shall continue uncured for a period of ten (10) days; or
(d) The Borrowers or the Subsidiaries shall fail to perform
or observe any of the covenants, terms, provisions, conditions, agreements or
obligations under any other material agreement, indenture, document, note or
other instrument executed or to be executed by the Borrowers or the Subsidiaries
with Bedford or any other person or entity and such failure shall continue
uncured for a period of ten (10) days; or
(e) Any Borrower or Subsidiary shall (1) become insolvent;
(2) admit in writing its inability to pay its debts as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for it or for a substantial part of its property or
business; or
(f) A trustee, liquidator or receiver shall be appointed for
any Borrower or Subsidiary or for a substantial part of its property or business
without its consent and shall not be discharged within thirty (30) days after
such appointment; or
(g) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
any Borrower or Subsidiary and shall not be dismissed within thirty (30) days
thereafter; or
(h) Any material money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against any Borrower or
Subsidiary or any of its properties or other assets and shall remain unvacated,
unbonded or unstayed for a period of fifteen (15) days or in any event later
than five (5) days prior to the date of any proposed sale thereunder; or
(i) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against any Borrower or
Subsidiary and, if instituted against a Borrower or Subsidiary, shall not be
dismissed within thirty (30) days after such institution or any Borrower or
Subsidiary shall by any action or answer approve of, consent to, or acquiesce in
any such proceedings or admit the material allegations
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of, or default in answering a petition filed in any such proceeding; or
(j) This Agreement, the Note, the Second Note, if issued,
the Security Documents, the Warrant, the Second Warrant, if issued, the
Registration Rights Agreement or any of the other related documents shall, at
any time while any amount due under the Loan or the Second Loan, if made, shall
remain unpaid, cease to be in full force and effect or shall be declared null
and void, or the validity or enforceability thereof shall be contested by a
Borrower or a Subsidiary, or a Borrower or a Subsidiary shall deny that it has
any further liability or obligation under this Agreement, the Note, the Second
Note, if issued, the Warrant, the Second Warrant, if issued, the Registration
Rights Agreement, the Security Documents or any related document to which it is
a party;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by Bedford (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
Bedford and at Bedford's sole discretion, Bedford may consider the Note and/or
the Second Note, if issued, immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and Bedford may immediately, and without expiration of any
period of grace, enforce any and all of Bedford's rights and remedies provided
herein or in the Security Documents or any other rights or remedies afforded by
law.
ARTICLE VIII
OTHER AGREEMENTS
Section 8.1 INCENTIVE STOCK OPTION PLAN. PMCI shall be entitled to
establish an incentive stock option plan (the "Stock Plan") consisting of up to
ten percent (10%) of the shares of Common Stock issued and outstanding as of the
date of the Closing. Adoption of the Stock Plan and approval of the grants of
options thereunder, shall each require the affirmative vote of at least eighty
percent (80%) of the members of the Board of Directors of PMCI.
Section 8.2 EMPLOYEE BONUS POOL. PMCI shall be entitled to establish
an employee bonus pool (the "Bonus Pool") in a total amount equal to ten percent
(10%) of PMCI's pre-tax earnings prior to any calculation of the bonus pool,
excluding any extraordinary or non-recurring income and expenses. Adoption of
the Bonus Pool and the grant of bonuses thereunder, shall each require the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors of PMCI.
Section 8.3 FUTURE FUNDING. The Borrowers hereby grant Bedford an
exclusive right, at Bedford's option, to loan an
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additional $1,800,000 to the Borrowers (the "SECOND LOAN") pursuant to a
promissory note substantially in the form attached hereto as EXHIBIT C (the
"SECOND NOTE") and a warrant substantially in the form attached hereto as
EXHIBIT D (the "SECOND WARRANT"). Bedford may exercise its option to make the
Second Loan at any time prior to the date which is the earlier of July 1, 1996
or 30 days after the issuance by the United States Securities and Exchange
Commission of a final order IN THE MATTER OF PORTFOLIO MANAGEMENT CONSULTANTS,
INC. (D-1968), BEFORE THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION as to
PMCI and Phillips.
Section 8.4 RIGHT OF FIRST REFUSAL. For so long as any amount of
principal or interest remains outstanding under the Loan or the Second Loan, if
made, and/or Bedford owns or has right to acquire at least ten percent (10%) of
the issued and outstanding shares of Common Stock, on a fully diluted basis
(which for this determination, Bedford shall be deemed to have the right to
acquire all of the shares of Common Stock issuable pursuant to the Mirror
Options, without regard as to whether such Mirror Options are vested), Bedford
shall have the following rights, which shall be exercisable at Bedford's sole
option:
(a) RIGHT OF FIRST NEGOTIATION. In the event any Borrower,
Subsidiary or other entity owned, directly or indirectly, by a Borrower or
Subsidiary (the "FINANCING ENTITY") desires to obtain equity financing or debt
financing involving a right to acquire equity ("EQUITY FINANCING"), the
Financing Entity shall, before soliciting any other offers to provide such
Equity Financing, notify Bedford in writing of the Financing Entity's desire to
obtain Equity Financing and the terms and conditions on which the Financing
Entity is willing to obtain such Equity Financing from Bedford (the "FINANCING
NOTICE"). For a period of thirty (30) days following delivery of such notice to
Bedford (the "EXCLUSIVE NEGOTIATION PERIOD"), the Financing Entity shall
negotiate exclusively and in good faith with Bedford for the Equity Financing,
and shall not enter into negotiations or discussions with any other Person
during the Exclusive Negotiation Period regarding obtaining Equity Financing
from such person. In the event that the parties fail to agree on the terms and
conditions of the Equity Financing prior to the expiration of the Exclusive
Negotiation Period, the Financing Entity shall be free to obtain the proposed
Equity Financing from any other person on such terms and conditions no more
favorable than the terms proposed in the Financing Notice. In the event that
the Financing Entity fails to obtain Equity Financing within six (6) months
following the expiration of the Exclusive Negotiation Period, then, prior to
soliciting Equity Financing from any other person, the Financing Entity shall
again be obligated to first offer the Equity Financing to Bedford in accordance
with the foregoing provisions.
(b) RIGHT OF FIRST REFUSAL. In the event that a Financing Entity
receives an unsolicited offer from a third party (an "OFFEROR") to provide
Equity Financing, which is acceptable to the Financing Entity, before entering
into negotiations with such
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Offeror, the Financing Entity shall notify Bedford in writing of the terms
offered for the Equity Financing by such Offeror (the "FINANCING OFFER").
Bedford shall then have a period of twenty (20) days (the "OFFER PERIOD") in
which to notify the Financing Entity in writing of Bedford's desire to provide
Equity Financing on the terms and conditions set forth in the Financing Offer,
with the closing of such Equity Financing to occur as soon as reasonably
possible after preparation of all necessary documentation. If Bedford fails to
timely respond to the Financing Entity's notice, the Financing Entity shall have
the right to obtain the Equity Financing from the Offeror and Bedford's rights
hereunder shall be deemed waived and of no further force or effect; provided,
that in the event that the Financing Entity fails to obtain the Equity Financing
from the Offeror within three (3) months following the expiration of the Offer
Period, then, prior to accepting any subsequent offer from an Offeror to provide
Equity Financing, the Financing Entity shall again be obligated to first offer
to obtain Equity Financing from Bedford in accordance with the foregoing
provisions.
Section 8.5 ADDITIONAL OPTIONS. Upon (i) the exercise of any
presently outstanding options and Warrants to purchase Common Stock by any
optionee or grantee other than Bedford, or the exercise of options granted
pursuant to the Stock Plan (an "EXERCISED OPTION") and (ii) any exchange of any
presently outstanding Preferred Stock for Common Stock ("PREFERRED EXCHANGE") at
any time that there are amounts outstanding under the Loan and/or the Second
Loan, if made, and/or Bedford owns any Common Stock, whichever is later, Bedford
shall have an option to purchase an equal number of shares of Common Stock at
the same price as such Exercised Option or in the case of a Preferred Exchange
at the lower of the price designated in the transaction or the average daily
closing prices for the Common Stock for the 30 consecutive trading days
immediately preceding the date of the Preferred Exchange and subject to the same
anti-dilution provisions as contained in the Warrant (a "MIRROR OPTION").
Bedford shall be entitled to exercise each Mirror Option at any time prior to
the date which is five years after the date on which Bedford receives written
notice that the applicable Exercised Option or Preferred Exchange was closed.
ARTICLE IX
MISCELLANEOUS
Section 9.1 AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, the Note, the Second Note, if issued, the Warrant,
the Second Warrant, if issued, the Registration Rights Agreement, the Brokerage
Pledge or the Security Documents, and no consent by Bedford to any departure by
the Borrowers therefrom, shall in any event be effective unless the same shall
be in writing and signed by Bedford, and then such
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waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
Section 9.2 USURY SAVINGS CLAUSE. It is expressly stipulated and
agreed to be the intent of the Borrowers and Bedford at all times to comply with
the applicable law governing the maximum rate or amount of interest payable on
or in connection with the Loan and the Note. If the applicable law is ever
judicially interpreted so as to render usurious any amount called for under the
Note or under this Agreement, or, contracted for, charged, taken, reserved or
received with respect to the Loan, or if acceleration of the maturity of the
Note, any prepayment by the Borrowers, or any other circumstance whatsoever,
results in the Borrowers having paid any interest in excess of that permitted by
applicable law, then it is the express intent of the Borrowers and Bedford that
all excess amounts theretofore collected by Bedford be credited on the principal
balance of the Note (or, if the Note has been or would thereby be paid in full,
refunded to the Borrowers), and the provisions of the Note and this Agreement
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate maturity of the Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Bedford does not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to Bedford for
the use, forbearance or detention of the indebtedness evidenced hereby or by the
Note shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until payment
in full so that the rate or amount of interest on account of such indebtedness
does not exceed the maximum rate or amount of interest permitted under
applicable law. The term "applicable law" as used herein shall mean any federal
or state law applicable to the Loan.
Section 9.3 EXPENSES. The Borrowers and Subsidiaries shall bear
their own legal and other expenses incurred in connection with the negotiation,
preparation, execution and consummation of this Agreement and the transactions
contemplated hereby. PMCI shall pay $30,000 of the costs incurred by Bedford in
connection with its due diligence investigation of the Borrowers (including
travel expenses) and Bedford shall bear any due diligence expenses in excess of
$30,000. In addition, PMCI shall bear all legal and travel expenses (excluding
travel expenses incurred in connection with due diligence) incurred by Bedford
in connection with this Agreement which amounts shall be paid at the Closing or
within 5 days after the date this Agreement is terminated, whichever is earlier.
Section 9.4 ASSIGNMENT. This Agreement may be assigned by Bedford
to an affiliate of Bedford. This Agreement shall inure to the benefit of and be
binding on and be enforceable by the
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respective successors, assigns and legal representatives of the parties hereto.
Section 9.5 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Executed counterparts
sent by fax shall be effective as originals.
Section 9.6 SURVIVAL OF PROVISIONS. All of the representations,
warranties, covenants, terms, conditions and agreements of each party hereto
shall not merge into the Closing but shall survive until satisfied in full.
Section 9.7 ENTIRE AGREEMENT. This Agreement, including all the
Exhibits and Schedules hereto (each of which is incorporated herein by this
reference), together with all other agreements, documents and arrangements
referenced herein, contains the entire Agreement between the parties hereto and
supersedes any and all prior agreements, arrangements and understandings between
the parties relating to the subject matter hereof. No oral understandings,
statements, promises or inducements contrary to the terms of this Agreement
exist. The parties also intend this Agreement to be a complete and exclusive
statement of the terms of this Agreement, which may not be explained or
supplemented by evidence of consistent additional terms.
Section 9.8 CHOICE OF LAW. This Agreement is entered into and is to
be performed in accordance with the laws of the State of Colorado, and shall be
construed and enforced in accordance therewith, without giving effect to
Colorado conflicts of law principles which might otherwise provide for the
application of the substantive law of another jurisdiction.
Section 9.9 MUTUAL COOPERATION. Each party hereto agrees to execute
and deliver such other and further instruments and documents as may reasonably
be requested by the other party hereto to carry out this Agreement.
Section 9.10 NOTICES, ETC. All Notices and other communications
required or permitted hereunder will be in writing and will be addressed (a) if
to Bedford, at
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
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With copies to:
Karen L. Barsch, Esq.
Otten, Johnson, Robinson,
Neff & Ragonetti, P.C.
1600 Colorado National Building
950 Seventeenth Street
Denver, Colorado 80202
or at such other address as Bedford will have furnished to the Borrowers in
writing, or (b) if to the Borrowers and/or Subsidiaries, at
PMC International, Inc,
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips, President
or at such other address as the Borrowers or Subsidiaries will have furnished to
Bedford in writing in accordance with this section.
Except as otherwise specifically provided herein, all notices and
other communications hereunder shall be deemed to have been given if personally
delivered to any officer of the party being served, if by telex, at the time
they are transmitted, provided that the receiving party's answer-back has been
given, if by facsimile transmission, upon electronic confirmation of
transmission, or five (5) business days after mailing thereof by registered air
mail, return receipt requested, postage prepaid, to the addresses of the
Borrowers, Subsidiaries and Bedford set forth above until notice of change
thereof is served in the manner provided in this section.
Section 9.11 SEVERABILITY. In case any provision of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the validity, legality and enforceability or the remaining
provisions will not in any way be affected or impaired thereby.
Section 9.12 MISCELLANEOUS. Time is of the essence for the
performance of each and every covenant and the satisfaction of each and every
condition contained in this Agreement. The headings and captions of this
Agreement are for the purpose of reference only and shall not limit or define
any meaning or terms thereof. All references to the masculine herein shall
include both the neuter and the feminine. The singular shall include the plural
and vice versa.
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IN WITNESS WHEREOF, the Borrowers, the Subsidiaries and Bedford have
executed this Agreement as of the date first above written.
PMC INTERNATIONAL, INC., a Colorado
corporation
By: /s/ Kenneth S. Phillips
-----------------------------
Title: President
--------------------------
BEDFORD CAPITAL FINANCIAL CORPORATION, a
corporation organized under the laws of
Liberia
By: /s/ W. L. Atkinson
-----------------------------
Title: Authorized Agent
--------------------------
PORTFOLIO MANAGEMENT CONSULTANTS, INC.,
a Colorado corporation
By: /s/ Kenneth S. Phillips
-----------------------------
Title: President
--------------------------
PORTFOLIO BROKERAGE SERVICES, INC., a
Colorado corporation
By: /s/ Kenneth S. Phillips
-----------------------------
Title: President
--------------------------
PORTFOLIO TECHNOLOGY SERVICES, INC., a
Colorado corporation
By: /s/ Kenneth S. Phillips
-----------------------------
Title: President
--------------------------
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EXHIBIT A
July 26, 1995
Bedford Capital Financial Corporation
2nd Floor
Charlotte Hs.
Shirly Street
Box N964
Nassau, Bahamas
Re: $1,200,000 loan to PMC International, Inc. and Portfolio
Technology Services, Inc.
Ladies and Gentlemen:
We have acted as counsel for PMC International, Inc., a Colorado
corporation ("PMCI"), Portfolio Technology Services, Inc., a Colorado
corporation ("TECHNOLOGY"), Portfolio Brokerage Services, Inc., a Colorado
corporation ("BROKERAGE") and Portfolio Management Consultants, Inc., a Colorado
corporation ("CONSULTANTS") in connection with that certain Investment Agreement
by and between Bedford Capital Financial Corporation and PMCI, Technology,
Brokerage and Consultants dated July 27, 1995 (the "AGREEMENT").
In connection therewith, the Borrowers and the Subsidiaries have
requested that we deliver to you our opinions regarding certain matters. The
purpose of this letter is to set forth the opinions so requested. All
capitalized terms used in this opinion but not otherwise defined herein shall
have the meanings assigned to such terms in the Agreement.
In rendering the opinions set forth below, we have examined and
reviewed copies of the following documents:
A. The Articles Incorporation of each of the Borrowers and the
Subsidiaries;
B. The Agreement, executed by each of the Borrowers and the
Subsidiaries; and
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C. Such other documents, agreements and instruments, and such laws,
rules, regulations and other legal restrictions as we have deemed necessary or
appropriate to render the opinions hereinafter expressed.
We have considered such questions of law as we deem necessary for the
purpose of rendering the opinions set forth herein. We have assumed the
authenticity of all items submitted to us as originals and the conformity with
originals of all items submitted to us as copies.
Subject to the foregoing and based upon our examination of the
Agreement, and upon such other investigations, provisions and other matters we
deemed necessary, we are of the following opinions:
1. The execution, delivery and performance by the Borrowers and the
Subsidiaries of the Agreement is within each of the Borrowers' and the
Subsidiaries' corporate powers and have been duly authorized by all necessary
corporate action.
2. The Agreement has been duly executed and delivered by each of the
Borrowers and the Subsidiaries.
This opinion letter is being furnished for your use and the use of
your counsel. No other use or distribution of this opinion may be made without
our prior written consent.
Very truly yours,
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EXHIBIT B
AMENDMENT OF BYLAWS
The bylaws of PMC International, Inc. (formerly known as Portfolio
Services, Inc. and Schield Management Company) are hereby amended as follows:
Section 1 of Article III is hereby amended by replacing the word
"three" with the word "five."
Section 8 of Article III is hereby amended by deleting the first
sentence of such section and inserting in lieu thereof the following:
A majority of the number of directors fixed by these Bylaws shall
constitute a quorum for the transaction of business, and the act of a
majority of directors entitled to vote at any meeting, whether present
or not, shall be the act of the Board of Directors, except as follows:
(a) any vote that would affect the status of the corporation as
a publicly traded company shall require the unanimous approval of all
directors then in office; and
(b) the following matters shall require the approval of at least
80% of the directors: (i) approval of an incentive stock option plan
and grants of stock options thereunder; (ii) approval of an employee
cash bonus pool and allocations of bonuses granted thereunder; and
(iii) approval of any underwritten offering of capital stock or debt
of the corporation.
Article IX is hereby amended by deleting such Article in its entirety
and inserting in lieu thereof the following:
ARTICLE IX
AMENDMENT
These Bylaws may at any time and from time to time be amended,
altered or repealed by the Board of Directors, except that Section 8
of Article III may not be amended, except by a vote of that number of
the directors designated in the provision to be amended, or by the
shareholders at any annual or special meeting.
Page 58 of 89 pages
<PAGE>
EXHIBIT C
PROMISSORY NOTE
---------------
(COMMERCIAL)
$1,800,000.00 Denver, Colorado
__________, 1995
FOR VALUE RECEIVED, PMC International, Inc., a Colorado corporation,
and Portfolio Technology Services, Inc., a Colorado corporation (collectively,
"Borrower"), promises to pay to Bedford Capital Financial Corporation, or order
("Note Holder"), ONE MILLION EIGHT HUNDRED THOUSAND AND NO/100s DOLLARS
($1,800,000.00) plus interest at 8.5% per annum on unpaid principal. Interest
shall accrue on this Note but shall not be payable until August 10, 1996.
Beginning August 10, 1996, and continuing each month thereafter until July 10,
1998, the Borrower will pay to the Note Holder interest accrued (but unpaid) on
the Note subsequent to July ___, 1996 [INSERT 1 YEAR ANNIVERSARY DATE OF CLOSING
UNDER UNDER INVESTMENT AGREEMENT], plus 1/24th of the interest accrued (but
unpaid) prior to July ___, 1996 [INSERT 1 YEAR ANNIVERSARY DATE OF CLOSING UNDER
UNDER INVESTMENT AGREEMENT]. Beginning August 10, 1998, and continuing on the
10th day each month thereafter, until this Note is paid in full, Borrower will
pay to Note Holder all accrued and unpaid interest on this Note. The entire
principal amount outstanding and all accrued and unpaid interest thereon, shall
be due and payable on July ___, 2000.
All payments on this Note shall be made to Note Holder at P.O. Box
N964, Nassau, Bahamas, Attn: Richard C.W. Mauran, Chairman and CEO, and Suzanne
J. Black, Treasurer and CFO, or at such other address as may be specified by
written notice from Note Holder to Borrower from time to time.
This Note is issued pursuant to that certain Investment Agreement (the
"Agreement") dated of even date herewith between the Borrower and the Note
Holder and is subject to all of the terms, provisions and conditions thereof.
Capitalized terms not defined herein shall have the meanings specified in the
Agreement. Each subsequent Note Holder hereof shall be bound by and entitled to
the benefits of the Agreement.
Notwithstanding the foregoing, upon the terms and conditions and in
the manner provided in the Warrant, the Note Holder shall have the right to
cause a prepayment of this Note by exercise of the Warrant.
Borrower may repay the principal amount outstanding under this Note,
in whole or in part, at any time without penalty. Any partial prepayment shall
not postpone the due date of any subsequent payments or change the amount of
such payments.
Payments received for application to this Note shall be applied first
to the payment of costs and expense of collection
Page 59 of 89 pages
<PAGE>
and/or suit, if any, second to the payment of accrued interest specified above,
and the balance applied in reduction of the principal amount thereof.
This Note is secured by all of the assets of the Borrower and its
subsidiaries pursuant to the terms of separate security agreements dated [INSERT
DATE OF SECURITY DOCUMENTS] (the "Security Documents").
Overdue principal, and (to the extent permitted under applicable law)
overdue interest, whether caused by acceleration of maturity or otherwise, shall
bear interest at a fluctuating rate, adjustable the day of any change in such
rate, equal to five percentage points (5%) above the annual rate publicly
announced or published from time to time by Norwest Bank Colorado, N.A., in
Denver, Colorado as its prime rate, until paid, and shall be payable monthly or,
at the option of the Note Holder hereof, on demand.
Time is of the essence hereof. In the event of (a) any default in any
payment of the principal of or interest on this Note on or before five (5) days
after the date such payment is due, or (b) any default or event of default under
the provisions of the Agreement or the Security Documents which is not cured by
Borrower within ten (10) days after written notice from Note Holder, then the
whole principal sum of this Note plus accrued interest and all obligations of
Borrower to Note Holder, direct or indirect, absolute or contingent, now
existing or hereafter arising, shall, at the option of Note Holder, become
immediately due and payable without notice or demand, and Note Holder shall have
and may exercise any or all of the rights and remedies provided herein, in the
Agreement and the Security Documents, as they may be amended, modified or
supplemented from time to time and under applicable laws.
If Borrower fails to pay any amount when due under this Note and the
Note Holder has to take any action to collect the amount due or to exercise its
rights under the Agreement or the Security Documents, including without
limitation retaining attorneys for collection of this Note, or if any suit or
proceeding is brought for the recovery of all or any part of or for protection
of the indebtedness or to enforce Note Holder's rights under the Agreement or
the Security Documents, then Borrower agrees to pay on demand all costs and
expenses of any such action to collect, suit or proceeding, or any appeal
thereof, incurred by Note Holder, including but not limited to the fees and
disbursements of Note Holder's attorneys and their staff.
Borrower waives presentment, notice of dishonor, notice of
acceleration and protest, and assents to any extension of time with respect to
any payment due under this Note, to any substitution or release of collateral
and to the addition or release of any party. No waiver of any payment or other
right
Page 60 of 89 pages
<PAGE>
under this Note shall operate as a waiver of any other payment or right.
No delay or failure of the Note Holder in the exercise of any right or
remedy provided for hereunder shall be deemed a waiver of such right by the Note
Holder, and no exercise of any right or remedy shall be deemed a waiver of any
other right or remedy that the Note Holder may have.
All notices to Borrower hereunder shall be in writing, and shall be
hand delivered, sent by overnight courier, or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
PMC International, Inc.
555 Seventeenth Street
14th Floor
Denver, Colorado 80202
Any notice shall be deemed effective when hand delivered, or one day after
timely delivery (as evidenced by receipt from the overnight courier) to an
overnight courier for the next day delivery to Borrower, or three days after the
same is deposited with the United States Postal Service.
If any provision of this Note shall be held invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions of this Note shall not be impaired thereby, nor shall
the validity, legality or enforceability of any such defective provision be in
any way affected or impaired in any other jurisdiction.
This Note is to be governed by and construed according to the laws of
the State of Colorado.
BORROWER:
---------
PMC INTERNATIONAL, INC., a
Colorado corporation
By: ______________________________
Title: ___________________________
PORTFOLIO TECHNOLOGY SERVICES,
INC., a Colorado corporation
By: _______________________________
Title: ____________________________
Page 61 of 89 pages
<PAGE>
EXHIBIT D
SECOND WARRANT TO PURCHASE COMMON STOCK
---------------------------------------
PMC INTERNATIONAL, INC.
Date of Issuance: ____________, 19__ Certificate No. W-2
This is to certify that, for value received, Bedford Capital Financial
Corporation or registered assigns ("HOLDER") is entitled to purchase, subject to
the provisions of this Second Warrant, from PMC International, Inc., a Colorado
corporation ("COMPANY"), 1,800,000 shares of the common stock, $.01 par value,
of the Company ("COMMON STOCK") at the price of $1.00 per share. The number of
shares of Common Stock to be received upon the exercise of this Second Warrant
and the price to be paid for a share of Common Stock may be adjusted from time
to time in accordance with the terms of this Second Warrant. The shares of
Common Stock deliverable upon such exercise, and as adjusted from time to time,
are hereinafter sometimes referred to as "SECOND WARRANT STOCK," and the
exercise price of a share of Common Stock in effect at any time, and as adjusted
from time to time, is hereinafter sometimes referred to as the "EXERCISE PRICE."
1. EXERCISE OF SECOND WARRANT. Subject to the following paragraph
of this Second Warrant, this Second Warrant may be exercised in whole or in part
at any time or from time to time on or after the date of issuance hereof but not
later than the fifth anniversary of the date of issuance hereof, or, if such
tenth anniversary date is a day on which banking institutions are authorized by
law to close, then on the next succeeding business day, by presentation and
surrender hereof to the Company or at the office of its stock transfer agent, if
any, with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of Shares of Second Warrant Stock
specified in such form, together with all federal and state taxes applicable
upon such exercise. If this Second Warrant should be exercised in part only,
the Company, upon surrender of this Second Warrant for cancellation, shall
execute and shall deliver a new Second Warrant evidencing the right of the
Holder to purchase the balance of the shares of Second Warrant Stock purchasable
hereunder. Upon receipt by the Company of this Second Warrant at the office or
the agency of the Company, in proper form for exercise, the Holder shall be
deemed to be the Holder of record of the shares of Second Warrant Stock issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such shares of Second
Warrant Stock shall not then be actually delivered to the Holder.
Notwithstanding the above, this Second Warrant must be exercised in
full within 30 days after delivery by the Company to Bedford of the Company's
audited financial statements which
Page 62 of 89 pages
<PAGE>
indicate that the Company has earned after-tax profits of at least $1,000,000
for a period of two consecutive fiscal years.
2. PAYMENT OF THE EXERCISE PRICE. Upon exercise of this Second
Warrant, the Exercise Price may be paid either in cash, certified funds or
conversion of principal outstanding under that certain Promissory Note
(Commercial) dated ______________, 19___ made by the Company payable to the
order of Bedford in the original principal amount of $1,800,000.
3. RESERVATION OF SHARES OF SECOND WARRANT STOCK. The Company
hereby agrees that, at all times, there shall be reserved for issuance and/or
delivery upon exercise of this Second Warrant such number of shares of its
Common Stock as shall be required for issuance or delivery upon exercise of this
Second Warrant.
4. FRACTIONAL SHARES. No fractional shares of Second Warrant Stock
or scrip representing fractional shares of Second Warrant Stock shall be issued
upon the exercise of this Second Warrant. With respect to any fraction of a
share of Second Warrant Stock called for upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the current market value of such fractional share determined as follows:
a. PUBLICLY TRADED COMMON STOCK. If the Company's Common Stock
is publicly traded, the average daily closing prices for 30 consecutive trading
days immediately preceding the date of exercise of this Second Warrant. The
closing price for each day shall be the last sale price regular-way or, in case
no such sale takes place on such date, the average of the closing bid and asked
prices regular-way, on the principal national securities exchange in which the
Company's Common Stock is listed or admitted to trading, or if it is not listed
or admitted to trading on any national securities exchange, the last sale price
of such Common Stock on the consolidated transaction reporting system of the
National Association of Securities Dealers ("NASD"), if such last sale
information is reported on such system, or if not so reported, the average of
the closing bid and asked prices of such Common Stock on the National
Association of Securities Dealers Automatic Quotation system ("NASDAQ"), or any
comparable system, or if the Common Stock is not listed on NASDAQ, or a
comparable system, the average of the closing bid and asked prices as furnished
by two members of the NASD selected from time to time by the Company for that
purpose.
b. NON-PUBLICLY TRADED COMMON STOCK. If the Company's Common
Stock is not publicly traded, the current value shall be an amount, not less
than the book value, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Company.
5. EXCHANGE, ASSIGNMENT OR LOSS OF SECOND WARRANT. This Second
Warrant is exchangeable, without expense, at the option
Page 63 of 89 pages
<PAGE>
of the Holder, upon presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, for other Second Warrants of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of Second Warrant Stock purchasable
hereunder. Any assignment shall be made subject to the provisions of Section 8
by surrender of this Second Warrant to the Company or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto duly executed
and with funds sufficient to pay any transfer tax; whereupon, the Company,
without charge, shall execute and shall deliver a new Second Warrant in the name
of the assignee named in such instrument of assignment and this Second Warrant
shall promptly be cancelled. This Second Warrant may be divided or may be
combined with other Second Warrants which carry the same rights upon
presentation hereof at the office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
the denominations in which new Second Warrants are to be issued and signed by
the Holder hereof. The term "SECOND WARRANT" as used herein includes any Second
Warrants issued in substitution for or replacement of this Second Warrant or
into which this Second Warrant may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction, or
mutilation of this Second Warrant, and in the case of loss, theft, or
destruction of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Second Warrant, if mutilated, the Company will execute and
will deliver a new Second Warrant of like tenor and date. Any such new Second
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Second Warrant so
lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone.
6. RIGHTS OF THE HOLDER; LIMITATIONS OF LIABILITY. The Holder, by
virtue hereof, shall not be entitled to any rights of a shareholder in the
Company, either at law or in equity, and the rights of the Holder are limited to
those expressed in the Second Warrant and are not enforceable against the
Company except to the extent set forth herein. No provision hereof, in the
absence of affirmative action by the Holder to purchase Common Stock, and no
enumeration herein of the rights or privileges of the Holder shall give rise to
any liability of such Holder for the Exercise Price or as a shareholder of the
Company.
7. ADJUSTMENTS.
a. STOCK DIVIDENDS AND STOCK SPLITS. In case the Company shall
effect a stock dividend, stock split or reverse stock split of the outstanding
shares of Common Stock, the Exercise Price shall be proportionately decreased in
the case of a stock dividend or stock split or increased in the case of a
reverse stock split (on the date that such transaction shall become effective)
by multiplying the Exercise Price in effect immediately prior to the stock
dividend or stock split by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately
Page 64 of 89 pages
<PAGE>
prior to such stock dividend or stock split, and the denominator of which is the
number of shares of Common Stock outstanding immediately after such stock
dividend or stock split.
b. CONSOLIDATIONS AND MERGERS. In case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary, in which merger the Company is the continuing corporation) or in
the case of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the Company shall cause
effective provision to be made so that the Second Warrant holder shall have the
right thereafter, by exercising this Second Warrant, to purchase the kind and
amount of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, or conveyance as may be issued or payable with
respect to or in exchange for the number of shares of the Company theretofore
purchasable upon the exercise of this Second Warrant had such consolidation,
merger, sale or conveyance not taken place. The foregoing provision shall
similarly apply to successive consolidations, mergers, sales, or conveyances.
No event described above shall require that the Holder exercise its rights
hereunder or accelerate the termination date of this Second Warrant.
c. ADJUSTMENT OF EXERCISE PRICE. In the event that the Company
shall issue or distribute Common Stock or issue rights, warrants or options
entitling the holder thereof to subscribe for or purchase Common Stock at a
price per share (the "NEW PRICE") which is less than the Exercise Price per
share of Common Stock then in effect, then at the earliest of (i) the date the
Company shall enter into a firm contract for such issuance or distribution,
(ii) the record date for the determination of stockholders entitled to receive
any such rights, warrants or options, if applicable, or (iii) the date of actual
issuance or distribution of any such Common Stock or rights, warrants or
options, the Exercise Price in effect immediately prior to such earliest date
shall be adjusted so that the Exercise Price shall equal the New Price. Such
adjustment shall be made successively whenever any such Common Stock, rights,
warrants or options are issued or distributed at a price below the then current
Exercise Price. In determining whether any rights, warrants or options entitle
the holders to subscribe for or purchase shares of Common Stock at less than the
Exercise Price, and in determining the aggregate offering price of shares of
Common Stock so issued or distributed, there shall be taken into account any
consideration received by the Company for such Common Stock, rights, warrants or
options, the value of such consideration, if other than cash, to be determined
by the Board of Directors whose determination shall be conclusive and described
in a certificate filed with the minute book of the Company.
d. NO ADJUSTMENT FOR SMALL AMOUNTS. Anything in this Section
to the contrary notwithstanding, the Company shall not be required to give
effect to any adjustment in the Exercise Price
Page 65 of 89 pages
<PAGE>
unless and until the net effect of one or more adjustments, determined as above
provided, shall have required a change of the Exercise Price by at least one
cent, but when the cumulative net effect of more than one adjustment so
determined shall be to change the actual Exercise Price by at least one cent,
such change in the Exercise Price thereupon be given effect.
e. NUMBER OF SHARES ADJUSTED. Upon any adjustment of the
Exercise Price, the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the number of
shares of Second Warrant Stock initially issuable upon exercise of this Second
Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the new Exercise Price.
f. STATEMENT ON SECOND WARRANTS. Irrespective of any
adjustments in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Second Warrants, the Second Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Second Warrants initially issuable pursuant to this
Agreement.
g. NOTICE OF TRANSACTIONS. The Company will give written
notice to the Holder at least 30 days prior to the date on which (i) any
transaction effecting the type of security issuable hereunder of the Exercise
Price is consummated, (ii) a registration statement for a public offering of the
Company's securities is initially filed with the Securities and Exchange
Commission, or (iii) the Company declares any cash dividends to be paid to its
shareholders.
8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
a. RESTRICTION ON TRANSFER. Unless registered under applicable
federal and state securities laws, this Second Warrant or the Second Warrant
Stock or any other security issued or issuable upon exercise of this Second
Warrant may not be sold, transferred, or otherwise disposed of except to a
person who, in the opinion of counsel for the Company, is a person to whom this
Second Warrant or such Second Warrant Stock may legally be transferred pursuant
to Section 5 hereof without registration and without the delivery of a current
Prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provisions of this Section 8 with
respect to any resale or other disposition of such securities.
b. LEGEND. The Company may cause the following legend, or one
similar thereto, to be set forth on each certificate representing Second Warrant
Stock or any other security issued or issuable upon exercise of this Second
Warrant, unless counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary:
Page 66 of 89 pages
<PAGE>
The shares represented by this Certificate have not
been registered under the Securities Act of 1933 (the "ACT")
and are "restricted securities" as that term is defined in
Rule 144 under the Act. The shares may not be offered for
sale, sold, or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant
to an exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Company.
9. APPLICABLE LAW. This Second Warrant shall be governed by and
construed in accordance with the laws of Colorado.
10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Second Warrant may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it only if the Company has obtained the written consent of the
Holder of this Second Warrant.
11. SECTION HEADINGS. The section headings in this Second Warrant
are for convenience of reference only and shall not be deemed to alter or affect
any provision hereof.
IN WITNESS WHEREOF, the Company has caused this Second Warrant to be
signed and attested by its duly authorized officers to be dated the Date of
Issuance hereof.
PMC INTERNATIONAL, INC., a Colorado
corporation
By: _______________________________
Title: ____________________________
ATTEST:
By: ________________________ DATE: _____________________________
Secretary
Page 67 of 89 pages
<PAGE>
PURCHASE FORM
Dated: ____________________
The undersigned hereby irrevocably elects to exercise the within
Second Warrant to the extent of purchasing ______ shares of Second Warrant Stock
and hereby makes payment of $____________________ in payment of the actual
Exercise Price thereof.
_____________________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: __________________________________________________________________________
(Please typewrite or print in block letters)
Address: _______________________________________________________________________
________________________________________________________________________________
Signature: _____________________________________________________________________
______________________________
ASSIGNMENT FORM
For value received, ____________________________________ hereby sells,
assigns, and transfers unto:
Name: __________________________________________________________________________
(Please typewrite or print in block letters)
Address: ______________________________________________________________________
the right to purchase the Common Stock represented by this Second Warrant to the
extent of _____ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _______________
_____________________________________________________, attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Signature: ___________________________________
Dated: ___________________________
Page 68 of 89 pages
<PAGE>
SCHEDULE 4.2 AND
SCHEDULE 4.9
CAPITALIZATION
AND
REGISTRATION RIGHTS
Page 69 of 89 pages
<PAGE>
BEDFORD CAPITAL CORPORATION
<TABLE>
<CAPTION>
SHARES ISSUABLE
UPON EXERCISE OF
OPTIONS OR WARRANTS
-------------------------------
NAME EXERCISE EXPIRATION REGISTRATION
---- PRICE DATE SHARES CODE
----- ---- ------ ----
<S> <C> <C> <C> <C>
Coleman Robinson $3.10 09/95 2,000 (1)
Paul Calcagno $2.50 12/95 6,667 (1)
Richard Case $2.50 12/95 6,667 (1)
Davstar Managed Investments $2.50 12/95 20,000 (1)
Brenda Heartfield $2.50 12/95 20,000 (1)
Jerry B. Karnell $2.50 12/95 26,667 (1)
Charles Olsen, Jr. $2.50 12/95 20,000 (1)
Charles Olsen, Sr. $2.50 12/95 6,667 (1)
Henry Roth $2.50 12/95 16,667 (1)
Sanford Schwartz $2.50 12/95 16,667 (1)
David Ware $2.50 12/95 13,334 (2)
Ken Bernstein $3.75 04/96 9,250 (1)
Richard Frueh $3.75 04/96 5,800 (1)
Ken Greenberg $3.75 04/96 9,250 (1)
Sandy Greenberg $3.75 04/96 50,500 (1)
Sissel Greenberg $3.75 04/96 2,500 (1)
Richard Kamerling $3.75 04/96 5,800 (1)
Robert Lemon $3.75 04/96 11,100 (1)
Harvey Morrow $3.75 04/96 5,800 (1)
Ken Bernstein $3.10 07/96 3,000 -
Richard Frueh $3.10 07/96 1,360 -
Sandy Greenberg $3.10 07/96 10,200 -
Richard Kamerling $3.10 07/96 1,360 -
Robert Lemon $3.10 07/96 2,720 -
Harvey Morrow $3.10 07/96 1,360 -
Page 70 of 89 pages
<PAGE>
Glenn S. Cutler $3.10 09/96 10,000 (1)
Howard Hebert & Suzanne Hebert $3.10 09/96 5,000 (1)
Wilbur Schield $3.10 09/96 2,000 (1)
Jack Franz $3.30 09/96 2,000 (1)
Karen Jeffrey $2.50 11/96 14,000 (1)
Ted Robinson $2.50 11/96 4,000 (1)
David Ware $2.50 1/97 2,000 (2)
Robert Geller $2.50 6/97 12,000 (2)
Marshall L. Schield $2.50 6/97 20,000 (1)
David Ware $2.50 6/97 2,000 (2)
Steven Austin $2.50 10/97 13,000 (1)
Charles Powell $2.50 10/97 1,500 (1)
David Ware $2.50 10/97 2,000 (2)
Corey Colehour $3.10 2/98 4,000 (1)
Robert Geller $3.10 2/98 38,000 (2)
David Ware $3.10 2/98 10,000 (2)
J. Gibson Watson $1.30 3/99 150,000 (3)
Allen Goldstone $1.12 9/99 250,000 (2)(3)
Michael B. Opatowski $1.37 9/99 50,000 -
-------
866,836
</TABLE>
Page 71 of 89 pages
<PAGE>
<TABLE>
<CAPTION>
Shares Issuable
Upon Exercise of
Options or Warrants
-------------------------------------
Exercise Expiration Registration
Name Price Date Shares Code
---- -------- ---------- ------ ------------
<S> <C> <C> <C> <C>
Underwriter's Warrants (4) 12/95 10,800 (2)
Various Company Employees $1.37 12/99 238,500 (3)
Private Placement
Warrants (5) $1.62 12/98 300,000 (2)
Lakenburg, Thalman Warrants (6) (6) (6) (6)
<FN>
(1) Piggyback registration rights.
(2) Demand and piggyback registration rights.
(3) S-8 registration rights.
(4) As part of the Underwriters' compensation relating to the Company's
December, 1990 Public Offering, the Company issued Warrants for the
purchase of a total of 180 Units to the Underwriters of that offering.
Each Unit was identical to the Units sold to the public in that offering
and consisted of 60 shares of Common Stock, 600 warrants, and 200 shares of
the Company's Series A Preferred Stock. The warrants comprising a part of
the Units have expired. Pursuant to the terms of the Underwriters'
Warrant, a Unit may be Purchased by any holder of the Warrant for $1,200.
(5) Warrants were issued in connection with the Company's 1995 Private Offering
of convertible notes.
(6) The January 1995 letter agreement between the Company and Ladenburg,
Thalmann & Co., Inc. provides in part as follows:
"Ladenburg and its assignees will receive warrants to purchase 10% of
any shares sold to investors unless such investor or investors shall
acquire all of the Company's outstanding equity. These warrants will
be exercisable at the same price as the securities sold pursuant to
the private placement for a term of four years commencing six months
from the date of the closing of the Sale with terms to be agreed upon
by the parties hereto."
</TABLE>
If Ladenburg is entitled to any warrants, the terms of these warrants (including
any registration rights) are not known.
Page 72 of 89 pages
<PAGE>
SCHEDULE 4.6
Litigation
A wholly-owned subsidiary of PMCI, Portfolio Management Consultants,
Inc. ("PMC") and two of its officers, directors and principal shareholders,
Kenneth S. Phillips ("Phillips") and Marc N. Geman, have been the target of an
investigation and allegations by the United States Securities Exchange
Commission ("SEC") in IN THE MATTER OF PORTFOLIO MANAGEMENT CONSULTANTS, INC.
(D-1968, BEFORE THE UNITED STATES SECURITIES EXCHANGE COMMISSION. The regional
staff of the SEC has agreed to present to the SEC a proposed settlement of the
matter as to PMC and Phillips, which proposed settlement may or may not be
accepted by the SEC.
Page 73 of 89 pages
<PAGE>
SCHEDULE 4.8
Employment Agreement, dated May 5, 1995, between Portfolio Management
Consultants and Carolyn Kling.
Employment Agreement, dated May 8, 1995, between Portfolio Management
Consultants and Stephen T. Ford.
Page 74 of 89 pages
<PAGE>
EXHIBIT 5
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.
(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.
(b) The Option is exercisable as to all, but not less than all,
of the Option Shares immediately upon the execution
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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 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
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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.
12. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Colorado.
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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, Manager
------------------------------
Kenneth S. Phillips, Manager
BEDFORD CAPITAL FINANCIAL CORPORATION
By: /s/ W. L. Atkinson
------------------------------
Title: Agent
---------------------------
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EXHIBIT 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made and entered
into this 26th day of July, 1995, by and between Bedford Capital Financial
Corporation, a corporation organized under the laws of Liberia ("PURCHASER") and
Marc Geman ("SELLER").
RECITALS
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 1,000,000 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, 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 $1,000,000 (One Million Dollars), which
purchase price shall be paid by wire transfer to an account designated by Seller
concurrent with the execution and delivery of this Agreement.
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 free and clear of
any liens or encumbrances.
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 acknowledges that any
certificate(s) issued to the Purchaser to represent the Shares shall bear a
legend
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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/ Mark Geman
------------------------------------
Marc Geman
PURCHASER:
BEDFORD CAPITAL FINANCIAL
CORPORATION, a corporation organized
under the laws of Liberia
By: /s/ W. L. Atkinson
--------------------------------
Title: Agent
-----------------------------
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EXHIBIT 7
WARRANT TO PURCHASE COMMON STOCK
PMC INTERNATIONAL, INC.
Date of Issuance: July 21, 1995 Certificate No. W-1
This is to certify that, for value received, Bedford Capital Financial
Corporation or registered assigns ("HOLDER") is entitled to purchase, subject to
the provisions of this Warrant, from PMC International, Inc., a Colorado
corporation ("COMPANY"), 1,200,000 shares of the common stock, $0.01 par value,
of the Company ("COMMON STOCK") at the price of $1.00 per share. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock may be adjusted from time to time
in accordance with the terms of this Warrant. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "WARRANT STOCK," and the exercise price of
a share of Common Stock in effect at any time, and as adjusted from time to
time, is hereinafter sometimes referred to as the "EXERCISE PRICE."
1. EXERCISE OF WARRANT. Subject to the following paragraph of this
Warrant, this Warrant may be exercised in whole or in part at any time or from
time to time on or after the date of issuance hereof but not later than the
tenth anniversary of the date of issuance hereof, or, if such tenth anniversary
date is a day on which banking institutions are authorized by law to close, then
on the next succeeding business day, by presentation and surrender hereof to the
Company or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Shares of Warrant Stock specified in such form, together
with all federal and state taxes applicable upon such exercise. If this Warrant
should be exercised in part only, the Company, upon surrender of this Warrant
for cancellation, shall execute and shall deliver a new Warrant evidencing the
right of the Holder to purchase the balance of the shares of Warrant Stock
purchasable hereunder. Upon receipt by the Company of this Warrant at the
office or the agency of the Company, in proper form for exercise, the Holder
shall be deemed to be the Holder of record of the shares of Warrant Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Warrant Stock shall not then be actually delivered to the Holder.
Notwithstanding the above, this Warrant must be exercised in full
within 30 days after delivery by the Company to Bedford of the Company's audited
financial statements which indicate that the Company has earned after-tax
profits of at least $1,000,000 for a period of two consecutive fiscal years.
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2. PAYMENT OF THE EXERCISE PRICE. Upon exercise of this Warrant,
the Exercise Price may be paid either in cash, certified funds or conversion of
principal outstanding under that certain Promissory Note (Commercial) dated July
___, 1995 made by the Company payable to the order of Bedford in the original
principal amount of $1,200,000.
3. RESERVATION OF SHARES OF WARRANT STOCK. The Company hereby
agrees that, at all times, there shall be reserved for issuance and/or delivery
upon exercise of this Warrant such number of shares of its Common Stock as shall
be required for issuance or delivery upon exercise of this Warrant.
4. FRACTIONAL SHARES. No fractional shares of Warrant Stock or
scrip representing fractional shares of Warrant Stock shall be issued upon the
exercise of this Warrant. With respect to any fraction of a share of Warrant
Stock called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of such fractional share determined as follows:
a. PUBLICLY TRADED COMMON STOCK. If the Company's Common Stock
is publicly traded, the average daily closing prices for 30 consecutive trading
days immediately preceding the date of exercise of this Warrant. The closing
price for each day shall be the last sale price regular-way or, in case no such
sale takes place on such date, the average of the closing bid and asked prices
regular-way, on the principal national securities exchange in which the
Company's Common Stock is listed or admitted to trading, or if it is not listed
or admitted to trading on any national securities exchange, the last sale price
of such Common Stock on the consolidated transaction reporting system of the
National Association of Securities Dealers ("NASD"), if such last sale
information is reported on such system, or if not so reported, the average of
the closing bid and asked prices of such Common Stock on the National
Association of Securities Dealers Automatic Quotation system ("NASDAQ"), or any
comparable system, or if the Common Stock is not listed on NASDAQ, or a
comparable system, the average of the closing bid and asked prices as furnished
by two members of the NASD selected from time to time by the Company for that
purpose.
b. NON-PUBLICLY TRADED COMMON STOCK. If the Company's Common
Stock is not publicly traded, the current value shall be an amount, not less
than the book value, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Company.
5. EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
Holder thereof
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to purchase in the aggregate the same number of shares of Warrant Stock
purchasable hereunder. Any assignment shall be made subject to the provisions
of Section 8 by surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed and with funds sufficient to pay any transfer tax; whereupon, the
Company, without charge, shall execute and shall deliver a new Warrant in the
name of the assignee named in such instrument of assignment and this Warrant
shall promptly be cancelled. This Warrant may be divided or may be combined
with other Warrants which carry the same rights upon presentation hereof at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice specifying the names and the denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"WARRANT" as used herein includes any Warrants issued in substitution for or
replacement of this Warrant or into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction, or mutilation of this Warrant, and in the case of
loss, theft, or destruction of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will
execute and will deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not the Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
6. RIGHTS OF THE HOLDER; LIMITATIONS OF LIABILITY. The Holder, by
virtue hereof, shall not be entitled to any rights of a shareholder in the
Company, either at law or in equity, and the rights of the Holder are limited to
those expressed in the Warrant and are not enforceable against the Company
except to the extent set forth herein. No provision hereof, in the absence of
affirmative action by the Holder to purchase Common Stock, and no enumeration
herein of the rights or privileges of the Holder shall give rise to any
liability of such Holder for the Exercise Price or as a shareholder of the
Company.
7. ADJUSTMENTS.
a. STOCK DIVIDENDS AND STOCK SPLITS. In case the Company shall
effect a stock dividend, stock split or reverse stock split of the outstanding
shares of Common Stock, the Exercise Price shall be proportionately decreased in
the case of a stock dividend or stock split or increased in the case of a
reverse stock split (on the date that such transaction shall become effective)
by multiplying the Exercise Price in effect immediately prior to the stock
dividend or stock split by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such stock dividend or
stock split, and the denominator of which is the number of
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shares of Common Stock outstanding immediately after such stock dividend or
stock split.
b. CONSOLIDATIONS AND MERGERS. In case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary, in which merger the Company is the continuing corporation) or in
the case of any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the Company shall cause
effective provision to be made so that the Warrant holder shall have the right
thereafter, by exercising this Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, or conveyance as may be issued or payable with
respect to or in exchange for the number of shares of the Company theretofore
purchasable upon the exercise of this Warrant had such consolidation, merger,
sale or conveyance not taken place. The foregoing provision shall similarly
apply to successive consolidations, mergers, sales, or conveyances. No event
described above shall require that the Holder exercise its rights hereunder or
accelerate the termination date of this Warrant.
c. ADJUSTMENT OF EXERCISE PRICE. In the event that the Company
shall issue or distribute Common Stock or issue rights, warrants or options
entitling the holder thereof to subscribe for or purchase Common Stock at a
price per share (the "NEW PRICE") which is less than the Exercise Price per
share of Common Stock then in effect, then at the earliest of (i) the date the
Company shall enter into a firm contract for such issuance or distribution,
(ii) the record date for the determination of stockholders entitled to receive
any such rights, warrants or options, if applicable, or (iii) the date of actual
issuance or distribution of any such Common Stock or rights, warrants or
options, the Exercise Price in effect immediately prior to such earliest date
shall be adjusted so that the Exercise Price shall equal the New Price. Such
adjustment shall be made successively whenever any such Common Stock, rights,
warrants or options are issued or distributed at a price below the then current
Exercise Price. In determining whether any rights, warrants or options entitle
the holders to subscribe for or purchase shares of Common Stock at less than the
Exercise Price, and in determining the aggregate offering price of shares of
Common Stock so issued or distributed, there shall be taken into account any
consideration received by the Company for such Common Stock, rights, warrants or
options, the value of such consideration, if other than cash, to be determined
by the Board of Directors whose determination shall be conclusive and described
in a certificate filed with the minute book of the Company.
d. NO ADJUSTMENT FOR SMALL AMOUNTS. Anything in this Section
to the contrary notwithstanding, the Company shall not be required to give
effect to any adjustment in the Exercise
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Price unless and until the net effect of one or more adjustments, determined as
above provided, shall have required a change of the Exercise Price by at least
one cent, but when the cumulative net effect of more than one adjustment so
determined shall be to change the actual Exercise Price by at least one cent,
such change in the Exercise Price thereupon be given effect.
e. NUMBER OF SHARES ADJUSTED. Upon any adjustment of the
Exercise Price, the Holder shall thereafter (until another such adjustment) be
entitled to purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by multiplying the number of
shares of Warrant Stock initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product so obtained
by the new Exercise Price.
f. STATEMENT ON WARRANTS. Irrespective of any adjustments in
the Exercise Price or the number or kind of shares purchasable upon the exercise
of the Warrants, the Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
g. NOTICE OF TRANSACTIONS. The Company will give written
notice to the Holder at least 30 days prior to the date on which (i) any
transaction effecting the type of security issuable hereunder of the Exercise
Price is consummated, (ii) a registration statement for a public offering of the
Company's securities is initially filed with the Securities and Exchange
Commission, or (iii) the Company declares any cash dividends to be paid to its
shareholders.
8. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933.
a. RESTRICTION ON TRANSFER. Unless registered under applicable
federal and state securities laws, this Warrant or the Warrant Stock or any
other security issued or issuable upon exercise of this Warrant may not be sold,
transferred, or otherwise disposed of except to a person who, in the opinion of
counsel for the Company, is a person to whom this Warrant or such Warrant Stock
may legally be transferred pursuant to Section 5 hereof without registration and
without the delivery of a current Prospectus under the Act with respect thereto
and then only against receipt of an agreement of such person to comply with the
provisions of this Section 8 with respect to any resale or other disposition of
such securities.
b. LEGEND. The Company may cause the following legend, or one
similar thereto, to be set forth on each certificate representing Warrant Stock
or any other security issued or issuable upon exercise of this Warrant, unless
counsel
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for the Company is of the opinion as to any such certificate that such legend is
unnecessary:
The shares represented by this Certificate have not
been registered under the Securities Act of 1933 (the "ACT")
and are "restricted securities" as that term is defined in
Rule 144 under the Act. The shares may not be offered for
sale, sold, or otherwise transferred except pursuant to an
effective registration statement under the Act or pursuant
to an exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Company.
9. APPLICABLE LAW. This Warrant shall be governed by and construed
in accordance with the laws of Colorado.
10. AMENDMENT AND WAIVER. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it only if the Company has obtained the written consent of the Holder of this
Warrant.
11. SECTION HEADINGS. The section headings in this Warrant are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers to be dated the Date of Issuance
hereof.
PMC INTERNATIONAL, INC., a Colorado
corporation
By: /s/ Kenneth S. Phillips
-------------------------------
Title: President
----------------------------
ATTEST:
By: /s/ Vali Nasr DATE: July 27, 1995
------------------------ --------------------------------
Secretary
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PURCHASE FORM
Dated:
--------------------
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ______ shares of Warrant Stock and hereby
makes payment of $____________________ in payment of the actual Exercise Price
thereof.
-----------------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
----------------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------
---------------------------------------------------------------------------
Signature:
--------------------------------------------------------
------------------------------
ASSIGNMENT FORM
For value received, _____________________________________ hereby
sells, assigns, and transfers unto:
Name:
------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
--------------------------------------------------------
the right to purchase the Common Stock represented by this Warrant to the extent
of _____ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _______________
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_____________________________________________________, attorney, to transfer the
same on the books of the Company with full power of substitution in the
premises.
Signature:
-----------------------------------
Dated:
---------------------------
Page 89 of 89 pages
