SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
September 24, 1997
(Date of report)
PMC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-14937 84-0627374
(State of (Commission file number) (IRS Employer
incorporation Identification
or organization) Number)
555 Seventeenth Street, 14th Floor
Denver, CO 80202
(Address of principal executive offices)
(303) 292-1177
(Registrant's telephone number, including area code)
<PAGE>
PMC INTERNATIONAL, INC.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On September 24, 1997, PMC International, Inc. ("PMCI" or "the
Company") completed its acquisition (the "Acquisition") of ADAM
Investment Services, Inc. ("ADAM"), a Delaware corporation, and
its wholly owned subsidiary, Optima Funds, Inc., ("Optima") a
Georgia corporation, pursuant to a Stock Purchase Agreement dated
July 25, 1997 ("the Agreement") among the Company, ADAM and
ADAM's shareholders. PMCI acquired all of the issued and
outstanding shares of common stock of ADAM from its shareholders
in consideration for payment of $5 million at closing and two
earn-out payments on the first and second anniversary dates of
the closing. The first earn-out payment will equal 1.0% of
ADAM's standard fee assets under management in excess of $500
million, determined on the one-year anniversary of the closing of
the Acquisition, not to exceed $2.0 million, plus interest
thereon at a rate of 8.75%. The second earn-out payment will
equal 1.0% of ADAM's standard fee assets under management in
excess of $700 million, determined on the two-year anniversary of
the closing of the Acquisition, not to exceed $2.0 million.
The Acquisition will be accounted for using the purchase method
of accounting. Mr. Michael T. Wilkinson, the majority beneficial
owner of ADAM, entered into a four-year Non-Compete Agreement in
connection with the Acquisition and Messrs. Scott A. MacKillop,
President of ADAM; Gary A. Miller, Senior Vice President and
Chief Investment Officer of ADAM; and Michael J. Flinn, Senior
Vice President and National Sales Manager of ADAM, all greater
than 5% beneficial owners of ADAM, entered into employment
agreements in connection with the Acquisition. In addition, Mr.
MacKillop was appointed an Executive Vice President and the Chief
Operating Officer of PMCI.
The foregoing discussion of the Agreement, Mr. Wilkinson's
Non-Compete Agreement and Mr. MacKillop's Employment Agreement
are qualified in their entirety by reference to the terms of such
agreements, which constitute exhibits hereto and are incorporated
herein by reference.
The Acquisition was funded from the proceeds of a private
placement of PMCI common stock which also closed on September 24,
1997. The Company raised approximately $7.3 million by selling
4,882,996 shares of PMCI common stock at $1.50 per share.
Prior to the Acquisition, ADAM and its subsidiary Optima were
independent providers of mutual fund asset allocation products
and services to investment advisors and brokers/dealers, with
principal officers in Atlanta, Georgia.
<PAGE>
PMC INTERNATIONAL, INC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
The following financial statements of ADAM Investment Services,
Inc. and Subsidiary, together with the related independent
auditors' report, are filed herewith.
i. Consolidated Balance Sheets as of December 31, 1996 and
1995;
ii. Consolidated Statement of Income for the years ended
December 31, 1996 and 1995;
iii. Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1996 and 1995; and
iv. Consolidated Statement of Cash Flows for the years ended
December 31, 1996 and 1995
(b) Pro Forma financial information
The following unaudited pro forma consolidated financial statements
of the Company and related notes to unaudited pro forma consolidated
financial statements are filed herewith.
i. Unaudited Pro Forma Consolidated Statement of Income for the
Year Ended December 31, 1996;
ii. Unaudited Pro Forma Consolidated Balance Sheet June 30, 1997; and
iii. Unaudited Pro Forma Consolidated Statement of Income
for the 6 months ended June 30, 1997;
(c) Exhibits
The following exhibits are filed herewith or incorporated by
reference:
2.1 Stock Purchase Agreement among PMC International, Inc.,
Michael T. Wilkinson, Scott A. MacKillop, Gary A. Miller,
Michael J. Flinn, Jared L. Shope, Graham L. Guy, John W.
Burgin, and ADAM Investment Services, Inc., dated as of July
25, 1997
2.2 Non-Compete Agreement between ADAM Investment Services,
Inc., and Michael T. Wilkinson
2.3 Employment Agreement between ADAM Investment Services,
Inc., and Scott A. MacKillop
<PAGE>
PMC INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PMC International, Inc.
\s\ Kenneth S. Phillips
Kenneth S. Phillips
Date: October 9, 1997 President & Chief Executive Officer
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTS
To the Board of Directors of
ADAM Investment Services, Inc. and Subsidiary
We have audited the consolidated balance sheet of ADAM Investment
Services, Inc. and Subsidiary as of December 31, 1996 and the
related consolidated statements of income, stockholders' equity,
and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of ADAM Investment Services, Inc. and Subsidiary as of
December 31, 1996, and the results of their operations and their
cash flows for the year then ended in conformity with generally
accepted accounting principles.
Faucett, Taylor & Associates, P.C.
March 20, 1997
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTS
To the Board of Directors of
ADAM Investment Services, Inc. and Subsidiary
We have audited the consolidated balance sheet of ADAM Investment
Services, Inc. and Subsidiary as of December 31, 1995 and the
related consolidated statements of income, stockholders' equity,
and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of ADAM Investment Services, Inc. and Subsidiary as of
December 31, 1995 and the results of their operations and their
cash flows for the year then ended in conformity with generally
accepted accounting principles.
Faucett, Taylor & Associates, P.C.
March 15, 1996
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 & DECEMBER 31, 1995
ASSETS
1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 733,359 $ 581,025
Marketable securities (notes 2 & 6) 46,612 28,525
Accounts receivable 121,359 165,894
Receivable - related parties
(note 3) 303,119 201,009
Prepaid expenses (note 2) 864,673 932,884
Deferred tax asset (note 4) 111,000 126,000
-------------- -------------
Total current assets 2,180,122 2,035,337
FURNITURE & EQUIPMENT(1)(note 2) 204,390 234,958
OTHER ASSETS
Goodwill(2) 712,289 585,659
-------------- -------------
Total assets $ 3,096,801 $ 2,855,954
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
CURRENT LIABILITIES
Accounts payable $ 571,562 $ 228,769
Accrued interest 32,633 22,000
Deferred revenue (note 2) 1,068,567 1,188,878
Income taxes payable (note 4) 53,320 71,437
Notes payable, current
portion 210,884 280,153
-------------- -------------
Total current liabilities 1,936,966 1,791,237
DEFERRED TAX LIABILITY (note 4) 17,142 14,142
NOTES PAYABLE net of current
portion 360,000 466,768
-------------- -------------
Total liabilities 2,314,108 2,272,147
MINORITY INTEREST -0- 24,935
STOCKHOLDERS' EQUITY 782,693 558,872
-------------- -------------
Total liabilities &
stockholders' equity $ 3,096,801 $ 2,855,954
============== =============
(1) net of accumulated depreciation of $485,867 in fiscal year
1996; $408,647 in fiscal year 1995.
(2) net of accumulated amortization of $87,334 in fiscal year
1996; $34,451 in fiscal year 1995.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
1996 1995
...................... ......................
ADVISORY SERVICE FEES $15,389,734 $15,015,933
COMMISSIONS EXPENSE 11,005,780 10,784,083
-------- --------
ADVISORY SERVICE NET PROFIT 4,383,954 4,231,850
OTHER INCOME:
Other service fees 199,294 202,081
Investment income 23,029 15,244
-------- --------
4,606,277 4,449,175
OPERATING EXPENSES
Salaries, payroll
taxes & benefits $2,252,668 $2,298,586
Professional fees 493,574 391,186
Office expenses 335,611 331,365
Rent 339,928 282,965
Travel, entertainment
& other 234,083 138,402
Marketing & publication 75,222 121,462
Depreciation &
amortization 134,793 110,590
Equipment rental 60,067 59,721
Insurance 46,626 42,802
Other taxes 31,545 32,016
Maintenance & repairs 30,825 29,668
Contract labor 17,918 27,772
Other misc. expenses 18,964 26,569
Data processing 9,819 12,390
Net realized losses
on investments 0 7,513
Allocation to/from
related parties (note 3) (9,527) 4,072,116 (15,417) 3,897,590
-------- -------- -------- --------
Net operating income 534,161 551,585
INTEREST EXPENSE 53,957 57,599
-------- --------
Net income before
income taxes &
minority interest 480,204 493,986
INCOME TAXES (note 4)
Current tax expense 208,752 169,608
Deferred tax expense 18,000 226,752 15,000 184,608
-------- -------- -------- --------
Net income before
minority income 253,452 309,378
MINORITY INTEREST 1,820 989
======== ========
Net income $251,632 $310,367
======== ========
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
YEAR ENDED DECEMBER 31, 1996
------- --------- ------- -------- --------- --------
ADDITIONAL UNREALIZED
(1)COMMON PAID IN RETAINED TREASURY HOLDING
STOCK CAPITAL EARNINGS STOCK GAIN(LOSS) TOTAL
------- --------- ------- -------- --------- --------
BALANCE
December
31, 1995 $1,000 $1,341,783 $(358,911) $(425,806) $806 $ 558,872
NET INCOME 251,632 251,632
CHANGE IN
UNREALIZED
GAIN(LOSS) 269 269
(2)DIVIDENDS (28,080) (28,080)
------- --------- ------- -------- --------- --------
BALANCE
December
31, 1996 $1,000 $1,341,783 $(135,359) $(425,806) $1,075 $782,693
======= ========== ========= ========= ======== ==========
YEAR ENDED DECEMBER 31, 1995
------- --------- ------- -------- --------- --------
ADDITIONAL UNREALIZED
(2)COMMON PAID IN RETAINED TREASURY HOLDING
STOCK CAPITAL EARNINGS STOCK GAIN(LOSS) TOTAL
------- --------- ------- -------- --------- --------
BALANCE
December
31, 1994 $1,000 $1,315,377 $(641,198) $ -0- $(9,772) $666,007
PURCHASE
OF
TREASURY
STOCK (600,000) (600,000)
SALE OF
TREASURY
STOCK 25,806 174,194 200,000
NET INCOME 310,367 310,367
CHANGE IN
UNREALIZED
GAIN(LOSS) 10,578 10,578
(3)DIVIDENDS (28,080) (28,080)
------- --------- ------- -------- --------- --------
BALANCE
December
31, 1995 $1,000 $1,341,783 $(358,911) $(425,806) $806 $558,872
======= ========== ========== ========== ======== ==========
(1) Common stock authorized and issued is 1,000 shares with 783
shares outstanding in 1996 with $1 par value.
(2) Common stock authorized and outstanding is 1,000 shares in
1995 with $1 par value.
(3) Dividends paid at the rate of $28 per share for common
stock.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
1996 1995
Cash flows from operating activities
Net income $ 251,632 $ 310,367
--------- ---------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Net realized loss on investments -0- 7,513
Depreciation & amortization 134,793 110,590
Deferred taxes 18,000 15,000
Minority interest 1,820 (989)
Change in receivable - related parties (102,110) (114,591)
Change in accrued expenses 10,633 22,000
Change in accounts receivable 44,535 206,071
Change in prepaid expense 68,211 105,974
Change in accounts payable 342,793 (74,823)
Change in income taxes payable (18,117) (26,328)
Change in deferred revenue (120,311) (187,562)
--------- ---------
Total adjustments 380,247 62,855
--------- ---------
Net cash provided by operating
activities 631,879 373,222
--------- ---------
Cash flows from investing activities
Purchase of furniture & equipment (51,342) (92,088)
Payment for purchase of subsidiary (6,268) (419,758)
Proceeds from sale of marketable
securities -0- 498,685
Purchase of marketable securities (17,818) (5,882)
--------- ---------
Net cash used by investing activities (75,428) (19,043)
--------- ---------
Cash flows from financing activities
Proceeds from notes payable -0- 427,074
Repayment of notes payable (376,037) (160,153)
Purchase of treasury stock -0- (120,000)
Dividends paid (28,080) (28,080)
--------- ---------
Net cash provided by financing
activities (404,117) 118,841
--------- ---------
Increase in cash and cash equivalents 152,334 473,020
Cash & cash equivalents, beginning of
year 581,025 108,005
--------- ---------
Cash & cash equivalents, end of year $ 733,359 $ 581,025
========= =========
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
Supplemental disclosure of cash flow information:
Cash paid during the year for:
1996 1995
Interest $ 46,901 $35,599
Income taxes $226,869 $98,622
Supplemental disclosure of noncash investing and financing
activities:
In fiscal year 1996, the Company purchased the remaining 25%
of the capital stock of Optima Funds Management, Inc., with
a note payable of $200,000.
In fiscal year 1996, the Company also recorded a net
unrealized gain on investments in the stockholders' equity
account of $269.
In fiscal year 1995, the Company purchased treasury stock of
$600,000 for cash of $120,000 and a note payable of
$480,000. The Company exchanged shares of treasury stock at
a gain of $25,806 which was included in additional paid in
capital.
In fiscal year 1995, the Company purchased 75% of the
capital stock of Optima Funds Management, Inc., as follows:
(FY 1995)
Fair value of net assets acquired $ 77,770
Goodwill 620,110
---------
Total purchase price $697,880
=========
Consideration exchanged:
(FY 1995)
Cash $464,600
Payable 33,280
Treasury Stock 200,000
--------
Total consideration exchanged $697,880
========
In fiscal year 1995, the Company also recorded a net
unrealized gain on investments in the stockholders' equity
account of $10,578.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company
considers all cash on deposit with a maturity of three months or
less to be cash equivalents.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
1. ORGANIZATION
ADAM Investment Services, Inc., ("the Company") was incorporated
under the laws of the State of Delaware on April 3, 1980, and is
registered with the Securities and Exchange Commission as an
investment adviser under the Investment Advisers Act of 1940.
The Company offers investment advisory services to clients
throughout the United States. One of the Company's primary
investment services is a managed account program used by
investment advisors who market the service to their investment
clients. The Company marketed this service to investment
advisors in prior years through Advisory Consulting Group, Inc.
(ACG). The Company took over this marketing during 1996 and
plans on continuing to market its own products. The Company
earns fees for the investment management services provided to
clients. Investment advisers using the service with their
clients pay the Company annual fees for training, marketing
materials and support.
The Company acquired 75% of Optima Funds Management, Inc. in
March 1995 and acquired the remaining 25% in February 1996.
Optima Funds Management, Inc., registered with the Securities and
Exchange Commission on April 27, 1987 as an investment adviser.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Consolidation - The accompanying financial statements include the
accounts of the Company and it holly owned subsidiary, Optima
Funds Management, Inc. Intercompany transactions and balances
have been eliminated in consolidation.
Revenue and commission recognition - The Company earns fees from
clients for investment services provided. The Company typically
bills its fees in advance on a quarterly basis. Billed but
unearned fees are reflected in the accompanying consolidated
balance sheet as deferred revenue. Investment service fees are
recognized as income as the services are provided.
The Company pays a commission to subscribers for investment
clients who contract to use The ADAM Network. Commissions are
based on a percentage of the fee income earned by the Company and
commissions are typically paid in advance on a quarterly basis.
Commissions paid in advance are included in prepaid expenses in
the accompanying consolidated balance sheet and amounted to
$784,635 at December 31, 1996 and $853,406 at December 31,
1995. Prepaid commissions are recognized as an expense as the
related fee income is recognized.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES (CONTINUED)
Marketable securities - The Company has adopted FAS Statement 115
on accounting for certain investments in debt and equity
securities. Under the FAS Statement 115, the Company's
marketable securities are classified as available-for-sale,
trading, or held to maturity securities are classified as
available-for-sale, trading, or held to maturity securities
according to management's intentions. At both December 31, 1996
and 1995, all of the Company's marketable securities were
available-for-sale (see Note 9).
Furniture and equipment - Furniture and equipment are carried at
cost. Depreciation is computed on the straight-line method over
the estimated useful lives of the assets, which is five years.
Furniture and equipment at the balance sheet date consists of the
following:
1996 1995
Equipment $ $
432,781 386,634
Furniture 217,685 217,180
Leasehold Improvements 39,791 39,791
--------- ---------
690,257 643,605
Less accumulated
depreciation (485,867) (408,647)
========= =========
$ 204,390 $ 234,958
========= =========
Credit Risk - There are funds in excess of the federally insured
amounts for the Company of $1,106,857 in fiscal year 1996 and
$479,997 in fiscal year 1995. However, due to the rating and
stability of the financial institution at which these funds are
held, management believes credit risk is minimal.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
3. RELATED PARTY TRANSACTIONS
The Company is affiliated with LCG Holdings, Inc. ("LCG") through
partial common ownership and management. LCG provides certain
administrative and other services for the Company. Management
has estimated LCG's costs for these services at $503,379 in
fiscal year 1996 and $484,583 in fiscal year 1995 which consist
of salaries and benefits, rent, and other administrative costs in
the approximate amounts of $320,389; $49,613; and $133,377
respectively in fiscal year 1996 and of $328,000; $36,000; and
$120,000 respectively in fiscal year 1995.
The Company provides data processing services for LCG.
Management has estimated the cost of such services to be $512,906
in fiscal year 1996 and $500,000 in fiscal year 1995 which
consists of salaries and benefits, rent and other administrative
costs in the approximate amounts of $286,877; $119,977; and
$106,032, respectively for fiscal year 1996 and $297,000;
$161,000; and $42,000, respectively for fiscal year 1995. These
expenses are included in the Company's accompanying consolidated
statement of income.
The Company and LCG have charged each other for the estimated
costs of providing these services to each other. These related
party charges are presented in the accompanying consolidated
statement of income on a net basis as allocations to/from related
parties. The gross and net amount of these charges are:
1996 1995
Company charges to LCG for data
processing services $ (512,906) $ (500,000)
LCG charges to the Company for
management and
administrative services 503,379 484,583
--------- ---------
Net related party cost allocation $ (9,527) $ (15,417)
========== ==========
At December 31, 1996 the Company had a receivable from LCG in the
amount of $303,119 which was repaid January 16, 1997. At
December 31, 1995 the Company had a receivable from LCG in the
amount of $201,009.
4. DEFERRED TAXES
Deferred income taxes arise from temporary differences resulting
from income and expense items reported for financial accounting
and tax purposes in different periods. Deferred taxes under FAS
109 are classified as current or noncurrent depending on the
classification of the assets and liabilities to which they
relate. Deferred taxes arising from timing differences that are
not related to an asset or liability are classified as current or
noncurrent depending on the periods in which the timing
differences are expected to reverse.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
4. DEFERRED TAXES (CONTINUED)
Temporary differences giving rise to the deferred tax asset or
liability result from recognition of deferred revenues, prepaid
expenses and depreciation expense, as well as, the tax benefit of
net operating loss carryforwards.
The Company has available at December 31, 1996 and 1995 an unused
operating loss carryforward that expires in 2005 which may be
applied against future taxable income. Due to the change in
ownership from the purchase of the Company in 1992, the operating
losses available for use are limited by tax regulations to $3,115
per year, which was reported in fiscal year 1996 as $28,035
through 2005 and in fiscal year 1995 as a total of $31,150
through 2005.
The Company's effective income tax rate is higher than what would
be expected if the federal statutory rate were applied to income
from continuing operations primarily because of income recognized
and expenses deductible for tax purposes that are not recognized
for financial reporting purposes.
5. DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution plan that covers all
full time employees 21 years of age and older who have completed
one year of service. Contributions to the plan by employees are
limited to 15% of their salary. The Company matches the employee
contributions 50% up to a maximum amount which is the lesser of
6% of the employee's salary or the IRS limitation. The Company
contribution is at the discretion of the Board of Directors.
Contributions paid to the plan by the Company were $35,106 in
1996 and $18,984 in 1995.
The vesting schedule is as follows:
Years of Service Percentage
Vested
----------------- -----------------
1 20
2 40
3 60
4 80
5 100
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
6. MARKETABLE SECURITIES
Following is a summary of investment securities classified as
available-for-sale at December 31, 1996 and December 31, 1995:
Gross Unrealized
Fair Value Amortized Cost Holding Gain
----------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995
........ ........ ....... ........ ........ .......
Mutual Funds $29,078 $11,810 $28,003 $11,004 $ 1,075 $ 806
Money Funds 17,534 16,715 17,534 16,715 -0- -0-
-------- -------- ------- -------- -------- -------
$46,612 $28,525 $45,537 $27,719 $ 1,075 $ 806
======== ======== ======= ======== ======== =======
Realized gains and losses are determined on the average cost
method. During 1996 and 1995 sales proceeds and gross realized
gains and losses on securities classified as available for sale
were:
1996 1995
Sales proceeds NA $ 498,685
========== =========
Gross realized
losses $ 115 $ 8,722
========== =========
Gross realized
gains $ 302 $ 1,209
========== =========
Stockholders' equity included an unrealized holding gain on
available-for-sale securities of $1,075 for 1996 and $806 for
1995.
7. SUBSEQUENT EVENT
On February 1, 1996, the Company purchased the minority interest
in Optima Funds Management, Inc., with a $200,000 note payable.
8. MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ADAM INVESTMENT SERVICES, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 & DECEMBER 31, 1995
9. NOTES PAYABLE
The Company had nine notes payable in 1996 and eight notes
payable in 1995 to stockholders of the Company with an aggregate
amount due of $210,884 in fiscal year 1996 of which $90,884 was
current in fiscal year 1996 and an aggregate amount due of
$266,921 in fiscal year 1995. The notes require quarterly
principal and interest payments and bear interest at the rate of
11% per annum and matured April 1, 1997.
The Company has a note payable to a former stockholder of the
Company, reported as $360,000 in fiscal year 1996 of which
$120,000 is current and $480,000 in fiscal year 1995. The note
requires annual principal and interest payments and bears
interest at the rate of 5% per annum and matures February 9, 1999.
1996 1995
Notes payable $ 570,884 $ 746,921
Less: Current
portion (210,844) (280,153)
---------- ----------
Long term $ 360,000 $ 466,768
========== ==========
Principal maturities of long term debt for the next five years
and in aggregate are as follows:
as reported in Consolidated Financial Statements for Year Ended
December 31, 1996
Years Ending December 31 Amount
1997 $210,884
1998 160,000
1999 160,000
2000 40,000
2001 -0-
---------------
$ 570,884
===============
as reported in Consolidated Financial Statements for Year Ended
December 31,1995
Years Ending December 31 Amount
1996 $ 280,153
1997 226,768
1998 120,000
1999 120,000
2000 -0-
---------------
$ 746,921
===============
<PAGE>
PMC INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information
is based upon the historical financial statement of PMC
International, Inc. and the historical financial statement of
ADAM Investment Services, Inc. and Subsidiary.
The unaudited pro forma consolidated balance sheet presents the
combined financial position of PMC International, Inc. and ADAM
Investment Services, Inc. as of June 30, 1997, using the purchase
method of accounting. Accordingly, the combined identifiable
assets and liabilities of the Companies have been adjusted to
their estimated fair values based upon a preliminary purchase
price of $5,000,000.
The unaudited pro forma consolidated statement of income for the year
ended December 31, 1996, assumes the business combination occurred on
January 1, 1996, and includes the historical operations of PMC
International, Inc., for the year ended December 31, 1996, and the
historical operations of ADAM Investment Services, Inc. for the fiscal
year ended December 31, 1996, adjusted for the pro forma effects of the
business combination.
The unaudited pro forma consolidated statement of income for the six months
ended June 30, 1997, assumes the business combination occurred on
January 1, 1997, and includes the historical operations of PMC
International, Inc., for the six months ended June 30, 1997, and the
historical operation of ADAM Investment Services, Inc. for the six months
ended June 30, 1997, adjusted for the pro forma effects of the
business combination.
The following unaudited consolidated pro forma financial information
has been prepared based upon assumptions deemed appropriate by
PMC International, Inc. and are not necessarily indicative of the
consolidated financial position or results of operation if the
business combination had been consummated on the assumed dates
and are not necessarily indicative of the actual results of the
future operations of the combined companies.
<PAGE>
PMC INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1996
Pro PMCI/ADAM
PMCI ADAM Forma combined
Adjustment
REVENUE:
Investment
management fees $9,634,992 15,389,734 $ 25,024,726
Other income 451,889 222,323 674,212
--------- --------- --------- ---------
Total revenue 10,086,881 15,612,057 0 25,698,938
EXPENSES:
Investment mgr.
and other fees 5,580,846 11,005,780 16,586,626
Salaries and
benefits 3,487,811 2,286,180 5,773,991
Clearing charges
and user fees 813,239 9,819 823,058
Advertising and
promotion 830,140 309,305 1,139,445
General and
administrative 845,767 124,460 970,227
Software
development costs 132,392 0 132,392
Occupancy and
equipment costs 1,149,084 830,860 1,979,944
Professional fees 763,086 511,492 1,274,578
Settlement expenses 155,000 0 155,000
Interest 331,008 53,957 384,965
Goodwill
amortization - ADAM 537,620(1) 537,620
--------- --------- --------- ---------
Total expenses 14,088,373 15,131,853 537,620 29,757,846
Net income before
income taxes &
minority interest $(4,001,492) $ 480,204 $(537,620) $(4,058,908)
INCOME TAXES:
Current tax expense 0 208,752 208,752
Deferred tax
expense 0 18,000 18,000
--------- --------- --------- ---------
Net income
before minority
interest (4,001,492) 253,452 (537,620) (4,285,660)
MINORITY INTEREST: 0 1,820 1,820
--------- --------- --------- ---------
Net income (loss) $(4,001,492) $ 251,632 $ (537,620) $(4,287,480)
========= ========= ========= =========
Net income (loss)
per common share $ (0.71) $ 322.61 $ (0.40)
========= ======== =========
WEIGHTED AVERAGE OF
SHARES OUTSTANDING 5,702,036 780 10,804,880
========= ========= =========
(1) The adjustment of $537,620 reflects twelve months of
amortization cost of the ADAM goodwill ($5,376,202 amortized over
120 months.)
<PAGE>
PMC INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
PMCI ADAM Pro PMCI/ADAM
Forma combined
Adjustment
Cash & cash equivalents $3,109,724 $ 79,338 $7,324,494 (1) $ 4,824,217
(564,339)(2)
(5,125,000)(3)
Receivables:
Investment management
fees 970,554 161,421 1,131,975
Other receivables 140,494 111,000 251,494
--------- --------- --------- ---------
Total 4,220,772 351,759 1,635,155 6,207,686
Furniture & equipment
(net) 1,252,174 165,161 1,417,335
Software development
(net) 493,872 0 493,872
Prepaid expenses &
other assets 713,120 747,447 1,460,567
Long term note
receivables 564,946 0 564,946
Goodwill (net) 0 685,240 5,125,000 (3) 5,376,202
(434,038)(3)
--------- --------- --------- ---------
$7,244,884 $1,949,607 $6,326,117 $15,520,608
Total assets ========= ========= ========= =========
LIABILITIES
Account payable 754,693 294,023 $ 0 1,048,716
Accrued expenses 511,481 10,500 0 521,981
Other liabilities 106,193 19,294 0 125,487
Deferred revenue 551,489 831,752 0 1,383,241
Notes payable 10,619 40,000 0 50,619
Obligations under
capital lease 369,682 0 0 369,682
--------- --------- --------- ---------
Total current
liabilities 2,304,157 1,195,569 0 3,499,726
Note payable - long
term 0 320,000 0 320,000
--------- --------- --------- ---------
Total liabilities $2,304,157 $1,515,569 $0 $3,819,726
SHAREHOLDERS' EQUITY
Preferred stock $345,455 $ 0 $ 0 $ 345,455
Common stock 366,664 1,000 (1,000)(3) 415,494
48,830 (1)
Treasury stock (ADAM) 0 (425,806) 425,806 (3) 0
Additional paid in
capital 16,208,069 1,341,784 (1,341,784)(3) 22,919,394
7,275,664 (1)
(564,339)(2)
Accumulated deficit (11,979,461) (482,940) 482,940 (3) (11,979,461)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS'
EQUITY 4,940,727 434,038 6,326,117 11,700,882
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 7,244,884 $1,949,607 $ 6,326,117 $15,520,608
========= ========= ========= =========
(1) The adjustment of $7,324,494 reflects the proceeds of the
PMC International common stock offering (4,882,996 shares, .01
par value at $1.50/share).
(2) The adjustment of $564,339 reflects corporate finance fees
paid to Keefe, Bruyette & Woods, Inc., related to the PMC
International common stock offering.
(3) The adjustment reflects the ADAM acquisition price of
$5,000,000; costs incurred related to the ADAM acquisition of
$125,000; and the inclusion of ADAM's equity at 6/30/97 of $434,038.
<PAGE>
PMC INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 1997
Pro PMCI/ADAM
PMCI ADAM Forma combined
Adjustments
REVENUE:
Investment
management fees $5,618,982 $6,433,532 12,052,514
Other income 232,224 83,305 315,529
-------- -------- -------- ---------
Total revenue 5,851,206 6,516,837 0 12,368,043
EXPENSES:
Investment mgr.
and other fees 2,734,674 4,641,176 7,375,850
Salaries and
benefits 2,138,957 1,292,960 3,431,917
Clearing charges
and user fees 277,655 0 277,655
Advertising and
promotion 416,730 117,552 534,282
General and
administrative 585,049 189,522 774,571
Software
development costs 85,683 0 85,683
Occupancy and
equipment costs 607,754 346,424 954,178
Professional fees 300,708 235,978 536,686
Interest 16,121 14,830 30,951
Goodwill
Amortization - Optima 0 27,049 (27,049) 0
Goodwill
Amortization - ADAM 0 0 268,810(1) 268,810
-------- -------- --------- ---------
Total expenses 7,163,331 6,865,491 241,761 14,270,583
NET income (loss)
before income taxes (1,312,125) (348,654) (241,761) (1,902,540)
INCOME TAXES 0 0 0 0
-------- -------- -------- ---------
Net income (loss) (1,312,125) (348,654) (241,761) (1,902,540)
======== ======== ======== =========
Net loss per common
share $(0.09) $(451.04) $ (0.10)
======= ======== =======
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANCING 14,523,220 773 19,406,216
======== ======== =========
(1) The adjustment of $268,810 reflects the six months of
amortization cost of the ADAM goodwill ($5,376,202 amortized
over 120 months).
<PAGE>
EXECUTION VERSION
STOCK PURCHASE AGREEMENT
AMONG
PMC INTERNATIONAL, INC.,
MICHAEL T. WILKINSON, SCOTT A. MACKILLOP,
GARY A. MILLER, MICHAEL J. FLINN, JARED L. SHOPE,
GRAHAM L. GUY, JOHN W. BURGIN
AND
ADAM INVESTMENT SERVICES, INC.
DATED AS OF JULY 25, 1997
#297907
1
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of July 25, 1997,
is by and among PMC International, Inc., a Colorado
corporation ("Buyer"), ADAM Investment Services, Inc., a
Delaware corporation (the "Company"), Michael T. Wilkinson,
Scott A. MacKillop, Gary A. Miller, Michael J. Flinn, Jared L.
Shope, Graham L. Guy and John W. Burgin. Messrs. Wilkinson,
MacKillop, Miller, Flinn, Shope, Guy and Burgin are referred to
individually as a "Shareholder" and collectively as
"Shareholders."
WHEREAS, the Shareholders are the owners of all of the
issued and outstanding shares of capital stock of the Company;
and WHEREAS, the Shareholders desire to sell all of the shares of
stock of the Company to the Buyer, and the Buyer desires to
purchase such shares of stock from the Shareholders, in each case
in accordance with the terms and subject to the conditions hereof;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein and subject to the conditions and
other terms hereof, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement (as defined below),
the following terms shall have the respective meanings set forth
in this Article I (such definitions to be equally applicable to
both the singular and plural forms of the terms herein defined):
"Acquisition Proposal" shall have the meaning set forth
in Section 6.12.
"Additional Consideration" shall be a number of shares
of common stock of Buyer equal to (a) 20% of the excess of the
Alternative Purchase Price Adjustment paid or payable to Seller,
if any, pursuant to Section 2.2(b)(ii)(A) over $2,000,000, not to
exceed $200,000, divided by (b) the "Current Market Value" of a
share of common stock of Buyer at the time the Additional
Consideration is paid. For these purposes, the "Current Market
Value" per share of common stock at any date shall be determined
as follows: If the common stock is listed on a National
Securities Exchange or quoted on the NASDAQ Stock Market or on an
over the counter electronic bulletin board, the Current Market
Value per share of common stock shall be the average of the daily
closing sale prices for each Business Day during the period
commencing 10 Business Days before such date and ending on the
date three Business Days prior to such date or, if the security
has been listed on a National Securities Exchange or quoted on
the NASDAQ Stock Market or on an over the counter electronic
bulletin board for less than 10 consecutive
#297907
-1-
<PAGE>
Business Days, before such date, then the average of the daily
closing bid prices for all of the Business Days before such date
for which daily closing sale prices are available. If the common
stock is not then listed on a National Securities Exchange or
quoted on the NASDAQ Stock Market or on an over the counter
electronic bulletin board, the Current Market Value per share of
common stock shall be the value of the common stock as determined
reasonably and in good faith by the Board of Directors of the
Buyer and certified in a board resolution.
"Advisers Act" shall mean the Investment Advisers Act of
1940, as amended, and the rules and regulations of the SEC
thereunder.
"Advisory Agreement" shall mean any investment advisory
agreement entered into by the Company or Optima for the purpose
of providing investment advisory services.
"Affiliate" shall mean any Person that, directly or
indirectly, control with, the Person specified.
"Agreement" shall mean this Agreement among the
Shareholders, the Company and Buyer as such Agreement may
hereafter be amended.
"Alternative Purchase Price Adjustment" shall have the
meaning set forth in Section 2.2(b).
"Applicable Law" shall mean any domestic or foreign
federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree, policy, guideline or
other requirement (including those of the NASD) applicable to the
Shareholders, the Company, Optima, Buyer or any of their
respective Affiliates, properties, assets, operations, officers,
directors, employees or agents, as the case may be.
"Base Consideration" shall mean an amount equal to (i)
$5,000,000, less (ii) all Liabilities of the Company or Optima as
of the Closing Date, which are or should have been disclosed in
the Company Financial Statements or Schedule 4.6, except for
Liabilities incurred by the Company or Optima in the ordinary
course of its business prior to the Closing Date in an amount not
to exceed the amounts outstanding at any one time as set forth on
Exhibit A.
"Business Day" shall mean any day that the New York
Stock Exchange is normally open for trading and that is not a day
on which banks in the State of New York are generally closed for
regular banking business.
"Buyer" has the meaning set forth on the first page
hereof and includes any direct or indirect successor or assign.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" shall mean the date of the Closing.
#297907
-2-
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall have the meaning set forth on the first
page hereof.
"Company Accounts" shall mean accounts under the
discretionary management of the Company, Optima or Buyer or
accounts with respect to which the Company, Optima or Buyer
provides investment advice, in each case pursuant to an
investment advisory agreement with any investment adviser or
other firm listed on the Company Accounts Schedule (as such
schedule may be revised from time to time upon the mutual written
agreement of Buyer and the Shareholder Representative) attached
hereto as Exhibit B (which shall initially be in a coded format
and which shall be revised, immediately following the execution
hereof, to include names and other relevant account information),
and which shall be those accounts from which the Company, Optima
or Buyer derives an asset based fee consistent with its standard
fee structure subject to normal volume or relationship based
discounting, but which shall not include any accounts managed or
advised by Buyer as of the Date of this Agreement, and which
shall include such other accounts as are mutually agreed upon.
"Company Balance Sheet" has the meaning set forth in
Section 4.6.
"Company Financial Statements" has the meaning set forth
in Section 4.6.
"Company Plan" has the meaning set forth in Section
4.15(a).
"Confidentiality Agreement" shall mean that certain
confidentiality agreement between Buyer and the Company dated
March 26, 1997 relating to confidential information provided by
the Company to Buyer and confidential information provided by the
Buyer to the Company and the Shareholders.
"Consent" shall mean, with respect to any Person, any
approval, consent, communication, confirmation, notice, filing,
permit, waiver, amendment, or other authorization required to be
obtained or made by such Person under any Contract, Advisory
Agreement, agreement or other obligation legally binding upon or
affecting such Person or any Assets or operations of such Person.
"Consulting Agreements" shall mean the consulting
agreements between the Company and each of Jared L. Shope and
Graham L. Guy to be executed by the parties thereto on or before
the Closing Date, in each case in a form to be agreed upon by
Buyer and the parties thereto.
"Contract" shall mean any written or oral contract,
agreement, promise, obligation, undertaking or understanding that
is legally binding, including Advisory Agreements.
"Disagreement" has the meaning set forth in Section
2.3(b).
"Due Diligence Period" shall have the meaning set forth in
Section 6.8(b).
#297907
-3-
<PAGE>
"Due Diligence Review" shall have the meaning set forth in
Section 6.8(b).
"Employment Agreements" shall mean those certain employment
agreements between the Company and each of Scott A. MacKillop,
Gary A. Miller and Michael J. Flinn, to be executed by the
parties thereto on or before the Closing Date, in each case in a
form to be agreed upon by Buyer and the parties thereto.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the rules, regulations,
interpretations and class exemptions issued by the Department of
Labor thereunder.
"ERISA Affiliate" means any entity, trade or business that
is a member of a group described in Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA that includes the
Company, or that is a member of the same "controlled group" as
the Company pursuant to Section 4001(a)(14) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC
thereunder.
"Final Purchase Price Adjustment" shall have the meaning set
forth in
Section 2.2(a).
"GAAP" shall mean generally accepted accounting principles
as used in the United States of America as in effect at the time
any applicable financial statements were prepared or any act
requiring the application of GAAP was performed.
"Government Approval" shall mean any approval, Consent,
communication, confirmation, notice, permit, waiver, amendment,
or other authorization required to be obtained from (or, in the
case of filings, notices or other communications, given to) a
Governmental Authority under Applicable Law in connection with a
proposed activity or transaction.
"Governmental Authority" shall mean any government, any
state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government,
including, without limitation, any authority, agency, department,
board, commission or instrumentality of the United States, any
State of the United States or any political subdivision thereof,
and any court, tribunal or arbitrator(s) of competent
jurisdiction, and any governmental or non-governmental
self-regulatory organization, agency or authority (including,
without limitation, the NASD).
"Incremental Company Assets" shall mean all financial assets
included in Company Accounts on the two-year anniversary of the
Closing Date with respect to which (i) the Company or Optima
provides asset management services, or (ii) the Company, Optima
or Buyer provides investment advice, and from which the Company,
Optima or Buyer derives an asset based fee consistent with its
standard fee structure subject to normal volume or relationships
based discounting, and such other accounts as are mutually agreed
upon, excluding all appreciation or depreciation in the value of
such Assets since the Closing Date.
#297907
-4-
<PAGE>
"Indemnifiable Claim" shall mean any Loss for which a party
is entitled to indemnification under this Agreement.
"Indemnified Party" shall mean the party entitled to
the benefits of indemnification hereunder. "Indemnifying
Party" shall mean the party obligated to provide indemnification
hereunder.
"Independent Accounting Firm" shall mean an independent
public accounting firm mutually agreed to by the Buyer and the
Shareholder Representative, other than any accounting firm that
has performed services for Buyer or the Company or any of their
respective Affiliates during the past five years.
"Initial Company Assets" shall mean financial assets
included in Company Accounts on the one-year anniversary of the
Closing Date, with respect to which (i) the Company or Optima
provides asset management services, or (ii) the Company, Optima
or Buyer provides investment advice, and from which the Company,
Optima or Buyer derives an asset based fee consistent with its
standard fee structure subject to normal volume or relationships
based discounting, and such other accounts as are mutually agreed
upon, excluding all appreciation or depreciation of the value of
such Assets since the Closing Date.
"Intellectual Property" has the meaning set forth in Section
4.16(a).
"Initial Purchase Price Adjustment" shall have the meaning
set forth in
Section 2.2(a).
"IRS" shall mean the Internal Revenue Service.
"Liability" shall mean any item required to be shown as a
liability on a balance sheet prepared in accordance with GAAP.
"Lien" shall mean any lien, pledge, security interest,
claim, charge, easement, limitation, commitment, encroachment,
restriction or encumbrance of any kind or nature whatsoever.
"Loss" shall mean any and all claims, losses, liabilities,
costs, penalties, fines and expenses (including reasonable
expenses for attorneys, accountants, consultants and experts),
damages, obligations to third parties, expenditures, proceedings,
judgments, awards, settlements or demands that are imposed upon
or otherwise incurred, suffered or sustained by the relevant
party.
"Material Contract" has the meaning set forth in Section 4.8.
"NASD" shall mean the National Association of Securities
Dealers and,
as applicable, NASD Regulation, Inc.
#297907
-5-
<PAGE>
"Non-Third Party Claim" has the meaning set forth in Section
8.4(d).
"Notice of Disagreement" shall have the meaning set forth in
Section 2.3(b)
"Optima" shall mean Optima Funds Management, Inc., a Georgia
corporation and wholly-owned subsidiary of the Company.
"Permits" has the meaning set forth in Section 4.12(a).
"Person" shall mean any individual, corporation, company,
partnership (limited or general), joint venture, association,
trust or other entity or similar contractual arrangement or
relationship.
"Private Placement" shall mean the completion by the Buyer
of a private placement of debt or equity securities to certain
accredited investors (as such term is defined in Rule 501 of
Regulation D under to the Securities Act) in which Buyer receives
aggregate proceeds of at least $7,000,000.
"Records" shall mean all records and original documents (and
copies thereof) in the Company's or Optima's permanent possession
as of the Closing Date which (a) pertain to or are utilized by
the Company or Optima to administer, reflect, monitor, evidence
or record information respecting the business or conduct of the
Company, or (b) are necessary or appropriate or required in order
to comply with any Applicable Law, including records required to
be prepared, maintained, or filed in accordance with any
Securities Laws and shall include all such records maintained on
electronic or magnetic media, or in the electronic database
system of the Company.
"Regulatory Documents" shall mean, with respect to a
Person, all forms, reports, information statements, registration
statements, brochures, schedules and other documents filed, or
required to be filed, since January 1, 1993 by such Person with
any Governmental Authority pursuant to Applicable Laws.
"Right" shall have the meaning set forth in Section 4.4(a).
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder.
"Securities" shall mean any security as defined in the
Securities Act.
"Securities Laws" shall mean the Securities Act; the
Exchange Act; the Investment Company Act of 1940, as amended; the
Advisers Act; state securities laws; and all rules, regulations
and written interpretations promulgated pursuant thereto.
#297907
-6-
<PAGE>
"Shareholder Representative" shall mean the Person
designated in writing by Michael T. Wilkinson, in a form
acceptable to Buyer, not less than ten days prior to the Closing,
to serve as such for purposes of this Agreement; provided,
however, if no such designation is made or written notice thereof
is not given to Buyer, in each case not less than ten days prior
to the Closing, then Scott A. MacKillop shall be deemed to be the
Shareholder Representative for all purposes under this Agreement.
The Shareholder Representative may be changed by the provision of
10 days prior written notice thereof by Mr. Wilkinson to Buyer,
provided however, if such changed Shareholder Representative is
not a Shareholder, Buyer shall have the right to approve the
changed Shareholder Representative, which approval shall not be
unreasonably withheld.
"Shareholders" has the meaning set forth on the first page
hereof.
"Shares" has the meaning set forth in Section 2.1.
"Tax Return" or "Returns" shall mean any return, report,
estimates, information statement, schedule or other document
(including any related or supporting information and including
any Form 1099 or other document or report required to be provided
by the Company to third parties) with respect to Taxes, including
any document required to be retained or provided to any
Governmental Authority pursuant to 31 U.S.C. Sections 5311-5328
or any successor sections and regulations promulgated thereunder,
relating to the Company or any consolidated group of which any
such entity was a member at the applicable time, and any amended
Tax Returns.
"Taxes" shall mean all federal, provincial, territorial,
state, municipal, local, foreign or other taxes, imposts, rates,
levies, assessments and other charges (and all interest and
penalties thereon), including, without limitation, all income,
excise, franchise, gains, capital, real property, goods and
services, transfer, value added, gross receipts, windfall
profits, severance, ad valorem, personal property, production,
sales, use, license, stamp, documentary stamp, mortgage
recording, employment, payroll, social security, unemployment,
disability, estimated or withholding taxes, and all customs and
import duties, and all interest, penalties and losses thereon or
associated therewith or associated with any Tax Return.
"Third Party Claim" has the meaning set forth in Section
8.4(a).
"Wire Transfer" shall mean a payment in immediately
available funds by wire transfer in lawful money of the United
States of America to such account as shall have been designated
by written notice to the Buyer in accordance with the terms of
this Agreement.
#297907
-7-
<PAGE>
ARTICLE II
PURCHASE AND SALE OF THE SHARES
Section 2.1 Shares. At the Closing, the Shareholders
will sell to Buyer 920 shares of common stock (inclusive of the
exercise of all outstanding options and other Rights), par value
$1.00, of the Company (the "Shares"), which Shares will represent
at and as of the Closing all of the issued and outstanding shares
of capital stock of the Company. All of the Shares shall be duly
authorized, validly issued, fully paid and nonassessable.
Section 2.2 Purchase Price.
(a) If, on the Closing Date, the value of all
Company Accounts less the value of such Accounts as to which the
Company or Optima has received Client notice of termination, is
greater than or equal to seven hundred seventy-five million
dollars ($775,000,000), then the purchase price to be paid by the
Buyer for the Shares shall be equal to (i) the Base
Consideration, plus (ii) an amount equal to (A) one percent (1%)
of the fair market value of Initial Company Assets in excess of
five hundred million dollars ($500,000,000) on the one-year
anniversary of the Closing Date, up to an amount not to exceed
two million dollars ($2,000,000), plus interest thereon from the
Closing Date until paid at the rate of the greater of (x) eight
and one-half percent (8.5%), or (y) the dividend or interest rate
to be paid to the investors in the Private Placement (the
"Initial Purchase Price Adjustment"), plus (B) one percent (1%)
of the fair market value of Incremental Company Assets in excess
of seven hundred million dollars ($700,000,000) on the two-year
anniversary of the Closing Date, up to an amount not to exceed
two million dollars ($2,000,000) (the "Final Purchase Price
Adjustment").
(b) If, on the Closing Date, the value of all
Company Accounts less the value of such Accounts as to which the
Company or Optima has received Client notice of termination, is
less than seven hundred seventy-five million dollars
($775,000,000), then the purchase price to be paid by the Buyer
for the Shares shall be equal to (i) the Base Consideration, less
one million dollars ($1,000,000), plus (ii) an amount equal to
(A) one percent (1%) of the fair market value of Initial Company
Assets in excess of four hundred million dollars ($400,000,000)
on the one-year anniversary of the Closing Date, up to an amount
not to exceed three million dollars ($3,000,000), plus interest
thereon from the Closing Date until paid at the rate of the
greater of (x) eight and one- half percent (8.5%), or (y) the
dividend or interest rate to be paid to the investors in the
Private Placement (the "Alternative Purchase Price Adjustment"),
plus (B) the Final Purchase Price Adjustment (determined in
accordance with Section 2.2(a)(ii)(B)), plus (C) the Additional
Consideration, if any.
(c) The Purchase Price shall be paid by the
Buyer as follows: (i) the Base Consideration shall be paid at the
Closing in accordance with Section 3.2; (ii) the Initial Purchase
Price Adjustment or Alternative Purchase Price Adjustment, as
applicable, shall be paid on or before the fifth (5th) Business
Day following the date of determination of such Adjustment,
either upon mutual agreement by the Buyer and the Shareholder
Representative, or as provided in Section 2.3 for resolving
disputes over the Initial Purchase Price Adjustment or the
Alternative
#297907
-8-
<PAGE>
Purchase Price Adjustment, as applicable; (iii) the Final
Purchase Price Adjustment shall be paid on or before the fifth
(5th) Business Day following the date of determination of the
Final Purchase Price Adjustment, either upon mutual agreement by
the Buyer and the Shareholder Representative, or as provided in
Section 2.3 for resolving disputes over the Final Purchase Price
Adjustment; and (iv) the Additional Consideration, if any, shall
be paid on the fifth (5th) Business Day after the determination
of the Alternative Purchase Price Adjustment either by mutual
agreement of the Parties or as provided in Section 2.3. If there
is any dispute between Buyer and the Shareholder Representative
regarding the value of all Company Accounts on the Closing Date,
then such value shall be determined in accordance with the
procedures set forth in Section 2.3 regarding Purchase Price
Adjustments. The parties agree that all amounts of the Initial,
Alternative or Final Purchase Price Adjustments and the
Additional Consideration, not subject to dispute, shall be paid
on or before the fifth (5th) Business Day following delivery of
the Notice of Disagreement by the Shareholder's Representative as
set forth in Section 2.3(b).
Section 2.3 Determination of Purchase Price
Adjustments.
(a) As soon as reasonably practical but not
more than 30 days following the one-year anniversary of the
Closing Date, with respect to the Initial Purchase Price
Adjustment or the Alternative Purchase Price Adjustment, and not
more than 30 days following the two-year anniversary of the
Closing Date, with respect to the Final Purchase Price
Adjustment, the Buyer shall deliver to the Shareholder
Representative a schedule calculating the amount of Initial
Company Assets and the Incremental Company Assets, as applicable
(the "Company Asset Schedule"). The parties shall consult with
one another and cooperate in the preparation of the Company Asset
Schedule. For informational purposes only, Buyer will prepare and
deliver to the Shareholder Representative an interim calculation
of the amount of Initial Company Assets within seven months after
the Closing Date and an interim calculation of the Incremental
Company Assets within nineteen months after the Closing Date.
(b) Within five Business Days after delivery of
the Company Asset Schedule to the Shareholder Representative, the
Shareholder Representative may dispute all or any portion of the
Company Asset Schedule by giving written notice in accordance
with the terms of Section 10.5 of this Agreement (a "Notice of
Disagreement") to Buyer stating there is a disagreement. Within
thirty days of the effective date of the Notice of Disagreement,
the Shareholder Representative shall deliver to Buyer a statement
of objections in accordance with the terms of Section 10.5 of
this Agreement ("Objection Statement") setting forth in
reasonable detail the basis for any such dispute (any such
dispute being hereinafter called a "Disagreement"). Buyer agrees
to reasonably cooperate with the Shareholder Representative in
connection with his review of the Company Asset Schedules. After
delivery of the Objection Statement, the parties shall promptly
commence good faith negotiations with a view to resolving all
such Disagreements. If the Shareholder Representative does not
give such a Notice of a Disagreement within the five-Business-Day
period set forth herein or if the Objection Statement is not
delivered within the thirty-day period set forth herein, the
Shareholder Representative and the Shareholders shall be deemed
to have accepted such Company Asset Schedule in the form
delivered to the Shareholder Representative by Buyer.
#297907
-9-
<PAGE>
(c) If the Shareholder Representative shall
deliver a Notice of Disagreement and Objection Statement and
Buyer shall not dispute all or any portion thereof by giving
written notice to the Shareholder Representative setting forth in
reasonable detail the basis for such dispute within five Business
Days following the delivery of such Objection Statement, Buyer
shall be deemed to have accepted the Company Asset Schedule as
modified in the manner described in the Objection Statement. If
Buyer disputes all or any portion of the Objection Statement
within the five-Business-Day period described in the previous
sentence, and within five Business Days following the delivery to
the Shareholder Representative of the notice of such dispute the
Shareholder Representative and Buyer do not resolve the
Disagreement (as evidenced by a written agreement among the
parties hereto), such Disagreement shall thereafter be referred
by either Buyer or the Shareholder Representative to an
Independent Accounting Firm for a resolution of such Disagreement
in accordance with the terms of this Agreement. The
determinations of such Independent Accounting Firm with respect
to any Disagreement shall be rendered within twenty (20) Business
Days after referral of the Disagreement to such Independent
Accounting Firm or as otherwise agreed to between the Shareholder
Representative and Buyer, shall be final and binding upon the
parties, the amount so determined shall be used to complete the
Company Asset Schedule and the parties agree that the procedures
set forth in this Section 2.3 shall be the sole and exclusive
remedy with respect to the determination of the Initial Purchase
Price Adjustment or Alternative Purchase Price Adjustment, as
applicable, and the Final Purchase Price Adjustment, as
applicable. Buyer, the Shareholder Representative and the
Shareholders shall use their best efforts to cause the
Independent Accounting Firm to render its determination within
the ten-Business-Day period described in the previous sentence,
and each shall cooperate with such Independent Accounting Firm
and provide it with access to the books, records, personnel and
representatives and such other information as such Independent
Accounting Firm may require in order to render its determination.
All of the fees and expenses of any Independent Accounting Firm
retained pursuant to this paragraph (c) shall be paid one-half by
Buyer and one-half by the Shareholders.
(d) Promptly after the Company Asset Schedule
for the Initial Purchase Price Adjustment, the Alternative
Purchase Price Adjustment or the Final Purchase Price Adjustment,
as applicable, has been finally determined in accordance with
paragraphs (a), (b) and (c) of this Section 2.3 (including by
means of a deemed acceptance thereafter by the Shareholders and
the Shareholder Representative or by Buyer as provided in
paragraphs (b) and (c), respectively), but in no event later than
five Business Days following such final determination, the Buyer
shall deliver by Wire Transfer to the account designated by the
Shareholder Representative an amount equal to the Initial
Purchase Price Adjustment, the Alternative Purchase Price
Adjustment or the Final Purchase Price Adjustment, as applicable,
to be held in such account on behalf of, and distributed from
such account to, all of the Shareholders in accordance with their
respective interests in the Company immediately prior to the
Closing. The distribution of such amounts from such account shall
be solely a matter between the Shareholders, on the one hand, and
the Shareholder Representative, on the other hand. The Buyer will
have fully satisfied its obligations regarding payment of the
purchase price once it delivers such aggregate amount to the
account designated by the Shareholder Representative.
#297907
-10-
<PAGE>
(e) If any amount of the Initial or Alternative
Purchase Price Adjustment, as applicable, is not made within
thirty (30) days of the date payment of such amount is due and
owing hereunder, (i) Buyer shall pay to the Shareholders interest
on such unpaid amount until paid at a rate equal to the lesser of
21% or the maximum rate permitted under Applicable Laws of
Colorado, and (ii) an additional $1,000,000 (the Prepayment
Amount), which shall be deemed a prepayment of all or a part of
the Final Purchase Price Adjustment, shall become due and owing
within thirty (30) days thereafter. The Prepayment Amount shall
be applied against, and shall reduce the amount owed by Buyer
under, the Final Purchase Price Adjustment. If the Final Purchase
Price Adjustment is less than the Prepayment Amount, Shareholders
shall pay to the Company, within 30 days after the determination
of the Final Purchase Price Adjustment in accordance with this
Section 2.3, an amount equal to eighty five percent (85%) of the
excess of the Prepayment Amount over the Final Purchase Price
Adjustment, with the remaining fifteen percent (15%) to be
retained by the Shareholders. Interest shall accrue on all past
due amounts to be paid under this Section 2.3(e) at a rate equal
to the lesser of 21% or the maximum rate permitted under
Applicable Laws of Colorado.
(f) The Initial, Alternative, or Final Purchase
Price Adjustment, as applicable, shall be reduced by the amount
of any indemnification obligation of the Shareholders to Buyer
pursuant to Article VIII.
ARTICLE III
CLOSING
Section 3.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Holme Roberts & Owen LLP, 1700 Lincoln, Suite
4100, Denver, Colorado, at 10:00 a.m., local time, on the fifth
Business Day after the conditions set forth in Article VII have
been satisfied or waived or at such other date, time and place as
Buyer and the Shareholder Representative shall agree (the date on
which the Closing takes place being referred to herein as the
"Closing Date"). The parties shall use their efforts to complete
Closing on or before September 12, 1997, but in any event no
later than September 30, 1997.
Section 3.2 Instruments of Transfer; Payment of
Consideration.
(a) Not less than two or more than four
Business Days prior to the Closing Date, the Shareholder
Representative shall deliver to Buyer written Wire Transfer
instructions.
(b) At the Closing, the Shareholders and the Company shall
deliver to Buyer the following:
(i) certificates representing all of the Shares, in each
case duly executed in blank or accompanied by stock powers
duly executed in blank, in proper form for transfer, with all
appropriate stock transfer tax stamps affixed; and
#297907
-11-
<PAGE>
(ii) the documents required to be delivered pursuant to
Section 7.1. (c) At the Closing, Buyer shall deliver, or shall
cause to be delivered, to the Shareholder Representative the
following: (i) the Base Consideration, by Wire Transfer to the
account identified by the Shareholder Representative, to be held
in such account on behalf of, and distributed from such account
to, all of the Shareholders in accordance with their respective
interests in the Company immediately prior to the Closing; and
(ii) the documents required to be delivered pursuant to
Section 7.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company and each Shareholder jointly and severally
represent and warrant to Buyer as of the date of this Agreement
as follows:
Section 4.1 Organization and Related Matters. The
Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. Optima
is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Georgia. Each of the
Company and Optima has the corporate power and authority to carry
on its business as it is now being conducted and to own, lease
and operate all of its properties and assets. Each of the Company
and Optima is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned,
leased or operated by it makes such qualification or licensing
necessary, except where the failure to be so qualified or
licensed would not have a material adverse effect on the assets,
properties, prospects or operations of the Company. The copies of
the Certificate of Incorporation and Bylaws and any amendments
thereto of each of the Company and Optima heretofore delivered to
Buyer are complete and correct copies of such instruments on the
date of this Agreement and the Closing Date.
Section 4.2 Authority; No Violation.
(a) The Company has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by all
requisite corporate action on the part of the Company and the
Shareholders, and no other corporate proceedings on the part of
the Company (including, without limitation, any approval of the
Shareholders) are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Company
and the Shareholders and (assuming the due
#297907
-12-
<PAGE>
authorization, execution and delivery of this Agreement by Buyer)
constitutes a valid and binding obligation of the Company and the
Shareholders, enforceable against the Company and the
Shareholders in accordance with its terms.
(b) Neither the execution and delivery of this
Agreement by the Company or the Shareholders, nor the
consummation by the Company or the Shareholders, as the case may
be, of the transactions contemplated hereby to be performed by
them, nor compliance by the Company or the Shareholders with any
of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws (or other governing
documents) of the Company or Optima, or (ii) except as set forth
in Schedule 4.2(b), and assuming that the Consents referred to in
Section 6.2 hereof are duly obtained, (x) violate, conflict with
or require any Consent under any Applicable Law to which the
Company, Optima or any of their Affiliates or any of their
properties, contracts or assets are subject, or (y) violate,
conflict with, result in a breach of any provision of or the loss
of any benefit under, constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a
default) under, result in the termination of or a right of
termination or cancellation under, accelerate or result in a
right of acceleration of the performance required by, result in
the creation of any material Lien upon the Shares or the
properties or assets of the Company, Optima or any of their
Affiliates, or require any Consent under any Contract to which
the Company, Optima or any of their Affiliates is a party, or by
which the Company, Optima, any of their Affiliates or any
Shareholder, or any of their respective properties or assets, may
be bound or affected.
Section 4.3 Consents and Approvals. Except for such
consents, approvals and notices as are set forth in Section 6.2
and Schedule 4.3, no Consents or Governmental Approvals are
necessary to comply with all Applicable Laws, Contracts or
Permits and to preserve all rights of the Company or Optima
thereunder in connection with (i) the execution and delivery by
the Company and the Shareholders of this Agreement and (ii) the
consummation by the Company and the Shareholders of the
transactions contemplated hereby. Neither the Company nor any of
the Shareholders has any reason to believe that any approval or
Consent set forth in Section 6.2 or in Schedule 4.3 will not be
obtained prior to the Closing.
Section 4.4 Stock Ownership. (a) The Shareholders own
beneficially and of record all of the Shares, and the
Shareholders have the full and unrestricted power to sell,
assign, transfer and deliver the Shares to Buyer in accordance
with the terms of this Agreement free and clear of any Liens.
There are no shares of capital stock of the Company issued or
outstanding other than the Shares. All of the Shares are duly
authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights. Except as set forth in Schedule 4.4, there
is no outstanding option, warrant, convertible or exchangeable
security, right, subscription, call, unsatisfied preemptive right
or other agreement or right of any kind (each, a "Right") to
purchase or otherwise acquire from the Company, the Shareholders
or any other Person any capital stock of the Company or any
Right. Except as set forth in Schedule 4.4, there are no
agreements or understandings of any kind with respect to the
voting of the Shares. The Company does not have any Subsidiaries
other than Optima, and does not own, directly or indirectly, any
equity or other ownership interest in any other Person.
#297907
-13-
<PAGE>
(b) The Company owns beneficially and of record
all of the shares of Capital Stock of Optima (the "Optima
Shares"). There are no shares of capital stock of Optima issued
or outstanding other than the Optima Shares. All of the Optima
Shares are duly authorized, validly issued, fully paid,
nonassessable and free of any preemptive rights. Except as set
forth in Schedule 4.4, there are no Rights to purchase or
otherwise acquire from the Company, the Shareholders or any other
Person any capital stock or Rights of Optima. Except as set forth
in Schedule 4.4, there are no agreements or understandings of any
kind with respect to the voting of the Optima Shares. Optima does
not have any Subsidiaries, and does not own, directly or
indirectly, any equity or other ownership interest in any other
Person.
(c) At completion of the Closing, Buyer will
own all of the Shares free and clear of all Liens and the Company
will own all of the Optima Shares free and clear of all Liens and
no Person will own, directly or indirectly, any Rights to
purchase or acquire any capital stock of Rights of the Company or
Optima.
Section 4.5 Regulatory Documents.
(a) Since January 1, 1993, the Company and its
Affiliates have timely filed all Regulatory Documents, together
with any amendments required to be made with respect thereto,
that were required to be filed by such Persons under Applicable
Laws, and have paid all fees and assessments due and payable in
connection therewith. Each of the Company and Optima is duly
registered as an investment adviser under the Advisers Act and
under applicable state statutes. Schedule 4.5(a) lists the states
in which either the Company or Optima is registered as an
investment adviser. Each such federal and state registration is
in full force and effect. Each of the Company and Optima has all
Permits required to operate its business as presently conducted.
(b) As of their respective dates (and the
dates they were filed, if different), the Regulatory Documents of
the Company and each of its Affiliates complied in all material
respects with the requirements of the Securities Laws, as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Regulatory Documents, and none of
such Regulatory Documents, as of their respective dates (and the
dates they were filed, if different), contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Company has previously
delivered or made available to Buyer a true, correct and complete
copy of each such Regulatory Document filed with the SEC after
January 1, 1993, and prior to the date hereof (including a Form
ADV of each of the Company and Optima as in effect on the date
hereof) and will deliver to Buyer promptly after the filing
thereof a true, correct and complete copy of each Regulatory
Document filed by the Company with the SEC after the date hereof
and prior to the Closing Date.
Section 4.6 Financial Statements. The Company has
previously delivered to Buyer copies of (a) the audited
consolidated balance sheets of the Company as of December 31st
for the fiscal years 1995 and 1996, and the related audited
statements of income, changes in shareholders' equity and cash
flows for the fiscal years 1995 and 1996, inclusive, in each case
accompanied by the audit report of Faucett, Taylor & Associates,
P.C., independent public
#297907
-14-
<PAGE>
accountants with respect to the Company and (b) the unaudited
interim consolidated balance sheets and related statement of
income, changes in shareholders' equity and cash flows of the
Company at or for the period beginning January 1, 1997 and ending
June 30, 1997 (collectively, the statements referred to above
being referred to as the "Company Financial Statements" and the
balance sheet as of June 30, 1997, being referred to as the
"Company Balance Sheet"). The balance sheets referred to in the
previous sentence (including the related notes, where applicable)
present fairly the consolidated financial position of the Company
as of the dates thereof, and the other financial statements
referred to in this Section 4.6 present fairly (subject, in the
case of the unaudited statements, to recurring audit adjustments
normal in nature and amount) the consolidated results of its
operations and its cash flows for the respective fiscal periods
therein set forth; each of such statements (including the related
notes, where applicable) comply in all material respects with
applicable accounting requirements with respect thereto; and,
except as set forth in Schedule 4.6 hereto, each of such
statements (including the related notes, where applicable) has
been prepared in accordance with GAAP consistently applied during
the periods involved. Except for (i) those Liabilities that are
fully reflected or reserved against on the Company Balance Sheet
and (ii) Liabilities incurred in the ordinary course of business,
consistent with past practice since the date of the Company
Balance Sheet and which are set forth or described on Exhibit A,
the Company has no Liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise, and whether
due or to become due, which are required by GAAP to be shown on
its consolidated balance sheet or disclosed in related notes to
the Company Financial Statements.
Section 4.7 Ineligible Persons. Neither the Company,
Optima, nor any "affiliated person" (as defined in the Investment
Company Act of 1940, as amended) of the Company or Optima is
ineligible under the Investment Company Act to serve as an
investment adviser (or in any other capacity contemplated by the
Investment Company Act) to a registered investment company.
Neither the Company, Optima, nor any "associated person" (as
defined in the Advisers Act) of the Company or Optima, is
ineligible under the Advisers Act to serve as an investment
adviser or as an associated person to a registered investment
adviser. Neither the Company, Optima, nor any "associated person"
(as defined in the Exchange Act) of the Company or Optima, is
ineligible under the Exchange Act or the NASD's Conduct Rules to
serve as a broker-dealer or as an associated person to a
registered broker-dealer.
Section 4.8 Material Contracts. Schedule 4.8 sets forth
a complete and accurate list of all Contracts to which the
Company or Optima is a party (excluding policies of insurance in
the ordinary course of business) or by which any of their
properties or assets are bound which: (x) contain obligations of
the Company or Optima, individually or in the aggregate, in
excess of $10,000; (y) involve payments based on profits or
revenues of the Company or Optima; or (z) are otherwise material
to the business, properties or assets of the Company or Optima
(hereinafter referred to collectively as the "Material
Contracts"). To the Company's or Optima's best knowledge, each of
the Material Contracts is in full force and effect and
enforceable in accordance with its terms. Neither the
Shareholders, the Company nor Optima has received written notice
of cancellation of or default under or intent to cancel or call a
default under any of the Material Contracts. To the Company's and
Optima's best knowledge, there exists no event or
#297907
-15-
<PAGE>
condition which with or without notice or lapse of time or both
would be a breach or a default on the part of the Company or
Optima or on the part of any other party to such Material
Contracts.
Section 4.9 Advisory Agreements. Each Advisory Agreement
to which the Company or Optima is a party is in compliance in all
material respects with the provisions of the Advisers Act has
been duly approved at all times in compliance, in all material
respects, with the Advisory Act and all other Applicable Laws.
Each such Advisory Agreement has been performed by the Company or
Optima, as applicable, in accordance with the Advisory Act and
all other Applicable Laws. Each agreement with a broker-dealer
and each agreement with any distributor, financial planner,
solicitor, finder, administrator or other Person to which the
Company or Optima is a party is in compliance, in all material
respects, with all Applicable Laws and has been duly approved and
performed by the Company or Optima, as applicable, in accordance
with all Applicable Laws.
Section 4.10 No Other Broker. No broker, finder or
similar intermediary has acted for or on behalf of, or is
entitled to any broker's, finder's or similar fee or other
commission from the Company, Optima, the Shareholders or, to the
Company's and the Shareholder's knowledge, Buyer or any of their
respective Affiliates in connection with this Agreement or the
transactions contemplated hereby.
Section 4.11 Legal Proceedings. Except as disclosed in
Schedule 4.11, there are no legal, administrative, arbitral or
other proceedings, claims, suits, actions or governmental or
regulatory investigations or inquiries of any nature that are
pending or, to the Company's best knowledge, threatened against
or in any manner relating to the Company, Optima, the
Shareholders, or the properties, assets, businesses or operations
thereof or that challenge in any manner the validity or propriety
of the transactions contemplated by this Agreement, and there is
no injunction, order, judgment, decree, or regulatory restriction
imposed upon the Company, Optima, the Shareholders, or any of the
properties, assets or businesses thereof which, individually or
in the aggregate, could reasonably be expected to have a material
adverse effect on the Company or Optima or the assets,
properties, prospects or operations of the Company or Optima or
the ability of the Company or the Shareholders to consummate the
transactions contemplated by this Agreement.
Section 4.12 Compliance with Applicable Law.
(a) Except as disclosed in Schedule 4.12(a),
each of the Company and Optima holds, and has at all times held,
all licenses, franchises, permits, registrations and
authorizations (collectively, "Permits") necessary for the lawful
ownership and use of their properties and assets and the conduct
of their businesses under and pursuant to all Applicable Laws,
and has complied, in all material respects with all Applicable
Laws, and is not in default in any material respect under, any
Applicable Law relating to the Company and Optima or any of their
assets, properties or operations, and to the best knowledge of
the Company, Optima, and the Shareholders does not know of or
have reason to believe that there are or may be any violations of
any of the above and
#297907
-16-
<PAGE>
has not received written or oral notice asserting any such
violation. All Permits are valid and in good standing and are not
subject to any suspension, modification or revocation or
proceedings related thereto.
(b) Except as disclosed on Schedule 4.12(b),
since January 1, 1992, no Governmental Authority has initiated
any administrative proceeding or, to the best knowledge of the
Company or Optima, investigation or inquiry into or related to
the business or operations of the Company, Optima, any employee
of the Company or Optima, or any Shareholder. There is no
unresolved violation, criticism, exception investigation, or
inquiry by any Governmental Authority relating to any examination
of the Company, Optima, any employee of the Company or Optima, or
any Shareholder.
(c) Each of the Company and Optima has at all
times established and maintained records in accordance with
Applicable Law, which records accurately reflect transactions in
reasonable detail, and accounting controls, policies and
procedures sufficient to ensure that such transactions are
recorded in a manner that permits the preparation of financial
statements in accordance with GAAP and applicable regulatory
accounting requirements.
Section 4.13 Insurance. All of the insurance policies
and bonds of the Company or Optima are listed in Schedule 4.13.
To the best knowledge of the Company, each such insurance policy
or bond is in full force and effect, and neither the Company nor
Optima has received notice or any other indication from any
insurer or agent of any intent to cancel any such insurance
policy or bond.
Section 4.14 Labor and Employment Matters. Except as set
forth in Schedule 4.14, (a) no collective bargaining agreement or
similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee
association, exists which is binding on the Company or Optima,
(b) each of the Company and Optima is, and has at all times been,
in compliance, in all material respects, with all Applicable Laws
respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, and occupational
safety and health, and is not engaged in any unfair labor
practice, and (c) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or affecting the
Company or Optima.
Section 4.15 Employee Benefit Plans; ERISA.
(a) Schedule 4.15 includes a complete list of
all bonus, profit sharing, compensation, termination, stock
option, stock appreciation right, restricted stock, performance
unit, pension, retirement, deferred compensation, employment,
severance, termination pay, welfare and other employee benefit
plans, agreements and arrangements, labor agreements, trusts,
funds and other arrangements in effect as of the date hereof for
the benefit or welfare of any director, officer, employee or
former employee of the Company or Optima or pursuant to which the
Company, Optima or any ERISA Affiliate has any liability,
contingent or otherwise, including, but not limited to, any
liability with respect to any such plan or arrangement maintained
by any Person that is or has been an ERISA Affiliate of the
Company or Optima at
#297907
-17-
<PAGE>
any time during the past five years (each, a "Company Plan").
Each Company Plan is in material compliance with all Applicable
Laws including ERISA and the Code. No Company Plan is subject to
Title IV of ERISA or Section 302 of ERISA or Section 412 or 4971
of the Code. No Company Plan is a multiemployer plan (as defined
in Section 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
plan that has two or more contributing sponsors at least two of
whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan"), nor has the Company
or any ERISA Affiliate, at any time since September 2, 1974,
contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(b) With respect to each Company Plan, the
Company has delivered or made available to Buyer a true, correct
and complete copy of: (i) each writing constituting a part of
such Company Plan, including, without limitation, all plan
documents, benefit schedules, trust agreements, and insurance
contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any. Except as specifically
provided in this Agreement or the foregoing documents delivered
or made available to Buyer, there are no amendments to the
Company Plan that have been adopted or approved nor has the
Company or any of its Affiliates undertaken to make any such
amendments.
(c) Schedule 4.15 identifies each Company Plan
that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). The IRS has
issued a favorable determination letter with respect to each
Qualified Plan that has not been revoked, and there are no
existing circumstances nor any events that have occurred that are
likely to adversely affect the qualified status of any Qualified
Plan or the related trust. No Company Plan is intended to meet
the requirements of Code Section 501(c)(9).
(d) All contributions required to be made to
any Company Plan by Applicable Law or by any plan document or
other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Company Plan, for
any period through the date hereof have been timely made or paid
in full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected on or reserved
for in the Company Financial Statements.
(e) There does not now exist, nor do any
circumstances exist that could result in, any Liability following
the Closing under ERISA with respect to the Company or Optima
arising from any actions or inactions taken by the Company,
Optima or any current or former ERISA Affiliate. Without limiting
the generality of the foregoing, neither the Company nor any
current or former ERISA Affiliate has engaged in any transaction
described in Sections 4069, 4204 or 4212 of ERISA.
(f) Neither the Company, nor Optima, nor any of
their Affiliates have any Liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or
dependents thereof, except for health continuation coverage as
required by Section 4980B of the
#297907
-18-
<PAGE>
Code or Part 6 of Title I of ERISA and at no expense to the
Company nor Optima nor any of their Affiliates.
(g) Except as provided in this Agreement,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either
alone or in conjunction with any other event) result in, cause
the accelerated vesting or delivery of, or increase the amount or
value of, any payment or benefit to any employee of the Company,
or Optima or any of their Affiliates. Without limiting the
generality of the foregoing, no amount paid or payable by the
Company, or Optima, or any of their Affiliates in connection with
the transactions contemplated hereby (either solely as a result
thereof or as a result of such transactions in conjunction with
any other event) will be an "excess parachute payment" within the
meaning of Section 280G of the Code. (h) There
are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which
have been asserted or instituted against the Company, Optima, any
present or former ERISA Affiliate, the Company Plans, any
fiduciaries thereof with respect to their duties to the Company
Plans or the assets of any of the trusts under any of the Company
Plans which could reasonably be expected to result in any
Liability of the Company or Optima or any of their Affiliates to
the Pension Benefit Guaranty Corporation, the Department of
Treasury, the Department of Labor or any Multiemployer Plan.
(i) Set forth on Schedule 4.15(i) is an
accounting of all obligations, contingent or otherwise, of the
Company or Optima or any of their Affiliates (other than
obligations to pay base salary and annual bonuses in the ordinary
course of business consistent with past practice) owing or
payable to, or on behalf of, employees or former employees of the
Company or Optima or any of their respective predecessors that
are not accrued or otherwise reflected on or reserved for in the
Company Financial Statements.
Section 4.16 Technology and Intellectual Property.
(a) Attached hereto as Schedule 4.16(a) is a
list of all material (i) domestic and foreign registered
trademarks and service marks, registered copyrights and patents,
(ii) applications for registration or grant of any of the
foregoing, (iii) unregistered trademarks, service marks, trade
names, logos and assumed names, and (iv) licenses for any of the
foregoing, in each case, owned by the Company or Optima or used
in or necessary to conduct the business of the Company or Optima.
The items on Schedule 4.16(a), together with all other material
trademarks, service marks, trade names, logos, assumed names,
patents, copyrights, trade secrets, computer software, licenses,
formulae, customer lists or other databases, designs and
inventions currently used in or necessary to conduct the business
of the Company or Optima constitutes the "Intellectual Property."
(b) Except as set forth in Schedule 4.16(b),
each of the Company and Optima has ownership of, or such other
rights by license, lease or other agreement in and to, the
Intellectual Property as necessary to conduct its business as
presently conducted. To the best knowledge of the Company and the
Shareholders, neither the Company nor Optima has infringed
#297907
-19-
<PAGE>
or violated any trademark, trade name, copyright, patent, trade
secret right or other proprietary right of others. Neither the
Company nor Optima has received notice of any claim respecting
any such violation or infringement. Each of the Company and
Optima has no reason to believe that upon consummation of the
transactions contemplated hereby Buyer or any of its Affiliates
will be in any way restricted in the use of any of the
Intellectual Property under any Applicable Law, Contract or
otherwise, or that use of such Intellectual Property by Buyer or
any of its Affiliates will violate or infringe the rights of any
Person, or subject any of Buyer or its Affiliates to liability of
any kind, under any Applicable Law, Contract or otherwise.
(c) The Company has developed and owns the
rights to certain software which it has made available to LCG
Associates ("LCG"). The Company will enter into a licensing
agreement with LCG ("Licensing Agreement") for the ADAM Software,
on or prior to Closing, in form and substance satisfactory to
Buyer and Shareholder Representative.
Section 4.17 Taxes.
(a) (i) All Returns required to be filed by or
on behalf of the Company have been duly filed on a timely basis
and such Returns (including all attached statements and
schedules) are true, complete and correct. All Taxes shown to be
payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other
Taxes are payable by the Company with respect to items or periods
covered by such Returns (whether or not shown on or reportable on
such Returns) or with respect to any period prior to the Closing
Date except for any Taxes which may relate to the period from
January 1, 1997 to the Closing Date and are not yet due and
payable; (ii) the Company has withheld and paid over all Taxes
required to have been withheld and paid over (including any
estimated taxes), and has complied with all information reporting
and backup withholding requirements, including maintenance of
required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor,
or other third party; (iii) there are no liens on any of the
assets of the Company with respect to Taxes, other than liens for
Taxes not yet due and payable or for Taxes that are being
contested in good faith through appropriate proceedings and for
which appropriate reserves have been established; and (iv) the
Company has furnished the Buyer with true and complete copies of
all federal and state income tax returns of the Company for all
periods since January 1, 1995.
(b) Except as disclosed on Schedule 4.17: (i)
the Returns of the Company have never been audited by a
governmental or taxing authority, nor is any such audit in
process, pending or threatened (formally or informally); (ii) no
deficiencies exist or have been asserted (either formally or
informally) or are expected to be asserted with respect to Taxes
of the Company, and no notice (either formally or informally) has
been received by the Company that it has not filed a Return or
paid Taxes required to be filed or paid by it; (iii) the Company
is not a party to any action or proceeding for assessment or
collection of Taxes, nor has such action or proceeding been
asserted or threatened (either formally or informally) against it
or any of its assets; (iv) no waiver or extension of any statute
of limitations is in effect with respect to Taxes or Returns of
the Company; (v) no action has been taken that would have the
effect of deferring any liability for Taxes for the Company from
any period prior to the Closing Date to any period
#297907
-20-
<PAGE>
after the Closing Date; (vi) there are no outstanding requests
for rulings, subpoenas or requests for information pending with
respect to the Company; (vii) no power of attorney has been
granted by the Company, with respect to any matter relating to
Taxes; and (viii) there is no liability for unpaid Taxes of the
Company for any periods ending on or before December 31, 1996.
(c) Except as disclosed on Schedule 4.17: (i)
the Company has not made an election, and is not required to
treat any asset as owned by another person for federal income tax
purposes or as tax-exempt bond financed property or tax-exempt
use property within the meaning of Section 168 of the Code; (ii)
the Company has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder
would result in a nondeductible expense pursuant to Section 280G
of the Code or an excise tax to the recipient of such payment
pursuant to Section 4999 of the Code; (iii) the Company has not
agreed, nor is it required to make, any adjustment under Code
Section 481(a) by reason of a change in accounting method or
otherwise; (iv) the Company has not disposed of any property that
has been accounted for under the installment method; (v) the
Company is not a party to any interest rate swap, currency swap
or similar transaction; (vi) the Company is not a United States
real property holding corporation within the meaning of Section
897(c)(2) of the Code and Buyer is not required to withhold tax
on the purchase of the stock of the Company; (vii) the Company
has not participated in any international boycott as defined in
Code Section 999; (viii) there are no outstanding balances of
deferred gain or loss accounts related to deferred intercompany
transactions with respect to the Company under Treasury
Regulations ss.ss. 1.1502-13 or 1.1502-14; (ix) the Company is
not subject to any joint venture, partnership or other
arrangement or contract that is treated as a partnership for
federal income tax purposes; (x) the Company does not have and
has never had a permanent establishment in any foreign country,
as defined in any applicable tax treaty or convention between the
United States and such foreign country; and (xi) the transactions
contemplated herein are not subject to the tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code, or of any other provision of law.
(d) All references to the "Company" in this
Section 4.17 shall include all subsidiaries of the Company.
Section 4.18 No Adverse Change. Except as set forth on
Schedule 4.18 or otherwise disclosed in the Company's unaudited
financial statements dated June 30, 1997 or this Agreement, since
December 31, 1996, (a) each of the Company and Optima has
operated its business only in the ordinary course of business
consistent with past practice; (b) there has been no material
adverse change in the financial condition, prospects, results of
operations, assets or business of the Company or Optima; and (c)
neither the Company nor Optima has taken any action or suffered
any event that if taken or suffered after the date hereof would
violate Section 6.1 of this Agreement.
Section 4.19 Real Property. The assets or property of
the Company or Optima that consist of leasehold interests in real
property are listed in Schedule 4.19, together with annual lease
payments and all Liens thereon. All offices where either the
Company or Optima presently conducts its business are subject to
leases listed in Schedule 4.19. Neither the Company nor
#297907
-21-
<PAGE>
Optima has any interests in any real property except for the
leases set forth in Schedule 4.19. The Company has furnished
Buyer with true, correct and complete copies of all leases listed
in Schedule 4.19.
To the best knowledge of the Company, all leases listed
in Schedule 4.19 are in full force and effect in accordance with
their respective terms, and there is not any existing default or
event which with notice or lapse of time or both would become a
default under any such lease.
Section 4.20 Filing Documents. None of the information
regarding the Company, Optima or the Shareholders or any other
matter supplied or to be supplied by the Company, Optima or any
Shareholder included or for inclusion in any documents to be
filed with any Governmental Authority in connection with the
transactions contemplated hereby will, at the respective times
such documents are filed with any Governmental Authority, contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and the
Shareholders as of the date of this Agreement as follows:
Section 5.1 Organization and Related Matters. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Colorado. Buyer has the
corporate power and authority to carry on its business as it is
now being conducted and to own, lease and operate all of its
properties and assets. Buyer is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties
and assets owned, leased or operated by it makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed would not have a material adverse
effect on the Buyer or its assets, properties, prospects or
operations.
Section 5.2 Authority; No Violation.
(a) Buyer has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by all
requisite corporate action on the part of Buyer, and no other
corporate proceedings on the part of Buyer or its shareholders
are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and (assuming the due
authorization, execution and delivery of this Agreement by the
Company and the Shareholders) constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance with
its terms.
#297907
-22-
<PAGE>
(b) Neither the execution and delivery of this
Agreement by Buyer, nor the consummation by Buyer of the
transactions contemplated hereby to be performed by it, nor
compliance by Buyer with any of the terms or provisions hereof,
will (i) violate any provision of the organizational documents of
Buyer or (ii) except as set forth in Schedule 5.2(b), and
assuming that the consents and approvals referred to in Section
6.2 hereof are duly obtained, (x) violate, conflict with or
require any Consent under any Applicable Law to which Buyer or
any of its Affiliates or any of its properties or assets are
subject, or (y) violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate or result in a right of acceleration of the
performance required by, result in the creation of any material
Lien upon the properties, Contracts or assets of the Buyer, or
require any notice, approval or Consent under any Contract to
which Buyer or any of its Affiliates is a party, or by which
Buyer or any of its Affiliates, or any of its or their properties
or assets, may be bound or affected.
Section 5.3 Consents and Approvals. Except for the
Consents set forth in Schedule 5.3 and Section 6.2, no Consents
of any Governmental Authority or any third party are necessary to
comply with all Applicable Laws, Contracts or Permits and to
preserve all rights of Buyer thereunder in connection with (a)
the execution and delivery by Buyer of this Agreement and (b) the
consummation by Buyer of the transactions as contemplated hereby.
Section 5.4 Legal Proceedings. There are no legal,
administrative, arbitral or other proceedings, claims, actions,
suits or governmental or regulatory investigations or inquiries
of any nature that are pending or, to Buyer's best knowledge,
threatened against or in any manner relating to Buyer or any of
its Affiliates or its or their properties, assets or businesses
or that challenge in any manner the validity or propriety of the
transactions contemplated by this Agreement, and there is no
injunction, order, judgment, decree or regulatory restriction
imposed upon Buyer or any of its Affiliates or its or their
properties, assets or businesses which, individually or in the
aggregate, could reasonably be expected to have (a) a material
adverse effect on the Buyer or its assets, properties, prospects
or operations of Buyer or (b) a material adverse effect on the
parties' ability to consummate the transactions contemplated by
this Agreement.
Section 5.5 Ineligible Persons. Neither Buyer nor any
"associated person" (as defined in the Advisers Act) of Buyer is
ineligible under the Advisers Act to serve as an investment
adviser or as an associated person to a registered investment
adviser. Neither Buyer nor any "associated person" (as defined in
the Exchange Act) of Buyer is ineligible under of the Exchange
Act or the NASD's Conduct Rules to serve as a broker-dealer or as
an associated person to a registered broker-dealer.
Section 5.6 Filing Documents. None of the information
regarding the Buyer or any of its Affiliates supplied or to be
supplied by the Buyer included or for inclusion in any other
documents to be filed with any Governmental Authority in
connection with the transactions contemplated hereby will, at the
respective times such documents are filed with any Governmental
Authority, contain any untrue statement of a material fact or
omit to state a
#297907
-23-
<PAGE>
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of Business by the Company and
Optima. During the period from the date of this Agreement and
continuing through the Closing Date, except as expressly
contemplated or permitted by this Agreement or with the prior
written consent of Buyer, each of the Company and Optima shall
(a) carry on its business in the ordinary course consistent with
prudent business practice and in compliance with all Applicable
Law, Permits or Contracts; (b) make all reasonable efforts to
preserve and to prevent any interference with its present
business organization and relationships, in particular with third
party investment advisors and broker/dealers; (c) make all
reasonable efforts to keep available the present services of its
officers and employees; and (d) make all reasonable efforts to
preserve its rights, franchises, goodwill and relations with its
customers, clients and others with whom it conducts business.
Without limiting the generality of the foregoing, except as
expressly permitted by this Agreement or consented to in writing
by Buyer, neither the Company nor Optima shall, directly or
indirectly:
(i) amend, or agree to amend its Certificate of
Incorporation or Bylaws (or comparable instruments), or merge
with or into or consolidate with, or agree to merge with or into
or consolidate with, any other Person, subdivide or in any way
reclassify any shares of its capital stock, or change or agree to
change in any manner the rights, powers or privileges with
respect to its outstanding capital stock;
(ii) issue or sell or purchase any Security, or
issue any Right, or enter into any Contracts to issue or sell any
shares of its capital stock;
(iii) incur any indebtedness for borrowed money
(other than customary trade indebtedness incurred in the ordinary
course of business consistent with past practices and as
described on Schedule A) or guarantee the indebtedness of other
Persons;
(iv) waive, or agree to waive, any right of
material value to its assets, property or business;
(v) make, or agree to make, any material change in
its accounting methods or practices for tax or accounting
purposes or make, or agree to make, any material change in
depreciation or amortization policies or rates adopted by it for
Tax or accounting purposes;
(vi) materially change, or agree to materially
change, any of its business policies or practices that relate to
its business or operations, including, without limitation, fee
#297907
-24-
<PAGE>
structure, fee waivers, expense reimbursement, interest rate
management, securities selection, sales and marketing, personnel,
budget or product development policies;
(vii) make any loan or advance to any of the
Shareholders or the Company's Affiliates, officers, directors,
employees, consultants, agents or other representatives (other
than travel advances made in the ordinary course of business), or
make any other loan or advance, otherwise than in the ordinary
course of business;
(viii) sell, offer to sell, abandon or make any
other disposition of any of its assets or property, except in the
ordinary course of business; grant or suffer, or agree to grant
or suffer, any Lien on any of its material assets or property;
(ix) except as set forth and agreed to in Exhibit A
and except in the ordinary course of business in amounts less
than $10,000 in the aggregate, incur or assume, or agree to incur
or assume, any Liability or obligation (whether or not currently
due and payable) relating to its business or any of its assets or
property;
(x) make any material change in its overall
investment strategy or mix of products;
(xi) enter into, or agree to enter into, any
Contract, agreement or arrangement with any of its Affiliates;
(xii) declare or pay dividends or declare or make any
other distributions of any kind payable to the Shareholders, or
make any direct or indirect redemption, retirement, purchase or
other acquisition of any shares of its capital stock or any
Rights;
(xiii) create, renew, amend, terminate or cancel, or
take any other action that may result in the creation, renewal,
amendment, termination or cancellation of, any Contract, except
in the ordinary course of business and as could not, in the
aggregate, reasonably be expected to have a material adverse
effect on either of the Company or Optima or the assets,
properties, prospects or operations of either such Person; enter
into or amend, or agree to enter into or amend, (x) any Contract
pursuant to which it agrees to indemnify any party on behalf of
its business or pursuant to which it agrees to refrain from
competing with any party with respect to its business or (y) any
Contract to provide investment advisory, sub-advisory,
management, distribution, marketing, custody or other services
other than in the ordinary course of business and consistent with
past practices;
(xiv) take any action impairing its rights under any
Contract other than in the ordinary course of business;
(xv) adopt, amend, renew or terminate any Company Plan
or any other employee program, agreement, arrangement or policy
between the Company and one or more of its employees, other than
in the ordinary course of business;
#297907
-25-
<PAGE>
(xvi) commit any act or omission which constitutes a
breach or default under any Contract or Permit to which it
is a party or by which it or any of its properties, assets or
business is bound;
(xvii) enter into any new line of business;
(xviii) acquire or agree to acquire, in any manner,
including by way of merger, consolidation, purchase of an equity
interest or assets, any business or any corporation, partnership,
association or other business organization or division thereof;
(xix) materially increase the salary, wages, pension or
profit sharing plan of any employee; or
(xx) agree (by Contract or otherwise) to do any of the
foregoing or permit any of the foregoing to occur.
Section 6.2 Advisory Agreement Consents. As soon as
reasonably practicable after the execution of this Agreement,
each of the Company and Optima shall in writing inform its
investment advisory clients, who are parties to Advisory
Agreements, of the transactions contemplated by this Agreement.
The consent of each such client to the assignment of its Advisory
Agreement to Buyer shall be requested in writing by the Company
and Optima, the form of such request to be reasonably acceptable
to Buyer, and each of the Company and Optima shall use its best
efforts to obtain such consent prior to the Closing; or in the
case of agreements which prohibit assignment or state by their
terms such Advisory Agreements terminate upon assignment, use
their best efforts to ensure that such clients enter into new
agreements with the Company, Optima or Buyer effective on the
Closing Date. Buyer agrees that, except in the case of Advisory
Agreements which prohibit assignment or state by their terms that
they terminate upon assignment, consent of any client to the
assignment of any Advisory Agreement to the Buyer may be obtained
by requesting written consent as aforesaid and informing such
client of: (a) the intention to complete the Transaction, which
will result in an assignment of such Advisory Agreement to Buyer;
(b) the Company's or Optima's intention to continue the advisory
services, pursuant to the existing Advisory Agreement, for such
client after the Closing, if such client does not orally or in
writing inform the Company or Optima of its intention to
terminate such Advisory Agreement prior to the Closing; and (c)
the fact that the consent of such client will be presumed to be
provided if such client continues to accept, without termination,
advisory services from the Company or Optima for at least 45 days
after mailing of such notice. In addition, the Company agrees to
use its best efforts to obtain the written consent of broker
dealers and investment advisors with whom the Company and Optima
have business relationships, to the acquisition by Buyer, prior to
the Closing.
Section 6.3 Maintenance of Records.
(a) Through the Closing Date, the Company will
establish and maintain, and will cause Optima to establish and
maintain, the Records in the same manner and with the same care
that the Records have been maintained prior to the execution of
this Agreement. From and
#297907
-26-
<PAGE>
after the Closing Date, each party to this Agreement shall permit
the other parties reasonable access to any applicable Records
within its possession or control reasonably necessary in
connection with any claim, action, litigation, inquiry,
examination or other proceeding involving the party requesting
access to such Records or in connection with any obligation owed
by such party to any Person or Governmental Authority or any
present or former client of the Company.
(b) For a period of not less than six years
after the Closing Date, neither Buyer nor any of its Affiliates
shall dispose of or destroy any Records, and thereafter none of
the above persons shall dispose of or destroy any such Records
without first offering to turn over possession thereof (at the
Shareholders' expense) by written notice to the Shareholder
Representative, at least thirty days prior to the proposed date
of such disposition or destruction.
Section 6.4 Employees, Employee Benefits. Prior to the
Closing Date, the Company shall enter into the Employment
Agreements and the Consulting Agreements. The Buyer acknowledges
that the Employment Agreements and the Consulting Agreements
shall be binding obligations of the Buyer and the Company after
the Closing Date.
Section 6.5 Further Assurances. For a reasonable period
of time after the Closing Date, upon the request of Buyer, the
Company and the Shareholders shall promptly execute and deliver
such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as
Buyer may reasonably request to fully effectuate the purposes of
this Agreement.
Section 6.6 Efforts of Parties to Close. During the
period from the date of this Agreement through the Closing Date,
each party hereto shall use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to
the consummation of the transactions contemplated hereby,
including the execution and delivery of any documents,
certificates, instruments or other papers that are reasonably
required for the consummation of the transactions contemplated
hereby. During the period from the date of this Agreement and
continuing through the Closing, except as required by Applicable
Law or with the prior written consent of the other parties to
this Agreement, no party to this Agreement shall take any action
which, or fail to take any action the failure of which to be
taken, would, or could reasonably be expected to, (a) result in
any of the representations and warranties set forth in this
Agreement on the part of the party taking or failing to take such
action being or becoming untrue in any material respect; (b)
result in any conditions to the Closing set forth in Article VII
not being satisfied; or (c) adversely affect or materially delay
the receipt of any of any requisite Governmental Approvals or
other Consents. Notwithstanding the foregoing or any other
provision hereof, the failure of the Private Placement to close
on or before September 30, 1997, or at all, for any reason
(including a decision by Buyer not to consummate the Private
Placement) shall not be deemed a violation of this Section 6.6 or
a breach of any other
obligation under this Agreement.
Section 6.7 Confidentiality and Announcements.
#297907
-27-
<PAGE>
(a) The parties agree to be bound by and comply
with the provisions set forth in the Confidentiality Agreement,
the provisions of which are hereby incorporated herein by
reference.
(b) Other than as required by Applicable Law or
as Buyer considers appropriate under applicable securities laws,
neither the Shareholders, the Company, Optima, nor Buyer shall,
and each of the foregoing shall cause each of their Affiliates,
employees, directors, partners and agents, including accountants,
lenders, counsel and investment bankers not to, disclose to any
Person the fact of the execution and delivery hereof or any of
the contents or terms hereof or of the Employment Agreements or
the Consulting Agreements, without the prior written consent of
Buyer and the Shareholder Representative; provided however, the
parties shall be entitled to recommunicate the contents of any
public disclosures agreed to and disseminated by the parties.
(c) Subject to Sections 6.9(a) and (b), the
Buyer and the Shareholder Representative shall consult with each
other as to the form and substance of any press release related
to this Agreement or the transactions contemplated hereby, as
well as other public disclosures related hereto and thereto;
provided, that Buyer shall have the final determination of the
content of such public disclosures to comply with the Securities
Laws.
Section 6.8 Access; Certain Communications. Between
the date of this Agreement and the Closing Date, subject to any
Applicable Laws relating to the exchange of information,
(a) Each of the Company and Optima shall afford
to Buyer and its authorized agents and representatives complete
access, upon reasonable notice and during normal business hours,
to all Contracts, documents and information of or relating to the
assets, liabilities, business, operations, prospects, personnel
and other aspects of its business. Each of the Company and Optima
shall cause its personnel, attorneys and accountants to provide
assistance to Buyer in Buyer's investigation of matters relating
to the purchase of the Shares, including allowing Buyer and its
authorized agents and representatives access to the offices of
the Company and Optima and related data processing facilities;
provided, however, that Buyer's investigation shall be conducted
in a manner which does not unreasonably interfere with the
Company's normal operations, clients, and employee relations.
(b) Buyer shall be entitled to reasonably
conduct a review of the Company's and Optima's business
relationships with broker/dealers and investment advisors, who,
in Buyer's opinion, are material to the Company and/or Optima.
The Company agrees to reasonably cooperate with such efforts. In
the event the Buyer is not satisfied with the outcome of its
review of such business relationships, Buyer shall be entitled,
in its discretion, to terminate this Agreement prior to the
expiration of the Due Diligence Period (as defined in Section
6.8(c)).
(c) Promptly following the date of this
Agreement, Buyer shall complete its review of the Company and
Optima and their respective operations, business affairs,
prospects and financial conditions, including, without
limitation, those matters which are the subject of Seller's
representations and warranties (the "Due Diligence Review").
Buyer shall conclude such
#297907
-28-
<PAGE>
review by not later than August 29, 1997 (the "Due Diligence
Period"). Each party hereto shall promptly advise the other
parties of any situation, event, circumstance or other matter
which could reasonably be expected to result in the termination
of this Agreement pursuant to Section 9.1 hereof. Notwithstanding
anything herein or implied to the contrary, the Due Diligence
Review shall not limit, restrict or preclude, or be construed to
limit, restrict or preclude, Buyer, at any time or from time to
time thereafter, from conducting such further reviews or from
exercising any rights available to it hereunder as a result of
the existence or occurrence prior to the Due Diligence Period of
any event or condition which was not detected in the Due
Diligence Review and which would constitute a breach of any
representation, warranty or covenant under this Agreement.
Section 6.9 Regulatory Matters; Third Party
Consents.
(a) The parties to this Agreement shall
cooperate with each other and use their reasonable best efforts
promptly to prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, and to
do all things reasonably necessary to obtain as promptly as
practicable all Governmental Approvals and Consents of third
parties that are necessary or advisable to consummate the
transactions contemplated by this Agreement. If any third party
Consent set forth in Section 4.3 or contemplated by Section 6.2
(excluding any Governmental Approval) is not obtained prior to
the Closing, or if the assignment of any Contract would be
ineffective or would individually or in the aggregate adversely
affect any material rights or benefits thereunder so that Buyer
would not in fact receive all such rights and benefits, at the
request of Buyer, the parties hereto, each without cost, expense
or liability to the other (except as provided in Article VIII
hereof), shall fully cooperate in good faith to seek, if
possible, an alternative arrangement to achieve the economic
results intended. The parties to this Agreement will have the
right to review in advance, and will consult with the other on,
in each case subject to Applicable Laws relating to the exchange
of information, all the information relating to Buyer, the
Company, Optima or the Shareholders, as the case may be, that
appears in any filing made with, or written materials submitted
to, any third party or any Governmental Authority in connection
with the transactions contemplated by this Agreement; provided,
however, that nothing contained herein shall be deemed to provide
any party to this Agreement with a right to review any
information provided to any Governmental Authority by Buyer on a
confidential basis in connection with the transactions
contemplated hereby. The parties to this Agreement agree that
they will consult with each other with respect to the obtaining
of all Government Approvals and third party Consents necessary or
advisable to consummate the transactions contemplated by this
Agreement and each party will keep the others apprised of the
status of matters relating to completion of the transactions
contemplated herein. The party responsible for a filing as set
forth above shall promptly deliver to the other parties hereto
evidence of the filing of all statements, applications, filings,
registrations, notices and letters or notifications relating
thereto (except for any confidential portions thereof), and any
supplement, amendment or item of additional information in
connection therewith (except for any confidential portions
thereof). The party responsible for a filing shall also promptly
deliver to the other parties hereto a copy of each material
notice, order, opinion and other item of correspondence received
by such filing party from any Governmental Authority in respect
of any such statement, application, filing, notice or
registration (except for any confidential portions
#297907
-29-
<PAGE>
thereof). In exercising the foregoing rights and obligations,
Buyer, the Company and the Shareholders shall each act reasonably
and as promptly as practicable.
(b) Each party to this Agreement shall, upon
request, furnish each other with all information concerning
itself and its directors, officers, stockholders, Affiliates and
such other matters as may be reasonably necessary or advisable in
connection with any statement, filing, registration, notice or
application made by or on behalf of Buyer, the Company, Optima or
the Shareholders to any Governmental Authority in connection with
the transactions contemplated by this Agreement (except to the
extent that such information would be, or relates to information
that would be, filed under a claim of confidentiality).
(c) The parties to this Agreement shall
promptly advise each other upon receiving or becoming aware of
any communication from any Governmental Authority whose consent
or approval is required for consummation of the transactions
contemplated by this Agreement which causes such party to believe
that there is a reasonable likelihood that any requisite
regulatory approval will not be obtained or that the receipt of
any such approval will be materially delayed.
Section 6.10 Notification of Certain Matters.
(a) Each party to this Agreement shall give
prompt notice to the other parties of (i) the occurrence, or
failure to occur, of any event or existence of any condition that
has caused or could reasonably be expected to cause any of its
representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect at any time after
the date of this Agreement, up to and including the Closing Date,
and (ii) any failure on its part to comply with or satisfy, in
any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement. In
connection with the Closing, the Company and Buyer will promptly
supplement or amend the various Schedules to this Agreement to
reflect any matter which, if existing, occurring or known at the
date of this Agreement, would have been required to be set forth
or described in such Schedules or which is necessary to correct
any information in such Schedules, which was or has been rendered
inaccurate thereby. No such supplement or amendment to the
Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article VII hereof,
the accuracy when made or deemed made of any representations and
warranties hereunder, or the compliance by any party hereto with
its covenants and agreements set forth herein, or for purposes of
determining any party's indemnification obligations pursuant to
Article VIII hereof.
(b) During the period from the date of this
Agreement to the Closing Date, the Company will cause one or more
of its designated representatives to periodically confer with
representatives of Buyer and to report the general status of the
ongoing operations of the Company and Optima. The Company will
promptly notify Buyer of any material change in the conduct of
its business, or Optima's business, in its relationship to third
party sales, distribution and servicing organizations and
personnel in the operation of the properties or assets of the
Company or Optima, and of any complaints, investigations,
inquiries, examinations or hearings (or communications indicating
that the same may be contemplated) of any Governmental
#297907
-30-
<PAGE>
Authority, or the institution or the threat of litigation
involving the Company or Optima, and will keep Buyer fully
informed of such events.
Section 6.11 Expenses. Except as otherwise expressly
provided herein, Buyer, on the one hand, and the Company and the
Shareholders, on the other hand, shall each bear their respective
direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby.
Section 6.12 Third Party Proposals. Neither the Company,
Optima, the Shareholders nor any of their respective Affiliates
shall directly or indirectly solicit, encourage or facilitate
inquiries or proposals, or enter into any definitive agreement,
with respect to, or initiate or participate in any negotiations
or discussions with any Person concerning, any acquisition or
purchase of all or a substantial portion of the properties or
assets of, or of any equity interest in, the Company or Optima
other than as contemplated by this Agreement (each, an
"Acquisition Proposal") or furnish any information to any such
Person. The Company, the Shareholders and any of their respective
Affiliates and agents shall notify Buyer immediately if any
Acquisition Proposal (including the terms thereof) is received
by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, any
of the Company, Optima, the Shareholders or any of their
respective Affiliates. The Company (including Optima) and each of
the Shareholders shall, and shall cause their respective
Affiliates, officers, directors, employees, representatives and
advisors to, immediately cease or cause to be terminated any
existing activities, including discussions or negotiations with
any Persons, conducted prior to the date hereof with respect to
any Acquisition Proposal and shall seek to have all materials
distributed to such Persons by the Company, any Shareholder or
any of their respective Affiliates or advisors returned to the
Company promptly. None of the Company, Optima, the Shareholders
or any of their respective Affiliates shall amend, modify, waive
or terminate, or otherwise release any Person from, any
standstill, confidentiality or similar agreement or arrangement
currently in effect. The Company and the Shareholders shall cause
their respective officers, directors, agents, advisors and
Affiliates (including Optima) to comply with the provisions of
this Section 6.12.
Section 6.13 Voting of Shares. During the period from
the date of this Agreement and continuing through the Closing
Date, and except as otherwise provided herein, no Shareholder
shall(a) deposit its Shares into a voting trust or enter into a
voting agreement or arrangement with respect to such Shares or
grant any proxy with respect thereto or (b) enter into any
contract, option or other arrangement or undertaking with respect
to the direct or indirect acquisition or sale, assignment,
pledge, transfer or other disposition of any of its Shares. Each
Shareholder, by this Agreement, with respect to those Shares that
he owns, and for the period from the date of this Agreement and
continuing through the earlier of the Closing Date or the date of
termination of this Agreement pursuant to Section 9.1, agrees not
to vote its shares in a manner inconsistent with the consummation
of the transactions contemplated under this Agreement and agrees
to take such action with respect to the voting of those Shares as
reasonably requested by Buyer and as the laws of the State of
Delaware may permit or require) (i) in favor of the approval of
this Agreement and the transactions contemplated hereby, (ii)
against any Acquisition Proposal or any action or agreement that
would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company or
any of the Shareholders hereunder or
#297907
-31-
<PAGE>
that would result in any of the conditions set forth in Article
VII not being fulfilled, and (iii) in favor of any other matter
relating to consummation of the transactions contemplated by this
Agreement. Nothing in this Section 6.13 shall prevent the Company
or any Shareholders from exercising any right it may have under
this Agreement.
Section 6.14 Tax Matters.
(a) All tax-sharing agreements or similar
agreements with respect to or involving the Company shall be
terminated by the Company prior to the Closing Date, and, for
periods after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder for amounts due with
respect to periods prior to the Closing Date.
(b) No new elections with respect to Taxes or
any changes in current elections with respect to Taxes affecting
the Company shall be made after the date of this Agreement
without the prior written consent of Buyer.
ARTICLE VII
CONDITIONS TO THE PARTIES' OBLIGATIONS TO
PURCHASE AND SELL THE SHARES
Section 7.1 Conditions to Buyer's Obligations. The
obligations of Buyer to purchase the Shares shall be subject to
the following conditions, any of which may be waived in writing
by Buyer:
(a) The representations and warranties of the
Company set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and,
unless otherwise expressly limited, as of the Closing Date as
though made on and as of the Closing Date;
(b) The Company and the Shareholders shall have
performed and complied in all material respects with all
agreements, covenants, obligations and conditions required by
this Agreement to be performed or complied with by them at or
prior to the Closing Date;
(c) The Company shall have delivered to Buyer a
certificate or certificates, dated as of the Closing Date, signed
on behalf of the Company by its Chief Executive Officer and Chief
Financial Officer confirming the satisfaction of the conditions
contained in paragraphs (a) and (b) of this Section 7.1;
(d) Buyer shall have received the opinion of the Company's
counsel, dated as of the Closing Date, in form and substance
satisfactory to the Buyer; (e) Each of the Employment Agreements
and the Consulting Agreements shall have been approved by the
Buyer and executed by the parties thereto, shall be in full force
and
#297907
-32-
<PAGE>
effect, and shall not have been breached by any party thereto and
neither the Company nor Optima shall be a party to any other
employment, consulting or similar agreement except as disclosed
in Schedules 4.15(3) and (4); provided, however, that no Rights
to acquire capital stock of the Company or Optima are or could
become payable thereunder;
(f) Except as disclosed in the Company's
unaudited financial statements dated June 30, 1997 and as
otherwise disclosed in writing to Buyer, since December 31, 1996,
no event shall have occurred which had or could reasonably be
expected to have, individually or in the aggregate with any other
event occurring after such date, a material adverse effect on the
Company, its assets, properties, prospects or operations;
(g) The Company shall have delivered to Buyer a
certificate of the Secretary of State of the State of Delaware as
to the good standing of the Company dated as of a date not
earlier than ten days prior to the Closing Date, together with a
copy of the Certificate of Incorporation, as amended, of the
Company, certified by the Secretary of State of the State of
Delaware;
(h) The Company shall have delivered to Buyer a
certificate of the Secretary of State of the State of Georgia as
to the good standing of Optima dated as of a date not earlier
than ten days prior to the Closing Date, together with a copy of
the Certificate of Incorporation, as amended, of Optima,
certified by the Secretary of State of the State of Georgia;
(i) Non-Competition and Indemnification Agreements in a form
satisfactory to the Buyer shall have been executed by each of the
Shareholders; (j) All of the Consents indicated in Schedule 4.3
or contemplated by Section 6.2 shall have been duly obtained or
made; and
(k) Neither the Company nor Optima shall have
any severance Liability due and owing or that will become due and
owing as a result of the transaction contemplated hereby.
Section 7.2 Conditions to the Company's and the
Shareholders' Obligations. The obligation of the Company or the
Shareholders to sell the Shares to Buyer shall be subject to the
following conditions, which may be waived in writing by the
Shareholder Representative:
(a) The representations and warranties of Buyer
set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and, unless
otherwise expressly limited, as of the Closing Date as though
made on and as of the Closing Date;
(b) Buyer shall have performed and complied in
all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing Date;
#297907
-33-
<PAGE>
Section 7.3 Mutual Conditions. The obligations of each
party to this Agreement to effect the transactions contemplated
by this Agreement shall be subject to the following conditions,
any of which may be waived in writing by both the Shareholder
Representative and the Buyer:
(a) No order, injunction or decree issued by
any Governmental Authority or other legal restraint or
prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect or known by any
party to be threatened to be imposed. No proceeding initiated by
any Governmental Authority seeking an injunction shall be pending
or known by any party to be threatened to be imposed. No statute,
rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental
Authority which prohibits, restricts or makes illegal
consummation of the transactions contemplated hereby or known by
any party to be threatened to be imposed;
(b) All Governmental Approvals required to
consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired;
and
(c) Clients who have Advisory Agreements with
the Company or Optima included in Company Accounts representing
an aggregate of at least $700,000,000 shall have Consented to the
assignment of their respective Advisory Agreements to the Buyer
in accordance with Section 6.2 or shall have entered into new
Advisory Agreements with the Buyer.
(d) The Private Placement shall have been
completed.
(e) The License Agreement shall have been
executed by the Parties.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties and
Covenants. All representations and warranties of the parties
contained in this Agreement, including any schedules made a part
hereof, and any covenants or other agreements the performance of
which is specified to occur on or prior to the Closing Date,
shall survive the Closing for a period of thirty (30) months
following the Closing Date; provided, however, that the
representations and warranties of the parties contained in
Sections 4.3, 4.4(c), 4.5, 4.7, 4.9, 4.10, 4.12, 4.15, 4.17,
4.20, 5.3, 5.5 and 5.6 shall survive the Closing for a period
from the Closing Date until the expiration of the applicable
statutory period of limitations. Any covenant or other agreement
herein any portion of the performance of which may be or is
specified to occur after the Closing shall survive the Closing
indefinitely or for such lesser period of time as may be
specified therein.
#297907
-34-
<PAGE>
Section 8.2 Obligations of the Shareholders. From and
after the Closing Date, the Shareholders hereby agree, jointly
and severally, to indemnify, defend and hold harmless Buyer and
its respective employees, officers, directors, representatives,
agents and Affiliates from and against any and all Losses which
any of them may suffer, incur or sustain arising out of,
attributable to, or resulting from: (a) any inaccuracy in or
breach of any of the representations or warranties of the Company
or the Shareholders made in this Agreement; and (b) any breach or
nonperformance of any of the covenants or other agreements made
by the Company or any Shareholder in or pursuant to this
Agreement. The indemnification obligation hereunder shall survive
the Closing as specified in Section 8.5. The indemnification
obligation hereunder (i) shall not exceed the Purchase Price, and
(ii) shall not include claims, or portions thereof, with respect
to which such indemnification would violate Applicable Laws.
Section 8.3 Obligations of Buyer. From and after the
Closing Date, Buyer hereby agrees to indemnify, defend and hold
harmless the Shareholders and their respective employees,
officers, directors, partners, representatives, agents, and
Affiliates from and against any and all Losses which any of them
may suffer, incur, or sustain arising out of, attributable to, or
resulting from: (a) any inaccuracy in or breach of any of the
representations and warranties of Buyer made in this Agreement;
(b) any breach or nonperformance of any of the covenants or other
agreements made by Buyer in or pursuant to this Agreement; and
(c) any claims by investors in connection with the Private
Placement other than claims based on information provided or
approved by the Company, Optima or their respective officers,
employees, shareholders or agents. The indemnification obligation
hereunder shall survive the Closing as specified in Section 8.5.
The indemnification obligation hereunder (i) shall be limited to
amounts due and owing under this Agreement as of the date a claim
regarding such Loss is asserted, and (ii) shall not include
claims, or portions thereof, with respect to which such
indemnification would violate Applicable Laws.
Section 8.4 Procedure.
(a) Notice of Third Party Claims. Any
Indemnified Party seeking indemnification for any Loss or
potential Loss arising from a claim asserted by a third party
against the Indemnified Party (a "Third Party Claim") shall give
written notice to the Indemnifying Party specifying in all
material respects the source of the Loss or potential Loss under
Section 8.2 or 8.3, as the case may be. Written notice to the
Indemnifying Party of the existence of a Third Party Claim shall
be given by the Indemnified Party promptly after notice of the
Third Party Claim; provided, however, that the Indemnified Party
shall not be foreclosed from seeking indemnification pursuant to
this Article VIII by any failure to provide such prompt notice of
the existence of a Third Party Claim to the Indemnifying Party,
except and only to the extent that the Indemnifying Party
actually incurs an incremental out-of-pocket expense or otherwise
has been materially damaged or prejudiced as a result of such
delay.
(b) Defense. Except as otherwise provided
herein, the Indemnifying Party may elect to compromise or defend,
at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel (which counsel shall be reasonably
satisfactory to the Indemnified Party), any Third Party Claim. If
the Indemnifying Party elects to compromise or
#297907
-35-
<PAGE>
defend such Third Party Claim, it shall, within thirty (30) days
after receiving notice of the Third Party Claim (ten (10) days if
the Indemnified Party states in such notice that prompt action is
required), notify the Indemnified Party of its intent to do so,
and the Indemnified Party shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against,
such Third Party Claim. If the Indemnifying Party elects not to
compromise or defend against the Third Party Claim, or fails to
notify the Indemnified Party of its election to do so as herein
provided, or otherwise fails to pursue the defense of such Third
Party Claim with reasonable diligence, (i) the Indemnified Party
may pay (without prejudice of any of its rights as against the
Indemnifying Party), compromise or defend such Third Party Claim
(until such defense is assumed by the Indemnifying Party) and
(ii) the costs and expenses of the Indemnified Party incurred in
connection therewith shall be paid by the Indemnifying Party
pursuant to the terms of this Agreement. Notwithstanding anything
to the contrary contained herein, in connection with any Third
Party Claim in which the Indemnified Party shall reasonably
conclude, based upon advice of its outside legal counsel, that
(x) there is a conflict of interest between the Indemnifying
Party and the Indemnified Party in the conduct of the defense of
such Third Party Claim or (y) there are specific defenses
available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party and which
could be materially adverse to the Indemnifying Party, then the
Indemnified Party shall have the right to assume and direct the
defense of such Third Party Claim. In such an event, the
Indemnifying Party shall pay the reasonable fees and
disbursements of counsel of the Indemnifying Party and one
counsel to all the Indemnified Parties. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnified
Party may settle or compromise any Third Party Claim (unless the
sole relief payable in respect of such Third Party Claim is
monetary damages that are paid in full by the Indemnifying Party)
over the objection of the other; provided, however, that consent
to settlement or compromise shall not be unreasonably withheld by
the Indemnified Party. In any event, except as otherwise provided
herein, the Indemnified Party and the Indemnifying Party may each
participate, at its own expense, in the defense of such Third
Party Claim. If the Indemnifying Party chooses to defend any
claim, the Indemnified Party shall make available to the
Indemnifying Party any personnel or any books, records or other
documents within its control that are reasonably necessary or
appropriate for such defense, subject to the receipt of
appropriate confidentiality agreements.
(c) Miscellaneous. The procedures set forth in
Section 8.4(a)-(b) above shall apply solely with respect to Third
Party Claims and shall not be deemed to apply to, or otherwise
affect or limit, an Indemnified Party's rights under this
Agreement with respect to any claim for Losses other than a Third
Party Claim.
(d) Notice of Non-Third Party Claims. Any
Indemnified Party seeking indemnification for any Loss or
potential Loss arising from a claim asserted by any party to this
Agreement against the Indemnifying Party (a "Non-Third Party
Claim") shall give written notice to the Indemnifying Party
specifying in detail the source of the Loss or potential Loss
under Section 8.2 or 8.3, as the case may be.
Section 8.5 Survival of Indemnity. Any matter as to which a
claim has been asserted by formal notice pursuant to Section 8.4
and within the time limitation applicable by reason of
#297907
-36-
<PAGE>
Section 8.1 that is pending or unresolved at the end of any
applicable limitation period under this Article VIII or
Applicable Law shall continue to be covered by this Article VIII
notwithstanding any applicable statute of limitations (which the
parties hereby waive) or the expiration dates set forth in
Section 8.1 until such matter is finally terminated or otherwise
resolved by the parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are
finally determined and paid.
Section 8.6 Minimum Losses. Except for Taxes or
severance Liabilities subject to indemnification hereunder, no
party shall have any right to obtain indemnification under this
Agreement until aggregate Losses of such party and its Affiliates
(for purposes of this section the Shareholders shall be deemed to
be Affiliates) and the successors and assigns of such party and
its Affiliates exceed $50,000; after such time, only the
aggregate amount of such Losses in excess of $50,000 shall be
recoverable in accordance with the terms hereof.
Section 8.7 Subrogation. Any Indemnifying Party shall be
subrogated to any right of action which the Indemnified Party may
have against any other person with respect to any matter giving
rise to a claim for indemnification hereunder.
Section 8.8 Adjustments to Indemnification Obligations.
The amount which any Indemnifying Party is or may be required to
pay any Indemnified Party pursuant to this Article VIII shall be
reduced (including, without limitation, retroactively) by any
insurance proceeds or other amounts actually recovered by or on
behalf of such Indemnified Party in reduction of the related
Loss. If an Indemnified Party shall have received the payment
required by this Agreement from an Indemnifying Party in respect
of a Loss and shall subsequently actually receive insurance
proceeds or other amounts in respect of such Loss, then such
Indemnified Party shall pay to such Indemnifying Party a sum
equal to the amount of such insurance proceeds or other amounts
actually received (net of any expenses in obtaining the same and
Taxes resulting from obtaining such amounts).
Section 8.9 Remedies. This Article VIII shall not
restrict the ability of any party to seek specific performance of
this Agreement or any provision hereof or any other form of
equitable or legal relief against any breach by any other party
hereto. Nothing in this Article VIII shall limit the remedies
available to an Indemnified Party to enforce its right to
indemnification.
ARTICLE IX
TERMINATION
Section 9.1 Termination.
(a) This Agreement may be terminated prior to the Closing
as follows:
(i) by written consent of both the Shareholder
Representative and Buyer;
#297907
-37-
<PAGE>
(ii) by the Shareholder Representative or Buyer if a
condition to the terminating party's obligation to close set
forth in Section 7.1, 7.2, or 7.3, as the respective case may be,
cannot be fully satisfied prior to the date set forth in Section
9.1(a)(iv) below, unless caused by the breach of any
representation, warranty, covenant, obligation or other agreement
under this Agreement (x) by the Company or any of the
Shareholders, in the case of a termination by the Shareholder
Representative, or (y) by Buyer, in the case of termination by
Buyer;
(iii) by the Shareholder Representative or Buyer (provided
that the terminating party is not then in material breach of any
representation, warranty, covenant, obligation, or other
agreement contained herein) if there shall have been a material
breach of any of the covenants, obligations, or agreements or any
of the representations or warranties set forth in this Agreement
on the part of the Company or any of the Shareholders, in the
case of a termination by Buyer, or on the part of Buyer, in the
case of a termination by the Shareholder Representative, which
breach is not cured within thirty (30) days following written
notice given by the terminating party to the party committing
such breach, or which breach, by its nature, cannot be cured
prior to the Closing;
(iv) by Buyer or the Shareholder Representative if the
Closing has not occurred on or before September 30, 1997; and
(v) by Buyer in the event that (i) Buyer's Due Diligence
Review of the Company discloses matters the impact of which
affects the Company in a manner that Buyer, in the good faith
exercise of its reasonable judgment, believes either (A) to be
inconsistent in any material and adverse respect with any of the
representations or warranties of the Company or the Shareholders;
(B) (x) to be of such significance as to be expected to have a
material adverse effect on the assets, properties, prospects or
operations of the Company or Optima, or (y) to deviate materially
and adversely from the Company Financial Statements; or (C) Buyer
is not satisfied with the results of the investigation undertaken
pursuant to Section 6.8(b).
(vi) by either Buyer or the Shareholder Representative if
the closing of the Private Placement has not occurred prior to
September 30, 1997.
(b) The termination of this Agreement shall be
effectuated by the delivery by the party terminating this
Agreement to the Buyer, in the case of a termination by the
Shareholder Representative, or to the Shareholder Representative,
in the case of a termination by the Buyer, of a written notice of
such termination. If this Agreement so terminates, it shall
become null and void and have no further force or effect, except
as provided in Section 9.3.
Section 9.2 Exclusive Dealing; Break-Up Fee. (a) Neither
the Company, Optima, nor any of their shareholders or other
holders of beneficial interest in shares of capital stock of the
Company or Optima, shall, directly or indirectly, solicit or
entertain offers from, negotiate with, or in any manner
encourage, discuss, accept or consider any Acquisition Proposal
prior to the Closing Date, or such earlier date by which Buyer
notifies the Shareholder Representative of Buyer's intention to
terminate this Agreement. In the event of a breach of the
covenant in the immediately preceding sentence, the Company shall
pay to Buyer, in cash, as liquidated damages
#297907
-38-
<PAGE>
an amount equal to two hundred fifty thousand dollars ($250,000)
plus, if any transaction involving an Acquisition Proposal is
consummated within two years after the date of this Agreement,
twenty percent (20%) of the amount received by the Company or its
shareholders (including successors and assigns) that reflects a
value for the Company (including its assets or subsidiaries) in
excess of any amount offered in writing to the Company by any
other Person prior to the date hereof (each, a "Prior Offer").
(b) If this Agreement is terminated (i) by
Buyer as a result of a material breach of this Agreement by the
Company or any Shareholder, or (ii) by the Company or any
Shareholder for any reason other than as a result of (x) a
material breach by Buyer of its obligations hereunder, or (y) the
failure of the closing of the private placement to occur by
September 30, 1997, then in either such case, the Company shall
pay to Buyer, in cash, as liquidated damages an amount equal to
(A) two hundred fifty thousand dollars ($250,000), plus (B) if
any transaction of the type described in 9.2(a) above is
consummated within two years after the date of termination, an
amount equal to twenty percent (20%) of the value of the
aggregate consideration received by the Company or its
shareholders (including successors and assigns) that reflects a
value for the Company (including its assets or subsidiaries) in
excess of the amount of the Prior Offer.
Section 9.3 Survival After Termination. If this
Agreement is terminated in accordance with Section 9.1 hereof and
the transactions contemplated hereby are not consummated, this
Agreement shall become void and of no further force and effect,
without any liability on the part of any party hereto, except as
provided in Article VIII and Section 9.2 and except that Sections
6.7(a) and 6.11 shall survive any such termination.
Notwithstanding the foregoing, nothing in this Section 9.3 shall
relieve any party to this Agreement of liability for a material
breach of any provision of this Agreement or any agreement made
as of the date hereof or subsequent thereto pursuant to this
Agreement. Notwithstanding any other provision in this Agreement
to the contrary, the failure of the closing of the Private
Placement to occur on or before September 30, 1997, or at all,
for any reason, shall not be deemed to be a breach of this
Agreement, and the rights of the parties shall be limited to the
right to terminate as provided in Section 9.1(a)(vi). Buyer
agrees to provide notice hereunder to the Shareholder
Representative within three Business Days of any determination by
Buyer's management that it does not intend to, or in good faith
believes it will not be able to, complete the Closing of the
Private Placement. Upon receipt of such notice, the Company shall
be free to engage in the activity referred to in Section 9.2(a)
regarding solicitation and discussion of Acquisition Proposals,
without being subject to any penalty.
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendments; Waiver. This Agreement may not be
amended, altered or modified except by written instrument
executed by the Buyer and the Shareholder Representative but
may be modified in any respect through a written instrument so
executed. Any agreement on
#297907
-39-
<PAGE>
the part of any party to waive (i) any inaccuracies in the
representations and warranties contained herein by any other
party or in any document, certificate or writing delivered
pursuant hereto by any other party, or (ii) compliance with any
of the agreements, obligations, covenants or conditions contained
herein, shall be valid only if set forth in an instrument in
writing signed on behalf of such waiving party. No such waiver
shall constitute a waiver of, or estoppel with respect to, any
subsequent or other inaccuracy, breach or failure to strictly
comply with the provisions of this Agreement.
Section 10.2 Entire Agreement. This Agreement (including
Schedules, certificates, lists and documents referred to herein,
and any documents executed by the parties simultaneously herewith
or pursuant hereto) constitutes the entire agreement of the
parties hereto, except as provided herein, and supersedes all
prior agreements and understandings, written and oral, among the
parties with respect to the subject matter hereof.
Section 10.3 Interpretation. When a reference is made in
this Agreement to Sections, Exhibits or Schedules, such reference
shall be to a Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrases "the
date of this Agreement," "the date hereof" and terms of similar
import, unless the context otherwise requires, shall be deemed to
refer to the date set forth in the first paragraph of this
Agreement. For purposes of this Agreement, the defined terms
herein shall continue to have the same meanings after the Closing
as before the Closing.
Section 10.4 Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
Section 10.5 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if (a) delivered in person, (b) transmitted by telecopy
(with written confirmation), (c) mailed by certified or
registered mail (return receipt requested) or (d) delivered by an
express courier (with written confirmation) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
#297907
-40-
<PAGE>
If to the Shareholders, in c/o of Shareholder
Representative:
Scott A. MacKillop, Shareholder
Representative
100 Galleria Parkway, Suite 1200
Atlanta, Georgia 30399
Telecopy No.: (770) 644-0124
If to the Company:
ADAM Investment Services, Inc.
100 Galleria Parkway, Suite 1200
Atlanta, Georgia 30399
Attention: Scott A. MacKillop
Telecopy No.: (770) 644-0124
If to Buyer:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Maureen
E. Dobel, Esq.
Telecopier No: (303) 293-2152
With a copy to:
Holme Roberts & Owen LLP
1700 Lincoln Street, Suite 4200
Denver, Colorado 80203
Attention: Francis
R. Wheeler, Esq.
Telecopier No: (303) 866-0200
Section 10.6 Binding Effect; Persons Benefiting; No
Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors
and assigns. Nothing in this Agreement is intended or shall be
construed to confer upon any entity or person other than the
parties hereto and their respective successors and permitted
assigns any right, remedy or claim under or by reason of their
Agreement or any part hereof. This Agreement may not be assigned
by any of the parties hereto without the prior written consent of
Buyer, with respect to any assignment by the Company or any of
the Shareholders, or the Shareholder Representative, with respect
to any assignment by Buyer.
Section 10.7 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall
constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.
#297907
-41-
<PAGE>
Section 10.8 Governing Law. THIS AGREEMENT, THE LEGAL
RELATIONS BETWEEN THE PARTIES AND THE ADJUDICATION AND THE
ENFORCEMENT THEREOF, SHALL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
COLORADO, WITHOUT REGARD TO APPLICABLE CHOICE OF LAW PROVISIONS
THEREOF.
Section 10.9 Specific Performance. The Company, the
Shareholders and Buyer each acknowledge that, in view of the
unique nature of its business and the transactions contemplated
by this Agreement, each party would not have an adequate remedy
at law for money damages in the event that the covenants,
agreements and obligations to be performed before and after the
Closing Date have not been performed in accordance with their
terms, and therefore agree that the other parties shall be
entitled to specific enforcement of the terms hereof in addition
to indemnification hereunder and any other equitable remedy to
which such parties may be entitled.
Section 10.10 WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES.
AFTER THE CLOSING DATE, THE PARTIES TO THIS AGREEMENT AGREE TO
WAIVE ANY RIGHT TO A JURY TRIAL AS TO ALL DISPUTES ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT AND FURTHER IRREVOCABLY
WAIVE ANY RIGHT TO SEEK PUNITIVE OR OTHER NON-COMPENSATORY
DAMAGES IN EXCESS OF SUCH PARTY'S ACTUAL DAMAGES.
#297907
-42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
PMC INTERNATIONAL, INC.
By: /s/
Name: Kenneth S. Phillips
Title: President and Chief
Executive Officer
ADAM INVESTMENT SERVICES, INC.
By: /s/
Name:
Title:
MICHAEL T. WILKINSON
/s/
SCOTT A. MACKILLOP
/s/
GARY A. MILLER
/s/
MICHAEL J. FLINN
/s/
#297907
-43-
<PAGE>
JARED L. SHOPE
/s/
GRAHAM L. GUY
/s/
JOHN W. BURGIN
/s/
#297907
-44-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>
<C>
<C>
Page
ARTICLE I
DEFINITIONS.................................................................................1
ARTICLE II PURCHASE AND SALE OF THE
SHARES.............................................................8
Section 2.1
Shares.................................................................................8
Section 2.2 Purchase
Price.........................................................................8
Section 2.3 Determination of Purchase Price
Adjustments............................................9
ARTICLE III
CLOSING....................................................................................11
Section 3.1
Closing...............................................................................11
Section 3.2 Instruments of Transfer; Payment of
Consideration.....................................11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE
COMPANY...........................................................................12
Section 4.1 Organization and Related
Matters......................................................12
Section 4.2 Authority; No
Violation...............................................................12
Section 4.3 Consents and
Approvals................................................................13
Section 4.4 Stock
Ownership.......................................................................13
Section 4.5 Regulatory
Documents..................................................................14
Section 4.6 Financial
Statements..................................................................14
Section 4.7 Ineligible
Persons....................................................................15
Section 4.8 Material
Contracts....................................................................15
Section 4.9 Advisory
Agreements...................................................................16
Section 4.10 No Other
Broker.......................................................................16
Section 4.11 Legal
Proceedings.....................................................................16
Section 4.12 Compliance with Applicable
Law........................................................16
Section 4.13
Insurance.............................................................................17
Section 4.14 Labor and Employment
Matters..........................................................17
Section 4.15 Employee Benefit Plans;
ERISA.........................................................17
Section 4.16 Technology and Intellectual
Property..................................................19
Section 4.17
Taxes.................................................................................20
Section 4.18 No Adverse
Change.....................................................................21
Section 4.19 Real
Property.........................................................................21
Section 4.20 Filing
Documents......................................................................22
#297907
-i-
<PAGE>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
BUYER....................................................22
Section 5.1 Organization and Related
Matters......................................................22
Section 5.2 Authority; No
Violation...............................................................22
Section 5.3 Consents and
Approvals................................................................23
Section 5.4 Legal
Proceedings.....................................................................23
Section 5.5 Ineligible
Persons....................................................................23
Section 5.6 Filing
Documents......................................................................23
ARTICLE VI
COVENANTS..................................................................................24
Section 6.1 Conduct of Business by the Company and
Optima.........................................24
Section 6.2 Advisory Agreement
Consents...........................................................26
Section 6.3 Maintenance of
Records................................................................26
Section 6.4 Employees, Employee
Benefits..........................................................27
Section 6.5 Further
Assurances....................................................................27
Section 6.6 Efforts of Parties to
Close...........................................................27
Section 6.7 Confidentiality and
Announcements.....................................................28
Section 6.8 Access; Certain
Communications........................................................28
Section 6.9 Regulatory Matters; Third Party
Consents..............................................29
Section 6.10 Notification of Certain
Matters.......................................................30
Section 6.11
Expenses..............................................................................31
Section 6.12 Third Party
Proposals.................................................................31
Section 6.13 Voting of
Shares......................................................................31
Section 6.14 Tax
Matters...........................................................................32
ARTICLE VII CONDITIONS TO THE PARTIES' OBLIGATIONS TO
PURCHASE AND SELL THE
SHARES..........................................................32
Section 7.1 Conditions to Buyer's
Obligations.....................................................32
Section 7.2 Conditions to the Company's and the
Shareholders' Obligations.........................33
Section 7.3 Mutual
Conditions.....................................................................34
ARTICLE VIII
INDEMNIFICATION............................................................................34
Section 8.1 Survival of Representations,
Warranties and Covenants.................................34
Section 8.2 Obligations of the
Shareholders.......................................................35
Section 8.3 Obligations of
Buyer..................................................................35
Section 8.4
Procedure.............................................................................35
Section 8.5 Survival of
Indemnity.................................................................37
Section 8.6 Minimum
Losses........................................................................37
Section 8.7
Subrogation...........................................................................37
Section 8.8 Adjustments to Indemnification
Obligations............................................37
Section 8.9
Remedies..............................................................................37
ARTICLE IX
TERMINATION................................................................................38
Section 9.1
Termination...........................................................................38
Section 9.2 Exclusive Dealing; Break-Up
Fee.......................................................39
Section 9.3 Survival After
Termination............................................................39
#297907
-ii-
<PAGE>
ARTICLE X
MISCELLANEOUS..............................................................................40
Section 10.1 Amendments;
Waiver....................................................................40
Section 10.2 Entire
Agreement......................................................................40
Section 10.3
Interpretation........................................................................40
Section 10.4
Severability..........................................................................40
Section 10.5
Notices...............................................................................41
Section 10.6 Binding Effect; Persons Benefiting; No
Assignment.....................................41
Section 10.7
Counterparts..........................................................................42
Section 10.8 Governing
Law.........................................................................42
Section 10.9 Specific
Performance..................................................................42
Section 10.10 WAIVER OF JURY TRIAL AND PUNITIVE
DAMAGES.............................................42
#297907
-iii-
<PAGE>
</TABLE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered
into as of September 23, 1997, between ADAM Investment Services,
Inc., a Delaware corporation (the "Company"), and Scott A.
MacKillop ("Employee").
RECITALS
A. PMC International, Inc. ("PMCI") has entered into a
stock purchase agreement, dated as of July 25, 1997 (the "Stock
Purchase Agreement"), pursuant to which PMCI will acquire all of
the outstanding capital stock of the Company (the "Acquisition").
B. Employee is a member of the leadership team of the
Company and PMCI desires Employee to continue his affiliation
with the Company in such capacity. Therefore, the Company has
offered, and Employee has accepted, employment with the Company.
This Agreement sets forth the terms on which the Company employs
Employee.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and
of the representations, warranties, covenants and agreements
contained herein, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the
following terms have the following meanings:
"Base Salary" has the meaning set forth in
Section 3(a).
"Company" means ADAM Investment Services, Inc.,
a Delaware corporation, its successors and assigns, and
any of its present or future subsidiaries.
"Competitive Advisory Business" means services,
products or software in the wrap-fee or privately
managed account business (whether using mutual funds or
separate accounts) and/or services, products or software
in the performance reporting business to the extent such
services, products or software are provided to or through
financial intermediaries, including, but not limited to,
investment advisors, broker-dealers, banks, insurance
companies, accounting firms and financial planners for
use in providing services to the retail and small
institutional accounts (typically under $30 million in assets)
of such financial intermediaries. The term "Competitive
Advisory Business" includes the offering of any of the
following products or services through financial
intermediaries, either alone or in combination, whether
or not such products or services are generally or
customarily understood to be included in the term
"wrap-fee" or "privately managed account" business, and
whether or not such products or services are offered for
a single fee or are charged for separately: (1)
investment recommendations or portfolio management
services based on or tailored to the specific investment
needs and/or risk tolerance of the client whose assets
are
1
#327210.05
<PAGE>
being managed, (2) access to the asset management services of
separate account managers, (3) automated trading services that
involve the exercise of discretionary authority, a limited power
of attorney or similar authorization granted by an asset
management client and (4) the preparation of reports or
statements that show the securities transactions in a client
account and/or calculate, display or analyze the performance or
investments held in a client account. The term "Competitive
Advisory Business" does not include personally providing
investment advisory products or services directly to clients
through a financial planning, investment management or investment
consulting firm, as long as either (1) at least 75% of the
clients of such firm have assets under management or under
advisement by such firm in excess of $30 million, or (2) such
clients are not primarily secured by such firm through referrals
or solicitations by individuals not employed by such firm who
derive a fee or other compensation for such referrals or
solicitations. The term "Competitive Advisory Business"
specifically includes, but is not limited to, any investment
advisory services or products provided to financial
intermediaries by Lockwood Financial Services, Inc.; Rheinhardt
Werba Bowen Advisory Services; Advisory Consulting Group; SEI
Investments; Brinker Capital; Meridian Investment Management;
Frank Russell Company and Callan Associates, Inc. The term
"Competitive Advisory Business" also includes "turn key asset
management programs."
"Employee" has the meaning set forth in the preamble to
this Agreement.
"Expiration Date" has the meaning set forth in Section 4.
"Inventions" means inventions, discoveries, trade
secrets, products, processes, devices, methods, designs,
formulas, techniques, programs, computer software as well as
improvements thereof, in each case whether or not patentable,
that are (a) based on or comprising Proprietary Information, (b)
made or conceived by Employee, whether or not during the hours of
his engagement with the Company or with the use or assistance of
the Company's facilities, materials or personnel, either solely
or jointly with others, (c) related to or arising out of
Employee's employment by the Company, and (d) during the term of
this Agreement or any extension hereof. Notwithstanding the
foregoing, "Inventions" does not include inventions of Employee
that Employee establishes, by competent proof, are neither
derived from or made in connection with Proprietary Information
nor developed for the Company.
"Participate In" means directly or indirectly,
individually or with or through any other person or entity, own,
manage, operate, control, lend money to or participate in the
ownership, management, operation or control of, or be connected
to as a director, officer, employee, partner, consultant, agent,
independent contractor or otherwise, or acquiesce in the use of
his name in. Notwithstanding the foregoing, Employee will not be
deemed to Participate In a business merely because he owns 5% or
less of the outstanding common stock of a corporation if, at the
time of his acquisition thereof, such stock is listed on a
national securities exchange, is reported on Nasdaq, or is
regularly traded in the over-the-counter market by a member of a
national securities exchange.
2
#327210.05
<PAGE>
"PMCI" has the meaning set forth in the
recitals to this Agreement.
"Proprietary Information" means information
and materials disclosed to or known or developed by Employee
about the Company's plans, strategies, prospects, products,
processes and services, including information and materials
relating to the Company's research, development, inventions,
purchasing, accounting, engineering, marketing, merchandising and
selling, but excluding information that Employee establishes, by
competent proof, (i) was known, other than under an obligation of
confidentiality, to Employee prior to his engagement by the
Company; (ii) has passed into the public domain prior to or after
its development by or for the Company other than through acts or
omissions attributable to Employee; or (iii) was subsequently
obtained other than under an obligation of confidentiality from a
third party not acquiring the information under an obligation of
confidentiality from the disclosing party.
2. Employment; Capacity; Duties; Reporting Structure;
Location. The Company will employ Employee as its President or in
such other capacity as the Company determines. During his
employment by the Company, Employee will perform the duties and
bear the responsibilities commensurate with his position and will
serve the Company faithfully and to the best of his ability.
Employee will devote his entire working time, attention and
energy to the business of the Company. Employee will not at any
time discredit the Company or any of its products or services.
Except for his involvement in personal investments, as long as
such involvement does not require any significant services on his
part, Employee will not engage in any other business activity
that requires significant personal services by Employee or that,
in the Company's judgment, may conflict with the proper
performance of Employee's duties under this Agreement. Employee
will report directly to the President of PMCI, currently Mr.
Kenneth Phillips. Employee initially will be based at the
Company's facilities in Denver, Colorado, where he will move
promptly after the date of this Agreement if he has not already
done so.
3. Base Salary; Bonuses; Benefits; Equity
Incentives: Sick Leave;
Vacation; Expenses.
(a) As compensation for all services provided
by Employee, the Company will pay Employee a salary of $240,000
per year ("Base Salary"), prorated for any portion of a year, for
each year during the term of this Agreement, payable in arrears
in the same manner as the Company customarily pays the salaries
of its employees or as the parties hereto may otherwise agree. In
the event the Board of Directors of PMCI institutes
across-the-board or tiered salary reductions for employees of
PMCI and its subsidiaries, Employee agrees that his Base Salary
will be subject to such salary reductions, provided however that
such reductions will not exceed a total of 10% of his Base Salary.
(b) Employee will be eligible for an annual
bonus of up to $50,000, based upon criteria to be mutually agreed
upon by Employee and PMCI.
(c) In addition to Base Salary, the Company
will provide Employee with the benefits of such insurance plans,
hospitalization plans, pension or profit sharing plans and other
employee fringe benefit plans as are customarily provided to
employees of the
3
#327210.05
<PAGE>
Company and for which Employee is eligible under the
terms of such plans. Nothing in this Agreement requires the
Company to adopt or maintain any such plan. During Employee's
employment by the Company, Employee will be entitled to four
weeks of paid vacation. If Employee does not use all of such
vacation time during a given year, then all of such unused time
up to a maximum of 40 hours may be carried over to the following
year, and any accumulated but unused vacation time in excess of
such 40 hours will be forfeited.
(d) In addition to the options to purchase up
to 250,000 shares of PMCI common stock granted to Employee by
PMCI, the Company may also award or grant Employee such stock
options and other equity incentives as are approved by the
Company in its sole discretion. Nothing in this Agreement
requires the Company to establish an equity incentive program or
confer on Employee any right to receive any stock option or other
equity incentive not awarded on or before the date hereof.
(e) The Company will reimburse Employee for all
reasonable out-of-pocket expenses incurred by Employee at the
request of the Company in the performance of his duties under
this Agreement and such other expenses as may be approved by the
Company in accordance with the Company's reimbursement policies
as in effect from time to time, in each case upon presentation to
the Company of an itemized accounting of such expenses with
reasonable supporting data.
(f) On the one-year anniversary of the date of
this Agreement, the Employee's salary will be reviewed with
respect to the one-year period then ended and, as appropriate,
his salary may be adjusted effective as of such date and his
salary will be reviewed annually thereafter during the term of
this Agreement or any renewal term hereof. Except as provided in
Section 3(a) above, for the salary review on the one-year
anniversary of the date of this Agreement Employee's salary will
not be subject to reduction without Employee's consent.
4. Term. Subject to Section 10(j), this Agreement will
become effective on the closing date of the Acquisition and,
unless earlier terminated in accordance with Section 5, will
expire two years from the date hereof (the "Expiration Date"). If
this Agreement expires or is terminated, this Agreement will
forthwith become void and there will be no liability or
obligation on the part of the parties hereto, except as otherwise
provided herein and except that the provisions of this Section 4
and Sections 6, 7, 8, 9 and 10 will remain in full force and
effect and survive any termination or expiration of this
Agreement.
4
#327210.05
<PAGE>
5. Termination.
(a) In the event of the death of the Employee,
except with respect to any benefits that have accrued and have
not been paid to the Employee under this Agreement, the
provisions of this Agreement will terminate immediately. However,
the Employee's estate will have the right to receive compensation
due to the Employee as of and to the date of his death and,
furthermore, to receive an additional amount equal to one-twelfth
(1/12) of the Employee's annual compensation then in effect as
specified in Section 3(a).
(b) If the Employee is prevented by illness,
accident, or other incapacity from properly performing his duties
under this Agreement (and, if required by the Company, upon the
furnishing of evidence satisfactory to the Company of such
disability), the Company will, during the continuance of his
disability, but only for the remaining term of this Agreement,
pay the Employee his compensation payable under the provisions of
Section 3 (other than the bonus provided for in Section 3(b) and
less the amount of any benefits paid to the Employee under any
disability insurance provided by the Company) and continue to
provide the Employee all other benefits provided under this
Agreement. As used herein, the term "disability" means the
complete and total inability of the Employee, due to illness,
physical or comprehensive mental impairment to substantially
perform all of his duties as described in this Agreement for a
consecutive period of 30 days or more.
(c) The Company may terminate this Agreement at any time
for Cause by giving written notice of termination to Employee.
For purposes of this Agreement, "Cause" means any one or more of
the following: (i) a breach of this Agreement, which breach
either (A) is not cured within 30 days after notice from the
Company specifying the action which constitutes the breach and
demanding its discontinuance, or (B) is cured and the breach
recurs during or after such 30-day period, (ii) the Employee's
(A) exhibition of willful disobedience to, or repeated failure to
perform, reasonable directions of the Company's Board of
Directors or PMCI's President, (B) commission of gross
malfeasance in the performance of his duties under this Agreement
or acts resulting in an indictment charging the Employee with the
commission of a felony; engaging in fraud, misappropriation or
embezzlement; (C) disclosure of confidential information in
violation of this Agreement; (D) willfully engaging in conduct
materially injurious to the Company; or (E) breach or threatened
breach by Employee of any provision of Sections 6, 7 or 8. A
material failure to perform his duties hereunder that results
from the disability of the Employee will not be considered Cause
for purposes of his termination. If Employee is terminated for
Cause, then Employee's right to receive Base Salary and benefits
will terminate as of the date of such notice and Employee will
return to the Company any and all stock options or other equity
interests that have been granted to Employee during the term of
this Agreement.
(d) The Company may terminate this Agreement at
any time after the one-year anniversary of the date of this
Agreement by giving six months' prior written notice of
termination to Employee. In that event Employee's right to
receive Base Salary and benefits will terminate as of the date of
termination.
5
#327210.05
<PAGE>
6. Non-Disclosure of Information.
(a) Except as specifically permitted by the
Company in writing and as required for Employee to perform his
services and duties hereunder, during the period beginning on the
date of this Agreement and ending on the date that is two years
after the expiration or termination of this Agreement (the
"Non-Disclosure Period") Employee will not disclose any
Proprietary Information to any person or entity for any purpose
or use or permit the use of any Proprietary Information. In
addition, during the Non-Disclosure Period Employee will not
undertake on behalf of any other person or entity any commercial
project, employment or consultancy that would result in use or
disclosure of Proprietary Information unless the Company has
consented in writing to such undertaking, employment or
consultancy. The Company may require that Employee and any person
or entity proposing to engage Employee in such a capacity provide
appropriate written assurances regarding the avoidance of any
such conflict.
(b) Upon the termination or expiration of this
Agreement, Employee will deliver to the Company or with the
Company's permission cause to be destroyed all notes, letters,
prints, records, forms, contracts, studies, reports, appraisals,
financial data, lists of names or other customer data, and any
other articles or papers, software, computer tapes and materials
that have come into his possession by reason of his engagement by
the Company, whether or not prepared by him, and he will not
retain any memoranda, summaries, or copies of any of those items.
(c) Employee acknowledges that Proprietary
Information of the Company is a unique and valuable asset of the
Company, the loss or unauthorized disclosure or use of which
would cause the Company irreparable harm.
6
#327210.05
<PAGE>
7. Inventions.
(a) Employee hereby assigns and agrees to
assign to the Company, or to any person or entity designated by
the Company, without royalty or other consideration to Employee
therefor other than the compensation set forth in this Agreement,
all of his right, title and interest in and to all (i)
Inventions, (ii) applications for United States of America and
foreign letters patent, (iii) United States of America and
foreign letters patent granted upon Inventions, and (iv) material
related to any of the foregoing subject to copyright. Employee
further acknowledges that all copyrightable materials developed
or produced by Employee within the scope of his engagement by the
Company constitute works made for hire. Notwithstanding anything
to the contrary in this Section 7(a), Employee's obligations
under this Section 7(a) will only apply to the extent the items
set forth in clauses (i) through (iv) hereof relate to or arise
out of Employee's employment by the Company.
(b) Employee will communicate promptly and
disclose to the Company, in such form as the Company may
reasonably request, all information, details and data pertaining
to any of the items described in Section 7(a).
(c) At the request of the Company, Employee
will do all acts necessary or appropriate to secure for the
Company the full benefits of each item described in Section 7(a),
and otherwise to carry into full force and effect the assignment
contained in Section 7(a). Such acts may include giving testimony
in support of Employee's inventorship and promptly executing and
delivering to the Company such papers, instruments and documents,
without expense to Employee, as may be appropriate in the
Company's opinion to apply for, secure, maintain, reissue, extend
or defend the Company's worldwide rights in any item described in
Section 7(a).
8. Covenants Not to Compete or Interfere.
(a) In view of the unique and valuable services
that Employee has been engaged to provide to the Company and
Employee's current and future knowledge of the Company's
Proprietary Information, during the period beginning on the date
of the closing of the Acquisition and ending on the earlier of
(i) the two-year anniversary of the date on which Employee ceases
to be employed by the Company and (ii) the two-year anniversary
of the payment by PMCI of the Final Purchase Price Adjustment
pursuant to Section 2.3(d) of the Stock Purchase Agreement (such
period, the "Non-Compete Period"), Employee will not Participate
In any Competitive Advisory Business or any other business in
which the Company is engaged, or has taken material steps to be
engaged, at the time of such termination or expiration.
Notwithstanding the foregoing, Employee will not be deemed to
Participate In a business merely because he owns 5% or less of
the outstanding stock of a corporation (measured in voting power
or equity) if, at the time of his acquisition thereof, such stock
is listed on a national securities exchange, is reported on
Nasdaq, or is regularly traded in the over-the-counter market by
a member of a national securities exchange.
7
#327210.05
<PAGE>
(b) During the Non-Compete Period, Employee
will not (i) directly or indirectly cause, or attempt to cause,
to leave the employ of the Company any employee of the Company
that is an employee of the Company at any time during the period
beginning six months before the date of this Agreement and ending
at the end of the Non-Compete Period; (ii) directly or indirectly
solicit any customer of the Company as to which Employee obtained
knowledge during his affiliation with the Company as a member of
the leadership team of the Company or with any affiliate of the
Company; (iii) knowingly or recklessly interfere or attempt to
interfere with any transaction in which the Company was involved
during the term of this Agreement; or (iv) in any other way
knowingly or recklessly interfere with the relationship between
the Company and any of its employees, customers or suppliers.
(c) If any provision of this Section 8 is held
to be invalid, illegal or unenforceable in any
jurisdiction by any court of competent jurisdiction, then (i)
such invalidity, illegality or unenforceability will not affect
such provision with respect to any other jurisdiction, (ii) such
invalidity, illegality or unenforceability will not affect any
other provision of this Agreement with respect to such
jurisdiction, and (iii) such court may modify such provision to
make it valid, legal, and enforceable in such jurisdiction, and
such provision will thereafter be enforced in its modified form
in such jurisdiction.
9. Injunctive Relief. Employee acknowledges that the
breach or threatened breach by Employee of any of the provisions
of Sections 6, 7 or 8 would cause the Company irreparable harm.
Upon the breach or threatened breach of any provision of Sections
6, 7 or 8, the Company will be entitled to an injunction, without
bond, restraining Employee from committing such breach. This
right will not be construed to limit the Company's ability to
obtain any other remedies available to it for such breach or
threatened breach, including the recovery of damages.
10. General Provisions.
(a) Remedies. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. No failure or delay on
the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise
thereof or of any other right.
(b) Governing Law. This Agreement, its
interpretation, and the legal relations between the parties
hereto will be governed by and construed in accordance with the
laws of the State of Colorado, without regard to the conflict of
laws rules thereof.
(c) Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any
jurisdiction by any court of competent jurisdiction, then (i)
such invalidity, illegality or unenforceability will not affect
such provision with respect to any other jurisdiction, (ii) such
invalidity, illegality or unenforceability will not affect any
other
8
#327210.05
<PAGE>
provision of this Agreement with respect to such
jurisdiction, and (iii) such court may modify such provision to
make it valid, legal, and enforceable in such jurisdiction, and
such provision will thereafter be enforced in its modified form
in such jurisdiction if the parties hereto agree that such
modification will achieve, to the extent possible, the economic,
business and other purposes of such invalid, illegal or
unenforceable provision.
(d) Notices. All notices and other
communications hereunder must be in writing and will be deemed
given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail, return receipt
requested, or sent via facsimile, with confirmation of receipt,
to the parties hereto at the following address or at such other
address for a party hereto as specified by notice hereunder:
(i) if to the Company, to:
ADAM Investment Services, Inc.
100 Galleria Parkway, Suite 1200
Atlanta, Georgia 30399
Attention: Scott A. MacKillop
Facsimile No.: 770-644-0124
with copies to:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Maureen E. Dobel, Esq.
Facsimile No: 303-293-2152
and
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: Francis R. Wheeler
Facsimile No.: 303-866-0200
(ii) If to Employee:
Scott A. MacKillop793 Old Paper Mill Drive
Marietta, Georgia 30067
(e) Assignment; Binding Effect and Benefit.
Except as otherwise provided in this Section 10(e), neither party
hereto may assign its rights or delegate its obligations under
this Agreement without the prior written consent of the other
party. The Company may assign its rights and delegate its
obligations under this Agreement to any of its affiliates or to
any
9
#327210.05
<PAGE>
person or entity that acquires all or substantially all
of the business of the Company whether through merger,
purchase of assets, or otherwise. This Agreement will be
binding upon and inure to the benefit of the parties
hereto and their respective legal representatives,
heirs, and permitted successors and assigns.
(f) Entire Agreement. This Agreement
constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, among the
parties hereto with respect to the subject matter hereof
(g) Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto.
(h) Headings; "Including". When a reference is
made in this Agreement to a section, such reference is to a
section of this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein will be
deemed in each case to be followed by the words "without
limitation." The section headings contained in this Agreement are
for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the context
may require, each pronoun includes the corresponding masculine,
feminine and neuter forms.
(i) Representation by Counsel. The parties
hereto acknowledge that they have had the opportunity to consult
with counsel and have done so to the extent they deemed
appropriate during the negotiation, preparation and execution of
this Agreement.
(j) Counterparts; Effective Date. This
Agreement may be executed in counterparts, each of which shall be
deemed to be an original, and all of which together shall be
deemed to be one and the same instrument. This Agreement will
become effective when one or more counterparts have been signed
by each of the parties hereto and delivered to the other parties
hereto, it being understood that all parties hereto need not sign
the same counterpart.
(k) Enforcement Costs. In the event of any proceeding to
enforce this Agreement, the prevailing party will be entitled to
receive from the other party all reasonable costs and expenses,
including the reasonable fees of attorneys, accountants and other
experts, incurred by the prevailing party in investigating and
prosecuting (or defending) such action at trial or upon any
appeal.
* * *
* *
10
#327210.05
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Employment Agreement as of the date first written
above.
THE COMPANY
ADAM INVESTMENT SERVICES, INC.
By: /s/
Its:
EMPLOYEE
/s/
Scott A. MacKillop
11
#327210.05
<PAGE>
NON-COMPETE AGREEMENT
This NON-COMPETE AGREEMENT (this "Agreement") is entered
into as of September 23, 1997, between ADAM Investment Services,
Inc., a Delaware corporation (the "Company"), and Michael T.
Wilkinson ("Individual").
RECITALS
A. PMC International, Inc. ("PMCI") has entered
into a stock purchase agreement, dated as of July 25, 1997 (the
"Stock Purchase Agreement"), pursuant to which PMCI will acquire
all of the outstanding capital stock of the Company (the
"Acquisition").
B. The Company and Individual desire to enter into
this Agreement.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual
covenants and conditions contained herein and other good and
valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Company and Individual hereby agree to
the following terms to protect the Company, while not
unreasonably restricting Individual after he terminates his
affiliation with the Company:
1. Acknowledgments.
(a) Individual specifically acknowledges that
he has been a member of the leadership team of the Company and
through his affiliation with the Company he has become privy to
substantial confidential and proprietary information of the
Company. Because of Individual's expertise and familiarity with
the Company, including the Company's confidential and proprietary
information, it would be harmful to the Company for Individual,
after he terminates his affiliation with the Company, immediately
to begin competing with the Company. (b) Individual also
specifically acknowledges that after he terminates his
affiliation with the Company he will be able to earn a livelihood
without violating the terms of this Agreement. Further,
Individual acknowledges that his representation of his ability to
earn a livelihood without violating the terms of this Agreement
is a material condition to the Company's entering this Agreement
with him.
2. Restrictions.
(a) Restricted Period. In consideration
of the benefits to be received by Individual as a result of the
Acquisition, Individual agrees that during the period beginning
on the date of the closing of the Acquisition and ending on the
two-year anniversary of the payment by PMCI of the Final Purchase
Price Adjustment pursuant to Section 2.3(d) of the
1
#327203.04
<PAGE>
Stock Purchase Agreement (the "Restricted Period") he
will not (i) Participate In (as hereinafter defined) any
Competitive Advisory Business (as hereinafter defined); (ii)
directly or indirectly cause, or attempt to cause, to leave the
employ of the Company any employee of the Company that is an
employee of the Company at any time during the period beginning
six months before the date of this Agreement and ending at the
end of the Restricted Period; (iii) directly or indirectly
solicit any customer of the Company as to which Individual
obtained knowledge during his affiliation with the Company as a
member of the leadership team of the Company; (iv) knowingly or
recklessly interfere or attempt to interfere with any transaction
in which the Company was involved during the term of this
Agreement; or (v) in any other way knowingly or recklessly
interfere with the relationship between the Company and any of
its employees, customers or suppliers.
(b) Participate In. For purposes of this
Agreement, "Participate In" means to directly or indirectly,
individually or with or through any other person or entity,
manage, operate, control or participate in the management,
operation or control of, or be connected to as a director,
officer, employee, partner, consultant, agent or independent
contractor, or acquiesce in the use of his name in.
(c) Competitive Advisory Business. For purposes
of this Agreement, "Competitive Advisory Business" means
services, products or software in the wrap-fee or privately
managed account business (whether using mutual funds or separate
accounts) and/or services, products or software in the
performance reporting business to the extent such services,
products or software are provided to or through financial
intermediaries, including, but not limited to, investment
advisors, broker-dealers, banks, insurance companies, accounting
firms and financial planners for use in providing services to the
retail and small institutional accounts (typically under $30
million in assets) of such financial intermediaries. The term
"Competitive Advisory Business" includes the offering of any of
the following products or services through financial
intermediaries, either alone or in combination, whether or not
such products or services are generally or customarily understood
to be included in the term "wrap-fee" or "privately managed
account" business, and whether or not such products or services
are offered for a single fee or are charged for separately: (1)
investment recommendations or portfolio management services based
on or tailored to the specific investment needs and/or risk
tolerance of the client whose assets are being managed, (2)
access to the asset management services of separate account
managers, (3) automated trading services that involve the
exercise of discretionary authority, a limited power of attorney
or similar authorization granted by an asset management client
and (4) the preparation of reports or statements that show the
securities transactions in a client account and/or calculate,
display or analyze the performance or investments held in a
client account. The term "Competitive Advisory Business" does not
include personally providing investment advisory products or
services directly to clients through a financial planning,
investment management or investment consulting firm, as long as
either (1) at least 75% of the clients of such firm have assets
under management or under advisement by such firm in excess of
$30 million, or (2) such clients are not primarily secured by
such firm through referrals or solicitations by individuals not
employed by such firm who derive a fee or other compensation for
such referrals or solicitations. The term "Competitive Advisory
Business" specifically includes,
2
#327203.04
<PAGE>
but is not limited to, any investment advisory services or
products provided to financial intermediaries by Lockwood
Financial Services, Inc.; Rheinhardt Werba Bowen Advisory
Services; Advisory Consulting Group; SEI Investments; Brinker
Capital; Meridian Investment Management; Frank Russell Company
and Callan Associates, Inc. The term "Competitive Advisory
Business" also includes "turn key asset management programs."
Notwithstanding any of the foregoing, the parties hereto
understand and agree that Individual is expected to be employed
by LCG Associates, Inc. and its parent LCG Holdings (collectively
referred to in this paragraph as "LCG"), a firm that provides
investment consulting to qualified plans and institutional
investors. The parties hereto agree that the Individual may be
employed by LCG and that such employment in and of itself will
not be a violation of this Agreement so long as LCG does not
engage in a Competitive Advisory Business.
(d) Limitations. The restrictions imposed by
this Agreement are limited to the geographical areas in which the
Company is conducting its business enterprise and business
operations at the date hereof, which consists of the United
States and its territories and possessions. The restriction upon
solicitation of customers imposed by Section 2(a)(iii) is limited
to customers of the Company at the date hereof.
3. Effective Date. Subject to Section 5(i), this
Agreement will become effective on the date hereof.
4. Injunctive Relief. Individual acknowledges that the
breach or threatened breach by Individual of any of the
provisions of Section 2 would cause the Company irreparable harm.
Upon the breach or threatened breach of any of the provisions of
Section 2, the Company will be entitled to an injunction, without
bond, restraining Individual from committing such breach. This
right will not be construed to limit the Company's ability to
obtain any other remedies available to it for such breach or
threatened breach, including the recovery of damages.
3
#327203.04
<PAGE>
5. General Provisions.
(a) Remedies. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not
preclude the exercise of any other remedy. No failure or delay on
the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver
of, or acquiescence in, any breach of any representation,
warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise
thereof or of any other right.
(b) Governing Law. This Agreement, its
interpretation, and the legal relations between the parties
hereto will be governed by and construed in accordance with the
laws of the State of Colorado, without regard to the conflict of
laws rules thereof.
(c) Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable in any
jurisdiction by any court of competent jurisdiction, then (i)
such invalidity, illegality or unenforceability will not affect
such provision with respect to any other jurisdiction, (ii) such
invalidity, illegality or unenforceability will not affect any
other provision of this Agreement with respect to such
jurisdiction, and (iii) such court may modify such provision to
make it valid, legal, and enforceable in such jurisdiction, and
such provision will thereafter be enforced in its modified form
in such jurisdiction.
(d) Assignment; Binding Effect. Neither this
Agreement nor any of the rights, benefits or obligations
hereunder may be assigned by any party hereto (whether by
operation of law or otherwise) without the prior written consent
of the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, and permitted successors
and assigns.
(e) Entire Agreement. This Agreement
constitutes the entire agreement between the parties hereto and
supersedes all prior agreements and understandings, whether oral
or written, between the parties hereto with respect to the
subject matter hereof.
(f) Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto.
(g) Headings; "Including". When a reference is
made in this Agreement to a section, such reference is to a
section of this Agreement unless otherwise indicated. As used in
this Agreement, the words "include," "includes" and "including"
when used herein will be deemed in each case to be followed by
the words "without limitation." The section headings contained in
this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this
Agreement. Whenever the context may require, each pronoun
includes the corresponding masculine, feminine and neuter forms.
4
#327203.04
<PAGE>
(h) Representation by Counsel. The parties
hereto acknowledge that they have had the opportunity to consult
with counsel and have done so to the extent they deemed
appropriate during the negotiation, preparation and execution of
this Agreement.
(i) Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed to be an
original, and all of which together shall be deemed to be one
and the same instrument.
(j) Enforcement Costs. In the event of any
proceeding to enforce this Agreement, the prevailing party will
be entitled to receive from the other party all reasonable costs
and expenses, including the reasonable fees of attorneys,
accountants and other experts, incurred by the prevailing party
in investigating and prosecuting (or defending) such action at
trial or upon any appeal.
* * *
* *
5
#327203.04
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
ADAM INVESTMENT SERVICES, INC.
By: /s/
Name:
Title:
INDIVIDUAL
/s/
Michael T. Wilkinson
6
<PAGE>
