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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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PMC INTERNATIONAL, INC.
(NAME OF SUBJECT COMPANY)
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PMC INTERNATIONAL, INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
PREFERRED STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
COMMON STOCK: 693437-40-2
PREFERRED STOCK: 693437-20-4
(CUSIP NUMBER OF CLASSES OF SECURITIES)
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MAUREEN E. DOBEL, ESQ.
GENERAL COUNSEL
PMC INTERNATIONAL, INC.
555 17TH STREET, 14TH FLOOR
DENVER, CO 80202
(303) 292-1177
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF
OF THE PERSON FILING STATEMENT)
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WITH A COPY TO:
FRANCIS R. WHEELER, ESQ.
HOLME ROBERT & OWEN LLP
1700 LINCOLN STREET, SUITE 4100
DENVER, CO 80203
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is PMC International, Inc., a Colorado
corporation (the "Company"). The address of the principal executive offices of
the Company is 555 17th Street, 14th Floor, Denver, Colorado 80202. The titles
of the classes of equity securities to which this Statement relates are the
shares of common stock, par value $.01 per share, of the Company, including
issued and outstanding scrip (the "Common Shares") and the shares of Series A
Preferred Stock, without par value, of the Company (the "Preferred Shares," and
together with the Common Shares the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to a tender offer by ZACQ Corp., a Colorado
corporation (the "Purchaser") and a wholly owned subsidiary of The Ziegler
Companies, Inc., a Wisconsin corporation ("Parent"), disclosed in a Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated November 9, 1998
to purchase all outstanding Common Shares and Preferred Shares at a price of
$0.60 per Common Share and $2.50 per Preferred Share, net to the seller in
cash, without interest thereon upon the terms and subject to the conditions set
forth in the Offer to Purchase dated November 9, 1998 (the "Offer to Purchase")
and the related Letter of Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 3, 1998 (the "Merger Agreement") among Parent, the Purchaser and
the Company. The Merger Agreement provides that, among other things, as soon as
practicable after the consummation of the Offer and satisfaction or, if
permissible, waiver of the conditions to the merger, the Purchaser shall be
merged with and into the Company (the "Merger"), the separate corporate
existence of the Purchaser shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). A copy of the Merger
Agreement is filed as Exhibit C-1 to this Statement and is incorporated herein
by reference.
According to the Offer to Purchase, the principal executive offices of the
Purchaser and Parent are located at 215 North Main Street, West Bend, Wisconsin
53095.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as described herein, incorporated herein by reference, or
described in the Information Statement attached hereto as Annex I and
incorporated herein by reference, to the knowledge of the Company, as of the
date hereof, there exists no material contract, agreement, arrangement or
understanding and no actual or potential conflict of interest between the
Company or its affiliates and (i) the Company or its executive officers,
directors or affiliates or (ii) the Purchaser or its executive officers,
directors or affiliates.
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(i) Certain contracts, agreements, arrangements or understandings and any
actual or potential conflicts of interest between the Company or its affiliates
and the Company or its executive officers, directors or affiliates.
OFFICER AND DIRECTOR OPTIONS
Certain officers, directors and employees of the Company have been granted
options to purchase Common Shares under the Company's stock option plans and
otherwise. Pursuant to the plans and agreements applicable to the options, in
the event of certain transactions like that resulting from the Offer and the
Merger, upon written notice from the Company, all outstanding options vest and
become fully exercisable up to the Effective Time of the Merger. At the
Effective Time, all outstanding options and the related stock option plans
immediately terminate and are of no further effect. The following officers and
directors have been granted stock options (with the following respective
exercise prices) by the Company: Mr. D. Porter Bibb (12,500 shares at $4.00 per
share); Mr. J. W. Nevil Thomas (12,500 shares at $4.00 per share); Mr. Emmett
J. Daly (12,500 shares at $10.00 per share); Mr. Scott A. MacKillop (75,750
shares at $6.485 per share); Ms. Maureen E. Dobel (18,816 shares at $4.75 per
share, 438 shares at $6.485 per share and 7,500 shares at $6.00 per share); and
Mr. Stephen Ash (10,000 shares at $6.485 per share and 12,000 shares at $4.75
per share).
EMPLOYMENT AGREEMENT
Mr. Scott MacKillop, the President of the Company, was a party to a two-year
employment agreement dated September 23, 1997, with PMC Investment Services,
Inc. ("PMCIS"), a wholly owned subsidiary of the Company, formerly known as
ADAM Investment Services, Inc. PMCIS had the right to terminate the agreement
at any time after the one-year anniversary of the date of the agreement by
giving six months' prior written notice. The agreement provided for a minimum
salary of $240,000, an annual bonus of up to $50,000, options to acquire 62,500
Common Shares at an exercise price of $6.485 per share (with such options
expiring six years from the date of grant and vesting ratably 20% per year over
a five-year period beginning September 24, 1998), and participation in the
Company's other benefit plans. As a condition to Parent's agreeing to enter
into the Merger Agreement, Mr. MacKillop agreed to terminate this agreement and
to enter into an employment agreement with the Company, as described below.
The foregoing summary of Mr. MacKillop's employment agreement with PMCIS does
not purport to be complete and is qualified in its entirety by reference to
such agreement, a copy of which is filed as Exhibit C-2 to this Statement and
is incorporated herein by reference.
On November 3, 1998, Mr. MacKillop and the Company entered into a one-year
employment agreement. This agreement provides for a minimum salary of $240,000
that the Company may augment with performance-based increases as established in
the Company's discretion, and participation in the Company's other benefit
plans. In addition, the new employment agreement provides that if payment in
full of the 1998 earn-out payment due under the PMCIS Acquisition Agreement (as
defined below) is not paid in accordance with the PMCIS Acquisition Agreement,
as
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amended as described below, then the Company will pay Mr. MacKillop $250,000 on
the earlier of April 2, 1999 or two business days after the consummation of the
Merger. Upon the effectiveness of this agreement, Mr. MacKillop's existing
employment agreement with PMCIS (as described above) was terminated.
The foregoing summary of Mr. MacKillop's employment agreement with the
Company does not purport to be complete and is qualified in its entirety by
reference to such agreement, a copy of which is filed as Exhibit C-3 to this
Statement and is incorporated herein by reference.
CHANGE IN CONTROL SEVERANCE AGREEMENTS
In May 1998, the Company entered into Change in Control Severance Agreements
with Mr. MacKillop, Stephen M. Ash and Maureen E. Dobel (for purposes of their
respective agreements, each the "Executive"). Each of these agreements provides
that if a Change in Control (as defined in each such agreement) occurs, and
before the two-year anniversary of the Change in Control or the Executive's
65th birthday, whichever comes first, (i) the Executive's employment is
terminated by the Company or any of its subsidiaries (unless such termination
is for cause or because Executive becomes permanently disabled and begins to
receive disability benefits pursuant to the long-term disability plan in effect
for, or applicable to, the Executive immediately prior to the Change in
Control), or (ii) if the Executive terminates his or her employment with the
Company or any of its subsidiaries for Good Reason (as defined in each such
agreement), then Executive will be entitled to (x) a cash payment payable
during each month of the Continuation Period (twenty-seven months following
termination of employment for Messrs. MacKillop and Ash, and twelve months
following termination of employment for Ms. Dobel) in an amount equal to 1/12
of the sum of the Executive's annual base salary and the average of the
Executive's annual bonus over the preceding three fiscal years, (y) a lump-sum
cash payment which the Company will pay within ten business days after the
expiration of the Continuation Period equal to the Company matching
contributions that would have been made under the Company's 401(k) savings
plan(s) on the amounts described in the preceding clause (x) if the Executive
had continued in employment and participated to the fullest extent under such
plan(s), and (z) during the Continuation Period, the Company will arrange to
provide the Executive with continued medical, group life, and dental benefits
substantially similar, and subject to the same employee contribution
requirement, to those that the Executive was receiving or entitled to receive
immediately prior to the date his or her employment is terminated.
In addition to the foregoing general terms, Mr. MacKillop's Change in Control
Severance Agreement also provides that if a Change in Control occurs, then Mr.
MacKillop may terminate his employment with the Company or any of its
subsidiaries for any reason, or without reason, during the sixty-day period
immediately following the first anniversary of a Change in Control giving rise
to a right to severance compensation. Upon the effectiveness of the employment
agreement entered into as of November 3, 1998 between the Company and Mr.
MacKillop, Mr. MacKillop's Change in Control Severance Agreement was
terminated.
The foregoing summary of certain provisions of the Change in Control
Severance Agreements between the Company, on the one hand, and each of Scott
MacKillop, Stephen Ash and Maureen Dobel, on the other hand, does not purport
to be complete and is qualified in its entirety by reference
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to such agreements, copies of which are filed as Exhibits C-4, C-5, and C-6,
respectively, to this Statement and are incorporated herein by reference.
PMCIS ACQUISITION AGREEMENT
The agreement providing for the acquisition of PMCIS by the Company, dated
July 25, 1997 (the "PMCIS Acquisition Agreement"), provided that the Company
would acquire all of the outstanding capital stock of PMCIS, of which
approximately 9.8% was owned by Mr. MacKillop, for up to $9,000,000 in cash and
up to $200,000 in Common Shares if certain conditions are met over time. In
addition, the Company agreed to assume the normal operating liabilities of
PMCIS at closing of the acquisition, estimated to be approximately $1,600,000.
At the closing of the PMCIS transaction, the Company paid $5,000,000 in cash
and agreed to make two earn-out payments on the first and second anniversary
dates of the closing. The first earn-out payment (including interest thereon)
is approximately $2,000,000, of which approximately $196,000 is to be paid to
Mr. MacKillop. The second earn-out payment will be determined on the two-year
anniversary of the closing of the PMCIS acquisition and will be equal to an
amount of up to $2,000,000, of which approximately 9.8% is to be paid to Mr.
MacKillop.
An excerpt from pages 15-16 of the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997, as filed with the Securities and
Exchange Commission (the "Commission") on March 31, 1998 and as amended on
Forms 10-KSB/A filed with the Commission on July 1 and July 7, 1998, contains a
summary of the PMCIS Acquisition Agreement. Such excerpt is filed as Exhibit C-
7 to this Statement and the description of the PMCIS Acquisition Agreement
contained therein is incorporated herein by reference.
On November 3, 1998 the Company entered into the First Amendment to Stock
Purchase Agreement modifying the payment terms of the first earn-out payment
owed to the former PMCIS shareholders. Such payment was due in full on November
6, 1998 and under the modified terms is payable as follows: $500,000 is payable
November 6, 1998; $500,000 is due on the earlier of January 6, 1999 or one
business day after consummation of the Offer; and the balance (including
interest accruing at 8.5% until November 6, 1998 and 12% thereafter) is due at
the earlier of the Effective Time of the Merger or March 31, 1999. If the
Company fails to make any of the foregoing payments and does not cure such
nonpayment within 5 business days after receiving notice thereof, such
nonpayment will constitute a default under the First Amendment to Stock
Purchase Agreement, such First Amendment will become null and void, and the
rights of the former PMCIS shareholders under the PMCIS Acquisition Agreement
may be enforced to the full extent permitted thereunder.
The foregoing summary of certain provisions of the First Amendment to Stock
Purchase Agreement among the Company and the former shareholders of PMCIS does
not purport to be complete and is qualified in its entirety by reference to
such agreement, a copy of which is filed as Exhibit C-8 to this Statement and
is incorporated herein by reference.
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AGREEMENTS WITH C.R. "SONNY" TUCKER
The Company has entered into a Consulting Agreement effective as of August
24, 1998 with C.R. "Sonny" Tucker, currently the acting Chief Executive Officer
of the Company. Mr. Tucker's Consulting Agreement provides that Mr. Tucker will
serve as a consultant performing as PMC's Interim Chief Executive Officer. The
agreement also provides that Mr. Tucker will be indemnified for all acts taken
as an officer of and consultant to the Company to the same extent as the
Company's other officers and directors (consistent with the Company's Articles
of Incorporation). Under Mr. Tucker's agreement, he is to be paid $28,350 per
month, and may be paid a bonus from time to time at the sole discretion of the
Company's Board of Directors. The initial term of Mr. Tucker's Consulting
Agreement is two months commencing August 24, 1998, with the term to be
extended for successive one-month periods unless either party gives timely
written notice to the contrary to the other party.
The Company has also entered into a Confidentiality/Nonsolicitation Agreement
effective as of August 24, 1998 with Mr. Tucker, which provides that Mr. Tucker
will not disclose or use for any purpose unrelated to his service to the
Company any Confidential Information (as defined in such agreement) during the
course of such service. The agreement also provides that, without the Company's
prior written consent, during the term of the agreement and for 12 months
thereafter Mr. Tucker will not (i) solicit or attempt to cause any employee,
agent or contractor of the Company or any of its affiliates to terminate his or
her consulting period, agency or contractor relationship, as applicable, with
the Company or such affiliate, (ii) interfere or attempt to interfere with the
relationship between the Company and its employees, contractors and agents,
(iii) solicit similar business that the Company or any of its affiliates offers
from any customer or client served by the Company, or (iv) interfere or attempt
to interfere with any transaction, agreement or business relationship in which
the Company or any of its affiliates was involved.
The foregoing summaries of certain provisions of Mr. Tucker's Consulting
Agreement and Confidentiality/Nonsolicitation Agreement do not purport to be
complete and are qualified in their entirety by reference to such agreements,
copies of which are filed as Exhibits C-9 and C-10, respectively, to this
Statement and are incorporated herein by reference.
WARRANT PURCHASE AGREEMENTS
The Company has entered into Warrant Purchase Agreements with certain of its
officers, directors and affiliates of its directors, pursuant to which such
officers, directors and affiliates of its directors have sold to the Company
certain outstanding warrants to purchase Common Shares of the Company at a
purchase price of $0.05 per warrant share. The aggregate number of Common
Shares underlying the purchased warrants is 150,001. The current exercise price
per warrant share ranges from $4.00 to $8.50. A form of Warrant Purchase
Agreement is filed as Exhibit C-16 to this Statement and is incorporated herein
by reference.
(ii) Certain contracts, agreements, arrangements or understandings and any
actual or potential conflicts of interest between the Company or its affiliates
and Parent, the Purchaser or their respective executive officers, directors or
affiliates.
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CONVERSION RIGHTS AND OPTIONS
The Company has granted Parent certain rights and options to acquire Common
Shares and Preferred Shares pursuant to the following instruments: (i) that
certain Convertible Promissory Note issued by the Company to Parent in the
principal amount of $500,000, dated October 15, 1998 (the "First Note"); (ii)
that certain Credit Agreement by and between the Company and Parent, providing
for revolving loans from Parent to the Company of up to an aggregate principal
amount of $3.5 million, dated November 3, 1998 (the "Credit Agreement"), with
all such loans under the Credit Agreement being evidenced by a single Note (the
"Second Note"); (iii) that certain Stock Option Agreement by and between the
Company and Parent, dated October 15, 1998 (the "Preferred Stock Option
Agreement") and (iv) that certain Stock Option Agreement by and between the
Company, dated November 3, 1998 (the "Common Stock Option Agreement" and
together with the Preferred Stock Option Agreement, the "Stock Option
Agreements").
The instruments referenced in the preceding paragraph provide Parent with the
following rights and options to acquire Common Shares and Preferred Shares: (i)
pursuant to the First Note, the Company granted Parent the right to convert, at
Parent's option, the then outstanding principal of the First Note at the time
of conversion or such lesser amount as selected by Parent, in whole or in part,
into Preferred Shares at $2.50 per Preferred Share (the "Preferred Conversion
Rights"); (ii) pursuant to the Credit Agreement, the Company granted Parent the
right to convert, at Parent's option, the then outstanding principal and
accrued interest of the Second Note at the time of conversion or such lesser
amount as selected by Parent, in whole or in part, into Common Shares at $0.60
per Common Share (the "Common Conversion Rights" and together with the
Preferred Conversion Rights, the "Conversion Rights"); (iii) pursuant to the
Preferred Stock Option Agreement, the Company granted Parent the option to
purchase 111,818 Preferred Shares at a price of $2.50 per Preferred Share (the
"Preferred Shares Option") and (iv) pursuant to the Common Stock Option
Agreement the Company granted Parent the option to purchase 4.5 million Common
Shares at a price of $0.60 per Common Share (the "Common Shares Option" and
together with the Preferred Shares Option, the "Options"). Parent may exercise
the Conversion Rights and the Options, in whole or in part, in order to meet
the Minimum Condition (as defined in Annex I attached hereto).
The above summary of certain provisions of the First Note, the Credit
Agreement, the Preferred Stock Option Agreement and the Common Stock Option
Agreement does not purport to be complete and is qualified in its entirety by
reference to the First Note, the Credit Agreement, the Preferred Stock Option
Agreement and the Common Stock Option Agreement, copies of which are filed as
Exhibits C-11, C-12, C-13, and C-14, respectively, to this Statement and are
incorporated herein by reference.
CREDIT AGREEMENT
On November 3, 1998, the Company and Parent entered into the Credit Agreement
pursuant to which Parent agreed to make, through March 31, 1999, revolving
credit loans (the "Loans") to the Company in an aggregate principal amount of
up to $3,500,000 at a variable rate of interest equal to the prime rate as
published in the Wall Street Journal (Midwest Edition). All Loans are to be
evidenced by the Second Note. The proceeds of the Loans are to be used solely
to retire indebtedness under a bridge loan provided to the Company by Dundee
Bancorp, Inc. in July 1998, to compensate
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investment managers, to pay legal and investment banking fees, to make earn-out
payments under the PMCIS Acquisition Agreement, as amended, and for general
working capital and general corporate purposes, including payment of aged
payables. In connection with the Credit Agreement, the Company made certain
standard representations and warranties and agreed to certain negative
covenants, including limitations on: liens, indebtedness, investments, payments
(including dividends and distributions), the disposition of assets, sales and
leasebacks, loans, transactions with affiliates, guarantees, formation of
subsidiaries and its ability to consolidate or merge with any other person. The
Company also agreed to standard affirmative covenants, including: timely
payment of the Loans, maintenance of its corporate existence, maintenance of
licenses, timely reporting, timely payment of taxes, inspection of properties
and records, compliance with laws and other agreements of the Company, where
noncompliance with any covenant would have a Material Adverse Effect (as
defined in the Credit Agreement). Parent has the standard remedies available to
creditors in the event of any default under the Credit Agreement including
acceleration and setoff. The Loans are secured by unlimited guarantees by three
of the Company's subsidiaries (described below) and by the assets of the
Company and three of its subsidiaries (described below).
The foregoing summary of certain provisions of the Credit Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Credit Agreement, a copy of which is filed as Exhibit C-12 to this Statement
and is incorporated herein by reference.
In connection with the Credit Agreement, three subsidiaries of the Company,
PMCIS, Portfolio Management Consultants, Inc. ("PMC") and Portfolio Technology
Services, Inc. ("PTS") each agreed to guaranty the Company's Obligations (as
defined in the Guarantees) to Parent of any kind, past, present or future, plus
any costs of collection.
The foregoing summary of certain provisions of the Guarantees does not
purport to be complete and is qualified in its entirety by reference to the
Guarantees, copies of which are filed as Exhibits C-17, C-18, and C-19 to this
Statement and are incorporated herein by reference.
In connection with the Credit Agreement, the Company, PMCIS, PMC and PTS
(each, a "Debtor") each granted to Parent a security interest pursuant to a
General Business Security Agreement (collectively, the "Security Agreements")
in all tangible and intangible assets, now owned or hereafter acquired by each
of them, wherever located, to secure all Obligations (as defined in the
Security Agreements) of the Debtor. Under the Security Agreements, each Debtor
made customary warranties and covenants. Upon an event of default or at any
time Parent deems itself insecure, Parent has all customary rights of a secured
party.
The foregoing summary of certain provisions of the Security Agreements does
not purport to be complete and is qualified in its entirety by reference to the
Security Agreements, copies of which are filed as Exhibits C-20, C-21, C-22,
and C-23 to this Statement and are incorporated herein by reference.
SHAREHOLDER TENDER AGREEMENTS
Parent has entered into Shareholder Tender Agreements with all of the
Company's directors and executive officers who own Shares, certain of the
Company's employees and affiliates, and affiliates
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of certain directors of the Company, pursuant to which such officers,
directors, employees and affiliates have agreed to tender their Common Shares
in connection with the Offer. The aggregate number of Common Shares subject to
these agreements is 262,277, or approximately 5.9% of the Common Shares
outstanding on November 3, 1998.
The foregoing summary of certain provisions of the Shareholder Tender
Agreements does not purport to be complete and is qualified in its entirety by
reference to the form of such agreements, a copy of which is filed as Exhibit
C-15 to this Statement and is incorporated herein by reference.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement.
Such summary does not purport to be complete and is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit C-1
to this Statement and is incorporated herein by reference. Capitalized terms
not otherwise defined herein have the respective meanings ascribed to them in
the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence the
Offer and that, upon the terms and subject to the prior satisfaction or waiver
of the conditions of the Offer, the Purchaser will purchase all Shares validly
tendered pursuant to the Offer. The Merger Agreement provides that the
Purchaser may in its sole discretion waive, in whole or in part, at any time or
from time to time, any condition (other than the Minimum Condition, which may
not be waived without the prior written consent of the Company), increase the
price per Common Share and/or Preferred Share payable in the Offer or make any
other changes in the terms and conditions of the Offer; provided that, unless
previously approved by the Company in writing, no change may be made that
decreases the price per Common Share or Preferred Share payable in the Offer,
changes the form of consideration payable in the Offer, reduces the maximum
number of Shares to be purchased in the Offer or imposes conditions to the
Offer in addition to those set forth in the Merger Agreement and the Offer to
Purchase. As of October 22, 1998, there were 4,446,828.5 Common Shares
(including scrip) issued and outstanding, 138,182 Preferred Shares issued and
outstanding, 943,290 Common Shares reserved for issuance for outstanding
warrants and for outstanding options, including options under the Company's
stock option plans (all of which warrants and options have exercise prices
greater than $0.60 per Share), and, except for Conversion Rights and Options
granted to the Purchaser, no other securities of the Company are outstanding or
committed to be issued. Based on this information, and as a result of the
expiration of certain options and the Company's repurchase of certain warrants
(as described below) since October 22, 1998, and assuming the full exercise of
the Conversion Rights and the Options, the Minimum Condition will be satisfied
without the Purchaser acquiring any Common Shares or Preferred Shares in the
Offer. Purchaser has agreed to use its best efforts to consummate the Offer,
including, if necessary, exercise of the Conversion Rights and the Options.
The Merger. The Merger Agreement provides that, upon the terms and subject to
the conditions of the Merger Agreement, and in accordance with the Colorado
Business Corporation Act (the "CBCA"), the Purchaser shall be merged with and
into the Company at the Effective Time. Following the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and
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assume all the rights and obligations of the Purchaser in accordance with the
CBCA and the Merger Agreement. The Articles of Incorporation and the By-laws of
the Company shall continue as the Articles of Incorporation and the By-laws of
the Surviving Corporation, the directors of the Company shall continue as the
directors of the Surviving Corporation, and the officers of the Company shall
continue as the officers of the Surviving Corporation, in each case until their
successors are chosen.
Conversion of Securities. The Merger Agreement provides that, at the
Effective Time, each Common Share and certificate for scrip issued and
outstanding immediately prior thereto (other than Common Shares owned by Parent
or any of its affiliates, including the Purchaser, and Common Shares held in
the Company treasury, and any Dissenting Shares (as defined below) representing
Common Shares) shall, by virtue of the Merger and without any action on the
part of the Purchaser, the Company or the holders of the Common Shares, be
converted into and represent the right to receive $0.60 per Common Share (or
any higher price that may be paid for each Common Share pursuant to the Offer)
in cash, without interest thereon (the "Common Share Offer Price").
At the Effective Time, each Preferred Share issued and outstanding
immediately prior thereto (other than Preferred Shares owned by Parent or any
of its affiliates, including the Purchaser, and Preferred Shares held in the
Company treasury, and any Dissenting Shares representing Preferred Shares)
shall, by virtue of the Merger and without any action on the part of the
Purchaser, the Company or the holders of the Preferred Shares, be converted
into and represent the right to receive $2.50 per Preferred Share (or any
higher price that may be paid for each Preferred Share pursuant to the Offer)
in cash, without interest thereon (the "Preferred Share Offer Price").
Each share of common stock of the Purchaser issued and outstanding
immediately prior to the Effective Time shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the Purchaser, the Company
or the holders of such shares, be converted into and shall thereafter evidence
one validly issued and outstanding share of common stock of the Surviving
Corporation.
Dissenting Shares. Shares which are held by holders who have properly
exercised dissenters rights with respect thereto in accordance with Article 113
of the CBCA will not be exchangeable for the right to receive an amount equal
to the Common Share Offer Price or Preferred Share Offer Price, as appropriate,
in cash, and instead holders of such Dissenting Shares will be entitled to
receive payment for their shares under the CBCA, unless and until such holders
have withdrawn or lost their right to dissent under the CBCA, in which case
Shares held by such holders will be exchangeable for the right to receive the
Common Share Offer Price or Preferred Share Offer Price, as appropriate, in
cash.
Representations and Warranties. In the Merger Agreement, the Company has made
customary representations and warranties to the Purchaser, including, but not
limited to, representations and warranties relating to: the Company's
organization, qualification and capitalization; its authority to enter into the
Merger Agreement and carry out related transactions; filings made by the
Company with the Commission under the Securities Act of 1933, as amended, or
the Exchange Act (including financial statements included in the documents
filed by the Company under these Acts); required consents and approvals;
compliance with applicable laws, the Company's intellectual property;
litigation involving the Company; the Company's benefit plans; title to its
assets; insurance coverage
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for the Company and its business; tax matters; Year 2000 compliance and the
absence of certain changes or events which would have a Material Adverse Effect
on the Company. "Material Adverse Effect" is defined as a material adverse
change in the financial condition or results of operations of the Company and
its subsidiaries taken as a whole, including without limitation information
that a significant customer intends to cancel or substantially reduce its
relationship with the Company and its subsidiaries, as determined by Parent in
its reasonable discretion.
The Purchaser and Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to the Purchaser's and Parent's organization and
qualification, authority to enter into the Merger Agreement, required consents
and approvals and the availability of sufficient funds to consummate the Offer
and the Merger.
Covenants Relating to the Conduct of Business. Under the Merger Agreement,
the Company has agreed that it will, and will cause its subsidiaries to, carry
on their respective businesses in the usual and ordinary course of business.
The Company has agreed that, except as contemplated by the Merger Agreement or
as disclosed by the Company to Parent in a schedule to the Merger Agreement,
prior to the Effective Time it shall not, and shall not permit any of its
subsidiaries to, without the prior consent of Parent:
(i) issue, sell, pledge or encumber, or authorize or propose the
issuance, sale, pledge or encumbrance of (a) any shares of capital stock of
any class (including Common Shares or Preferred Shares), or securities
convertible into any such shares, or any rights, warrants or options to
acquire any such shares or other convertible securities, or grant or
accelerate any right to convert or exchange any securities of the Company
or any of its subsidiaries for such shares, other than Common Shares
issuable upon exercise of currently outstanding options, or (b) any other
securities in respect of, in lieu of or in substitution for Common Shares
or Preferred Shares outstanding on the date of the Merger Agreement;
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including
Common Shares or Preferred Shares) or declare any dividends on Common
Shares or Preferred Shares;
(iii) split, combine or reclassify any shares of its capital stock or
declare or pay any dividend or distribution on any shares of capital stock
of the Company;
(iv) except pursuant to agreements or arrangements in effect on the date
of the Merger Agreement which have been disclosed to Parent, authorize
capital expenditures in excess of $50,000 in the aggregate, make any
acquisition or disposition of a material amount of assets or securities,
or, except for routine contracts with customers and clients consistent with
past practices, enter into or amend or terminate any contract material to
the business of the Company and its subsidiaries taken as a whole, or
release or relinquish any contract rights or claims material to the
business of the Company and its subsidiaries taken as a whole;
(v) pledge or encumber any material assets of the Company except in the
ordinary course of business;
(vi) except for loans from Parent or the Purchaser, incur any long-term
debt for borrowed money or short-term debt for borrowed money in an
aggregate amount in excess of $10,000;
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(vii) propose or adopt any amendments to the Articles of Incorporation or
By-Laws of the Company or any of its subsidiaries;
(viii) adopt a plan of complete or partial liquidation or resolutions
providing for the complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
the Company or any of its subsidiaries;
(ix) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except wholly owned subsidiaries of the Company in the
ordinary course of business and consistent with past practice;
(x) make any loans, advances or capital contributions to, or investments
in, any other person (other than loans or advances to subsidiaries and
loans or advances to employees in accordance with past practices);
(xi) except as required by applicable laws, adopt or amend any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, severance, termination, employment or other employee benefit
plan, agreement, trust, fund, policy or other arrangement for the benefit
or welfare of any registered representative, agent, employee or director or
former employee or director or, except as required by applicable laws or in
the ordinary course of business, increase the compensation or fringe
benefits of any employee or pay any employee or pay any benefit not
required by any existing plan, arrangement or agreement;
(xii) make any tax election or settle or compromise any federal, state,
local or foreign income tax liability, except in the ordinary course of
business and consistent with past practice;
(xiii) agree in writing or otherwise to take any of the foregoing
actions; or
(xiv) fail to comply in all material respects with all applicable laws.
No Solicitation. The Merger Agreement provides that neither the Company nor
any of its subsidiaries, nor any of their respective directors, officers,
employees, representatives, agents or affiliates will directly or indirectly
encourage, solicit, initiate or, except as is required in the exercise of
fiduciary duties of the Company's directors and officers under applicable laws,
upon advice of counsel to the Company, participate in any way in discussions or
negotiations with, or knowingly provide any information to, any corporation,
partnership, person or other entity or group (other than Parent or any of its
affiliates or associates) concerning any merger, sale of substantially all the
assets, sale of shares of capital stock or similar transactions involving the
Company or any material subsidiary or division of the Company, provided,
however, that nothing contained in the Merger Agreement will prohibit the
Company or its Board of Directors from (i) taking and disclosing to the
Company's shareholders a position with respect to a tender offer by a third
party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act,
(ii) making such disclosure to the Company's shareholders which, in the
judgment of the Board of Directors with the advice of counsel, may be required
under applicable law or (iii) providing information to, or participating in
discussions or negotiations with, any party that has actually made, and which
the Board of Directors believes in good faith would be capable of effecting an
acquisition of the Company on terms that are superior, from a financial point
of view, to the Offer and the Merger if the Board of Directors in good faith
believes, upon the written advice of counsel, that the failure to so disclose
would constitute a breach of its fiduciary duty to the Company and its
shareholders. The Merger Agreement requires the Company to promptly communicate
to Parent if it is furnishing information to or
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engaging in negotiations with any third party with respect to the acquisition
of the Company or any of its assets or subsidiaries.
Preservation of Relationships and Obtaining Consents. Pursuant to the Merger
Agreement, the Company has agreed that it will, and will cause its subsidiaries
to, use their reasonable best efforts to: (i) preserve their business
organizations intact; (ii) retain the services of their present officers and
key employees; (iii) preserve the goodwill of suppliers, customers, creditors
and others having material business relationships with them and (iv) obtain
consents to the assignment of contracts under the Investment Advisers Act of
1940, as amended (the "Investment Advisers Act"), required for the consummation
of the transactions contemplated by the Merger Agreement.
Warrants and Options. Warrants and options to purchase Common Shares are
outstanding under stock option plans of the Company and pursuant to grants
outside any formal plan (the "Company Stock Option Plans"). As of the date of
the Merger Agreement, options for a total of 662,625 Common Shares (the
"Company Stock Options") were outstanding under the Company Stock Option Plans
and warrants for a total of 118,751 Common Shares (the "Warrants") were
outstanding. The Merger Agreement provides that at the Effective Time each
Company Stock Option will automatically terminate and be of no further force
and effect whatsoever, and each Warrant will automatically be converted into
the right to receive upon exercise thereof, in lieu of Common Shares issuable
upon such exercise thereof immediately prior to the Effective Time, the Common
Share Offer Price (subject to any applicable withholding taxes). All of the
outstanding Company Stock Options and Warrants have exercise prices which
exceed $0.60 per Common Share.
Indemnification. Parent has agreed, from and after the Effective Time, to
cause the Surviving Corporation to honor the performance of certain contracts,
agreements and commitments of the Company and its subsidiaries, including those
reflected in their respective Articles of Incorporation and Bylaws, which
indemnify any officer or director of the Company and its subsidiaries against
claims made against them arising from their service prior to the Effective
Time. The Purchaser has also agreed that for six years from the date of the
Merger Agreement the Articles of Incorporation and the By-laws of the Surviving
Corporation will not be amended to reduce or limit the rights to indemnity
currently afforded thereunder.
Employee Benefits. The Merger Agreement provides that if any salaried or non-
union hourly employee of the Company or any of its subsidiaries is or becomes a
participant in any written employee benefit plan or program of Parent or any
member of its controlled group within the meaning of Section 414(b) or (c) of
the Code, such employee shall be credited under such plan or program with all
service prior to the Effective Time with the Company and its subsidiaries (and
any predecessor employer) to the extent credit was given by the Company and its
subsidiaries for purposes of eligibility and vesting under such plan or
program.
Parent and the Purchaser have acknowledged in the Merger Agreement that
consummation of the Offer will constitute a change of control of the Company
(to the extent such concept is relevant) for purposes of certain employment,
severance or benefit agreements and plans.
Board Representation. The Merger Agreement provides that promptly upon the
purchase by Parent or any of its affiliates of such number of Common Shares
which, when added to the number
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of Common Shares owned by Parent and the Purchaser, represents at least two-
thirds of the outstanding Common Shares, and from time to time thereafter,
Parent shall be entitled to designate such number of members of the Board of
Directors of the Company, rounded up to the next whole number, as will give
Parent, subject to compliance with the provisions of Section 14(f) of the
Exchange Act, representation on the Board of Directors of the Company equal to
the product of (i) the total number of directors on such Board and (ii) the
percentage that the aggregate number of Common Shares owned by Parent and its
affiliates bears to the total number of outstanding Common Shares. In that
case, the Company has agreed, through action of its Board of Directors, if
necessary, and upon the request of Parent, to promptly increase the size of the
Board of Directors of the Company and/or use its reasonable best efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's designees to be elected to the Board of Directors and to cause
Parent's designees to be so elected. The Company's obligation under the Merger
Agreement to appoint Parent's designees to the Board of Directors is subject to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Conditions Precedent. The Merger Agreement provides that the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver, at or prior to the Effective Time, of the following conditions: (a)
if required by applicable law, the Merger Agreement shall have been approved by
the requisite vote of the holders of two-thirds of the outstanding Common
Shares and two-thirds of the outstanding Preferred Shares, respectively; (b) no
governmental entity or court of competent jurisdiction shall have enacted,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree or injunction which prohibits or restricts the consummation of
the Merger; and (c) the Purchaser shall have accepted and paid for Shares
tendered pursuant to the Offer, including satisfaction of the Minimum Condition
(unless waived).
Termination. The Merger Agreement provides that it may be terminated and the
Merger contemplated thereby may be abandoned at any time notwithstanding
approval thereof by the shareholders of the Company, but prior to the Effective
Time: (i) by mutual written consent duly authorized by the Boards of Directors
of the Company (excluding any representative of Parent or an affiliate of
Parent), Parent and the Purchaser; (ii) by either Parent or the Company if the
Effective Time shall not have occurred on or before March 31, 1999; (iii) by
either Parent or the Company if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling, or taken any other action restraining, enjoining, or
otherwise prohibiting the Merger and such order, decree, ruling or other action
has become final and non-appealable; (iv) by the Purchaser, if (a) due to an
occurrence or circumstance that would result in a failure to satisfy any of the
conditions to the Purchaser's obligations set forth below under the paragraph
captioned "Certain Conditions to the Purchaser's Obligations," the Purchaser
shall have (1) failed to commence the Offer within 20 days following the date
of the Merger Agreement, (2) terminated the Offer or the Offer shall have
expired without the purchase of the Shares thereunder at any time after the
latest date, if any, to which the Offer shall have been extended pursuant to
the Merger Agreement or (3) failed to pay for Shares pursuant to the Offer by
the 40th business day following such commencement, unless such failure to
commence, termination or failure to pay for Shares shall have been caused by or
resulted from the failure of the Purchaser or Parent to perform in any respect
its material covenants and agreements contained in the Merger Agreement or the
Offer; or (b) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors of the Company
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shall have withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Offer, the Merger Agreement or the Merger, or shall have
recommended another offer, or shall have resolved to do any of the foregoing;
provided, however, that Parent shall have no right to terminate the Merger
Agreement and abandon the Merger if the Company withdraws or modifies its
recommendation of the Offer, the Merger Agreement, or the Merger, by reason of
taking and disclosing to the Company's shareholders a position contemplated by
Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to
another proposal, and if within ten days of taking and disclosing to its
shareholders the aforementioned position, the Company publicly reconfirms its
recommendation of the Offer, the Merger Agreement and the Merger and takes and
discloses to the Company's shareholders a recommendation to reject such other
proposal as contemplated by Rule 14e-2(a)(1) promulgated under the Exchange
Act; or (v) by the Company, if (a) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth below in
the paragraph captioned "Certain Conditions to the Purchaser's Obligations" or
otherwise, the Purchaser shall have (1) failed to commence the Offer as
provided in the Merger Agreement within 20 days following the date of the
Merger Agreement, (2) terminated the Offer or the Offer shall have expired
without the purchase of Shares thereunder at any time after the latest date, if
any, to which the Offer shall have been extended in accordance with the terms
of the Merger Agreement or (3) failed to pay for Shares pursuant to the Offer
by the 40th business day following such commencement, unless such failure to
commence, termination or failure to pay for Shares shall have been caused by or
resulted from the occurrence or existence of the condition described below in
paragraphs (iv) or (vii) of the paragraph captioned "Certain Conditions to the
Purchaser's Obligations" or (b) prior to the purchase of Shares pursuant to the
Offer, (1) a corporation, partnership, person or other entity or group shall
have made a bona fide proposal that the Board of Directors of the Company
believes, in good faith after consultation with its legal and financial
advisors, is more favorable to the Company and its shareholders than the Offer
and the Merger and (2) the Purchaser does not make, within ten days of the
Purchaser receiving notice of such third party proposal, an offer which the
Board of Directors believes, in good faith after consultation with its legal
and financial advisors, is at least as favorable to the Company's shareholders
as such third party proposal.
Fees and Expenses. The Company has agreed in the Merger Agreement to pay the
Purchaser the sum of $250,000 and all actual, documented out-of-pocket expenses
relating to the Offer and the Merger in an amount up to $100,000 if the Merger
Agreement or the transactions contemplated thereby are terminated or abandoned
(unless at such time Parent or the Purchaser shall be in breach in any material
respect of any of its obligations or representations and warranties thereunder)
and prior to or contemporaneously with such termination or abandonment, any
corporation, partnership, person, other entity or group (as defined in Section
13(d)(3) of the Exchange Act) other than Parent or any of its subsidiaries or
affiliates, shall have acquired or beneficially owns (and failed to tender such
Shares) (as defined in Rule 13d-3 promulgated under the Exchange Act) at least
33.34% of the then outstanding Common Shares.
Except as provided in the preceding paragraph, the Merger Agreement provides
that whether or not the Merger is consummated, each party thereto shall pay its
own expenses incident to preparing for, entering into and carrying out the
Merger Agreement and the consummation of the Offer and the Merger.
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Certain Conditions to the Purchaser's Obligations. Notwithstanding any other
term of the Offer, the Purchaser will not be required to accept for payment,
purchase or pay for, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) of the Exchange Act, any Shares tendered,
and may terminate or, subject to the terms of the Merger Agreement, amend the
Offer and may postpone the acceptance for payment of and payment for Shares, if
(i) on or before the time at which the Offer shall have expired, the number of
Shares validly tendered and not withdrawn immediately prior to the expiration
of the Offer shall not be sufficient to satisfy the Minimum Condition or (ii)
at any time after November 3, 1998 and before the time of acceptance for
payment for any such Shares any of the following conditions exists or shall
occur and remain in effect and, in the reasonable judgment of Parent, makes it
inadvisable to proceed with the Offer or with such acceptance for payment or
payments:
(i) there shall have occurred (a) any general suspension of trading in,
or limitation on prices for, securities on the American Stock Exchange, (b)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (c) a commencement of a war, armed
hostilities or other national or international calamity directly or
indirectly involving the United States, (d) any material limitation
(whether or not mandatory) by any governmental authority on, or any other
event which might materially and adversely affect, the extension of credit
by lending institutions or (e) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(ii) there shall have been any statute, rule or regulation enacted,
promulgated, entered or enforced or deemed applicable, or any decree, order
or injunction entered or enforced by any government or governmental
authority in the United States or by any court in the United States that
(a) restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (b) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any
portion of its or the Company's business or assets which is material to the
business of all such entities taken as a whole or (c) imposes material
limitations on the ability of the Purchaser effectively to acquire or to
hold or to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by the Purchaser
on all matters properly presented to the shareholders of the Company;
provided, however, that the Purchaser and Parent shall have used their best
efforts to have any such decree, order or injunction vacated or reversed,
including, without limitation, by proffering their willingness to accept an
order embodying any arrangement required to be made by the Purchaser or
Parent pursuant to the Merger Agreement (and notwithstanding anything in
this subsection (ii) to the contrary, no terms, conditions or provisions of
an order embodying such an arrangement shall constitute a basis for Parent
asserting nonfulfillment of the conditions contained in this subsection
(ii)); or
(iii) the Merger Agreement shall have been terminated in accordance with
its terms; or
(iv) the Company shall have breached or failed to perform any of its
covenants or agreements which breach or failure to perform is material to
the obligations of the Company under the Merger Agreement taken as a whole,
or any of the representations and warranties of the Company set forth in
the Merger Agreement shall not have been true in any respect which is
material to the Company and its subsidiaries taken as a whole, in each
case, when made, or a Material Adverse Effect (as defined in the Merger
Agreement) has occurred, provided that the aggregate effect under this
condition (iv) shall be in excess of $250,000; or
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(v) the Board of Directors of the Company shall have publicly withdrawn
or modified in any material respect adverse to Parent its recommendation of
the Offer; provided, however, Parent shall have no right to terminate the
Offer or not accept for payment or pay for any Shares if the Company
withdraws or modifies its recommendation of the Offer and the Merger, by
reason of taking and disclosing to the Company's shareholders a position
contemplated by Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act
with respect to another proposal, and if within ten days of taking and
disclosing to its shareholders the aforementioned position, the Company
publicly reconfirms its recommendation of the Offer and Merger and takes
and discloses to the Company's shareholders a recommendation to reject such
other proposal as contemplated by Rule 14e-2(a)(1) promulgated under the
Exchange Act; or
(vi) Parent and the Company shall have agreed that the Purchaser shall
terminate the Offer; or
(vii) the Company has not delivered to Parent consents conforming with
the requirements of the Investment Advisers Act from investment advisers
with assets under management with the Company representing in the aggregate
at least 80% of the total assets under management by the Company as of
October 1, 1998.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors.
At a special meeting held on October 26, 1998, the Board of Directors of the
Company (the "Board") unanimously approved the Merger Agreement and the
transactions contemplated thereby and unanimously determined that the Merger
and the Offer are fair to, and in the best interest of, the Company and its
shareholders. The Board unanimously recommends that holders of Shares tender
their Shares pursuant to the Offer. A copy of a letter to the Company's
shareholders communicating such approval and recommendation is filed as Exhibit
A-1 to this Statement and is incorporated herein by reference.
(b) Background of the Merger and the Offer.
The Company provides investment management and consulting services to
financial advisors which enable advisors to offer their clients a wide range of
institutional quality investment programs. Through these programs, the Company
offers financial advisors access to separately managed accounts, managed mutual
fund portfolios, and other back-office and consulting services. These services
are tailored for use by fee-based financial advisors who charge their clients
based on a percentage of assets under management.
The number of fee-based advisors has grown rapidly in recent years and the
demand for services like those offered by the Company has also grown. The
Company has benefited from this growth, increasing both its assets under
management and its revenues significantly in recent years. As the market for
the Company's services grew, competition within this segment of the financial
services industry also increased.
To address the opportunities in this market, the Company pursued a strategy
designed to expand its services to financial advisors, increase assets under
management, and improve operating
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efficiency. That strategy included the following actions. First, the Company
invested heavily in the development of its own proprietary portfolio accounting
system. Second, it expended significant resources developing a mutual fund
investment program that featured sophisticated software designed to help
advisors market the program to clients. Third, the Company pursued and obtained
a number of institutional relationships that were aggressively priced and
called for a high degree of customization and software development. Finally, in
September 1997, it acquired PMCIS (formerly, ADAM Investment Services, Inc.), a
provider of mutual fund portfolio management services, for a price of up to $9
million.
The Company encountered difficulties in implementing the strategy described
above. The Company's efforts to develop a proprietary portfolio accounting
system were only partially successful and failed to produce many of the
intended benefits. This failure resulted in the loss of at least one major
institutional relationship, and caused significant disruption to the Company's
operations. The Company's efforts to develop its own mutual fund program were
costly and did not generate the interest among financial advisors or produce
the revenues anticipated by the Company. Many of the Company's large
institutional relationships proved unprofitable and diverted resources from the
Company's core business. All of these difficulties slowed the Company's efforts
to integrate the PMCIS business with the Company's operations to such a degree
that the Company failed to realize many of the expected benefits of that
acquisition.
Because of those difficulties, in March 1998, the Board retained Putnam,
Lovell, de Guardiola and Thornton, Inc. ("Putnam Lovell"), to advise the
Company with respect to a possible sale of the Company or identification of a
strategic investor. The Board and the Company's management offered the names of
a number of possible purchasers and investors and Putnam Lovell generated its
own list. The Company's management and the Board contacted certain prospects,
while Putnam Lovell contacted others. Over 50 firms were approached.
Approximately 25 firms signed confidentiality agreements and requested a
confidential information memorandum describing the Company's business.
Through this process the Company received two formal offers, one from a bank
for the acquisition of the entire company, and one from Dundee Bancorp Inc.
("Dundee") to purchase a 51% equity interest. The Board considered both offers,
taking into account the Company's financial condition and strategic objectives.
Based on its review of both offers, the Board determined to hold negotiations
with Dundee and on July 7, 1998, entered into a letter of intent with Dundee
(the "Dundee Letter of Intent") whereby Dundee would make an equity investment
of $24 million in the Company. Dundee also provided a $1.5 million bridge loan
to the Company.
On August 10, 1998, the Dundee Letter of Intent was terminated based on
Dundee's stated belief that the Company would not provide the strategic
business advantages that Dundee had originally hoped to achieve through its
investment in the Company. Prior to the announcement of the termination of the
Dundee Letter of Intent, the Company's common stock was trading in the range of
2 7/8 to 3 3/8. Upon announcement of the termination, on August 10, 1998, the
trading price of the Company's common stock declined to a low of 1/16.
Following termination of the Dundee Letter of Intent, the Company immediately
began an effort to identify a new investor or purchaser for the Company.
Members of the Board and the Company's
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management, and representatives of Putnam Lovell contacted companies that had
previously expressed an interest in the Company, as well as companies not
previously contacted. Approximately 20 firms were approached. The Company's
management met in person with ten companies to discuss a possible investment
and the Board spoke by telephone with three of them. Seven companies submitted
investment proposals for consideration by the Company, two of which were
subsequently withdrawn. Notwithstanding these proposals, the Company did not
enter into any letter of intent or other agreement providing for the
acquisition of the Company or an investment therein with any other party
between the time the Dundee Letter of Intent was terminated and the Letter of
Intent with Parent was signed.
On August 24, 1998, the Board accepted the resignation of Kenneth S.
Phillips, the Company's founder, CEO and President. On that date the Board
appointed C.R. "Sonny" Tucker as the Company's acting CEO and Scott A.
MacKillop as the Company's President. Mr. Tucker had been serving as a
consultant to the Company on certain organizational and operational issues. Mr.
MacKillop had served as the Company's Chief Operating Officer, President of its
PMCIS subsidiary, and a member of the Board.
From August 7 through September 25, 1998, the Board met eight times and
considered and evaluated (i) the Company's financial condition and the Board's
responsibilities to creditors, shareholders, and clients, (ii) the scope of the
effort to seek an investor for the Company, (iii) the specific discussions that
management and members of the Board were having with potential investors, (iv)
the relative merits of the proposals that were received, and (v) the
probability of timely completing a transaction.
On September 2, 1998, the Board retained Value Investing Partners, Inc.
("Value Investing") to advise the Company on issues relating to a potential
sale, solicit potential strategic investors, manage the process of receiving,
qualifying and accepting offers, and to render an opinion as to the fairness of
the consideration to be paid by any strategic investor in the Company. Kevin R.
Greene, Chairman and Chief Executive Officer of Value Investing, met on
numerous occasions with members of the Board and the Company's management to
become familiar with the Company's history, operations, financial condition,
and prospects for the future. Mr. Greene provided the Board with guidance at
meetings held on September 16 and 17, September 22, and September 25, 1998.
On September 9, 1998, Richard Glaisner, an executive officer of one of
Parent's subsidiaries, contacted Mr. Tucker to express Parent's possible
interest in an investment in the Company. On September 10, 1998, before the
Company had disclosed any confidential information to Parent or any of its
employees or affiliates, the Company and Parent entered into a confidentiality
agreement concerning information provided as due diligence material by the
Company.
During the week of September 14, 1998, Parent and the Company, through Mr.
Glaisner and Mr. Tucker, discussed various business combinations, including a
possible transaction structured as a joint venture or the sale of substantially
all of the Company's assets to Parent, which Mr. Tucker declined. Mr. Glaisner
and Mr. Tucker then discussed a transaction whereby Parent would purchase a
majority of common stock directly from the Company and have the right to
nominate a majority of the Board.
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In addition to Mr. Glaisner, Dennis Wallestad (Senior Vice President and
Chief Financial Officer of Parent), and Peter Ziegler (President and Chief
Executive Officer of Parent) discussed these arrangements with the Company
during the week of September 21, 1998.
On September 25, 1998, after thorough review of the Company's situation and
options, the Board authorized the Company's management to execute a Letter of
Intent with Parent. Under the original Letter of Intent: Parent would make an
equity investment of $3,375,000 and would receive an option to purchase an
equivalent amount of Common Shares at $0.75 per Share; Parent would provide the
Company with $5,000,000 in credit under a facility convertible into Common
Shares at $0.75 per Share and would receive an option to purchase Common Shares
at $0.75 per Share in the amount of any credit in excess of $3,375,000 extended
under the facility; and Parent would make an immediate loan of $500,000 under
the facility. In authorizing the original Letter of Intent, the Board
considered a number of factors with respect to each outstanding offer,
including the following: (i) the financial terms and conditions of each offer,
(ii) whether the offer related to an investment in the entire Company including
its subsidiaries or only the purchase of a single subsidiary, (iii) the
anticipated time until conclusion of a transaction, and (iv) the stated
contingencies relating to financing and other matters that affected the
likelihood that a transaction would ultimately be concluded.
During the week of September 28, 1998, Mr. Wallestad conducted a more
detailed due diligence analysis of the Company and met with the Company's
officers. Similarly, representatives of Parent forwarded a lengthy due
diligence request to the Company on September 28, 1998 and S. Charles O'Meara
(Senior Vice President and General Counsel of Parent) and other representatives
of Parent visited the Company's headquarters and conducted additional due
diligence on October 1 and 2, 1998.
On October 5, 1998, the Company executed a confidentiality agreement with
respect to due diligence materials provided by Parent to the Company pursuant
to a due diligence request from the Company.
During the week of October 5, 1998, Parent discussed with Mr. Tucker, Ms.
Dobel, and Mr. MacKillop the terms of the $500,000 First Note and revised terms
of the proposed acquisition. Specifically, Parent proposed undertaking a tender
offer for all of the Company's shares at $.60 per Common Share and $2.50 per
Preferred Share and entering into a $3,500,000 credit facility.
On October 6 and 7, 1998, Mr. Tucker, Mr. MacKillop and Emmett Daly, a member
of the Board, met with officers to Parent to discuss the possible terms of the
proposed transaction and to conduct due diligence on Parent.
On October 7, 1998, Mr. Tucker, Mr. MacKillop and Mr. Daly visited with
representatives of Parent's management at the offices of GS/2/ Securities,
Inc., a subsidiary of Parent ("GS/2/"), located in Milwaukee, Wisconsin. The
purpose of the visit was to learn more about Parent and continue negotiations
regarding the transaction. Representatives of Parent present at this meeting
included, at various times, Messrs. Ziegler, Glaisner and Wallestad, and
Richard Schilffarth, an officer of GS/2/. During those meetings, Parent
informed the Company that it was not willing to proceed under the terms of the
Letter of Intent because such terms would not accomplish Parent's objectives.
As a result, the per share price and structure of the transaction were
renegotiated.
20
<PAGE>
On October 12, 1998, the Board met again to review the Company's financial
condition and to evaluate proposed changes to the Letter of Intent and
structure of the transaction. In lieu of the equity investment by Parent, the
transaction had been restructured as a cash tender offer to existing
shareholders at $0.60 per Common Share and $2.50 per Preferred Share to be
followed by a cash merger. In lieu of the $5,000,000 convertible credit
facility with an option, Parent would make available a $3,500,000 credit
facility convertible into Common Shares at $0.60 per Share and would receive an
option to purchase 4,500,000 Common Shares at $0.60 per Share. Parent would
loan the Company an additional $500,000 immediately under a note convertible
into Preferred Shares at $2.50 per Share and would receive an option to
purchase 111,818 Preferred Shares at $2.50 per Share. The Board considered the
Company's circumstances, the impact of the changes on timeliness and likelihood
of completing the transaction, and the benefits to creditors, shareholders and
clients. The Board authorized going forward with negotiation on the revised
terms.
On October 14, 1998, upon agreement by the parties to revised terms reflected
in the revised Letter of Intent, the Board, by written consent, approved the
First Note and the Preferred Stock Option Agreement.
On October 15, 1998, Parent loaned the Company $500,000 pursuant to the First
Note. The First Note is repayable by December 31, 1998, bears interest at a
variable rate equal to the prime rate as published in the Wall Street Journal
(Midwest Edition), and is convertible into Preferred Shares at the rate of
$2.50 per Share upon election by Parent. This summary of the First Note does
not purport to be complete and is qualified in its entirety by reference to the
First Note, a copy of which is filed as Exhibit C-11 to this Statement and is
incorporated herein by reference.
Also on October 15, 1998, and as a condition required by Parent before it
would agree to loan the Company the $500,000 pursuant to the First Note, the
Company and Parent entered into the Preferred Stock Option Agreement, pursuant
to which the Company granted Parent the option to purchase 111,818 Preferred
Shares at a price of $2.50 per Preferred Share. This summary of the Preferred
Stock Option Agreement does not purport to be complete and is qualified in its
entirety by reference to such agreement, a copy of which is filed as Exhibit C-
13 to this Statement and is incorporated herein by reference. These Preferred
Shares, together with those that may be acquired upon conversion of the First
Note, would equal upon exercise and conversion an aggregate of 311,818
Preferred Shares, or approximately 69% of the then outstanding Preferred
Shares. This would be an amount sufficient to approve on behalf of the holders
of the Preferred Shares any amendment to the provisions of the Company's
Articles of Incorporation applicable to the Preferred Shares and sufficient to
approve the Merger on behalf of the holders of the Preferred Shares. The $2.50
per Share conversion price under the First Note, and exercise price under the
Preferred Stock Option Agreement, is equal to the liquidation preference of the
Preferred Shares.
After October 15, members of the Company's management continued to negotiate
with members of Parent's management, especially with respect to the basis upon
which the Offer would proceed and the Merger would be consummated and with
respect to the priority of payment of certain of the Company's creditors, in
particular Dundee.
On October 21 and 22, 1998, members of the Company's management met with Mr.
Glaisner and Mr. Wallestad to continue discussions about the transaction and
the Company's financial condition and operations.
21
<PAGE>
On October 26, 1998, the Board held a meeting at which Value Investing
delivered its opinion that, as of such date, the consideration to be received
by the Company's shareholders pursuant to the Offer and the Merger is fair to
the shareholders from a financial point of view. In connection with the
issuance of its opinion, Value Investing also gave a presentation to the Board
with respect to the proposed Offer and Merger, explaining the factors it had
considered in arriving at the conclusions set forth in its opinion. After due
consideration (i) of the factors and process described above, (ii) of the
Company's financial condition, including the Company's cash and cash
equivalents of approximately $300,000, its accounts payable of approximately
$3,000,000, and its ongoing monthly negative cash flow, (iii) of the fact that
no other party of which the Board was aware would be willing and able to
provide financing to the Company as readily as Parent, and (iv) of the limited
trading volume of the market for the Common Shares and its effect on
shareholder attempts to sell Common Shares (recognizing that the trading price
of the Common Shares had recently exceeded the price to be paid for the Common
Shares in the Offer), and after thoroughly examining the transactions with
respect to the Company's creditors, shareholders, and clients, the Board
unanimously approved the Offer, the Merger and the other transactions with
Parent.
On October 28, 1998, the Board met again to consider the Company's financial
condition and to evaluate that status of and proposed changes to the
transactions with Parent, including the proposed termination of Mr. MacKillop's
employment agreement with PMCIS and his Change in Control Severance Agreement
with the Company and execution of a new employment agreement between Mr.
MacKillop and the Company. The Board considered the Company's circumstances,
the impact of the changes on timeliness and likelihood of completing the
transactions, and the benefits to the Company's creditors, shareholders and
clients. The Board authorized going forward with the transactions as thus
modified. The Board also considered and approved, without Mr. MacKillop's
participation, the termination and execution of the agreements with Mr.
MacKillop, as described above.
On November 3, 1998, the Merger Agreement was finalized and signed. On
November 3, 1998, the Company and Parent issued a joint press release publicly
announcing the transaction. A copy of the press release is filed as Exhibit A-2
to this Statement and incorporated herein by reference.
On November 5, 1998, the Company received a letter from the Commission
requesting that the Company's two investment adviser subsidiaries, PMC and
PMCIS, respond to certain possible deficiencies noted in the letter. Among
other matters, the letter inquired as to the financial condition of the Company
and its subsidiaries and their ability to meet their contractual commitments to
clients as a result of such condition. Parent has advised the Company that, on
or after consummation of the Merger, it is prepared to devote sufficient
financial resources to the Company and its subsidiaries so that they can meet
their respective contractual commitments referred to above.
* * * * *
The Purchaser commenced the Offer on November 9, 1998.
Reasons for the Recommendation of the Company's Board of Directors.
In light of the Board's review of the Company's competitive and financial
position, recent operating results and prospects, the Board determined that the
Offer and the Merger are fair to, and
22
<PAGE>
in the best interests of, the Company and its shareholders. In making such
recommendation and in approving the Merger Agreement and the transactions
contemplated thereby, the Board considered a number of factors, including, but
not limited to, the following:
(i) the terms and conditions of the Merger Agreement;
(ii) the views expressed by management of the Company (at the Board
meetings on September 9, 16, 17, 22, 25, and October 12, 26 and 28, 1998
and at several previous Board meetings) regarding the financial condition,
results of operations, business and prospects of the Company, including the
prospects of the Company if the Company were to remain independent;
(iii) the fact that Parent had already provided financing to the Company
pursuant to the First Note, which had assisted the Company in continuing
its operations and meeting its obligations and in exchange for which the
Company had been obligated to grant the conversion rights under the First
Note and to enter into the Preferred Stock Option Agreement with Parent,
thus foreclosing certain other alternative, albeit less immediately
promising, possible avenues of financing for the Company, and the views
expressed by management and the Board's conclusion that it was not aware of
any other party that would be willing and able to provide financing to the
Company as readily as Parent and that it was not likely that any other
party would consider a transaction that was more favorable to the Company
and its shareholders;
(iv) the presentation of Value Investing at the September 22 and 25, 1998
Board meetings and the presentation and opinion of Value Investing
delivered to the Board at its October 26, 1998 meeting to the effect that,
as of such date and based upon and subject to certain matters stated in
such financial presentation and opinion, the cash consideration of $0.60
per Common Share and $2.50 per Preferred Share to be received by holders of
Common Shares and Preferred Shares, respectively, in the Offer and the
Merger, taken together, was fair, from a financial point of view, to such
holders. Value Investing's opinion is directed only to the fairness, from a
financial point of view, of the cash consideration to be received in the
Offer and the Merger by holders of Shares. It was not intended to
constitute, and does not constitute, a recommendation as to whether any
shareholder should tender Shares pursuant to the Offer. A copy of the Value
Investing opinion is filed as Exhibit A-3 to this Statement and is
incorporated herein by reference. SHAREHOLDERS ARE URGED TO READ THE VALUE
INVESTING OPINION CAREFULLY AND IN ITS ENTIRETY;
(v) the fact that the Merger Agreement permits the Board, in the exercise
of its fiduciary duties, to furnish nonpublic information and data, and
enter into discussions and negotiations, in connection with an unsolicited
acquisition proposal and recommend an unsolicited acquisition proposal to
the Company's shareholders;
(vi) the fact that the Merger Agreement permits the Board, in the
exercise of its fiduciary duties, to terminate the Merger Agreement in
favor of an alternative acquisition proposal; even though upon such
termination, if an individual or entity other than Parent or any of its
subsidiaries or affiliates has obtained at least 33.34% of the then
outstanding Common Shares, the Company will be required to pay Parent a fee
of $250,000 and all actual, documented out-of-pocket expenses relating to
the Offer and the Merger in an amount up to $100,000; and
(vii) the fact that the transactions contemplated by the Merger Agreement
provide for an all cash payment to shareholders, with no financing
condition.
23
<PAGE>
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it.
With respect to the Board's exercise of its fiduciary obligations, while the
Board retained the ability to terminate the Merger Agreement in favor of an
alternative acquisition proposal it recognized that Parent's ability to acquire
Shares pursuant to the Conversion Rights under the First Note and the Second
Note and the Options under the Stock Option Agreements would give Parent the
ability to acquire more than two-thirds of each class of Shares and therefore
the ability to effect the Merger after completion of the Offer even if no
Shares were tendered by the existing shareholders of the Company. However, the
Board recognized Parent's insistence that the Offer and the Merger as Parent
had proposed them would be the only basis upon which Parent would proceed with
the loan under the First Note and the Offer.
The Board also considered that in the past, due to the limited trading volume
of the market for the Common Shares, shareholder attempts to sell significant
numbers of Common Shares often resulted in a decline in price. Moreover, the
Board recognized that given the Company's condition, the trading price of the
Shares may have exceeded their underlying value. Therefore, even though the
Offer price of $0.60 per Common Share is lower than the price at which the
Common Shares were traded prior to the public announcement of the Offer, the
Board considered that tendering in the Offer would provide an opportunity for
the Company's shareholders to receive the cash consideration to be paid in the
Offer without facing a decline in price.
It is expected that, if the Shares are not purchased by Parent in accordance
with the terms of the Offer or if the Merger is not consummated, the Company's
current management, under the general direction of the Board, will seek to
manage the Company as an ongoing business. However, there can be no assurance
that the Company would be able to continue to operate as a going business
without additional financing.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Value Investing as its financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of Value
Investing's engagement, the Company has agreed to pay Value Investing for its
services $75,000 for the delivery of its opinion as to the fairness of the
consideration to be received by the Company's shareholders pursuant to the
Offer and an additional $75,000 upon the Company's receipt of funding under the
Credit Agreement. The Company also has agreed to reimburse Value Investing for
out-of-pocket expenses, including reasonable legal fees and expenses, up to a
maximum amount of $25,000, and to indemnify Value Investing and certain related
parties against certain liabilities, including liabilities under the federal
securities laws, arising out of Value Investing's engagement.
Except as described in the preceding paragraph, neither the Company nor any
person acting on its behalf has employed, retained or agreed to compensate any
person to make solicitations or recommendations to the Company's shareholders
concerning the Offer.
24
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) On August 24, 1998, the Company concluded negotiations with Kenneth S.
Phillips concerning the termination of his employment and accepted his
resignation as President, Chief Executive Officer and Director of the Company
and from all officer and director positions with the Company's subsidiaries. In
connection with these events, the Company entered into a separation agreement
with Mr. Phillips whereby, among other things, the Company re-acquired 410,961
Common Shares in the name of KP3, LLC (a Colorado limited liability company
controlled by Mr. Phillips) that had been pledged as collateral to secure a
loan to KP3, LLC.
On September 15, 1998, pursuant to an election made by Maureen E. Dobel on
October 1, 1997, the Company's 401(k) savings plan purchased, for the benefit
of Ms. Dobel, 1,015 Common Shares at a purchase price of $0.19 per Share.
Except as set forth above, no transactions in the Shares have been effected
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any current executive officer, director, affiliate or subsidiary
of the Company.
(b) Except as declared under the signed Shareholder Tender Agreements,
pursuant to which all of the Company's executive officers and directors who
hold Shares have agreed to tender such Shares to the Purchaser in connection
with the Offer, the Company has no knowledge as to whether its affiliates
presently intend to tender their Shares to the Purchaser in connection with the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above, the Company is not engaged in any negotiation
in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of
material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as set forth below, and described in Item 3, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex I is being furnished in
connection with the contemplated designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's shareholders following
the purchase by the Purchaser of the number of Shares pursuant to the Offer
necessary to satisfy the Minimum Condition.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit A-1 Letter to shareholders of the Company, dated November 9, 1998.*
Exhibit A-2 Joint press release of Parent and the Company, dated November 3,
1998, publicly announcing the Offer and the proposed Merger.
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
Exhibit A-3 Opinion of Value Investing Partners, Inc., dated October 26, 1998.*
Exhibit C-1 Agreement and Plan of Merger, dated November 3, 1998, among Parent, the Purchaser, and the Company.
Exhibit C-2 Employment Agreement, dated September 23, 1997, between PMCIS (fka ADAM Investment Services, Inc.)
and Scott A. MacKillop.
Exhibit C-3 Employment Agreement, dated November 3, 1998, between the Company and Scott A. MacKillop.
Exhibit C-4 Change in Control Severance Agreement, dated May 15, 1998, between the Company and Scott A.
MacKillop.
Exhibit C-5 Change in Control Severance Agreement, dated May 15, 1998, between the Company and Stephen M. Ash.
Exhibit C-6 Change in Control Severance Agreement, dated May 21, 1998, between the Company and Maureen E. Dobel.
Exhibit C-7 Excerpt from pages 15-16 of the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997, as filed with the Commission on March 31, 1998 and as amended on Forms 10-KSB/A
filed with the Commission on July 1 and July 7, 1998, which contains a summary description of the
Stock Purchase Agreement, dated as of July 25, 1997, pursuant to which the Company acquired PMCIS
(fka ADAM Investment Services, Inc.).
Exhibit C-8 First Amendment to Stock Purchase Agreement, dated as of November 3, 1998, among the Company and the
former PMCIS Shareholders.
Exhibit C-9 Consulting Agreement, effective as of August 24, 1998, between the Company and C.R. "Sonny" Tucker.
Exhibit C- Confidentiality/Nonsolicitation Agreement, effective as of August 24, 1998, between the Company and
10 C.R. "Sonny" Tucker.
Exhibit C- Convertible Promissory Note, dated October 15, 1998, under which the Company promises to pay
11 $500,000 to the order of Parent.
Exhibit C- Credit Agreement, dated November 3, 1998, between Parent and the Company.
12
Exhibit C- Stock Option Agreement, dated as of October 15, 1998, between Parent and the Company with respect to
13 Preferred Shares.
Exhibit C- Stock Option Agreement, dated as of November 3, 1998, between Parent and the Company with respect to
14 Common Shares.
Exhibit C- Form of Shareholder Tender Agreement between Parent and certain officers, directors, affiliates of
15 the Company (including list of parties executing such agreements and the applicable number of Common
Shares).
Exhibit C- Form of Warrant Purchase Agreement between the Company and certain warrant holders (including list
16 of parties executing such agreements and the applicable number of warrants).
Exhibit C- Guaranty, dated October 15, 1998, by PMCIS.
17
Exhibit C- Guaranty, dated October 15, 1998, by PTS.
18
Exhibit C- Guaranty, dated October 15, 1998, by PMC.
19
Exhibit C- General Business Security Agreement, dated October 15, 1998, by the Company.
20
Exhibit C- General Business Security Agreement, dated October 15, 1998, by PMCIS.
21
Exhibit C- General Business Security Agreement, dated October 15, 1998, by PTS.
22
Exhibit C- General Business Security Agreement, dated October 15, 1998, by PMC.
23
</TABLE>
- --------
*Included with Schedule 14D-9 mailed to shareholders of the Company.
26
<PAGE>
SIGNATURE
AFTER REASONABLE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I
CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND
CORRECT.
PMC International, Inc.
/s/ Scott A. MacKillop
By: _________________________________
Name: Scott A. MacKillop
Title: President
Dated: November 9, 1998
27
<PAGE>
ANNEX I
PMC INTERNATIONAL, INC.
555 17TH STREET, 14TH FLOOR
DENVER, COLORADO 80202
----------------
INFORMATION STATEMENT PURSUANT
TO SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
----------------
This Information Statement, which is being mailed on or about November 9,
1998 as part of the Solicitation/Recommendation Statement on Schedule 14D-9 of
PMC International, Inc., a Colorado corporation (the "Company") to the holders
of shares of the Company's common stock, par value $.01 per share (the "Common
Shares") and preferred stock, without par value (the "Preferred Shares"). This
Information Statement is furnished in connection with the possible designation
by ZACQ Corp., a Colorado corporation (the "Purchaser") and a wholly owned
subsidiary of The Ziegler Companies, Inc., a Wisconsin corporation ("Parent"),
of persons to the Board of Directors of the Company (the "Board"). Such
designation is to be made pursuant to an Agreement and Plan of Merger dated as
of November 3, 1998 (the "Merger Agreement") among the Company, Parent and the
Purchaser.
Pursuant to the Merger Agreement, among other things, the Purchaser commenced
a cash tender offer on November 9, 1998 to purchase all of the issued and
outstanding Common Shares at a price of $0.60 per Common Share and all of the
issued and outstanding Preferred Shares (together with the Common Shares, the
"Shares") at a price of $2.50 per Preferred Share, net to the seller in cash,
as described in the Purchaser's Offer to Purchase dated November 9, 1998 and
the related Letter of Transmittal (which Offer to Purchase and related Letter
of Transmittal together constitute the "Offer"). The Offer is scheduled to
expire at 5:00 p.m. Eastern time on Thursday, December 10, 1998, unless
extended. The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Common Shares and Preferred Shares which, when added to the number of
Common Shares and Preferred Shares then owned by Parent and its affiliates,
will represent not less than two-thirds of the Common Shares outstanding and
two-thirds of the Preferred Shares outstanding, respectively (the "Minimum
Condition"). The Merger Agreement also provides for the merger (the "Merger")
of the Purchaser with and into the Company as soon as practicable after
consummation of the Offer. Following the consummation of the Merger (the
"Effective Time"), the Company will be the surviving corporation (the
"Surviving Corporation") and a wholly owned subsidiary of Parent. In the
Merger, each Share
<PAGE>
issued and outstanding immediately prior to the Effective Time (other than
Shares held by the Company or Parent, or any subsidiary of either, including
the Purchaser, or Shares with respect to which dissenters rights are properly
exercised under Colorado law) will be converted automatically into the right to
receive $0.60 per Common Share or $2.50 per Preferred Share, as appropriate (or
any higher price that may be paid per Common Share or Preferred Share in the
Offer), in cash, without interest thereon.
The terms of the Merger Agreement, a summary of the events leading up to the
Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase and
in the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
(the "Schedule 14D-9") with respect to the Offer, copies of which are being
delivered to shareholders of the Company contemporaneously herewith. Certain
other documents (including the Merger Agreement) were filed with the Securities
and Exchange Commission (the "SEC") as exhibits to the Schedule 14D-9 and as
exhibits to the Tender Offer Statement on Schedule 14D-1 of the Purchaser and
Parent (the "Schedule 14D-1"). The exhibits to the Schedule 14D-9 and the
Schedule 14D-1 may be examined at, and copies thereof may be obtained from, the
regional offices of and public reference facilities maintained by the SEC
(except that the exhibits thereto cannot be obtained from the regional offices
of the SEC) in the manner set forth in Section 8 of the Offer to Purchase.
No action is required by the shareholders of the Company in connection with
the election or appointment of the Purchaser Designees (as defined below) to
the Board. However, Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the mailing to the Company's
shareholders of the information set forth in this Information Statement prior
to a change in a majority of the Company's directors otherwise than at a
meeting of the Company's shareholders.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
such persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The Schedule 14D-1 indicates that the
principal executive office of Parent and the Purchaser is located at 215 North
Main Street, West Bend, Wisconsin 53095.
GENERAL
The Common Shares are the only class of voting securities of the Company
entitled to vote for the election of directors. Each Common Share is entitled
to one vote. As of October 22, 1998, there were 4,446,828.5 Common Shares
(including scrip) outstanding. The Board of Directors of the Company currently
consists of 5 members. Each director holds office until his successor is
elected and qualified or until his earlier death, resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, if requested by the Purchaser, the
Company will, promptly following the purchase by the Purchaser of at least two-
thirds of the outstanding Common Shares of the Company pursuant to the Offer,
take all necessary action to cause a number of persons designated by the
Purchaser (the "Purchaser Designees") rounded up to the next whole number, to
constitute a percentage of the members of the Board of Directors equal to the
percentage of Common Shares outstanding owned by the Purchaser and its
affiliates, including by accepting resignations of
Annex I Page 2
<PAGE>
those incumbent directors designated by the Company or increasing the size of
the Board and causing the Purchaser Designees to be elected.
The Purchaser has informed the Company that it intends to designate one or
more of the persons listed below to serve as directors of the Company and that
each of such Purchaser Designees has consented to act as a director of the
Company, if so designated. To the knowledge of the Company, none of the
Purchaser Designees owns any equity securities of the Company.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of such number of Common Shares which,
when added to the number of Common Shares owned by Parent and the Purchaser,
represents at least two-thirds of the outstanding Common Shares, which purchase
cannot be earlier than December 10, 1998, and that, upon assuming office, the
Purchaser Designees will thereafter constitute at least two-thirds of the
Board.
Biographical information concerning each of the Purchaser Designees and the
current directors and executive officers of the Company is presented on the
following pages.
PURCHASER DESIGNEES
The names, ages and positions of the Purchaser Designees are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PARENT OR SUBSIDIARY OF PARENT
---- --- --------------------------------------------
<C> <C> <S>
Peter D. Ziegler........ 49 Chairman, President and Chief Executive
Officer, Director of Parent and officer and
director of numerous subsidiaries of Parent
Dennis A. Wallestad..... 36 Chief Financial Officer and Senior Vice
President of Parent and officer and director
of numerous subsidiaries of the Parent
Richard J. Glaisner..... 56 President and Chief Executive Officer,
Ziegler Investment Division of B.C. Ziegler
and Company and director of certain
subsidiaries of the Parent
Richard Cogswell........ 50 Managing Director--Corporate Finance,
Ziegler Securities Division of B.C. Ziegler
and Company
Jeffrey C. Vredenbregt.. 45 Vice President, Treasurer and Controller of
Parent and officer of numerous subsidiaries
of the Parent
Thomas M. Trebby........ 43 Vice President, GS/2/ Securities, Inc.
Raymond C. Krieg........ 45 Executive Vice President, GS/2/ Securities,
Inc.
</TABLE>
Peter D. Ziegler was elected President of Parent and B.C. Ziegler and
Company, a wholly-owned subsidiary of Parent ("B.C. Ziegler and Company"), on
April 21, 1986, and became Chief Executive Officer of both companies on January
1, 1990, and Chairman in April 1997. He had previously served as Executive Vice
President of Parent since January 1, 1985. Mr. Ziegler is presently a director
of West Bend Mutual Insurance Company and Trustmark Insurance Company.
Dennis A. Wallestad was elected Chief Financial Officer of Parent in 1997. He
has also served as Senior Vice President, Chief Financial Officer and a
Director of B.C. Ziegler and Company and a Vice President and Director of
Ziegler Thrift Trading, Inc., a wholly owned subsidiary of Parent, since April
1997. From November 1996 to April 1997, Mr. Wallestad was Chief Administrative
Officer for Calamos Asset Management. From July 1994 to November 1996, he was
Chief Financial Officer of Firstar Investment Research Management Company. From
September 1991 to June 1994, Mr. Wallestad was an auditor for Arthur Andersen &
Co.
Annex I Page 3
<PAGE>
Richard J. Glaisner was elected President and Chief Executive Officer of the
Ziegler Investment Division of B.C. Ziegler and Company in 1997. He previously
served as President and Chief Executive Officer of Glaisner, Schilffarth,
Grande, & Scholl, Ltd. Mr. Glaisner is presently a director of Principal
Preservation Portfolios, Inc. and TCF National Bank--Wisconsin.
Richard Cogswell is Managing Director--Corporate Finance of the Ziegler
Securities Division of B.C. Ziegler and Company and has been employed by
Glaisner, Schilffarth, Grande, & Scholl, Ltd. for the last five years.
Jeffrey C. Vredenbregt is Vice President, Treasurer and Controller of the
Parent and has been employed by the Parent for more than the last five years.
Thomas M. Trebby was appointed Vice President of GS/2/ Securities, Inc., a
wholly owned subsidiary of Parent, in December 1996. He previously was a
principal with Cedar Hill Associates, Inc. from April 1994 to October 1996.
Prior to that he was affiliated with Blunt Ellis & Loewi from March 1985 to
April 1994 in a variety of positions, including Vice President and Regional
Consulting Director.
Raymond C. Krieg was appointed Executive Vice President--Operations of GS/2/
Securities, Inc. in July 1997. He previously served as President of GS/2/
Securities, Inc. from March 1989 to July 1997.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names of the current directors and executive officers of the Company,
their ages as of November 3, 1998, and certain other information about them are
set forth below. As indicated above, some of the current directors may resign
effective immediately following the purchase of Shares by the Purchaser
pursuant to the Offer.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C. R. Tucker....... 54 Acting Chief Executive Officer
Scott A.
MacKillop......... 47 President, Chief Operating Officer and Director
Stephen M. Ash..... 41 Chief Financial Officer and Treasurer
Maureen E. Dobel... 39 General Counsel, Corporate Secretary and Director
J. W. Nevil
Thomas............ 60 Chairman of the Board of Directors
D. Porter Bibb..... 61 Director
Emmett J. Daly..... 38 Director
</TABLE>
C.R. "Sonny" Tucker--Acting Chief Executive Officer. Mr. Tucker was appointed
on August 24, 1998 to serve as acting Chief Executive Officer of the Company.
Mr. Tucker has held positions as Chief Executive Officer of Shell Middle East
and Chief Financial Officer/Controller of Shell Offshore Inc. He also worked as
Managing Director for Westridge Capital Management and Director Investment
Planning of the Shell Oil Retirement and Savings plans.
Scott A. MacKillop--President, Chief Operating Officer, Director. Mr.
MacKillop joined the Company in September 1997 as Executive Vice President and
the Chief Operating Officer of the Company, and as President of PMCIS, as Chief
Operating Officer of Optima Funds, Inc., a wholly owned subsidiary of PMCIS,
and as a member of the Boards of Directors of both PMCIS and
Annex I Page 4
<PAGE>
Optima. Mr. MacKillop was appointed to the Board of Directors on October 27,
1997. Mr. MacKillop was appointed President of the Company on August 24, 1998.
Mr. MacKillop has been employed by PMCIS since 1992. From 1991 until 1992 Mr.
MacKillop served as outside general counsel to PMCIS.
Stephen M. Ash, CPA--Chief Financial Officer and Treasurer. Mr. Ash joined
the Company during the fourth quarter of 1997 as Vice President Finance and
Operations. In February, 1998 he was named Treasurer and President of Portfolio
Brokerage Services, Inc., the Company's wholly owned subsidiary. He was named
Chief Financial Officer in March 1998. Prior to joining the Company, from 1994
until 1997, Mr. Ash was a Senior Operations Manager for Mees Pierson Trust
Company, a division of Fortis, located in Curacao, Netherlands Antilles. Mr.
Ash has more than ten years experience as a Certified Public Accountant, first
as a Senior Manager in the audit department of KPMG--Peat Marwick from 1986 to
1993, and then as a Senior Manager with Ernst & Young from 1993 to 1994,
specializing in the audit of off-shore mutual funds, partnerships, and other
investment vehicles.
Maureen E. Dobel--General Counsel, Corporate Secretary and Director. Ms.
Dobel joined the Company in September 1995 as Corporate Counsel and was named
General Counsel and Corporate Secretary in December 1995. Ms. Dobel was
appointed to the Board on March 27, 1998. Prior to joining the Company, Ms.
Dobel spent eight years in private practice, specializing in securities,
corporate, real estate and transactional matters.
J.W. Nevil Thomas--Chairman of the Board. Mr. Thomas has been a Director of
the Company since July 1995. Since 1970 Mr. Thomas has served as President of
Nevcorp, Inc., an investment and financial and management consulting firm. In
addition, Mr. Thomas is a director of Bedford Capital Financial Corporation
("Bedford") and is chairman of Bedford Capital Corporation, a subsidiary of
Bedford, whose principal business is merchant banking. In addition to being a
Director of the Company and of Bedford and its subsidiary as described above,
Mr. Thomas is a director of Gan Canada Limited, Reliable Life Insurance
Company, Pet Valu Inc., French Fragrances, Inc., Old Republic Insurance and
several other private Canadian and American companies.
D. Porter Bibb--Director. Mr. Bibb became a Director of the Company in
October 1995. Mr. Bibb is a Managing Director of Ladenburg, Thalmann & Co.,
Inc., an investment banking firm. Prior to joining Ladenburg in 1984, Mr. Bibb
was a Managing Director of Bankers Trust Company, involved in the start-up of
their investment banking operations. Prior to that time, he was Director of
Corporate Development for the New York Times. In addition to being a Director
of the Company, Mr. Bibb is a Director of East Wind Group, Inc.
Emmett J. Daly--Director. Mr. Daly became a Director of the Company in
February 1997. Mr. Daly is currently Senior Vice President of Corporate Finance
of Keefe, Bruyette & Woods, Inc., an investment banking firm that Mr. Daly
joined in 1987 as an Associate in the Corporate Finance Department. Before that
time he spent two years as Credit Analyst followed by one year as an Assistant
Treasurer of Manufacturers Hanover Trust Company.
During 1997, the Board met six times. Attendance at Board meetings averaged
100% for each of the above directors serving on the Board during 1997.
Annex I Page 5
<PAGE>
The Bylaws of the Company were amended in December 1996 to set the number of
members of the Board of Directors at seven. Under subscription agreements with
investors in the Company's December 1996 private placement of 1,294,250 Common
Shares (the "December 1996 Offering"), those investors are entitled to
designate one director and one additional director is to be mutually acceptable
to the Company and such investors. The mutually acceptable director is
currently Emmett J. Daly. The director position to be designated by the
investors is vacant.
Under a Shareholders Agreement dated December 1996 among Bedford, the
Company, Kenneth S. Phillips, the former President and Chief Executive Officer
and a former Director of the Company, David L. Andrus, the former Executive
Vice President of the Company and KP3, LLC, a Colorado limited liability
company ("KP3"), the members of which are Mr. Phillips and a custodian for Mr.
Phillips' son, and subsequently terminated as to Mr. Phillips and KP3 in
connection with Mr. Phillips' August 24, 1998 resignation, (i) so long as
Bedford holds at least 10% of the Company's outstanding Common Shares, it is
entitled to designate one director, and (ii) so long as Bedford holds at least
5% of the Company's outstanding Common Shares, Bedford is entitled to designate
one additional director. Messrs. Thomas and Bibb currently are the directors
designated by Bedford.
COMPENSATION OF DIRECTORS
During 1997, the Company did not pay its employee directors for attending
board meetings. Each of the three outside directors received a $5,000 annual
retainer and a $500 fee for each meeting attended. The Company reimburses all
of its directors for travel and out-of-pocket expenses in connection with their
attendance at meetings of the Board of Directors. In addition, the Company has
granted options to the directors as compensation for their services, as
follows: On June 7, 1996, Mr. Bibb and Mr. Thomas were granted options to
purchase 12,500 Common Shares at an exercise price of $4.00 per share. Such
options expire on June 7, 2001 and vest 20% at such time as the average bid and
offer price for the Common Shares equals $4.00, $8.00, $12.00, $16.00, and
$20.00, respectively, for 20 consecutive trading days. On February 28, 1997,
Mr. Daly was granted options to purchase 12,500 Common Shares at an exercise
price of $10.00 per share. Such options expire five years from the date of
grant and vest 20% at such time as the average bid and offer price for the
Common Shares equals $10.00, $14.00, $18.00, $22.00, and $26.00, respectively,
for twenty consecutive trading days. On October 27, 1997, Mr. MacKillop was
granted options to purchase 12,500 Common Shares at an exercise price of $6.485
per share. Mr. MacKillop's options expire five years from the date of grant and
vest 20% at such time as the average bid and offer price for the Common Shares
equals $6.485, $10.50, $14.50, $18.50, and $22.50, respectively, for twenty
consecutive trading days. On March 27, 1998, Ms. Dobel was granted options to
purchase 12,500 Common Shares at an exercise price of $4.75 per share. Such
options expire five years from the date of grant and vest 20% at such time as
the average bid and offer price for the Common Shares equals $4.75, $8.75,
$12.75, $16.75 and $20.75, respectively, for twenty consecutive trading days.
All outstanding options have become fully vested and exercisable in connection
with the Offer and Merger and, if not exercised, will expire upon consummation
of the Merger.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board has established an Audit Committee, a Compensation
Committee and an Executive Committee. The Audit Committee is composed of
Messrs. Daly and Thomas, both of whom are independent directors. The functions
of the Audit Committee are to recommend to the
Annex I Page 6
<PAGE>
Board the appointment of independent auditors, to review the plan and scope of
any audit of the Company's financial statements and to review the Company's
significant accounting policies and other related matters.
The Compensation Committee consists of two independent directors who are not
employees of the Company. Messrs. Bibb and Daly currently serve as the members
of the Compensation Committee. The functions of the Compensation Committee are
to make recommendations to the Board regarding the compensation of executive
officers and to administer the Company's bonuses and stock option plans. It
also makes recommendations to the Board with respect to the compensation of the
Chairman of the Board and the Chief Executive Officer and approves the
compensation paid to other senior executives.
The Executive Committee consists of Messrs. MacKillop and Daly. The Executive
Committee possesses the powers and discharges the duties of the Board between
meetings of the full Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table and related notes contain information concerning
beneficial ownership of the Company's Common Shares as of October 22, 1998 by:
(i) each person known by the Company to own beneficially more than five percent
of the Common Shares, (ii) each director of the Company, (iii) each Named
Executive Officer, and (iv) all directors and executive officers of the Company
as a group. Unless otherwise indicated in the footnotes, each shareholder has
sole voting and investment power with respect to shares listed in the table.
The share amounts in this table reflect Common Shares issuable upon the
exercise of outstanding options and warrants, all of which have become fully
vested and exercisable as a result of the Offer and Merger and, if not
exercised, upon consummation of the Merger will expire (in the case of
outstanding options) or will automatically be converted into the right to
receive, upon exercise thereof, $.60 per warrant share (in the case of
outstanding warrants).
<TABLE>
<CAPTION>
NUMBER
OF PERCENT
NAME ADDRESS SHARES OF CLASS
---- ------- ------ --------
<S> <C> <C> <C>
C.R. Tucker 555 Seventeenth Street, 14th Fl. 0 --
Denver, Colorado 80202
Scott A. MacKillop 555 Seventeenth Street, 14th Fl. 81,250(1) 1.8
Denver, Colorado 80202
Stephen M. Ash 555 Seventeenth Street, 14th Fl. 22,000(8) *
Denver, Colorado 80202
Maureen E. Dobel 555 Seventeenth Street, 14th Fl. 27,847(2) *
Denver, Colorado 80202
J.W. Nevil Thomas Scotia Plaza, Suite 4712 17,500(3) *
40 King Street West
Toronto, Ontario M5H 3Y2
D. Porter Bibb 540 Madison Avenue 12,500(4) *
New York, New York 10022
Emmett J. Daly Two World Trade Center, 85th Fl. 31,250(5) *
New York, New York 10048
Bedford Capital Financial 2nd Floor, Charlotte Has. 708,750(6) 15.73
Corporation Shirly Street, Box N964
Nassau, Bahamas
</TABLE>
Annex I Page 7
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF PERCENT
NAME ADDRESS SHARES OF CLASS
---- ------- ------ --------
<S> <C> <C> <C>
Kenneth S. Phillips 766 16th Street 277,418(7) 6.1
Boulder, Company 80302
Bay Pond Partners, L.P. c/o Wellington Management 406,083(9) 9.13
Company, L.L.P.,
75 State Street
Boston, Massachusetts 02109
Bay Pond Investors c/o Wellington Management 270,250(9) 6.1
(Bermuda), Ltd. Company, L.L.P.,
75 State Street
Boston, Massachusetts 02109
Wheatley Partners, L.P. 80 Cutter Mill Road, Suite 311 401,916(9) 9.01
Great Neck, New York 11021
All Officers and Directors 193,347 4.20
as a group (7 persons)
</TABLE>
- --------
*Less than 1%.
(1) Includes 75,750 shares underlying presently exercisable options.
(2) Includes 26,754 shares underlying presently exercisable options and 1,093
shares held in the Company's 401(k) plan.
(3) Includes 12,500 shares underlying presently exercisable options and 2,500
shares owned by Mr. Thomas' spouse, Suzanne E. Thomas. Does not include
shares owned by Bedford of which Mr. Thomas is a director and a 6.13%
shareholder.
(4) Includes 12,500 shares underlying presently exercisable options.
(5) Includes 12,500 shares jointly owed with Regina Daly and 12,500 shares
underlying presently exercisable options.
(6) Includes 58,750 shares underlying presently exercisable options or
warrants.
(7) Includes 7,313 shares underlying presently exercisable warrants. As of
August 24, 1998, Mr. Phillips no longer was an officer or employee of the
Company.
(8) Includes 22,000 shares underlying presently exercisable options.
(9) Based solely upon information contained in a Schedule 13D filed with the
Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 24, 1997, the Company completed the acquisition of PMCIS by
acquiring all of the outstanding capital stock of PMCIS from its seven
shareholders. Mr. MacKillop was the President and a minority shareholder of
PMCIS. The Company paid to the PMCIS shareholders $5.0 million in cash at
closing and agreed to make two earn-out payments on the first and second
anniversary dates of the closing. In connection with the stock purchase, the
Company agreed to indemnify the shareholders against certain claims for a
period of 30 months after the closing or, in some cases, for a longer period of
time. On November 3, 1998 the Company entered into the First Amendment to Stock
Purchase Agreement modifying the payment terms of the first earn-out payment
owed to the former PMCIS shareholders. Such payment was due in full on November
6, 1998 and under the modified terms is payable as follows: $500,000 is payable
November 6, 1998; $500,000 is due on the earlier of January 6, 1999 or one
business day after consummation of the Offer; and the
Annex I Page 8
<PAGE>
balance (including interest accruing at 8.5% until November 6, 1998 and 12%
thereafter) is due at the earlier of the Effective Time of the Merger or March
31, 1999. If the Company fails to make any of the foregoing payments and does
not cure such nonpayment within 5 business days after receiving notice thereof,
such nonpayment will constitute a default under the First Amendment to Stock
Purchase Agreement, such First Amendment will become null and void, and the
rights of the former PMCIS shareholders under the PMCIS acquisition agreement
may be enforced to the full extent permitted thereunder.
On August 24, 1998, the Company entered into a separation agreement with
Kenneth S. Phillips, its then-President and Chief Executive Officer, providing
for his departure from the Company. That transaction is described under
"Employment Agreements."
EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation paid
by the Company and its subsidiaries to the Company's Chief Executive Officer
and to the three other executive officers whose salary and bonus exceeded
$100,000 in 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------
OTHER SECURITIES
FISCAL SALARY BONUS ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION OPTIONS(1)
- --------------------------- ------ ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
Kenneth S. Phillips(2) 1997 300,865 50,000 * 938
Former President, Chief 1996 252,000 -- * 12,500
Executive Officer 1995 228,124 -- * -0-
Scott A. MacKillop(3) 1997 206,331(4) 75,750
President & Chief Operating
Officer
David L. Andrus(5) 1997 292,500 50,000 -0-
Former Executive Vice 1996 240,000 -- 262,500
President 1995 40,000 -- -0-
Vali Nasr(6) 1997 191,456 20,360 -0-
Former Chief Financial 1996 129,375 9,640 12,500
Officer & Treasurer 1995 126,475 -- -0-
</TABLE>
- --------
(1) The shares of Common Stock to be received upon the exercise of all stock
options granted during the period covered by the Table.
(2) Mr. Phillips' employment with the Company terminated effective August 24,
1998
(3) Mr. MacKillop joined the Company in September 1997, in connection with the
acquisition of PMCIS.
(4) Includes $150,000 in salary received in 1997 from PMCIS for services
rendered prior to its acquisition by the Company.
(5) Mr. Andrus' employment with the Company terminated effective January 11,
1998.
(6) Mr. Nasr's employment with the Company terminated effective January 30,
1998. Subsequently, Mr. Nasr served as a consultant to the Company until
mid-March 1998.
*Amount received was less than $50,000 or 10% of total salary and bonus for the
year.
Annex I Page 9
<PAGE>
During the year ended December 31, 1997, the Company granted to the Named
Executive Officers options to acquire a total of 76,688 shares of Common Stock
as set forth in the following table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES ($/SHARE)
NAME OPTIONS GRANTED IN FISCAL YEAR(5) EXERCISE PRICE EXPIRATION DATE
---- ---------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Kenneth S. Phillips(1).. 938(2) 0.6 6.485 12/31/2002
Scott A. MacKillop...... 62,500(3) 51.6 6.485 09/24/2003
12,500(4) 6.485 10/27/2002
750(2) 6.485 12/31/2002
</TABLE>
- --------
(1) Mr. Phillips' employment with the Company terminated effective August 24,
1998.
(2) Options were granted on December 31, 1997 and are fully vested.
(3) Options were granted on September 24, 1997 and vest ratably 20% per year
over a five-year period commencing September 24, 1998.
(4) Options were granted on October 24, 1997; 2,500 options are vested and 20%
of the remainder vest each time the average bid and asked price of the
Common Shares equals $4.75, $8.75, $12.75, $16.75 and $20.75, respectively,
for twenty consecutive trading days.
(5) Based on an aggregate of 146,826 options granted in 1997 to employees of
the Company, including the Named Executive Officers.
The following table sets forth certain information with respect to the value
of options held at December 31, 1997 by the Named Executive Officers. The Named
Executive Officers did not exercise any options to purchase Common Shares
during 1997.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED ($) VALUE OF UNEXERCISED
OPTION AT IN-THE-MONEY OPTIONS
YEAR END AT YEAR END(1)
-------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth S. Phillips........ 5,938 7,500 $12,500 $18,750
David L. Andrus............ 193,750(2) 0 $71,250 0
Scott A MacKillop.......... 3,250 72,500 $ 49 $ 1,088
Vali Nasr.................. 12,500(3) 0 $31,250 0
</TABLE>
- --------
(1) The closing price for the Common Shares as reported on the Nasdaq National
Market on December 31, 1997 (the last day of trading in 1997) was $6.50.
Value is calculated on the basis of the difference between the option
exercise price and $6.50, multiplied by the number of Common Shares
underlying the option.
(2) As of April 11, 1998, options to purchase 23,750 shares expired.
(3) As of April 30, 1998, options to purchase 12,500 shares expired.
EMPLOYMENT AGREEMENTS
The Company had employment agreements with Mr. Phillips, its former President
and Chief Executive Officer and with Mr. Andrus, its former Executive Vice
President, both of which have
Annex I Page 10
<PAGE>
been terminated. PMCIS had an employment agreement with Mr. MacKillop, the
Executive Vice President and Chief Operating Officer of the Company, that has
been terminated and replaced by an employment agreement between Mr. MacKillop
and the Company.
The employment agreement with Mr. Phillips was dated July 26, 1995 and was
terminated effective August 24, 1998 upon Mr. Phillips's resignation as
President, Chief Executive Officer and Director of the Company. The Company
entered into a separation agreement with Mr. Phillips effective August 24, 1998
whereby the Company agreed to make severance payments to Mr. Phillips in an
amount of $50,000 for two months and $25,000 per month for an additional 23
months in lieu of the severance payments required under Mr. Phillips'
employment agreement. The separation agreement restricts Mr. Phillips from
competing or interfering with the Company's activities during the 27-month
period after his termination or from disclosing or utilizing proprietary
information.
The employment agreement with Mr. Andrus was dated July 26, 1995, was amended
in December 1996 and was terminated effective January 11, 1998. In August 1998,
the Company settled a dispute with Mr. Andrus concerning his entitlement to
severance under his employment agreement and entered into a settlement
agreement that provides for severance payments to Mr. Andrus.
The employment agreement with Mr. MacKillop was dated September 23, 1997.
PMCIS had the right to terminate the agreement at any time after the one-year
anniversary of the date of the agreement by giving six months' prior written
notice. In connection with the Offer and Merger, Mr. MacKillop agreed to
terminate the employment agreement with PMCIS and, on November 3, 1998, Mr.
MacKillop and the Company entered into an employment agreement. This new
agreement provides for a one-year term and a minimum salary of $240,000 that
the Company may augment with performance-based increases as established in the
Company's discretion, and participation in the Company's other benefit plans.
In addition, the new employment agreement provides that if payment in full of
the 1998 earn-out payment due under the PMCIS acquisition agreement is not paid
in accordance with the PMCIS acquisition agreement, as amended, then the
Company will pay Mr. MacKillop $250,000 on the earlier of April 2, 1999 or two
business days after the consummation of the Merger.
CHANGE IN CONTROL SEVERANCE AGREEMENTS
In May 1998, the Company entered into Change in Control Severance Agreements
with Mr. MacKillop, Mr. Ash and Ms. Dobel (for purposes of their respective
agreements, each the "Executive"). Each of these agreements provides that if a
Change in Control (as defined in each such agreement) occurs, and before the
two-year anniversary of the Change in Control or the Executive's 65th birthday,
whichever comes first, (i) the Executive's employment is terminated by the
Company or any of its subsidiaries (unless such termination is for cause or
because Executive becomes permanently disabled and begins to receive disability
benefits pursuant to the long-term disability plan in effect for, or applicable
to, the Executive immediately prior to the Change in Control), or (ii) if the
Executive terminates his or her employment with the Company or any of its
subsidiaries for Good Reason (as defined in each such agreement), then
Executive will be entitled to (x) a cash payment payable during each month of
the Continuation Period (twenty-seven months following termination of
employment for Messrs. MacKillop and Ash, and twelve months following
Annex I Page 11
<PAGE>
termination of employment for Ms. Dobel) in an amount equal to 1/12 of the sum
of the Executive's annual base salary and the average of the Executive's annual
bonus over the preceding three fiscal years, (y) a lump-sum cash payment which
the Company will pay within ten business days after the expiration of the
Continuation Period equal to the Company matching contributions that would have
been made under the Company's 401(k) savings plan(s) on the amounts described
in the preceding clause (x) if the Executive had continued in employment and
participated to the fullest extent under such plan(s), and (z) during the
Continuation Period, the Company will arrange to provide the Executive with
continued medical, group life, and dental benefits substantially similar, and
subject to the same employee contribution requirement, to those that the
Executive was receiving or entitled to receive immediately prior to the date
his or her employment is terminated.
In addition to the foregoing general terms, Mr. MacKillop's Change in Control
Severance Agreement also provides that if a Change in Control occurs, then Mr.
MacKillop may terminate his employment with the Company or any of its
subsidiaries for any reason, or without reason, during the sixty-day period
immediately following the first anniversary of a Change in Control giving rise
to a right to severance compensation. Pursuant to the employment agreement
entered into as of November 3, 1998 between the Company and Mr. MacKillop, Mr.
MacKillop's Change in Control Severance Agreement was terminated.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Shares and other
equity securities of the Company. Officers, directors and greater-than-ten-
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
The Company believes that during the year ended December 31, 1997, the
following officers, directors or 10% holders of its Common Shares filed late
reports, failed to report transactions on a timely basis or failed to file a
form required under Section 16 of the Exchange Act: Kenneth S. Phillips, Scott
A. MacKillop and J.W. Nevil Thomas, each failed to timely file one required
report. In each case, an appropriate report was subsequently filed with the
SEC.
Annex I Page 12
<PAGE>
EXHIBIT A-1
LETTER TO SHAREHOLDERS OF THE COMPANY
<PAGE>
PMC International, Inc.
November 9, 1998
Dear Shareholder:
We are pleased to report that, on November 3, 1998, PMC International, Inc.
(the "Company") entered into a merger agreement with The Ziegler Companies,
Inc. ("Ziegler") and one of its subsidiaries that provides for the acquisition
of the Company by Ziegler at a price of $.60 per common share (including
scrip) and $2.50 per preferred share, net to the seller in cash. Under the
terms of the proposed transaction, a Ziegler subsidiary is today commencing a
cash tender offer for all outstanding shares of the Company common stock
(including scrip) at $.60 per share and all outstanding shares of the Company
preferred stock at $2.50 per share. Following the successful completion of the
tender offer, the Ziegler subsidiary will be merged into the Company and all
common shares (including scrip) not purchased in the tender offer will be
converted into the right to receive $.60 per share in cash and all preferred
shares not purchased in the tender offer will be converted into the right to
receive $2.50 per share in cash.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE ZIEGLER TENDER OFFER
AND UNANIMOUSLY DETERMINED THAT THE TERMS OF THE TENDER OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALL COMPANY
SHAREHOLDERS TENDER THEIR SHARES IN THE ZIEGLER TENDER OFFER.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is
Ziegler's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read the enclosed
materials carefully.
The management and directors of PMC International, Inc. thank you for the
support you have given the Company.
Sincerely,
/s/ Scott A. MacKillop
Scott A. MacKillop
President
555 Seventeenth Street . Fourteenth Floor . Denver, CO 80202 . 303 292-
1177 . 800 852-1177 . Fax 303 293-2152
<PAGE>
EXHIBIT A-2
JOINT PRESS RELEASE
<PAGE>
FOR IMMEDIATE RELEASE
November 3, 1998
THE ZIEGLER COMPANIES, INC. SIGNS DEFINITIVE AGREEMENT
TO PURCHASE PMC INTERNATIONAL, INC.
WEST BEND, WIS.--The Ziegler Companies, Inc. [AMEX:ZCO], a financial
services holding company, announced today the signing of a definitive merger
agreement for the acquisition of PMC International, Inc., a Denver-based
investment management and consulting firm.
Under the terms of the agreement, a subsidiary of The Ziegler Companies
will commence a tender offer to acquire all of the outstanding common stock of
PMC International for $0.60 per share and all of the outstanding preferred stock
of PMC International for $2.50 per share. Following the completion of the
tender offer, The Ziegler Companies will consummate a second-step merger in
which the remaining PMC International common shareholders will receive $0.60 per
share and its preferred shareholders will receive $2.50 per share. The total
purchase price for the currently outstanding common and preferred stock,
including PMC International stock warrants and options, is approximately $3.1
million, which will be funded from working capital of The Ziegler Companies.
To support PMC International during the period in which the companies are
effecting the merger, The Ziegler Companies has executed a $3.5 million credit
facility with PMC International, the outstanding balance of which is convertible
into PMC common stock at $0.60 per share. On October 15, 1998, the Ziegler
Companies loaned $500,000 for working capital. In addition, the two firms have
entered into an option for common stock under which The Ziegler Companies may
immediately purchase 4,500,000 shares of PMC common stock for $0.60 per share.
The Ziegler Companies, Inc., with annual revenues of approximately $75
million, is a holding company headquartered in West Bend, Wis. The company's
principal subsidiary, B.C. Ziegler and Company, is an investment banking and
brokerage firm.
<PAGE>
Other Ziegler subsidiaries provide services that include asset management,
investment consulting, and reduced-commission brokerage services.
PMC International, Inc., with annual revenues of approximately $15 million,
provides investment management and consulting services that support the
relationships between financial advisers and their clients. Its services
include privately managed accounts and mutual fund wrap programs. The firm has
four subsidiaries, which include Portfolio Management Consultant, Inc., an
investment advisory firm; the company also operates a broker/dealer, an
investment advisory firm specializing in mutual fund asset allocation products,
and a subsidiary which develops proprietary software for the financial services
industry.
Peter D. Ziegler, president and chief executive officer of The Ziegler
Companies, said, "This acquisition fits strategically with our plans on the
money management side of our business. It adds $2 billion in assets under
management to Ziegler, and PMC's services complement our existing business
extremely well. Adding PMC positions us favorably as the financial services
industry moves away from transaction business toward fee-based services."
The board of directors of PMC International has unanimously approved the
tender offer and recommended that PMC shareholders accept the offer and tender
their shares. Scott MacKillop, president of PMC International, said, "This
transaction is very exciting for us because it represents the culmination of an
exhaustive 10-month effort to find a strategic partner who could provide the
financial strength, credibility and experience necessary to keep our firm in the
forefront of this highly competitive and growing part of the financial services
industry. This combination represents a win for our clients, our business
partners and our shareholders."
This new release contains forward-looking statements made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Management
of The Ziegler Companies, Inc. and PMC International, Inc. caution that the
projections are based on a current understanding of the PMC International
business, and are highly dependent on a variety of factors which could cause
actual results to differ from these
2
<PAGE>
estimates. These factors include, without limitation, general economic
conditions, market conditions in relevant markets, market acceptance of existing
and new products and services and successful integration of PMC International
with The Ziegler Companies.
CONTACTS: S. Charles O'Meara, General Counsel, The Ziegler Companies, Inc. (414)
334-5521; Scott MacKillop, President, PMC International, Inc. (303) 292-1177
3
<PAGE>
EXHIBIT A-3
OPINION OF VALUE INVESTING PARTNERS, INC.
VALUE INVESTING PARTNERS, INC.
489 FIFTH AVENUE, 27TH FLOOR . NEW YORK, NY 10017 . TEL: (212) 370-9646 . FAX:
(212) 370-9535
PRIVATE & CONFIDENTIAL
October 26, 1998
The Board of Directors
PMC International, Inc.
555 Seventeenth Street, 14th Floor
Denver, Colorado 80202
Gentlemen:
You have requested our opinion as investment bankers, as of the date hereof,
as to the fairness, from a financial point of view, to the stockholders of PMC
International, Inc. ("PMCI" or the "Company") of the consideration to be
received by them in connection with transactions contemplated by a draft
Agreement and Plan of Merger dated October 22, 1998 (the "Agreement") between
the Company, The Ziegler Companies, Inc. ("Ziegler"), and Zacq Corp. ("Zacq"),
a wholly-owned subsidiary of Ziegler. The Agreement provides for a cash tender
offer by Zacq for all of the issued and outstanding shares of common stock of
the Company (the "Common Stock") at a price of $0.60 per share, all of the
issued and outstanding shares of preferred stock of the Company (the
"Preferred Stock") at a price of $2.50 per share, and for a subsequent merger
of Zacq with and into the Company pursuant to which each outstanding share of
Common Stock and Preferred Stock (other than shares that are owned by Ziegler,
Zacq or any other wholly-owned subsidiary of Ziegler or shares held by
dissenting shareholders who perfect their dissenter rights under Colorado law)
will be converted into the right to receive $0.60 and $2.50 in cash,
respectively (the "Merger"). Also, the Agreement contains various other terms
and conditions, including a requirement that PMCI's Board of Directors
unanimously approve the Merger.
Value Investing Partners, Inc. ("Value Investing Partners"), as part of its
investment banking business, is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
private placements, public offerings, when-issued trading of spin-offs, and
valuations for corporate and other purposes. In the ordinary course of
business, Value Investing Partners has published research materials on other
companies that operate in the financial services industry, has acted as a
market maker in the equity securities of such other companies and,
accordingly, periodically may have positions (long or short) in such
securities.
On September 2, 1998, Value Investing Partners was retained as the exclusive
financial advisor to the Company in connection with the Agreement and will
receive a fee for the services performed with respect thereto, a portion of
which is contingent upon the consummation of the Agreement. The portion of the
fee to be received for providing this opinion is not contingent upon the
consummation of the Agreement. The Company has agreed to indemnify Value
Investing Partners against certain liabilities that may arise from activities
related to the advisory engagement.
In arriving at our opinion, we have undertaken such review, analyses, and
inquiries as we have deemed necessary and appropriate in the circumstances.
Among other things, for purposes of the opinion set forth herein, we have,
inter alia:
(i) reviewed the Agreement;
(ii) reviewed certain historical financial information relating to the
Company;
1
<PAGE>
(iii) reviewed certain projected financial information relating to the
Company furnished by the management of PMCI;
(iv) reviewed certain publicly available data relating to the Company;
(v) visited the Company's offices and made inquiries of the management of
the Company regarding the past and current business operations, financial
condition, and future prospects for the Company;
(vi) held discussions with the senior management of the Company to
understand the reasons for completing the Merger;
(vii) compared the financial information on PMCI to similar information
for certain companies deemed comparable to the Company and have reviewed
stock market information on such companies that have publicly traded
securities;
(viii) reviewed, to the extent publicly available, the financial terms of
certain acquisition transactions involving companies operating businesses
deemed similar to that of the Company;
(ix) analyzed the general economic outlook for companies that operate
within the financial management and advisory services industry; and
(x) conducted such other studies, reviews and analyses as we have deemed
appropriate.
In conducting our review and in rendering our opinion, we have assumed and
relied upon the accuracy, completeness and fairness of the financial and other
information provided to us or publicly available and we have not independently
verified such information. It is understood that we were retained by the Board
of Directors of the Company, and that the Board of Directors has not looked to
us for independent verification with respect to the financial and other
information provided to us or publicly available. We have further relied upon
the assurances of the management of the Company that it is not aware of any
facts that would make the information supplied to us, or publicly available,
inaccurate or misleading. With respect to the financial projections for the
Company, management of the Company has represented that such projections have
been reasonably prepared on a basis reflecting management's best currently
available estimates and judgments as to the future financial performance of
the Company. We express no opinion as to the financial projections prepared by
the Company's management.
We did not make an independent appraisal of the assets or the liabilities of
the Company, and we do not express an opinion regarding the liquidation value
or solvency of the Company. In addition, we do not express any opinion as to
the prices at which shares of the Company's common stock may trade following
the date of this opinion, at the closing date for the Merger, or at any later
time in the future if the Merger is not consummated. Our opinion as expressed
herein is limited to the fairness to the stockholders of PMCI, from a
financial point of view, of the $0.60 per Common Share and $2.50 per Preferred
Share cash consideration to be received by stockholders of the Company
pursuant to the Merger, and it does not address the Company's underlying
business decision to proceed with the Merger. We assume that the transaction
described in the Agreement will be consummated on the terms set forth therein,
without waiver of terms. Our opinion speaks only as of the date hereof, is
based upon general market, economic, financial, monetary and other conditions
as they exist and can be evaluated, and the information available to us, as of
the date hereof. Subsequent developments may affect this opinion, and we do
not have any obligation to update, revise or reaffirm this opinion.
It is understood that this opinion is solely for the information of the
Board of Directors of the Company, may not be relied upon by any third party
and is not a recommendation as to how any stockholder should vote at the
meeting that could be held to vote upon the Merger. Also, this opinion may not
be reproduced, quoted, published or otherwise used or referred to in any
manner, nor shall any public reference to Value Investing Partners be made,
without our prior written consent, except that the Company may include this
letter in proxy statements (Schedule 14D-9 filings) or similar documents
distributed to stockholders and in other filings with the Securities and
Exchange Commission, provided that any such disclosure shall first be
submitted to Value Investing Partners for its approval.
2
<PAGE>
Based upon and subject to the foregoing, and other matters that we
considered relevant, it is our opinion that, as of the date hereof, the $0.60
per Common Share and $2.50 per Preferred Share cash consideration to be
received by stockholders of the Company pursuant to the Merger is fair to the
stockholders of PMC International, Inc. from a financial point of view.
Very truly yours,
Value Investing Partners, Inc.
3
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
THE ZIEGLER COMPANIES, INC.
ZACQ CORP.
AND
PMC INTERNATIONAL, INC.
DATED AS OF NOVEMBER 3, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of November 3, 1998, among THE
ZIEGLER COMPANIES, INC., a Wisconsin corporation (the "Purchaser"), ZACQ CORP.,
a Colorado corporation (the "Sub"), which is a wholly-owned subsidiary of the
Purchaser, and PMC INTERNATIONAL, INC., a Colorado corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the respective Boards of Directors of the Purchaser, the Sub and
the Company have each determined that it is advisable and in the best interest
of each such corporation and its shareholders, on the terms and subject to the
conditions of this Agreement, (a) for the Sub to commence a cash tender offer to
purchase all outstanding shares of common stock, par value $0.01 per share, of
the Company, including scrip (the "Common Stock") and $0.325 Cumulative
Convertible Series A Preferred Stock, without par value, of the Company (the
"Preferred Stock") and (b) following the consummation of the cash tender offer,
to merge the Sub into the Company; and
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving that Offer (as hereafter defined) and the Merger (as hereafter
defined) and recommends that the holders of the Common Stock and Preferred Stock
accept the Offer;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and upon the terms and subject to the conditions
hereafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 hereof, as promptly as
practicable (but in any event within five business days of the date of this
Agreement), the Purchaser shall cause the Sub to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) an offer to purchase all outstanding shares of Common Stock (including
scrip) and Preferred Stock not owned by the Purchaser or the Sub at a price of
$0.60 per share of Common Stock (including scrip), net to the seller in cash and
$2.50 per share of Preferred Stock, net to the seller in cash, which offer shall
remain open for at least 20 business days (the "Offer") and, subject to the
conditions of the Offer set forth in Exhibit A hereto, shall use its best
efforts to consummate the Offer, including, if necessary, conversion of
convertible loans including a $3,500,000 credit facility and options outstanding
into Common Stock or Preferred Stock of the Company, as the case may be, in
order to consummate the Offer. The obligations of the Purchaser and the Sub to
consummate the Offer, to accept for payment and to pay for any shares of Common
<PAGE>
Stock and Preferred Stock tendered shall be subject only to those conditions set
forth in Exhibit A hereto.
(b) Neither the Purchaser nor the Sub will, without the prior written
consent of the Board of Directors of the Company, decrease the amount or change
the form of the consideration payable in the Offer, decrease the number of
shares of Common Stock or Preferred Stock sought pursuant to the Offer, change
the conditions to the Offer, impose additional conditions or terms to the Offer,
amend or waive the condition that there be validly tendered and not properly
withdrawn prior to the expiration of the Offer a number of shares of Common
Stock and Preferred Stock which when added to the number of shares of Common
Stock and Preferred Stock owned by the Purchaser and its affiliates constitutes
at least two-thirds of the then outstanding shares of Common Stock and two-
thirds of the then outstanding shares of Preferred Stock, respectively, on a
fully diluted basis, or amend any term of the Offer in any manner adverse to
holders of shares of Common Stock or Preferred Stock. Assuming the prior
satisfaction or waiver of the conditions to the Offer, the Purchaser covenants
and agrees to accept for payment and pay for, in accordance with the terms of
the Offer, shares of Common Stock and Preferred Stock tendered pursuant to the
Offer as soon as it is permitted to do so under applicable Law, provided that
the Purchaser and the Sub shall have the right, upon consultation with the
Company, to extend the Offer (if without such extension the Purchaser would be
unable to consummate the Offer) to a date not later than the 35th business day
following the commencement of the Offer or for such longer period as may be
required by Law.
(c) Notwithstanding anything to the contrary in this Agreement, the
Purchaser and the Sub further agree that, subject to the terms and conditions of
this Agreement, in the event that the conditions to the Offer set forth in
paragraphs (a) or (b) of Exhibit A hereto shall occur or exist (and shall not
have been waived), the Sub shall, at the Company's request, extend the Offer to
a date not later than the 40th business day following the commencement of the
Offer; provided, however, if the condition set forth in paragraph (d)(i) of
Exhibit A shall not have been satisfied, the Purchaser and the Sub shall, if
reasonably requested by the Company, extend the Offer for five business days to
enable the Company to cure such breach.
(d) As soon as practicable on or before the date of commencement of the
Offer, but not later than five business days after the execution of this
Agreement, the Purchaser and the Sub shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer which will contain the offer to purchase and form of the related
letter of transmittal (together with any supplements or amendments thereto, the
"Offer Documents"). The Offer Documents will comply in all material respects
with the provisions of applicable federal securities Laws and, on the date filed
with the SEC and on the date first published, sent or given to the holders of
the Common Stock and Preferred Stock of the Company, shall not contain any
untrue statement of a material fact or omit to state any 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, except
that no representation is made by the Purchaser or the Sub with respect to
information supplied by the Company in writing for inclusion in the Offer
Documents. The Purchaser, the Sub and the Company each agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that it shall be
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<PAGE>
discovered to have been or to have become false or misleading in any material
respect and the Purchaser and the Sub each further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and disseminated to the holders of the Common Stock and Preferred Stock of the
Company, in each case as and to the extent required by applicable federal
securities Laws. The Purchaser and the Sub agree to provide the Company and its
counsel in writing with any comments the Purchaser, the Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
after the receipt of such comments.
SECTION 1.02 Company Actions. The Company hereby consents to the Offer,
recommends its acceptance by the Company's shareholders and represents that (a)
its Board of Directors or a duly authorized committee thereof (at a meeting duly
called and held) has (i) determined that the Offer and the Merger (as
hereinafter defined) taken together, are fair to the holders of the Common Stock
and Preferred Stock of the Company and (ii) resolved, subject to its fiduciary
duties under applicable Laws as advised by counsel, to recommend acceptance of
the Offer and approval and adoption of this Agreement by the holders of the
Common Stock and Preferred Stock of the Company, and (b) Value Investing
Partners, Inc. has advised the Company's Board of Directors that the $0.60 per
share of Common Stock and $2.50 per share of Preferred Stock cash consideration
to be received by holders of Common Stock and Preferred Stock of the Company,
respectively, in the Offer and the Merger, taken together, is fair to such
shareholders (other than the Purchaser and its affiliates) from a financial
point of view. The Company hereby agrees to file with the SEC as soon as
practicable after the commencement of the Offer a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") containing the recommendations described in the
first sentence of this Section 1.02. The Company, the Purchaser and the Sub
each agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall be discovered to have been or
to have become false or misleading in any material respect and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to the holders of the
Company's Common Stock and Preferred Stock and to the extent required by
applicable federal securities Laws. The Company agrees to provide the Purchaser
and the Sub and their counsel, in writing, with any comments the Company or its
counsel may receive from the SEC or its Staff with respect to the Schedule 14D-9
promptly after the receipt of such comments. Notwithstanding anything contained
in this Section 1.02, if the Board of Directors of the Company determines in the
exercise of its fiduciary duties to withdraw, modify or amend its
recommendation, such withdrawal, modification or amendment shall not constitute
a breach of this Agreement. The Company hereby consents to the inclusion in the
Offer of the recommendation referred to in the first sentence of this Section
1.02. In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings and any available
listing or computer file containing the names and addresses of the record
holders of the shares of Common Stock and Preferred Stock as of a recent date
and will furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
holders of the Common Stock and Preferred Stock of the Company. Subject to the
requirements of applicable Law, and except for such steps as are necessary to
disseminate the documents constituting the Offer and any other documents
necessary to consummate the Merger, the Purchaser and the Sub and each of their
affiliates and associates shall hold in confidence the information contained in
any of such labels, listings and files, will use such information only in
connection with the Offer and the
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<PAGE>
Merger, and, if this Agreement is terminated, will deliver to the Company the
information and all copies of such information then in their possession and in
the possession of their legal, accounting and financial advisors.
SECTION 1.03 Directors. (a) Promptly upon the purchase by the Purchaser
or any of its affiliates of such number of shares of Common Stock which, when
added to the number of shares of Common Stock owned by the Purchaser and the
Sub, represents at least two-thirds of the outstanding shares of Common Stock,
and from time to time thereafter, the Purchaser shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give the Purchaser, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Board of Directors of
the Company equal to the product of the number of directors on the Board of
Directors of the Company and the percentage that such number of shares of Common
Stock so owned bears to the number of shares of Common Stock outstanding, and
the Company, through action of its Board of Directors, if necessary, shall, upon
request by the Purchaser, promptly, at the Company's election, either increase
the size of the Board of Directors of the Company or exercise its reasonable
best efforts to secure the resignations of such number of directors as is
necessary to enable the Purchaser's designees to be elected to the Board of
Directors of the Company and shall cause the Purchaser's designees to be so
elected to the Board of Directors.
(b) The obligations to appoint designees to its Board of Directors
hereunder shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill the obligations
under this Section 1.03 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 1.03.
The Purchaser will supply to the Company, in writing, and be solely responsible
for any information with respect to itself and its nominees, officers, directors
and affiliates required by Section 14(f) and Rule 14f-1.
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Colorado Business
Corporation Act (the "Colorado Law"), the Sub shall be merged with and into the
Company (the "Merger") as soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article VII hereof.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation"), and the separate corporate existence of the Sub
shall cease.
SECTION 2.02 Effective Time. The Merger shall be consummated by filing
with the Colorado Secretary of State articles of merger in such form as is
required by, and executed in accordance with, the relevant provisions of the
Colorado Law (the time of such filing or such other time as may be set forth in
the articles of merger being the "Effective Time").
-4-
<PAGE>
SECTION 2.03 Effects of the Merger. The Merger shall have the effects set
forth in the Colorado Law. As of the Effective Time, the Company shall be a
wholly-owned subsidiary of the Purchaser.
SECTION 2.04 Articles of Incorporation and By-Laws. The Articles of
Incorporation and Bylaws of the Company shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
SECTION 2.05 Directors and Officers. The directors of the Company at the
Effective Time shall continue as the directors of the Surviving Corporation
until their successors are duly elected and qualified. The officers of the
Company at the Effective Time shall continue as the officers of the Surviving
Corporation until their successors are duly appointed and qualified.
SECTION 2.06 Conversion of Shares. (a) Each share of Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Common Stock owned by the Purchaser or any affiliate of the Purchaser or held in
the treasury of the Company, and Dissenting Shares (as defined in Section 3.01
hereof) representing shares of Common Stock) shall, as of the Effective Time,
and by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive from the Surviving Corporation
the equivalent of $0.60 net to the holder in cash or any higher price paid per
share of Common Stock pursuant to the Offer (the "Common Stock Merger
Consideration"), payable to the holder thereof, without interest thereon, upon
the surrender of the certificate formerly representing such share of Common
Stock. At and after the Effective Time, each holder of a certificate or
certificates that represented issued and outstanding shares of Common Stock
immediately prior to the Effective Time (other than shares of Common Stock owned
by the Purchaser or any affiliate of the Purchaser and Dissenting Shares
representing shares of Common Stock) shall cease to have any rights as a
shareholder of the Company, except for the right to surrender such certificate
or certificates in exchange for the Common Stock Merger Consideration or to
perfect the right to receive payment for such shares pursuant to Article 113 of
Title 7 of the Colorado Revised Statutes and Section 3.01 hereof if such holder
has validly exercised and not withdrawn such right to receive payment for such
shares.
(b) Each share of Preferred Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Preferred Stock owned by the
Purchaser or any affiliate of the Purchaser or held in the treasury of the
Company, and Dissenting Shares (as defined in Section 3.01 hereof) representing
shares of Preferred Stock) shall, as of the Effective Time, and by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive from the Surviving Corporation $2.50 net to the holder
in cash or any higher price paid per share of Preferred Stock pursuant to the
Offer (the "Preferred Stock Merger Consideration"), payable to the holder
thereof, without interest thereon, upon the surrender of the certificate
formerly representing such share of Preferred Stock. At and after the Effective
Time, each holder of a certificate or certificates that represented issued and
outstanding shares of Preferred Stock immediately prior to the Effective Time
(other than shares of Preferred Stock owned by the Purchaser or any affiliate of
the Purchaser and Dissenting Shares representing shares of Preferred Stock)
shall cease to have any rights as a shareholder of the Company, except for the
right to surrender such certificate or certificates in exchange for the
Preferred Stock Merger Consideration
-5-
<PAGE>
or to perfect the right to receive payment for such shares pursuant to Article
113 of Title 7 of the Colorado Revised Statutes and Section 3.01 hereof if such
holder has validly exercised and not withdrawn such right to receive payment for
such shares.
(c) Each share of Common Stock and Preferred Stock held by the Pur chaser
or any of its affiliates or held in the Company's treasury or by a subsidiary of
the Company shall, as of the Effective Time, and by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
and be canceled and be retired without payment of any consideration therefor.
(d) The Purchaser and the Sub acknowledge that each share of Common Stock
outstanding immediately prior to the date hereof which was granted to
participants pursuant to the Stock Option Plans (as defined in Section 2.07
hereof) as of the date of acquisition of shares of Common Stock pursuant to the
Offer, will become fully vested and free of any and all restrictions to which
such shares of Common Stock are otherwise subject.
(e) Each certificate for scrip issued and outstanding immediately prior to
the Effective Time shall, as of the Effective Time, and by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive from the Surviving Corporation the equivalent of $0.60 net to
the holder in cash or any higher price paid per share of Common Stock pursuant
to the Offer, payable to the holder thereof, without interest thereon, upon the
surrender of the certificate formerly representing such scrip. At and after the
Effective Time, each holder of a certificate or certificates that represented
scrip immediately prior to the Effective Time shall cease to have any rights as
a holder of scrip of the Company, except for the right to surrender such
certificate or certificates in exchange for the Common Stock Merger
Consideration.
SECTION 2.07 Stock Options and Warrants. Promptly after the date hereof,
the Company shall give written notice of the Merger under its applicable Stock
Option Plans to the holders of all outstanding options to purchase Common Stock
granted to officers, employees, directors or consultants (or other persons) of
the Company ("Options"). Upon the occurrence of the Merger and in accordance
with their terms, all options, stock option plans, programs, arrangements or
agreements pursuant to which Options have or may be granted by the Company
(collectively, "Stock Option Plans") shall automatically terminate and be of no
further force and effect whatsoever, without the necessity for any additional
notice or action by the Surviving Corporation under the applicable Stock Option
Plans or otherwise. Each warrant to purchase Common Stock of the Company issued
and outstanding immediately prior to the Effective Time shall, as of the
Effective Time, automatically be converted solely into the right to receive from
the Company upon exercise thereof, in lieu of each share of Common Stock
issuable upon such exercise thereof immediately prior to the Effective Date, the
Common Stock Merger Consideration.
SECTION 2.08 Conversion of Sub Common Stock. Each share of common stock,
par value $.01 per share, of the Sub issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and exchangeable for one share of
common stock of the Surviving Corporation.
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<PAGE>
SECTION 2.09 Shareholders' Meeting. If approval by the Company's
shareholders is required by applicable Law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable Law:
(a) duly call, give notice of, convene and hold an annual or special
meeting (the "Shareholders' Meeting") of holders of shares of Common Stock and
Preferred Stock of the Company as soon as practicable following the consummation
of the Offer for the purpose of considering and taking action on this Agreement;
(b) subject to its fiduciary duties under applicable Laws as advised by
counsel, include in the Proxy Statement (as hereinafter defined) the
recommendation of the Board of Directors that shareholders of the Company vote
in favor of the approval and adoption of this Agreement; and
(c) use its best efforts (i) if a Proxy Statement or Information Statement,
as selected by the Purchaser, is required to be filed, to obtain and furnish the
information required to be included by it in the Proxy Statement, and, after
consultation with the Purchaser, respond promptly to any comments made by the
SEC with respect to the Proxy Statement and any preliminary version thereof and
cause the Proxy Statement to be mailed to its shareholders at the earliest
practicable time following the expiration of the Offer, and (ii) subject to
fiduciary duties of the Board of Directors under applicable Law as advised by
counsel, to obtain the necessary approvals of the Merger and this Agreement by
its shareholders. The Purchaser agrees that, at the Shareholders' Meeting, all
of the shares of Common Stock and Preferred Stock acquired pursuant to the Offer
or otherwise by the Purchaser, the Sub or any other affiliate of the Purchaser
will be voted in favor of the Merger and this Agreement.
SECTION 2.10 Merger Without Meeting of Shareholders. Notwithstanding the
foregoing, if, following the completion of the Offer, the Merger may be
consummated under Colorado Law without a vote of the Company's shareholders, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective without a meeting of the shareholders, as soon as
practicable after the acquisition of shares of Common Stock and Preferred Stock
pursuant to the Offer, but in no event later than 30 days thereafter.
SECTION 2.11 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after consummation of the Offer, and if required
by Law, after the vote of the shareholders of the Company in favor of the
adoption of this Agreement has been obtained, the Company (or the Purchaser or
the Sub, if appropriate) shall execute in the manner required by the Colorado
Law and deliver to the Secretary of State of the State of Colorado the duly
executed articles of merger, and the parties shall take all such other and
further actions as may be required by Law to make the Merger effective. Prior
to the filing referred to in this Section, a closing (the "Closing") will be
held at the offices of the Company (or such other place as the parties may
agree) for the purpose of confirming all the foregoing.
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ARTICLE III.
DISSENTING SHARES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, in the event that appraisal rights are available in
connection with the Merger pursuant to Colorado Law, shares of Common Stock or
Preferred Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who did not vote in favor of
the Merger and who comply with all of the relevant provisions of Article 113 of
Title 7 of the Colorado Revised Statutes (the "Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Common Stock
Merger Consideration or the Preferred Stock Merger Consideration, as
appropriate, unless and until such holders shall have failed to perfect or shall
have effectively withdrawn or lost their rights to appraisal under Colorado Law.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's shares of Common Stock or Preferred
Stock shall thereupon be deemed to have been converted into and to have become
exchangeable for the right to receive, as of the Effective Time, the Common
Stock Merger Consideration or Preferred Stock Merger Consideration, as
appropriate, without any interest thereon.
SECTION 3.02 Exchange of Certificates. (a) The Purchaser shall
deposit or cause to be deposited in trust for the benefit of the Surviving
Corporation with an exchange agent selected by the Purchaser (the "Exchange
Agent") at the Effective Time cash in an aggregate amount necessary to make the
payments pursuant to Section 2.06 hereof to holders (other than the Purchaser,
or the Sub or any of their respective affiliates) of shares of Common Stock and
Preferred Stock that are issued and outstanding immediately prior to the
Effective Time (such amounts being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, make
the payments provided for in the preceding sentence out of the Exchange Fund.
The Exchange Agent shall invest the Exchange Fund as the Purchaser directs,
provided that all such investments shall be in obligations of or guaranteed by
the United States of America, in commercial paper obligations receiving the
highest rating from either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $50 million.
The Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement. If for any reason (including, without limitation, losses
sustained by such investments) the Exchange Fund is inadequate to pay the amount
holders of Common Stock and Preferred Stock shall be entitled to hereunder, the
Surviving Corporation shall remain solely liable for the payment thereof.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Exchange Agent to mail to each record holder, as of the Effective
Time, other than the Purchaser or any of its affiliates and other than holders
of Dissenting Shares, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented scrip shares or shares of
Common Stock or Preferred Stock (the "Certificates") a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificate for payment therefor. Upon surrender to the
Exchange
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Agent of a Certificate, together with such letter of transmittal duly executed,
and any other required documents, the holder of such Certificate shall be paid
in exchange therefor cash in an amount equal to the product of the amount of
scrip or the number of shares of Common Stock, formerly represented by such
Certificate multiplied by the Common Stock Merger Consideration or the number of
shares of Preferred Stock formerly represented by such Certificate multiplied by
the Preferred Stock Merger Consideration, respectively, and such Certificate
shall forthwith be canceled. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. If payment is to be made to a
person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.02, each
Certificate (other than Certificates representing shares of Common Stock or
Preferred Stock owned by the Purchaser or any affiliate of the Purchaser, and
Dissenting Shares) shall represent for all purposes the right to receive the
Common Stock Merger Consideration or Preferred Stock Merger Consideration, as
appropriate, in cash multiplied by the number of shares of scrip, Common Stock
or Preferred Stock, respectively, evidenced by such Certificate, without any
interest thereon.
(c) After the Effective Time, there shall be no transfers of shares of
Common Stock or Preferred Stock or of scrip which were outstanding immediately
prior to the Effective Time on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in this Article III. As of the Effective Time, the stock ledger of the Company
shall be closed.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the holders of scrip or the
shareholders of the Company for six months after the Effective Time shall be
paid to the Surviving Corporation. Any shareholders of the Company who have not
theretofore complied with Section 3.01 hereof shall thereafter look only to the
Surviving Corporation for payment of their claim for the Common Stock Merger
Consideration or Preferred Stock Merger Consideration, as appropriate, without
any interest thereon.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser and the Sub as
follows:
SECTION 4.01 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Colorado and
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has all requisite corporate power and authority to carry on its business as it
is now being conducted. The Company is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be in good standing or so
qualified would not have a Material Adverse Effect. Each of the Company's
wholly owned subsidiaries is duly organized, validly existing and in good
standing under the applicable laws of its state of incorporation.
SECTION 4.02 Capitalization. The authorized capital stock of the
Company consists of (a) 50,000,000 shares of Common Stock, par value $.01 per
share, of which, as of October 22, 1998, 4,446,828.5 shares were issued and
outstanding (including scrip) and (b) 5,000,000 shares of Preferred Stock,
without par value, of which 450,000 shares have been designated as $0.325
Cumulative Series A Preferred Stock ("Preferred Stock"), of which, as of October
22, 1998, 138,182 shares were issued and outstanding. All of the issued and
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights. As of October 22, 1998, 943,290 shares of Common Stock and no shares of
Preferred Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of all outstanding Options under the
Stock Option Plans or warrants. Except as set forth above and except for the
conversion rights granted to the Purchaser in that certain Convertible
Promissory Note given by the Company, dated October 15, 1998 (the "Note) and the
$3,500,000 credit facility being entered into by the Purchasers concurrently
with this Agreement and the options to purchase 4,500,000 shares of Common Stock
and the options to purchase 111,818 shares of Preferred Stock granted to
Purchaser, there are not as of the date hereof, and at the Effective Time there
will not be, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or any other agreements of any character obligating
the Company to issue any additional shares of Common Stock, Preferred Stock or
any other shares of capital stock of the Company or any other securities
convertible into or evidencing the right to subscribe for any such shares.
SECTION 4.03 Corporate Power and Authority. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, if
required, the approval and adoption of this Agreement by the Company's
shareholders). This Agreement has been duly and validly executed and delivered
by the Company and, assuming this Agreement constitutes a valid and binding
obligation of each of the Purchaser and the Sub, this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms.
SECTION 4.04 Reports. (a) Except as set forth in Schedule 4.04,
since January 1, 1997, the Company has filed all required forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities Laws and the SEC's rules and regulations thereunder, all of which
have complied, after giving effect to all amendments thereof filed prior to
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the date hereof, in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, and the rules promulgated thereunder (collectively, the "SEC Reports").
None of the SEC Reports, including without limitation any financial statements
or schedules included therein, at the time filed, 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.
(b) The consolidated balance sheets and the related consolidated
statements of net earnings and of changes in financial position (including the
related notes thereto) of the Company included in the SEC Reports fairly present
the consolidated financial position of the Company and its subsidiaries as of
their respective dates, and the results of consolidated operations and changes
in consolidated financial position for the periods presented therein, all in
conformity with generally accepted accounting principles applied on a consistent
basis (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments), except as otherwise noted therein, and except that
the quarterly financial statements do not contain all of the footnote
disclosures required by generally accepted accounting principles.
SECTION 4.05 Offer Documents; Proxy Statement; Information Statement;
Other Information. The letter to shareholders, notice of meeting, proxy
statement and form of proxy, or the information statement, as the case may be
and as selected by Purchaser, to be distributed to shareholders in connection
with the Merger, are collectively referred to herein as the "Proxy Statement".
The Schedule 14D-9 and, if required for the consummation of the Merger under
applicable Law, the Proxy Statement will comply in all material respects with
the applicable federal securities Laws and, on the date filed with the SEC,
shall not contain any untrue statement of a material fact or omit to state any
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, except that no representation is made by the Company with
respect to information supplied by the Purchaser or any affiliate of the
Purchaser, in writing, for inclusion in the Schedule 14D-9 or the Proxy
Statement or any amendments or supplements thereto. None of the information
relating to the Company and its subsidiaries supplied in writing by the Company
for inclusion in the Offer Documents or the Proxy Statement, including any
amendments or supplements to either of the foregoing, or any schedules required
to be filed with the SEC in connection therewith, will, at the respective times
the Offer Documents or Proxy Statement or any amendments or supplements thereto
are filed with the SEC or mailed to the shareholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
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.
SECTION 4.06 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in a breach of any provision of the Articles of Incorporation or By-laws
of the Company or its subsidiaries; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) pursuant to the applicable requirements of
the Exchange Act, the Investment
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Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and
regulations of the NASD (as defined hereafter), (B) the filing of the articles
of merger pursuant to the Colorado Law, or (C) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect or a
material adverse effect on the consummation of the transactions contemplated
hereby; or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its subsidiaries, except for violations
which would not in the aggregate have a Material Adverse Effect or a material
adverse effect on the consummation of the transactions contemplated hereby.
SECTION 4.07 Brokerage Fees and Commissions. Except for those fees
and expenses payable to Value Investing Partners, Inc. and Putnam, Lovell, De
Guardiola & Thornton, Inc. collectively limited to less than $276,000, the
Company hereby represents and warrants to the Purchaser with respect to the
Company, that no person or entity is entitled to receive from the Company, or
any of its subsidiaries any investment banking, brokerage or finder's fee in
connection with this Agreement or the transactions contemplated hereby based
upon arrangements made by or on behalf of the Company.
SECTION 4.08 Events Subsequent to June 30, 1998. Except as described
on Schedule 4.08, in the Company's Form 10-QSB for the quarter ended June 30,
1998, as amended as of September 16, 1998, or related to transactions involving
the Purchaser or the Purchaser's affiliates since June 30, 1998, there has not
been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company and its
subsidiaries. Without limiting the foregoing, since that date and except as
provided in Schedule 4.08:
(i) The Company and its subsidiaries have not sold, leased,
transferred, or assigned any of its assets, tangible or intangible other
than for a fair consideration in the ordinary course of business;
(ii) the Company and its subsidiaries have not entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either requiring payment by the Company of
more than $25,000 or other than in the ordinary course of business (except
for product purchase orders and agreements in the ordinary course of
business and in amounts and on terms consistent with past practices);
(iii) no party (including the Company or its subsidiaries) has
accelerated, terminated, modified, or canceled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $25,000 to which the Company or its
subsidiaries is a party or by which it is bound;
(iv) the Company and its subsidiaries have not imposed or
permitted other parties to impose any security interest upon any of its or
their assets, tangible or intangible;
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(v) the Company and its subsidiaries have not made any capital
expenditure (or series of related capital expenditures) either involving
more than $25,000 or outside the ordinary course of business;
(vi) the Company and its subsidiaries have not issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligation
involving more than $25,000 in the aggregate;
(vii) the Company and its subsidiaries have not granted any
license or sublicense of any rights under or with respect to any
intellectual property;
(viii) the Company and its subsidiaries have not made any loan
to, or entered into any other transaction with, any of its or their
directors, officers, and employees outside the ordinary course of business;
(ix) the Company and its subsidiaries have not granted any
increase in the base compensation of any of its or their directors,
officers, and employees outside the ordinary course of business;
(x) the Company and its subsidiaries have not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its or their
directors, officers, employees, registered representatives or agents
outside the ordinary course of business; and
(xi) the Company and its subsidiaries have not issued any shares
of capital stock of any class (including shares of Common Stock or
Preferred Stock), or securities convertible into such shares or other
convertible securities or any rights, warrants or options to acquire any
such shares or other convertible securities.
SECTION 4.09 Intellectual Property. The Company and its
subsidiaries own or have the right to use pursuant to license, sublicense,
agreement, or permission all intellectual property necessary for the operation
of the business of the Company and its subsidiaries as presently conducted
(excluding property for which the loss of ownership or right to use would result
in a loss of not more than $10,000 annually in revenue) and there is no pending
or threatened challenge to the ownership or right of the Company and its
subsidiaries to use any of the foregoing.
SECTION 4.10 Litigation. Except litigation disclosed on Schedule
4.10, there is no action, order, writ, injunction, judgment or decree
outstanding or any claim, suit, litigation, proceeding, labor dispute, arbitral
action, governmental audit or investigation (collectively, "Actions") pending or
threatened against the Company or any of its subsidiaries and the Company does
not have any knowledge of an event that reasonably can be expected to result in
pending or threatened material litigation.
SECTION 4.11 Contracts. Except as disclosed on Schedule 4.11, all
contracts involving more than $50,000 to which the Company and/or its
subsidiaries are a party are valid and
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binding and in full force and effect and there are no defaults thereunder by the
Company, or to the knowledge of the Company by any other party thereto or events
which with notice or the passage of time would constitute a default by the
Company or to the knowledge of the Company by any other party thereto, except
for such defaults and events as to which requisite waivers or consents have been
obtained; and neither the execution of this Agreement nor the effectuation of
this plan of merger will constitute a default under or breach of any such
contract.
SECTION 4.12 Subsidiaries. The Company is the sole beneficial
holder and record owner of all of the issued and outstanding capital stock of
Portfolio Management Consultants, Inc., Portfolio Brokerage Services, Inc.,
Portfolio Technology Services, Inc. and PMC Investment Services, Inc. (the
"subsidiaries"), which the Company owns free and clear of all liens, except as
set forth on Schedule 4.12. There are no outstanding options or other rights to
purchase the securities of any of the subsidiaries. The Company does not own
any interest in any other corporation, partnership, or other entity, except for
any publicly traded securities held in trading accounts.
SECTION 4.13 Accounts Receivable. Except as identified on Schedule
4.13, all accounts receivable shown on the June 30, 1998 balance sheets or
incurred since the date thereof, represent arm's length transactions actually
made in the ordinary course of business and are believed collectible in the
ordinary course of business without the necessity of commencing legal
proceedings, and are not subject to counterclaim or set-off or in dispute.
SECTION 4.14 Title to Assets. The Company and its subsidiaries own
good and valid title to the assets and properties which they own or purport to
own, free and clear of any and all Liens affecting material assets and
properties of the Company and its subsidiaries, except those Liens identified on
the Schedule 4.14 and Liens for taxes not yet due and payable and such other
Liens or minor imperfections of title, if any, which do not materially detract
from the value or interfere with the present use of the affected asset or which
individually or in the aggregate would not have a Material Adverse Effect. As
used in this Agreement, the term "Lien" shall mean, with respect to any asset:
(a) any mortgage, pledge, lien, covenant, lease or security interest; and (b)
the interest of a vendor or lessor under any conditional sale agreement,
financing lease or other title retention agreement relating to such asset.
SECTION 4.15 Insurance Policies. The Company and its subsidiaries
currently maintain valid insurance as is reasonably prudent for the Company
(including its subsidiaries) and its business. No property damage, personal
injury or liability claims have been made, or are pending, against the Company
or its subsidiaries that are not covered by insurance. Within the past two (2)
years, no insurance company has canceled any insurance (of any type) maintained
by the Company (including its subsidiaries).
SECTION 4.16 Employee Benefit Plans.
(a) Definition. As used in this Agreement, the term "Employee Benefit
Plans" shall mean any pension plan, profit sharing plan, bonus plan, incentive
compensation plan, stock ownership plan, stock purchase plan, stock option plan,
stock appreciation rights plan, employee welfare plan, retirement plan, deferred
compensation plan, fringe benefit program,
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insurance plan, severance plan, disability plan, health care plan, sick leave
plan, death benefit plan, defined contribution plan, or any other plan or
program to provide retirement income, fringe benefits or other benefits to
former or current employees of the Company or its subsidiaries.
(b) Existing Plans. Except for the Employee Benefit Plans of the
Company identified as the "Existing Plans" on Schedule 4.16, the Company and its
subsidiaries do not maintain, nor is it bound by, any Employee Benefit Plan.
All of the Existing Plans are, to the extent applicable, in compliance in all
material respects with ERISA, the Code and all other applicable Laws. Except as
disclosed on Schedule 4.16, all of the Existing Plans that are intended to meet
the requirements of Section 401(a) or 403(a) of the Code have been determined to
be "qualified" within the meaning of the Code and, there are no facts that would
adversely affect the qualified status of any of such Existing Plans. Except as
disclosed on Schedule 4.16, each Existing Plan has been administered in all
material respects in accordance with its terms and is in compliance in all
material respects with all applicable Laws. Any Employee Benefit Plan that is
not an Existing Plan that has been terminated was done so in compliance in all
material respects with all applicable Laws, and, there is no basis for further
liability or obligation of the Company or its subsidiaries pursuant to any past
Employee Benefit Plan.
(c) Certain Matters. With respect to each Existing Plan which is
subject to either Title IV of ERISA or Section 412 of the Code, there are no
unfunded benefit liabilities as defined in Section 4001(a)(18) of ERISA, there
has occurred no failure to meet the minimum funding standards of Section 412 of
the Code, there is no "accumulated funding deficiency" within the meaning of
Section 412 of the Code, no such Existing Plan has terminated or has filed a
Notice of Intent to terminate, the Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such Existing Plan and there is no
outstanding liability under Section 4062 of ERISA.
(d) Prohibited Transactions; Reportable Events. There have been no
prohibited transaction within the meaning of Section 4975 of the Code or Section
406 of ERISA or reportable event as described in Section 4043 of ERISA has
occurred with respect to any of the Existing Plans.
(e) Multiemployer Plans. Neither Company nor its subsidiaries is
contributing to, nor has it ever contributed to, any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
(f) Claims. There are no pending or threatened claims with respect to
any of the Existing Plans, other than claims for benefits arising in the
ordinary course of business .
(g) Welfare Benefits. Except as disclosed on Schedule 4.16, neither
the Company nor any Existing Plan provides or has any obligation to provide (or
contribute to the cost of) post-retirement (or post-termination of service)
welfare benefits with respect to current or former employees, registered
representatives or agents of the Company or its subsidiaries, including without
limitation post-retirement medical, dental, life insurance, severance or any
similar benefit, whether provided on an insured or self-insured basis.
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(h) Welfare Plans. Except as otherwise provided in this Agreement,
each Existing Plan that is an "employee welfare benefit plan" as defined in
ERISA may be amended or terminated at any time after the Effective Time of
Merger without liability to the Company or any of its subsidiaries.
(i) COBRA. With respect to each Existing Plan, the Company has
complied in all material respects with the applicable health care continuation
and notice provisions of the Consolidation Omnibus Budget Reconciliation Act of
1985 and the proposed regulations thereunder, and the applicable requirements of
the Family and Medical Leave Act of 1993 and the regulations thereunder.
(j) The Merger. The Merger and the consummation of the transactions
contemplated by this Agreement will not entitle any current or former employee,
registered representatives or agents, of the Company or its subsidiaries to
severance benefits or any other payment, except as set forth in the Schedule
4.16(g), or accelerate the time of paying or vesting, or increase the amount of
compensation due any such person.
(k) Copies. Correct and complete copies of all Existing Plans,
together with recent summary plan descriptions, have been delivered by the
Company to the Purchaser.
SECTION 4.17 Taxes.
(a) Tax Returns. The Company and its subsidiaries have timely and
properly filed all federal, state, local and foreign tax returns (including but
not limited to income, business, franchise, sales, payroll, employee withholding
and social security and unemployment) which were required to be filed. The
Company and its subsidiaries have paid or made adequate provision, in reserves
reflected in its financial statements included in the SEC Reports in accordance
with generally accepted accounting principles, for the payment of all taxes
(including interest and penalties) and withholding amounts owed by them or
assessable against them. No material tax deficiencies have been proposed or
assessed against the Company (or its subsidiaries) and there is no basis in fact
for the assessment of any tax or penalty tax against the Company (or its
subsidiaries). No issue has been raised in any prior tax audit which, by
application of the same or similar principles, could reasonably be expected upon
a future tax audit to result in a proposed material deficiency for any period.
(b) Extensions. The Company and its subsidiaries have not consented
to any extension of the statute of limitation with respect to any open federal
or state tax returns.
(c) Tax Liens. There are no tax Liens upon any property or assets of
the Company (or its subsidiaries) except for Liens for current taxes not yet due
and payable.
(d) Delivery of Tax Returns. The Company has made available, and will
deliver upon request, to the Purchaser correct and complete copies of all tax
returns and reports of each of the Company and its subsidiaries filed for all
periods for which a tax audit or adjustment is not barred by the applicable
statute of limitations. No examination or audit of any tax return or
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report for any period not barred by the applicable statute of limitations has
occurred, no such examination is in progress and, to the knowledge of the
Company, no such examination or audit is planned.
(e) Employment Taxes. The Company and its subsidiaries have properly
withheld and timely paid all withholding and employment taxes which any of them
was required to withhold and pay relating to salaries, compensation and other
amounts heretofore paid to its employees or other Persons. All Forms W-2 and
1099 required to be filed with respect thereto have been timely and properly
filed.
(f) Tax Sharing Agreements. The Company and its subsidiaries are not
parties to any agreement relating to allocating or sharing any taxes.
(g) Excess Parachute Payments. The Company and its subsidiaries are
not parties to any contract that could result, on account of the Merger or
otherwise, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(h) Liabilities of Other Persons. The Company and its subsidiaries do
not have any liability for taxes of any kind of any Person other than the
Company and its subsidiaries under any contract or under Treasury Regulations
Section 1.1502-6 (or any similar provision of Law) as a transferee or successor
or otherwise.
SECTION 4.18 Labor Matters. Except as set forth in Schedule 4.18,
there are no pending and unresolved material claims by any Person against any of
the Company or its subsidiaries arising out of any Law relating to
discrimination against employees or employee practices or occupational or safety
and health standards. There is no pending or, to the knowledge of the Company,
threatened, labor dispute, strike or work stoppage.
SECTION 4.19 Vote Required. The affirmative vote of the holders of
two-thirds of the outstanding shares of Common Stock and two-thirds of the
outstanding shares of Preferred Stock, respectively, are the only vote of the
holders of any class or series of capital stock or other securities of the
Company entitled to vote necessary to approve the Merger, this Agreement and the
transactions contemplated by this Agreement.
SECTION 4.20 Year 2000 Compliance. The Company has in place
adequate and reasonable plans so that all of the material computer hardware and
software systems of the Company and its subsidiaries (including, without
limitation, those related to their facilities, accounting and bookkeeping
records and record keeping activities) are presently or will be prior to
December 31, 1999 Year 2000 Compliant. As used in this Agreement, the phrase
"Year 2000 Compliant" shall mean with respect to the Company's material hardware
and software systems, that such hardware and software is designed to be used
prior to, during, and after the calendar Year 2000 A.D., and such hardware and
software used during each such time period will accurately receive, provide and
process date/time data from, into and between the twentieth and twenty-first
centuries, and will not malfunction, cease to function, or provide invalid or
incorrect
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results as a result of date/time data, to the extent that other hardware and
software, used in combination with the Company's hardware and software, properly
exchanges date/time data with the Company's hardware and software.
SECTION 4.21 Undisclosed Liabilities. The Company and its
subsidiaries have no material liabilities of any nature except as disclosed in
the SEC Reports or which do not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 4.22 Compliance with Laws and Orders. Except as set forth
in Schedule 4.22, the Company and its subsidiaries are in compliance with all
applicable Laws and orders, including, without limitation, those applicable to
discrimination in employment, occupational safety and health, securities,
broker-dealer and investment advisor regulation, employment, retirement, labor
relations and the protection of the environment. Except as set forth in
Schedule 4.22, neither the Company nor its subsidiaries has received notice of
any violation or alleged violation of, and is not subject to liability for past
or continuing violation of any Laws or court or regulatory orders. All reports
and returns required to be filed by the Company with any government entity or
the National Association of Securities Dealers, Inc. ("NASD") have been filed,
and, after giving effect to any amendment thereof, were accurate and complete
when filed. Without limiting the generality of the foregoing, except as set
forth in Schedule 4.22:
(i) The operation of the Company's business and its subsidiaries
does not violate any provision of the Securities Act, the Securities
Exchange Act, the Advisers Act, the rules and regulations of the
Securities and Exchange Commission, the rules and regulations of the
NASD or state securities Laws and regulations and state Laws and
regulations respecting broker-dealers and investment advisors so as to
give rise to or constitute the grounds for a suit, action, claim or
demand by any government entity, the NASD or any person or persons
seeking compensation or damages or seeking to impose any penalty or to
restrain, enjoin or otherwise prohibit any aspect of the conduct of
the business in the manner in which it is now conducted.
(ii) The Company and its subsidiaries and their respective
employees and registered representatives and other associated persons
have all licenses, permits, approvals, authorizations, consents of all
government entities and the NASD required for the conduct of the
Business. All such licenses, permits, approvals, authorizations and
consents are in full force and effect and will not be affected or made
subject to loss, limitation or any obligation to reapply as a result
of the transactions contemplated hereby.
SECTION 4.23 Disclosures. No statement of fact by the Company
and/or its subsidiaries contained in this Agreement or in the Disclosure
Schedules contains or will contain any untrue statement of material fact
necessary in order to make the statements herein or therein contained, in light
of the circumstances under which they were made, not misleading as the date of
which it speaks.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND SUB
The Purchaser and the Sub represent and warrant to the Company as
follows:
Section 5.01 Organization and Qualification. Each of the Purchaser
and the Sub is a corporation duly organized, validly existing and in active
status or, if applicable, good standing under the Laws of the jurisdiction of
its incorporation and has all requisite corporate power and authority to carry
on its business as it is now being conducted. Each of the Purchaser and the Sub
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be in good standing or so qualified would not in the aggregate
have a material adverse effect on the financial condition or results of
operations of the Purchaser and its subsidiaries taken as a whole. The Sub is a
corporation wholly owned by the Purchaser that was recently formed for the
purpose of engaging in the transactions described in this Agreement and has not
engaged in any activity other than those incident to the foregoing.
SECTION 5.02 Corporate Power and Authority. Each of the Purchaser
and the Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Purchaser and the Sub of this Agreement and
the consummation by the Purchaser and the Sub of the trans actions contemplated
hereby have been duly authorized by the respective Boards of Directors of the
Purchaser and the Sub, and the shareholder of the Sub, and no other corporate
proceedings on the part of the Purchaser or the Sub are necessary to authorize
this Agreement, or commence the Offer or to consummate the transactions so
contemplated by this Agreement (including the Offer). This Agreement has been
duly and validly executed and delivered by each of the Purchaser and the Sub
and, assuming this Agreement constitutes a valid and binding obligation of the
Company, this Agreement constitutes the legal, valid and binding obligation of
each of the Purchaser and the Sub, enforceable against each of the Purchaser and
the Sub in accordance with its terms.
SECTION 5.03 Offer Documents; Proxy Statement. The Offer Documents
and the Offer will comply in all material respects with applicable federal
securities Laws, except that no representation is made by the Purchaser with
respect to information supplied by the Company, in writing, for inclusion in the
Offer Documents or any amendments or supplements thereto. None of the
information supplied by the Purchaser and its affiliates, in writing, for
inclusion in the Proxy Statement or any amendments or supplements thereto will,
at the respective times the Proxy Statement or any amendments or supplements
thereto are filed with the SEC, at the time that the Proxy Statement or any
amendment or supplement thereto is mailed to the Company's shareholders, or, at
the time of the Shareholders' Meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any 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.
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SECTION 5.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser and the Sub nor the
consummation by the Purchaser or the Sub of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or by-laws (or other similar governing
documents) of the Purchaser or the Sub; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) pursuant to the applicable requirements of
the Exchange Act, (B) the filing of the articles of merger pursuant to Colorado
Law, (C) any consents, approvals, authorizations or permits, filings or
notifications required to be given or made to any foreign jurisdiction, or (D)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not in the aggregate have any
material adverse effect on the financial condition or results of operations of
the Purchaser and its subsidiaries taken as a whole or a material adverse effect
on the consummation of the transactions contemplated hereby; or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Purchaser, except for violations which would not have in the aggregate any
material adverse effect on the financial condition or results of operations of
the Purchaser and its subsidiaries taken as a whole or a material adverse effect
on the consummation of the transactions contemplated hereby.
SECTION 5.05 Financing. The Purchaser and the Sub have and will
have, immediately prior to the consummation of the Offer, and at the Closing,
sufficient funds necessary to consummate timely the Offer and the Merger and the
other transactions contemplated hereby including the payment of related fees and
expenses.
SECTION 5.06 Financial Statements. The Purchaser has delivered to
the Company copies of the audited consolidated and unaudited consolidating
balance sheets of the Purchaser as of December 31, 1997 and June 30, 1998,
respectively, and the related audited consolidated statements of income,
shareholders' equity and cash flows for the fiscal year ended December 31, 1997
(including the related notes thereto) (the "Purchaser Financial Statements").
The Purchaser Financial Statements fairly present the consolidated financial
position of Purchaser as of their respective dates, and the results of
consolidated operations and changes in consolidated financial position for the
periods therein, all in conformity with generally accepted accounting
principles.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or as set forth in Schedule 6.01, during the
period from the date of this Agreement to the Effective Time, the Company and
its subsidiaries will each conduct its operations according to their ordinary
and usual course of business and consistent with past practice. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, or as set forth in Schedule 6.01, prior to the
Effective Time, neither the Company nor any of it subsidiaries, as the case may
be, will, without the prior written consent of the Purchaser, (i) issue, sell,
pledge or encumber, or authorize or propose the issuance, sale, pledge or
encumbrance of (A)
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any shares of capital stock of any class (including the shares of Common Stock
or Preferred Stock), or securities convertible into any such shares, or any
rights, warrants or options to acquire any such shares or other convertible
securities, or grant or accelerate any right to convert or exchange any
securities of the Company or any of its subsidiaries for such shares, other than
shares of Common Stock issuable upon exercise of currently outstanding Options,
or (B) any other securities in respect of, in lieu of or in substitution for
shares of Common Stock or Preferred Stock outstanding on the date hereof; (ii)
redeem, purchase or otherwise acquire, or propose to redeem, purchase or
otherwise acquire, any of its outstanding securities (including the shares of
Common Stock and Preferred Stock) or declare any dividends on Common Stock or
Preferred Stock; (iii) split, combine or reclassify any shares of its capital
stock or declare or pay any dividend or distribution on any shares of capital
stock of the Company; (iv) except pursuant to agreements or arrangements in
effect on the date hereof which have been disclosed to the Purchaser, authorize
any capital expenditure in excess of $50,000 in the aggregate, make any
acquisition or disposition of a material amount of assets or securities, or,
except for routine contracts with customers and clients consistent with past
practices, enter into or amend or terminate any contract, material to the
business of the Company and its subsidiaries taken as a whole, or release or
relinquish any contact rights or claims, material to the business of the Company
and its subsidiaries taken as a whole; (v) pledge or encumber any material
assets of the Company except in the ordinary course of business; (vi) except for
loans from Purchaser or Sub, incur any long-term debt for borrowed money or
short-term debt for borrowed money in an aggregate amount in excess of $10,000;
(vii) propose or adopt any amendments to the Articles of Incorporation or By-
Laws of the Company or any of its subsidiaries; (viii) adopt a plan of complete
or partial liquidation or resolutions providing for the complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its subsidiaries; (ix) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except wholly
owned subsidiaries of the Company in the ordinary course of business and
consistent with past practice; (x) make any loans, advances or capital
contributions to, or investments in, any other person (other than loans or
advances to subsidiaries and loans or advances to employees in accordance with
past practices); (xi) except as required by applicable Laws, adopt or amend any
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, severance, termination, employment or other employee benefit plan,
agreement, trust, fund, policy or other arrangement for the benefit or welfare
of any registered representative, agent, employee or director or former employee
or director or, except as required by applicable Laws or in the ordinary course
of business, increase the compensation or fringe benefits of any employee or pay
any employee or pay any benefit not required by any existing plan, arrangement
or agreement; (xii) make any tax election or settle or compromise any federal,
state, local or foreign income tax liability, except in the ordinary course of
business and consistent with past practice; (xiii) agree in writing or otherwise
to take any of the foregoing actions or (xiv) fail to comply in all material
respects with all applicable Laws. Following the date of this Agreement, the
Company will review its financing documents to determine if the consent of any
third party is required in connection with the transactions contemplated hereby.
If following such review, the Company becomes actually aware that any such
consent is required, it will so notify the Purchaser, and the parties hereto
shall use their respective best efforts to secure such consent; provided,
however, that for this purpose "best efforts" shall not require the Company or
the Purchaser to make any payment in order to secure any such consents.
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SECTION 6.02 No Solicitation. Neither the Company nor any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, shall, directly or indirectly, encourage,
solicit, initiate or, except as is required in the exercise of the fiduciary
duties of the Company's directors and officers under applicable Laws upon advice
of counsel to the Company, participate in any way in discussions or negotiations
with, or knowingly provide any information to, any corporation, partnership,
person or other entity or group (other than the Purchaser or any affiliate or an
associate of the Purchaser) concerning any merger, sale of substantially all the
assets, sale of shares of capital stock or similar transactions involving the
Company or any material subsidiary or division of the Company; provided,
however, that nothing contained in this Section 6.02 shall prohibit the Company
or its Board of Directors from (i) taking and disclosing to the Company's
shareholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, (ii) making such
disclosure to the Company's shareholders which, in the judgment of the Board of
Directors with the advice of counsel, may be required under applicable Law or
(iii) providing information to, or parti cipating in discussions or
negotiations with, any party that has actually made, and which the Board of
Directors believes in good faith would be capable of effecting an acquisition of
the Company on terms that are superior, from a financial point of view, to the
Offer and the Merger if the Board of Directors in good faith believes, upon the
written advice of counsel, that the failure to so disclose would constitute a
breach of their fiduciary duty to the Company and its shareholders. The Company
will promptly communicate to the Purchaser if it is furnishing information to or
engaging in negotiations with any third party with respect to the acquisition of
the Company or any of its assets or subsidiaries.
SECTION 6.03 Access to Information. Subject to the existing
confidentiality agreement among the parties, the Company and its subsidiaries
will, upon reasonable notice to Maureen Dobel or her designee, allow the
Purchaser and its authorized representatives reasonable access during regular
business hours to its offices, other facilities and books and records. The
Company will also make its employees available for interviews with the
Purchaser, with Company personnel present, for reasonable purposes in a manner
reasonably acceptable to Ms. Dobel.
SECTION 6.04 Notification of Certain Matters. Each of the Company
and the Purchaser shall give prompt notice to the other party of any notice or
other communication from (i) the SEC, NASD or any other regulatory body relating
to the Merger, the Offer or any of the transactions contemplated by this
Agreement or (ii) any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
SECTION 6.05 Best Efforts. Subject to the terms and conditions
herein provided, and with respect to the Company, to the fiduciary duties of the
Board of Directors of the Company under applicable Laws, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, in the
case of the Purchaser and the Sub, the filings required under the Colorado
Securities Act, as amended, with respect to the Offer and Merger and, in the
case of the Company, obtaining the consents of the fiduciary clients pursuant
to
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Section 6.11 hereof. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
SECTION 6.06 Indemnification and Insurance. (a) The Purchaser will
honor the Surviving Corporation's performance of all contracts, agreements and
commitments of the Company or any of its subsidiaries, including those reflected
in their Articles of Incorporation and Bylaws, which indemnify any officer or
director of the Company or any of its subsidiaries, as disclosed on Schedule
6.06(b), against claims made against them arising from their service, but only
to the extent that such contract, agreement or commitment was entered into
before the date of this Agreement and is listed on Schedule 6.06.
(b) Any indemnified party wishing to claim indemnification under this
Section, upon learning of any such action, suit, claim, proceeding or
investigation, shall promptly notify the Purchaser and the Surviving Corporation
thereof and the Purchaser and the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that any failure so to notify the
Purchaser and the Surviving Corporation of any obligation to indemnify such
indemnified party or of any other obligation imposed by this Section shall not
affect such obligations unless such failure to so notify materially prejudices
the rights of the Purchaser and the Surviving Corporation to defend any such
action, suit, claim, proceeding or investigation. The indemnified parties as a
group shall retain only one counsel in each jurisdiction to represent them with
respect to any single action; provided, however, in the event that there is,
under applicable standards of professional conduct, a conflict between the
positions of any two or more indemnified parties, the Purchaser and such
indemnified parties may retain, at the expense of the Purchaser and the
Surviving Corporation, as the case may be, such number of additional counsel as
are necessary to eliminate all conflicts of the type referred to above.
(c) In the event any claim is made against directors, officers or
employees of the Company that is covered or potentially covered by insurance,
the Surviving Corporation and the Purchaser shall do nothing that would in their
reasonable discretion forfeit, jeopardize, restrict or limit the insurance
coverage available for that claim until the final disposition of that claim.
(d) The Surviving Corporation and the Purchaser agree that until six
years from the date hereof, the Articles and the Bylaws of the Surviving
Corporation will not be amended to reduce or limit the rights to indemnity
currently afforded thereunder. To the knowledge of the Company, there are no
pending or threatened claims which are reasonably anticipated to result in a
claim for indemnification.
SECTION 6.07 Company Indebtedness. Prior to the Effective Time, the
Company shall cooperate with the Purchaser in taking such actions as are
reasonably appropriate or necessary in connection with the redemption,
prepayment, modification, satisfaction or elimination of any outstanding long-
term indebtedness of the Company or any of its subsidiaries with respect to
which a consent is required to be obtained to effectuate the Merger and the
transactions contemplated by this Agreement and has not been so obtained
(provided that prior to consummation of the Merger, the Company shall not be
required to actually redeem, prepay, modify, satisfy or
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eliminate any such outstanding long-term indebtedness, make any payment or
undertake any obligation in order to secure any such consents or take any steps
which would irrevocably lead to any of the foregoing).
SECTION 6.08 Benefit Plans. (a) Schedule 6.08(a) includes all
employee benefit plans, programs, policies and agreements which provide
compensation or other benefits upon a termination of employment, voluntary or
involuntary, for the 20 highest paid employees of the Company or its
subsidiaries or which include a "change of control" provision, and a complete
and correct copy (or model form) of each such plan, program, policy and
agreement has been provided to Purchaser. Schedule 6.08(a) also sets forth the
annual compensation and average annual compensation, as the case may be, as of
the date of this Agreement for purposes of calculating the amount payable for
each of the 20 highest paid employees of the Company or its subsidiaries and any
other employee covered by a change of control provision under any of the plans,
programs, policies and agreements listed on Schedule 6.08(a).
(b) If any salaried or non-union hourly employee of the Company or any
of its subsidiaries is or becomes a participant in any written employee benefit
plan or program of the Purchaser or any member of its controlled group within
the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as
amended (the "Code"), such employee shall be credited under such plan or program
with all service prior to the Effective Time with the Company and its
subsidiaries (and any predecessor employer) to the extent credit was given by
the Company and its subsidiaries for purposes of eligibility for all purposes
and vesting under such plan or program.
(c) The Purchaser and the Sub acknowledge that consummation of the
Offer will constitute a change of control of the Company (to the extent such
concept is relevant) for purposes of any and all of the agreements and plans
specified on Schedule 6.08(a).
SECTION 6.09 No Default. From the date of this Agreement to the
Effective Date, the Company shall not do any act or omit to do any act, or
permit any act or omission to act, which will cause a material breach of any
material contract to which the Company and/or its subsidiaries is a party.
SECTION 6.10 Preservation of Relationships. From the date of this
Agreement to the Effective Date, the Company and its subsidiaries shall use
reasonable best efforts to preserve their business organization intact, to
retain the services of their present officers and key employees and to preserve
the goodwill of suppliers, customers, creditors and others having material
business relationships with them.
SECTION 6.11 Obtaining Consents. The Company and its subsidiaries
shall use their reasonable best efforts to obtain consents to the assignments of
the contracts under the Advisers Act, as amended, required for the consummations
of transactions contemplated hereby.
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ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, at or prior to the
Effective Time, of the following conditions:
(a) this Agreement shall have been adopted by the affirmative vote of
the shareholders of the Company owning at least two-thirds of the Company's
outstanding Common Stock and two-thirds of the Company's outstanding Preferred
Stock in accordance with applicable Law, if such vote is required by applicable
Law;
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or governmental authority which prohibits, restrains,
enjoins or restricts the consummation of the Merger; provided, however, that the
parties shall use their best efforts to have any such order, decree or
injunction vacated or reversed;
(c) the Sub shall have purchased all shares of Common Stock and
Preferred Stock validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition shall not be applicable to the
obligations of the Purchaser or the Sub in violation of the terms of this
Agreement or the Offer if the Sub fails to purchase shares of Common Stock and
Preferred Stock tendered pursuant to the Offer;
SECTION 7.02 Opinion of Counsel for the Company. Prior to beginning
the Offer, Purchaser shall have been furnished with an opinion of Holme, Roberts
& Owen LLP, counsel for the Company.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of the Company, but prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company (excluding any representative of the Purchaser or an
affiliate of the Purchaser), the Purchaser and the Sub;
(b) by either the Purchaser or the Company, if the Effective Time
shall not have occurred on or before March 31, 1999 (provided that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation
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under this Agreement has been the cause of or resulted in the failure of the
Effective Time to occur on or before such date);
(c) by either the Purchaser or the Company, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling, or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the parties shall use their best efforts to have any such order, decree, ruling
or injunction vacated or reversed;
(d) by the Purchaser, if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in Exhibit
A hereto, the Sub shall have (A) failed to commence the Offer as provided in
Section 1.01 hereof within 20 days following the date of this Agreement; (B)
terminated the Offer or the Offer shall have expired without the purchase of
shares of Common Stock and Preferred Stock thereunder at any time after the
latest date, if any, to which the Offer shall have been extended pursuant to
Section 1.01(c) hereof or (C) failed to pay for shares of Common Stock or
Preferred Stock pursuant to the Offer by the 40th business day following such
commencement, unless such failure to commence, termination or failure to pay for
shares of Common Stock or Preferred Stock shall have been caused by or resulted
from the failure of the Sub or the Purchaser to perform in any respect its
material covenants and agreements contained in this Agreement or Offer; or (ii)
prior to the purchase of shares of Common Stock and Preferred Stock pursuant to
the Offer, the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to the Purchaser its approval or recommendation of
the Offer, this Agreement or the Merger, or shall have recommended another
offer, or shall have resolved to do any of the foregoing; provided, however, the
Purchaser shall have no right to terminate this Agreement and abandon the Merger
if the Company withdraws or modifies its recommendation of the Offer, this
Agreement or the Merger, by reason of taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a)(2) or (3) promulgated
under the Exchange Act with respect to another proposal, and if within ten days
of taking and disclosing to its shareholders the aforementioned position, the
Company publicly reconfirms its recommendation of the Offer, this Agreement or
the Merger and takes and discloses to the Company's shareholders a
recommendation to reject such other proposal as contemplated by Rule 14e-2(a)(1)
promulgated under the Exchange Act; or
(e) by the Company, if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in Exhibit
A hereto or otherwise, the Sub shall have (A) failed to commence the Offer as
provided in Section 1.01 hereof within 20 days following the date of this
Agreement, (B) terminated the Offer or the Offer shall have expired without the
purchase of shares of Common Stock and Preferred Stock thereunder at any time
after the latest date, if any, to which the Offer shall have been extended
pursuant to Section 1.01(c) hereof or (C) failed to pay for shares of Common
Stock or Preferred Stock pursuant to the Offer by the 40th business day
following such commencement, unless such failure to commence, termination or
failure to pay for shares of Common Stock or Preferred Stock shall have been
caused by or resulted from the occurrence or existence of the condition
described in paragraph (d) or (g) of Exhibit A hereto, or (ii) prior to the
purchase of shares of Common Stock and Preferred Stock pursuant to the Offer,
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(A) a corporation, partnership, person or other entity or group shall have made
a bona fide proposal that the Board of Directors of the Company believes, in
good faith after consultation with its legal and financial advisors, is more
favorable to the Company and its shareholders than the Offer and the Merger and
(B) the Sub does not make, within ten days of the Sub receiving notice of such
third party proposal, an offer which the Board of Directors believes, in good
faith after consultation with its legal and financial advisors, is at least as
favorable to the Company's shareholders as such third party proposal, it being
understood that the Company shall remain obligated to pay the fees to the
Purchaser pursuant to Section 9.09 hereof.
SECTION 8.02 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 8.01 hereof, this
Agreement, except for the provisions of this Section 8.02 and Section 9.09
hereof, shall forthwith become void and have no effect, without any liability on
the part of any party or its directors, officers or shareholders. Nothing in
this Section 8.02 shall relieve any party to this Agreement of liability for
breach of this Agreement.
SECTION 8.03 Amendment. To the extent permitted by applicable Law,
this Agreement may be amended by action taken by or on behalf of the Boards of
the Company (excluding any representative of the Purchaser or an affiliate of
the Purchaser), the Purchaser and the Sub at any time before or after adoption
of this Agreement by the shareholders of the Company; provided, however, that,
after any such shareholder approval, no amendment shall be made which decreases
the Common Stock Merger Consideration or Preferred Stock Merger Consideration or
which adversely affects the rights of the Company's shareholders hereunder
without the approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company (excluding any representatives or directors
appointed by or elected on behalf of the Purchaser or an affiliate of the
Purchaser), the Purchaser or the Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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<PAGE>
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
SECTION 9.02 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof except the Confidentiality Agreement, dated September __, 1998,
between the Company and the Purchaser and (b) shall not be assigned by operation
of Law or otherwise, provided that the Purchaser or the Sub may assign any of
their rights and obligations to any wholly-owned, direct or indirect subsidiary
of the Purchaser, but no such assignment shall relieve the Purchaser or the Sub
of its obligations hereunder. It is understood and agreed that either the
Purchaser, or any wholly-owned subsidiary of the Purchaser, may purchase shares
of Common Stock under the Offer.
SECTION 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agree ment, which shall remain in full force and
effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telegram, telecopier or
telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to the Purchaser or the Sub:
The Ziegler Companies Inc.
215 N. Main Street
West Bend, WI 53095-3317
Attention: S. Charles O'Meara, Esq.
with a copy to:
Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Conrad G. Goodkind, Esq.
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<PAGE>
if to the Company:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, CO 80202
Attention: C.R. Tucker and Scott A. MacKillop
with a copy to:
Holme Roberts & Owen LLP
Suite 4100, 1700 Lincoln
Denver, CO 80203
Attention: Francis R. Wheeler, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Colorado regardless of the
Laws that might otherwise govern under principles of conflicts of Laws
applicable thereto.
SECTION 9.06 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for all of Articles II and III and Section 6.06.
SECTION 9.08 Counterparts. This Agreement may be executed in
counterparts, manually or by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.09 Expenses. (a) All costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) The Purchaser acknowledges and agrees that the Company has
disclosed that it is indebted for fees and expenses (including fees and expenses
of its counsel and advisors) incurred by it in connection with the transactions
contemplated by this Agreement as set forth in Schedule 9.09. To the best
knowledge of the Company, the fees and expenses listed in Schedule 9.09
represent the only significant fees and expenses incurred by the Company in
connection with the transactions contemplated by this Agreement. It is
understood that certain of
-29-
<PAGE>
such fees and expenses may be paid by the Company prior to the execution of this
Agreement, and the Purchaser agrees to refrain from taking any action which
would interfere with the payment of the foregoing fees and expenses by the
Company.
(c) If this agreement or the transactions contemplated hereby are
terminated or abandoned (unless at such time the Purchaser or the Sub shall be
in breach in any material respect of any of its obligations or representations
and warranties hereunder) and prior to or contemporaneously with such
termination or abandonment, any corporation, partnership, person, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act) other than the
Purchaser or any of its subsidiaries or affiliates (collectively, "Person"),
shall have acquired or beneficially owns (and failed to tender such shares) (as
defined in Rule 13d-3 promulgated under the Exchange Act) at least 33.34% of the
then outstanding shares of Common Stock, then the Company shall promptly (and in
any event within 2 days of receipt by the Company of written notice from the
Purchaser) pay the Purchaser the sum of (x) two hundred fifty thousand dollars
and (y) all actual, documented out-of-pocket expenses relating to the Offer and
the Merger in an amount up to one hundred thousand dollars.
SECTION 9.10 Certain Definitions. For purposes of this Agreement:
(a) "subsidiary" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity.
(b) "Material Adverse Effect" shall mean any material adverse change
in the financial condition or results of operations of the Company and its
subsidiaries taken as a whole including, without limitation, information whether
written or oral, that Ernst & Young LLP intends to cancel or substantially
reduce the relationship with the Company and its subsidiary, as determined by
the Purchaser in its reasonable discretion.
(c) "Law" shall mean any federal, state, local or other law, rule,
regulation or governmental requirement of any kind and the rules, regulations
and orders promulgated thereunder by any regulatory agencies.
(d) "Person" shall mean a natural person, corporation, trust
partnership, limited liability company, governmental entity, agency or branch or
department thereof, or any other legal entity.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, as the same may be in effect from
time to time.
(f) "ERISA" shall mean the Employee Retirement Income Security Act of
1976, as amended, as the same may be in effect from time to time.
(g) "knowledge" shall mean actual knowledge of the officers and
directors of the Company or any knowledge which any such officer or director
should have by virtue of his
-30-
<PAGE>
or her position with or relationship to the Company and its subsidiaries from
operating or managing the Company and its subsidiaries.
SECTION 9.11 Performance by Sub. The Purchaser hereby agrees to
cause the Sub to comply with its obligations hereunder and under the Offer and
to cause the Sub to consummate the Merger as contemplated herein.
SECTION 9.12 Publicity. So long as this Agreement is in effect,
each of the Purchaser and the Sub, on the one hand, and the Company, on the
other hand, promptly shall consult and cooperate with the other prior to issuing
any press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to consultation, except as
may be required by Law or by obligations pursuant to any listing agreement with
any national securities exchange and except to allow internal communications
with employees.
SECTION 9.13 Agreement of Shareholders. Simultaneously herewith,
those shareholders named on Schedule 9.13 have entered into a letter agreement
with the Purchaser and the Sub pursuant to which such shareholders have agreed
to tender (and not withdraw) all shares of Common Stock and/or Preferred Stock
held by such shareholder to the Sub pursuant to the Offer on the terms set forth
in such letter agreement.
-31-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
THE ZIEGLER COMPANIES, INC.
By: /s/ Dennis A. Walstad
___________________________
Senior Vice President
____________________
and CFO
____________________
ZACQ CORP.
By: /s/ Richard J. Glaisner
___________________________
President
__________________
__________________
PMC INTERNATIONAL, INC.
By: /s/ C.R. Tucker
___________________________
Chief Executive
_________________
Officer
_________________
-32-
<PAGE>
EXHIBIT A
The capitalized terms used in this Exhibit A have the meanings set
forth in the attached Agreement, except that the term "Merger Agreement" shall
be deemed to refer to the attached Agreement.
Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment, purchase or pay for any shares of Common
Stock or Preferred Stock tendered, and may terminate or, subject to the terms of
the Merger Agreement, amend the Offer and may postpone the acceptance for
payment of and payment for scrip, or shares of Common Stock or Preferred Stock,
if (A) on or prior to the time at which the Offer shall have expired (i) the
number of shares of Common Stock or certificates for scrip validly tendered and
not withdrawn immediately prior to the expiration of the Offer, when added to
the shares of Common Stock then owned by the Purchaser and its affiliates, shall
not constitute two-thirds of the shares of Common Stock outstanding on a fully
diluted basis, (ii) the number of shares of Preferred Stock validly tendered
and not withdrawn immediately prior to the expiration of the Offer, when added
to the shares of Preferred Stock then owned by the Purchaser and its affiliates,
shall not constitute two-thirds of the shares of Preferred Stock outstanding on
a fully diluted basis or (B) at any time on or after October ___, 1998 and
before the time of acceptance for payment for any such shares of Common Stock
and Preferred Stock any of the following conditions exist or shall occur and
remain in effect:
(a) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the American
Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
a commencement of a war, armed hostilities or other national or
international calamity directly or indirectly involving the United
States, (iv) any material limitation (whether or not mandatory) by any
governmental authority on, or any other event which might materially
and adversely affect the extension of credit by lending institutions,
or (v) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof; or
(b) there shall have been any statute, rule or regulation
enacted, promulgated, entered or enforced or deemed applicable, or any
decree, order or injunction entered or enforced by any government or
governmental authority in the United States or by any court in the
United States that (i) restrains or prohibits the making or
consummation of the Offer or the consummation of the Merger, (ii)
prohibits or restricts the ownership or operation by the Purchaser (or
any of its affiliates or subsidiaries) of any portion of its or the
Company's business or assets which is material to the business of all
such entities taken as a whole or (iii) imposes material limitations
on the ability of the Purchaser effectively to acquire or to hold or
to exercise full rights of ownership of the shares of Common Stock or
Preferred Stock, including, without limitation, the right to vote the
shares of Common Stock or Preferred Stock purchased by the Purchaser
on all matters properly presented to
A-1
<PAGE>
the shareholders of the Company; provided, however, that the Purchaser
and the Sub shall have used their best efforts to have any such
decree, order or injunction vacated or reversed, including, without
limitation, by proffering their willingness to accept an order
embodying any arrangement required to be made by the Purchaser or the
Sub pursuant to Section 7.01(b) of the Merger Agreement (and
notwithstanding anything in this subsection (b) to the contrary, no
terms, conditions or provisions of an order embodying such an
arrangement shall constitute a basis for the Purchaser asserting
nonfulfillment of the conditions contained in this subsection (b)); or
(c) the Merger Agreement shall have been terminated in accordance
with its terms; or
(d) (i) the Company shall have breached or failed to perform any
of its covenants or agreements which breach or failure to perform is
material to the obliga tions of the Company under the Merger
Agreement taken as a whole, (ii) any of the representations and
warranties of the Company set forth in the Merger Agreement shall not
have been true in any respect which is material to the Company and its
subsidiaries taken as a whole, in each case, when made or (iii) a
Material Adverse Effect has occurred, provided that the aggregate
effect under (i), (ii), and (iii) shall be in excess of $250,000; or
(e) the Board of Directors of the Company shall have publicly
withdrawn or modified in any material respect adverse to the Purchaser
its recommendation of the Offer; provided, however, the Purchaser
shall have no right to terminate the Offer or not accept for payment
or pay for any scrip or shares of Common Stock or Preferred Stock if
the Company withdraws or modifies its recommendation of the Offer and
the Merger, by reason of taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a)(2) or (3)
promulgated under the Exchange Act with respect to another proposal,
and if within ten days of taking and disclosing to its shareholders
the aforementioned position, the Company publicly reconfirms its
recommendation of the Offer and Merger and takes and discloses to the
Company's shareholders a recommendation to reject such other proposal
as contemplated by Rule 14e-2(a)(1) promulgated under the Exchange
Act; or
(f) the Purchaser and the Company shall have agreed that the
Purchaser shall terminate the Offer, or
(g) the Company has not delivered to Purchaser consents
conforming with the requirements of the Advisers Act from investment
advisors with assets under management with the Company representing in
the aggregate at least 80% of the total assets under management by the
Company as of October 1, 1998.
which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payments.
A-2
<PAGE>
Subject to the terms and provisions of the Merger Agreement the
foregoing conditions are for the sole benefit of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to any
such condition and may be waived by the Purchaser in whole or in part, at any
time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
A-3
<PAGE>
EXHIBIT C-2
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 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."
<PAGE>
"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.
"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.
Exhibit C-2 Page 2
<PAGE>
(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 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.
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.
Exhibit C-2 Page 3
<PAGE>
(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.
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.
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.
Exhibit C-2 Page 4
<PAGE>
(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.
(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
Exhibit C-2 Page 5
<PAGE>
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 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. MacKillop
793 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
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
Exhibit C-2 Page 6
<PAGE>
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.
Exhibit C-2 Page 7
<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/ Scott A. MacKillop
----------------------------------------------
Its: President
----------------------------------------------
EMPLOYEE
/s/ Scott A. MacKillop
--------------------------------------------------
Scott A. MacKillop
Exhibit C-2 Page 8
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of November
3, 1998, between PMC International, Inc., a Colorado corporation (the
"Company"), and Scott A. MacKillop ("Employee").
RECITALS
--------
A. The Company has entered into an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"), pursuant to which the Company will be
the surviving corporation of a merger (the "Merger") with a wholly owned
subsidiary of The Ziegler Companies, Inc., a Wisconsin corporation ("Ziegler").
B. Employee is current President of the Company and Ziegler 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 PMC International, Inc., a Colorado 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 (often 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:
<PAGE>
(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, 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 Employee's name
in such above actions. 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 or is quoted on
NASDAQ.
2
<PAGE>
"Performance Salary" has the meaning set forth in Section 3(b).
------------------
"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 the initiation of 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.
"Ziegler" has the meaning set forth in the recitals to this Agreement.
-------
2. Employment; Capacity; Duties; Reporting Structure; Location. The
-----------------------------------------------------------
Company will employ Employee as its President. 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. As President, which position constitutes the senior
executive position of the Company, the responsibilities of Employee will
include, by way of illustration and not limitation, the day-to-day management
and operations of the Company. 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
Chairman and the Board of Directors of the Company. Employee will be based at
the Company's facilities in Denver, Colorado.
3. Base Salary; Performance Salary; Benefits; Sick Leave; Vacation;
----------------------------------------------------------------
Expenses.
- --------
(a) As compensation for all services provided by Employee, the Company
will pay Employee a base salary of $240,000 per year ("Base Salary"), prorated
for any portion of a year, 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.
(b) Employee will be eligible for performance-based increases to this
Base Salary as established by the Company in its discretion.
(c) In addition to Base Salary and Performance 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
<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, which will be reasonably used so as to avoid
disruption of the Company's operations.
(d) Except as set forth herein, 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.
4. Term. Subject to Section 9(j), this Agreement will become effective
----
on November 3, 1998 and, unless earlier terminated in accordance with Section 5,
will expire one year from such effective date (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 5, 6, 7, 8 and 9 will remain in full force and effect and
survive any termination or expiration of this Agreement.
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 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 reasonably 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 (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.
4
<PAGE>
(c) The Company may terminate this Agreement at any time, with or
without cause, by giving written notice of termination to Employee. If Employee
is terminated by the Company, then the Employee retains the right to receive and
the Company shall pay Base Salary, Performance Salary, and benefits through the
Expiration Date; provided, however, that Employee's right to receive and the
Company's obligation to pay Base Salary, Performance Salary and benefits for the
remaining term of this Agreement shall immediately terminate if the Employee
Participates In or obtains employment with a Competitive Advisory Business.
(d) The Employee may terminate this Agreement at any time, for any
reason, by giving written notice of termination to the Company. If Employee
terminates the Agreement, then the Employee releases all rights to receive Base
Salary, Performance Salary, and benefits, other than those which have accrued
prior to the date on which the Employee terminated the Agreement or those which
are required by law and agrees to provide a written release of any age or other
discrimination claims as part of the termination notice.
(e) Upon the termination of this Agreement, for any reason whatsoever,
until December 1, 1999, Employee shall not, directly or indirectly, solicit the
business of Ernst & Young LLP, or act in any other way reasonably intended to
interfere with the relationship between Ernst & Young LLP and the Company.
6. Non-Disclosure of Information.
-----------------------------
(a) Except as specifically permitted by the Company in writing or 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. This Section 6 is not intended to
prevent Employee from obtaining employment in the Company's industry and,
accordingly, the disclosure of the fact of Employee's employment or engagement
in the Company's industry or the use of Employee's industry knowledge or of
information or knowledge which has passed into the public domain other than
through acts or omissions attributable to Employee, shall not be deemed the
disclosure of Proprietary Information.
5
<PAGE>
(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.
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. Injunctive Relief. Employee acknowledges that the breach or
-----------------
threatened breach by Employee of any of the provisions of Section 5(e), 6 or 7
would cause the Company irreparable harm. Upon the breach or threatened breach
of any provision of Section 5(e), 6 or 7, the Company will be entitled to any
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.
6
<PAGE>
9. 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 of this Agreement with respect to 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:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Maureen E. Dobel, Esq.
Facsimile No.: 303-293-2152
7
<PAGE>
with copies to:
The Ziegler Companies, Inc.
215 N. Main Street
West Bend, Wisconsin 53095-3317
Attention: S. Charles O'Meara, Esq.
Facsimile No.: 414-334-2471
and
Quarles & Brady LLP
411 East Wisconsin Avenue, Suite 2550
Milwaukee, Wisconsin 53202
Attention: Conrad G. Goodkind, Esq.
Facsimile No.: 414-271-3552
(ii) if to Employee:
Scott A. MacKillop
2648 S. Kittredge Park Road
Evergreen, Colorado 80439
(e) Assignment: Binding Effect and Benefit. Except as otherwise
---------------------------------------
provided in this Section 9(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, without the prior written consent of Employee,
to any of its affiliates or to any person or entity that acquires all or
substantially all of the business of the Company whether through merger,
purchase of assets, or otherwise, provided that such assignment is for a
reasonable business purpose and not to avoid the terms and conditions hereunder.
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
----------------
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, whether oral or written,
between the parties hereto with respect to the subject matter hereof, including,
without limitation, the Employment Agreement dated September 23, 1997 and the
Change in Control Agreement, dated May 15, 1998, which, except as provided
herein, shall be null and void.
(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
8
<PAGE>
"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
extend 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date first written above.
THE COMPANY
PMC INTERNATIONAL, INC.
/s/ C.R. Tucker
By: _____________________________
CEO
Its: _____________________________
EMPLOYEE
/s/ Scott A. MacKillop
___________________________________
Scott A. MacKillop
9
<PAGE>
EXHIBIT C-4
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
May 15, 1998, is made and entered by and between PMC International, Inc., a
Colorado corporation (the "Company"), and Scott A. MacKillop (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short-term and long-term growth and
financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists; and
WHEREAS, the Board (as defined below) has determined that it is in the best
interests of the Company and its stockholders to secure the Executive's
continued services and to ensure the Executive's continued dedication and
objectivity in the event of any threat or occurrence of, or negotiation or other
action that could lead to, or create the possibility of, a Change in Control of
the Company, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks created by any such possible
Change in Control, and to encourage Executive's full attention and dedication to
the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and agreements contained herein, the Company and Executive
hereby agree as follows:
AGREEMENT
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the respective meanings set forth below:
(a) "Base Pay" means the Executive's annual base salary at a rate not less
than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in
Control or such higher rate as may be determined from time to time by
the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that the Executive shall have:
(i) committed a breach of this Agreement or any employment agreement
between the Company or Subsidiary and the Executive and either:
(A) such breach is not cured within thirty (30) days after
notice from the Company specifying the action which constitutes
the breach and demanding its discontinuance, or (B) such breach
is cured and the breach recurs during or after such 30-day
period,
(ii) exhibited willful disobedience of or repeated failure to perform
reasonable directions of the Board,
(iii) committed gross malfeasance in performance of his duties
hereunder,
(iv) committed acts resulting in an indictment charging the Executive
with the commission of a felony,
(v) engaged in fraud, misappropriation, or embezzlement,
<PAGE>
(vi) disclosed confidential information in violation of any agreement
between the Company or Subsidiary and the Executive, or
(vii) willfully engaged in conduct materially injurious to the
Company.
(d) "Change in Control" occurs when any of the following events occur
during the Term of this Agreement:
(i) any person or entity other than the Executive or Bedford Capital
Financial Corporation becomes the record or beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the
then outstanding voting stock of the Company,
(ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent at least eighty percent (80%) of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger
or consolidation, or
(iii) the shareholders approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(e) "Incentive Pay" means an annual amount equal to the average of the
annual bonus paid or payable in regard to services rendered in any
fiscal year during the three fiscal years immediately preceding the
fiscal year in which the Change in Control occurs pursuant to any
annual bonus plan, program or arrangement (whether or not funded) of
the Company or Subsidiary, or any successor thereto. The computation
of Incentive Pay shall include any fiscal years or portions thereof in
which no annual bonus was paid or payable. If the Executive has been
employed for less than three (3) years at the Termination Date, the
denominator used to compute such average shall equal the Executive's
length of employment.
(f) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the
earliest of (i) the second anniversary of the occurrence of the Change
in Control, (ii) the Executive's death or termination by disability,
or (iii) the Executive's attainment of age 65.
(g) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors or
other managing authority are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50% of whose ownership interest
representing the right generally to make decisions for such other
entity is,
owned or controlled, directly or indirectly, by the Company.
(h) "Term" means the period commencing as of the date hereof and expiring
as of the later of (i) the close of business on December 31, 2000, or
(ii) the expiration of the Severance Period; provided, however, that
(A) commencing on January 1, 2000 and each January 1 thereafter, the
term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given notice
that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company or
any Subsidiary, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(h), the
Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason
Exhibit C-4 Page 2
<PAGE>
of the transfer of Executive's employment between the Company and any
Subsidiary, or among any Subsidiaries
(i) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 3(b) or Section 3(c)).
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in
Control at any time during the Term, without further action, this Agreement
shall become immediately operative.
3. Termination Following a Change in Control. (a) If the Executive's
employment is terminated by the Company or any Subsidiary during the
Severance Period, the Executive shall receive the benefits described in
Section 4 unless such termination is the result of the occurrence of one or
more of the following events:
(i) The Executive's death,
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant
to, the long-term disability plan in effect for, or applicable
to, Executive immediately prior to the Change in Control,
(iii) Retirement of the Executive on or after age 65, or
(iv) Cause.
(b) If the Executive terminates his employment with the Company or its
Subsidiaries during the Severance Period while having Good Reason (as
defined below), the Executive shall receive the benefits described in
Section 4. The Executive shall have Good Reason if such termination is
not made in connection with any reason described in Section 3(a)
above, and if such termination follows the occurrence of:
(i) a reduction in the Executive's Base Pay or Incentive Pay as in
effect immediately prior to the Change in Control (including a
change in performance criteria which impacts negatively on the
Executive's ability to achieve Incentive Pay) under the
Executive's employment agreement with the Company or Subsidiary,
the failure to continue the Executive's participation in any
incentive compensation plan in which he was a participant
immediately prior to the Change in Control unless a plan
providing a substantially similar opportunity is substituted, or
the termination or material reduction of any employee benefit or
perquisite enjoyed by him immediately prior to the Change in
Control, unless comparable benefits or perquisites (determined
in the aggregate) are substituted,
(ii) material diminution in the Executive's duties as in effect
immediately prior to the Change in Control or assignment to the
Executive of duties materially inconsistent with his duties as
in effect immediately prior to the Change in Control,
(iii) the loss of any of the Executive's titles or positions (in his
capacity as an officer of the Company) held immediately prior to
the Change in Control,
(iv) the failure of the Company to obtain the assumption in writing
of its obligation to perform this Agreement by any successor
after a merger, consolidation, sale or similar transaction, or
(v) the Company relocates its principal executive offices, or
requires the Executive to have his principal location of work
changed, to any location that is in excess of fifty (50) miles
from the location thereof immediately prior to the Change in
Control,
Exhibit C-4 Page 3
<PAGE>
(vi) Notwithstanding anything contained in this Agreement to the
contrary, any circumstance described in clauses (i) through (v)
of this Section 3(b) shall not constitute Good Reason unless the
Executive gives written notice thereof to the Company in
accordance with Section 13 and the Company fails to remedy such
circumstance within fifteen (15) business days following receipt
of such notice.
(c) Notwithstanding anything contained in this Agreement to the contrary,
in the event of a Change in Control, the Executive may terminate
employment with the Company and any Subsidiary for any reason, or
without reason, during the sixty-day period immediately following the
date one year after the first occurrence of a Change in Control with
the right to severance compensation as described in Section 4.
(d) Except as otherwise described in Section 4, a termination by the
Company pursuant to Section 3(a) or by the Executive pursuant to
Section 3(b) or Section 3(c) will not affect any rights that the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing benefits, which rights shall be
governed by the terms thereof.
4. Severance Compensation. Any amounts and benefits to which the Executive is
entitled under this Agreement shall be offset and reduced by any other
amount of severance benefits to be received by the Executive upon
termination of employment under any employment agreement between the
Executive and the Company (or Subsidiary) or any other severance plan,
policy, agreement or arrangement of the Company or Subsidiary. The amounts
and benefits to which the Executive is entitled pursuant to Section 3 of
this Agreement are:
(a) A cash payment payable during each month of the Continuation Period
(as defined below) in an amount equal to 1/12 of the sum of Base Pay
and Incentive Pay, and commencing on the first day of the month
following the Termination Date,
(b) A lump-sum cash payment which the Company will pay within ten (10)
business days after the expiration of the Continuation Period (as
defined below) equal to the Company matching contributions that would
have been made under the Company's 401(k) savings plan(s) on the
amounts described in Section 4(a) if the Executive had continued in
employment and participated to the fullest extent under such plan(s).
For this purpose, the Company matching contribution rate shall be
determined using the rate of Company matching contribution in effect
at the Change in Control, or the rate in effect on the Termination
Date if greater.
(c) For a period of twenty-seven (27) months following the Termination
Date (the "Continuation Period"), the Company will arrange to provide
the Executive with continued medical, group life, and dental benefits
substantially similar, and subject to the same employee contribution
requirement, to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater,
immediately prior to the Change in Control). If and to the extent that
the Company determines that any benefit described in this Section 4(c)
cannot be paid or provided under any policy, plan, or program or
arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself make a lump-sum payment to the Executive equal
to the actuarial value of the Company's cost of providing such
benefits. Benefits otherwise receivable by the Executive pursuant to
this Section 4(c) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination
Date, and any such welfare benefits actually received by the Executive
shall be reported by the Executive to the Company.
Provided, however, notwithstanding any other agreement between the Company
or Subsidiary and the Executive to the contrary, any payments due under
this Section 4 that are rendered non-deductible by the Company (or any
Subsidiary) solely by virtue of the $1,000,000 limit on applicable employee
remuneration established under 162(m) of the Internal Revenue Code of 1986,
as amended, during the tax year of the Change in Control, shall not be
payable until the next following tax year of the Company or its successor.
Such payment shall then be made within ten (10) business days following the
start of such tax year.
Exhibit C-4 Page 4
<PAGE>
5. Excess Parachute Payment Limitations. In the event that the Executive would
be subject to a tax pursuant to Section 4999 of the Internal Revenue Code,
as amended, (the "Code"), as a result of an excess parachute payment, or a
deduction would not be allowed to the Company or any Subsidiary for all or
any part of such payment by reason of Section 280G of the Code, such
payment shall be reduced. In the event such reduction is required, the
amounts payable to the Executive under this Agreement, or any other
agreement, plan or program, of the Company or any Subsidiary, shall be
reduced to an amount such that the present value of all payments in the
nature of compensation which are contingent upon a Change in Control total
an amount not greater than three (3) times the Executive's base amount less
one dollar, as any such terms are defined or applied in Section 280G of the
Code and the proposed regulations thereunder. The determinations to be made
with respect to this Section 5 shall be made by the public accounting firm
that is retained by the Company as of the date immediately prior to the
Change in Control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
fifteen (15) business days of being requested to do so by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the
Company.
6. No Mitigation Obligation. The Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment, nor will any profits, income, earnings or other benefits from
any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Section 4 and Section 8 of this Agreement.
7. Legal Fees and Expenses. If any contest or dispute shall arise under this
Agreement involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Executive, on a current basis, for all legal fees and expenses, if any,
incurred by the Executive in connection with such contest or dispute
regardless of the result thereof.
8. Competitive Activity.
(a) Notwithstanding any other provision of this Agreement or any other
agreement between the Company and the Executive to the contrary,
during the continuance of his employment by the Company and for a
period of twenty-four (24) months after termination of his employment
(the "Non-Compete Period"), the Executive shall not (i) anywhere in
the United States, engage in any business which competes directly or
indirectly with the Company or (ii) directly or indirectly, use,
disseminate, or disclose for any purpose other than for the purposes
of the Company's business, any of the Company's confidential
information or trade secrets, unless such disclosure is compelled in a
judicial proceeding. Upon termination of his employment, all
documents, records, notebooks, and similar repositories of records
containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether
prepared by him or by others, shall be left with the Company or
returned to the Company upon its request. In the event the Executive
violates this Section 8, the remaining monthly payments provided for
under Section 4(a) and Section 4(c) shall cease.
(b) During the Non-Compete Period, the Executive 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
the Executive 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.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
10. Release. Payment of the severance compensation set forth in Section 4
hereto is conditioned upon the Executive executing and delivering to the
Company a general release to be provided by the Company.
Exhibit C-4 Page 5
<PAGE>
11. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any law or government regulation or
ruling.
12. Successors and Binding Effect. This Agreement is a personal service
agreement and may not be assigned by the Company or the Executive, except
that the Company may assign this Agreement to a successor by merger,
consolidation, sale of assets or other reorganization. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
13. Notices. Any notice required or permitted to be given under this Agreement
shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to 555 Seventeenth Street, 14th Floor,
Denver, Colorado 80202 or to the Company's then principal office, if
different, and if to the Executive, to 2648 S. Kittridge Park Road,
Evergreen, Colorado 80437.
14. Applicable Law. This Agreement is entered into in the State of Colorado and
for all purposes shall be governed by the laws of the State of Colorado.
15. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
16. 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.
17. Counterparts. This instrument may be executed in one or more counterparts,
each of which shall be deemed an original.
18. Amendment. This Agreement may not be amended except by an instrument in
writing executed by each of the parties hereto.
Exhibit C-4 Page 6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
PMC INTERNATIONAL, INC.
By: /s/ Kenneth S. Phillips
Kenneth S. Phillips
Title: President & CEO
SCOTT A. MacKILLOP
/s/ Scott A. MacKillop
Exhibit C-4 Page 7
<PAGE>
EXHIBIT C-5
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
May 15, 1998, is made and entered by and between PMC International, Inc., a
Colorado corporation (the "Company"), and Stephen M. Ash (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short-term and long-term growth and
financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists; and
WHEREAS, the Board (as defined below) has determined that it is in the best
interests of the Company and its stockholders to secure the Executive's
continued services and to ensure the Executive's continued dedication and
objectivity in the event of any threat or occurrence of, or negotiation or other
action that could lead to, or create the possibility of, a Change in Control of
the Company, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks created by any such possible
Change in Control, and to encourage Executive's full attention and dedication to
the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and agreements contained herein, the Company and Executive
hereby agree as follows:
AGREEMENT
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the respective meanings set forth below:
(a) "Base Pay" means the Executive's annual base salary at a rate not less
than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in
Control or such higher rate as may be determined from time to time by
the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that the Executive shall have:
(i) committed a breach of this Agreement or any employment
agreement between the Company or Subsidiary and the Executive
and either: (A) such breach is not cured within thirty (30)
days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, or (B)
such breach is cured and the breach recurs during or after such
30-day period,
(ii) exhibited willful disobedience of or repeated failure to
perform reasonable directions of the Board,
(iii) committed gross malfeasance in performance of his duties
hereunder,
(iv) committed acts resulting in an indictment charging the
Executive with the commission of a felony,
(v) engaged in fraud, misappropriation, or embezzlement,
<PAGE>
(vi) disclosed confidential information in violation of any agreement
between the Company or Subsidiary and the Executive, or
(vii) willfully engaged in conduct materially injurious to the
Company.
(d) "Change in Control" occurs when any of the following events occur
during the Term of this Agreement:
(i) any person or entity other than the Executive or Bedford
Capital Financial Corporation becomes the record or beneficial
owner, directly or indirectly, of more than fifty percent (50%)
of the then outstanding voting stock of the Company,
(ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent at least eighty percent (80%) of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or
(iii) the shareholders approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(e) "Incentive Pay" means an annual amount equal to the average of the
annual bonus paid or payable in regard to services rendered in any
fiscal year during the three fiscal years immediately preceding the
fiscal year in which the Change in Control occurs pursuant to any
annual bonus plan, program or arrangement (whether or not funded) of
the Company or Subsidiary, or any successor thereto. The computation
of Incentive Pay shall include any fiscal years or portions thereof in
which no annual bonus was paid or payable. If the Executive has been
employed for less than three (3) years at the Termination Date, the
denominator used to compute such average shall equal the Executive's
length of employment.
(f) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the
earliest of (i) the second anniversary of the occurrence of the Change
in Control, (ii) the Executive's death or termination by disability,
or (iii) the Executive's attainment of age 65.
(g) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors
or other managing authority are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50% of whose ownership interest
representing the right generally to make decisions for such
other entity is,
owned or controlled, directly or indirectly, by the Company.
(h) "Term" means the period commencing as of the date hereof and expiring
as of the later of (i) the close of business on December 31, 2000, or
(ii) the expiration of the Severance Period; provided, however, that
(A) commencing on January 1, 2000 and each January 1 thereafter, the
term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given notice
that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company or
any Subsidiary, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(h), the
Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason
Exhibit C-5 Page 2
<PAGE>
of the transfer of Executive's employment between the Company and any
Subsidiary, or among any Subsidiaries.
(i) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 3(b)).
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in
Control at any time during the Term, without further action, this Agreement
shall become immediately operative.
3. Termination Following a Change in Control. (a) If the Executive's
employment is terminated by the Company or any Subsidiary during the
Severance Period, the Executive shall receive the benefits described in
Section 4 unless such termination is the result of the occurrence of one or
more of the following events:
(i) The Executive's death,
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in
Control,
(iii) Retirement of the Executive on or after age 65, or
(iv) Cause.
(b) If the Executive terminates his employment with the Company or its
Subsidiaries during the Severance Period while having Good Reason (as
defined below), the Executive shall receive the benefits described in
Section 4. The Executive shall have Good Reason if such termination is
not made in connection with any reason described in Section 3(a)
above, and if such termination follows the occurrence of:
(i) a reduction in the Executive's Base Pay or Incentive Pay as in
effect immediately prior to the Change in Control (including a
change in performance criteria which impacts negatively on the
Executive's ability to achieve Incentive Pay) under the
Executive's employment agreement with the Company or
Subsidiary, the failure to continue the Executive's
participation in any incentive compensation plan in which he
was a participant immediately prior to the Change in Control
unless a plan providing a substantially similar opportunity is
substituted, or the termination or material reduction of any
employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or
perquisites (determined in the aggregate) are substituted,
(ii) material diminution in the Executive's duties as in effect
immediately prior to the Change in Control or assignment to the
Executive of duties materially inconsistent with his duties as
in effect immediately prior to the Change in Control,
(iii) the loss of any of the Executive's titles or positions (in his
capacity as an officer of the Company) held immediately prior
to the Change in Control,
(iv) the failure of the Company to obtain the assumption in writing
of its obligation to perform this Agreement by any successor
after a merger, consolidation, sale or similar transaction, or
(v) the Company relocates its principal executive offices, or
requires the Executive to have his principal location of work
changed, to any location that is in excess of fifty (50) miles
from the location thereof immediately prior to the Change in
Control,
Exhibit C-5 Page 3
<PAGE>
(vi) Notwithstanding anything contained in this Agreement to the
contrary, any circumstance described in clauses (i) through (v)
of this Section 3(b) shall not constitute Good Reason unless
the Executive gives written notice thereof to the Company in
accordance with Section 13 and the Company fails to remedy such
circumstance within fifteen (15) business days following
receipt of such notice.
(c) Except as otherwise described in Section 4, a termination by the
Company pursuant to Section 3(a) or by the Executive pursuant to
Section 3(b) will not affect any rights that the Executive may have
pursuant to any agreement, policy, plan, program or arrangement of the
Company providing benefits, which rights shall be governed by the
terms thereof.
4. Severance Compensation. Any amounts and benefits to which the Executive is
entitled under this Agreement shall be offset and reduced by any other
amount of severance benefits to be received by the Executive upon
termination of employment under any employment agreement between the
Executive and the Company (or Subsidiary) or any other severance plan,
policy, agreement or arrangement of the Company or Subsidiary. The amounts
and benefits to which the Executive is entitled pursuant to Section 3 of
this Agreement are:
(a) A cash payment payable during each month of the Continuation Period
(as defined below) in an amount equal to 1/12 of the sum of Base Pay
and Incentive Pay, and commencing on the first day of the month
following the Termination Date,
(b) A lump-sum cash payment which the Company will pay within ten (10)
business days after the expiration of the Continuation Period (as
defined below) equal to the Company matching contributions that would
have been made under the Company's 401(k) savings plan(s) on the
amounts described in Section 4(a) if the Executive had continued in
employment and participated to the fullest extent under such plan(s).
For this purpose, the Company matching contribution rate shall be
determined using the rate of Company matching contribution in effect
at the Change in Control, or the rate in effect on the Termination
Date if greater.
(c) For a period of twenty-seven (27) months following the Termination
Date (the "Continuation Period"), the Company will arrange to provide
the Executive with continued medical, group life, and dental benefits
substantially similar, and subject to the same employee contribution
requirement, to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater,
immediately prior to the Change in Control). If and to the extent that
the Company determines that any benefit described in this Section 4(c)
cannot be paid or provided under any policy, plan, or program or
arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself make a lump-sum payment to the Executive equal
to the actuarial value of the Company's cost of providing such
benefits. Benefits otherwise receivable by the Executive pursuant to
this Section 4(c) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination
Date, and any such welfare benefits actually received by the Executive
shall be reported by the Executive to the Company.
Provided, however, notwithstanding any other agreement between the Company
or Subsidiary and the Executive to the contrary, any payments due under
this Section 4 that are rendered non-deductible by the Company (or any
Subsidiary) solely by virtue of the $1,000,000 limit on applicable employee
remuneration established under 162(m) of the Internal Revenue Code of 1986,
as amended, during the tax year of the Change in Control, shall not be
payable until the next following tax year of the Company or its successor.
Such payment shall then be made within ten (10) business days following the
start of such tax year.
5. Excess Parachute Payment Limitations. In the event that the Executive would
be subject to a tax pursuant to Section 4999 of the Internal Revenue Code,
as amended, (the "Code"), as a result of an excess parachute payment, or a
deduction would not be allowed to the Company or any Subsidiary for all or
any part of such payment by reason of Section 280G of the Code, such
payment shall be reduced. In the event such reduction is required, the
amounts payable to the Executive under this Agreement, or any other
agreement, plan or program, of the Company or any Subsidiary, shall be
reduced to an amount such that the present value of all
Exhibit C-5 Page 4
<PAGE>
payments in the nature of compensation which are contingent upon a Change
in Control total an amount not greater than three (3) times the Executive's
base amount less one dollar, as any such terms are defined or applied in
Section 280G of the Code and the proposed regulations thereunder. The
determinations to be made with respect to this Section 5 shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days of being requested to do so by
the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company.
6. No Mitigation Obligation. The Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment, nor will any profits, income, earnings or other benefits from
any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Section 4 of this Agreement.
7. Legal Fees and Expenses. If any contest or dispute shall arise under this
Agreement involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Executive, on a current basis, for all legal fees and expenses, if any,
incurred by the Executive in connection with such contest or dispute
regardless of the result thereof.
8. Non-Solicitation. During the continuance of his employment by the Company
and for a period of twenty-four (24) months after termination of his
employment (the "Non-Solicitation Period"), the Executive 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-Solicitation Period, (ii)
directly or indirectly solicit any customer of the Company as to which the
Executive 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.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
10. Release. Payment of the severance compensation set forth in Section 4
hereto is conditioned upon the Executive executing and delivering to the
Company a general release to be provided by the Company.
11. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any law or government regulation or
ruling.
12. Successors and Binding Effect. This Agreement is a personal service
agreement and may not be assigned by the Company or the Executive, except
that the Company may assign this Agreement to a successor by merger,
consolidation, sale of assets or other reorganization. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
13. Notices. Any notice required or permitted to be given under this Agreement
shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to 555 Seventeenth Street, 14th Floor,
Denver, Colorado 80202 or to the Company's then principal office, if
different, and if to the Executive, to 10746 E. Maplewood Dr., Englewood,
Colorado 80111.
14. Applicable Law. This Agreement is entered into in the State of Colorado and
for all purposes shall be governed by the laws of the State of Colorado.
Exhibit C-5 Page 5
<PAGE>
15. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
16. 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.
17. Counterparts. This instrument may be executed in one or more counterparts,
each of which shall be deemed an original.
18. Amendment. This Agreement may not be amended except by an instrument in
writing executed by each of the parties hereto.
Exhibit C-5 Page 6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
PMC INTERNATIONAL, INC.
By: /s/ Kenneth S. Phillips
Kenneth S. Phillips
Title: President & CEO
STEPHEN M. ASH
/s/ Stephen M. Ash
Exhibit C-5 Page 7
<PAGE>
EXHIBIT C-6
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
May 21, 1998, is made and entered by and between PMC International, Inc., a
Colorado corporation (the "Company"), and Maureen Dobel (the "Executive").
RECITALS
WHEREAS, the Executive is a senior executive and key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short-term and long-term growth and
financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists; and
WHEREAS, the Board (as defined below) has determined that it is in the best
interests of the Company and its stockholders to secure the Executive's
continued services and to ensure the Executive's continued dedication and
objectivity in the event of any threat or occurrence of, or negotiation or other
action that could lead to, or create the possibility of, a Change in Control of
the Company, without concern as to whether Executive might be hindered or
distracted by personal uncertainties and risks created by any such possible
Change in Control, and to encourage Executive's full attention and dedication to
the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and agreements contained herein, the Company and Executive
hereby agree as follows:
AGREEMENT
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the respective meanings set forth below:
(a) "Base Pay" means the Executive's annual base salary at a rate not less
than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in
Control or such higher rate as may be determined from time to time by
the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that the Executive shall have:
(i) committed a breach of this Agreement or any employment
agreement between the Company or Subsidiary and the Executive
and either: (A) such breach is not cured within thirty (30)
days after notice from the Company specifying the action which
constitutes the breach and demanding its discontinuance, or (B)
such breach is cured and the breach recurs during or after such
30-day period,
(ii) exhibited willful disobedience of or repeated failure to
perform reasonable directions of the Board,
(iii) committed gross malfeasance in performance of his duties
hereunder,
(iv) committed acts resulting in an indictment charging the
Executive with the commission of a felony,
(v) engaged in fraud, misappropriation, or embezzlement,
<PAGE>
(vi) disclosed confidential information in violation of any
agreement between the Company or Subsidiary and the Executive,
or
(vii) willfully engaged in conduct materially injurious to the
Company.
(d) "Change in Control" occurs when any of the following events occur
during the Term of this Agreement:
(i) any person or entity other than the Executive or Bedford
Capital Financial Corporation becomes the record or beneficial
owner, directly or indirectly, of more than fifty percent (50%)
of the then outstanding voting stock of the Company,
(ii) the shareholders of the Company approve a merger or
consolidation of the Company with any other entity, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent at least eighty percent (80%) of the
combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or
(iii) the shareholders approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(e) "Incentive Pay" means an annual amount equal to the average of the
annual bonus paid or payable in regard to services rendered in any
fiscal year during the three fiscal years immediately preceding the
fiscal year in which the Change in Control occurs pursuant to any
annual bonus plan, program or arrangement (whether or not funded) of
the Company or Subsidiary, or any successor thereto. The computation
of Incentive Pay shall include any fiscal years or portions thereof in
which no annual bonus was paid or payable. If the Executive has been
employed for less than three (3) years at the Termination Date, the
denominator used to compute such average shall equal the Executive's
length of employment.
(f) "Severance Period" means the period of time commencing on the date of
the first occurrence of a Change in Control and continuing until the
earliest of (i) the second anniversary of the occurrence of the Change
in Control, (ii) the Executive's death or termination by disability,
or (iii) the Executive's attainment of age 65.
(g) "Subsidiary" means a corporation, company or other entity
(i) more than 50% of whose outstanding shares or securities
(representing the right to vote for the election of directors
or other managing authority are, or
(ii) which does not have outstanding shares or securities (as may be
the case in a partnership, joint venture or unincorporated
association), but more than 50% of whose ownership interest
representing the right generally to make decisions for such
other entity is,
owned or controlled, directly or indirectly, by the Company.
(h) "Term" means the period commencing as of the date hereof and expiring
as of the later of (i) the close of business on December 31, 2000, or
(ii) the expiration of the Severance Period; provided, however, that
(A) commencing on January 1, 2000 and each January 1 thereafter, the
term of this Agreement will automatically be extended for an
additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given notice
that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) if, prior to a Change in Control, the
Executive ceases for any reason to be an employee of the Company or
any Subsidiary, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate
and be of no further effect. For purposes of this Section 1(h), the
Executive shall not be deemed to have ceased to be an employee of the
Company or any Subsidiary by reason
Exhibit C-6 Page 2
<PAGE>
of the transfer of Executive's employment between the Company and any
Subsidiary, or among any Subsidiaries.
(i) "Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive
if the termination is pursuant to Section 3(b)).
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this Agreement will not be operative unless and
until a Change in Control occurs. Upon the occurrence of a Change in
Control at any time during the Term, without further action, this Agreement
shall become immediately operative.
3. Termination Following a Change in Control. (a) If the Executive's
employment is terminated by the Company or any Subsidiary during the
Severance Period, the Executive shall receive the benefits described in
Section 4 unless such termination is the result of the occurrence of one or
more of the following events:
(i) The Executive's death,
(ii) If the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits
pursuant to, the long-term disability plan in effect for, or
applicable to, Executive immediately prior to the Change in
Control,
(iii) Retirement of the Executive on or after age 65, or
(iv) Cause.
(b) If the Executive terminates his employment with the Company or its
Subsidiaries during the Severance Period while having Good Reason (as
defined below), the Executive shall receive the benefits described in
Section 4. The Executive shall have Good Reason if such termination is
not made in connection with any reason described in Section 3(a)
above, and if such termination follows the occurrence of:
(i) a reduction in the Executive's Base Pay or Incentive Pay as in
effect immediately prior to the Change in Control (including a
change in performance criteria which impacts negatively on the
Executive's ability to achieve Incentive Pay) under the
Executive's employment agreement with the Company or
Subsidiary, the failure to continue the Executive's
participation in any incentive compensation plan in which he
was a participant immediately prior to the Change in Control
unless a plan providing a substantially similar opportunity is
substituted, or the termination or material reduction of any
employee benefit or perquisite enjoyed by him immediately prior
to the Change in Control, unless comparable benefits or
perquisites (determined in the aggregate) are substituted,
(ii) material diminution in the Executive's duties as in effect
immediately prior to the Change in Control or assignment to the
Executive of duties materially inconsistent with his duties as
in effect immediately prior to the Change in Control,
(iii) the loss of any of the Executive's titles or positions (in his
capacity as an officer of the Company) held immediately prior
to the Change in Control,
(iv) the failure of the Company to obtain the assumption in writing
of its obligation to perform this Agreement by any successor
after a merger, consolidation, sale or similar transaction, or
(v) the Company relocates its principal executive offices, or
requires the Executive to have his principal location of work
changed, to any location that is in excess of fifty (50) miles
from the location thereof immediately prior to the Change in
Control,
Exhibit C-6 Page 3
<PAGE>
(vi) Notwithstanding anything contained in this Agreement to the
contrary, any circumstance described in clauses (i) through (v)
of this Section 3(b) shall not constitute Good Reason unless
the Executive gives written notice thereof to the Company in
accordance with Section 13 and the Company fails to remedy such
circumstance within fifteen (15) business days following
receipt of such notice.
(c) Except as otherwise described in Section 4, a termination by the
Company pursuant to Section 3(a) or by the Executive pursuant to
Section 3(b) will not affect any rights that the Executive may have
pursuant to any agreement, policy, plan, program or arrangement of the
Company providing benefits, which rights shall be governed by the
terms thereof.
4. Severance Compensation. Any amounts and benefits to which the Executive is
entitled under this Agreement shall be offset and reduced by any other
amount of severance benefits to be received by the Executive upon
termination of employment under any employment agreement between the
Executive and the Company (or Subsidiary) or any other severance plan,
policy, agreement or arrangement of the Company or Subsidiary. The amounts
and benefits to which the Executive is entitled pursuant to Section 3 of
this Agreement are:
(a) A cash payment payable during each month of the Continuation Period
(as defined below) in an amount equal to 1/12 of the sum of Base Pay
and Incentive Pay, and commencing on the first day of the month
following the Termination Date,
(b) A lump-sum cash payment which the Company will pay within ten (10)
business days after the expiration of the Continuation Period (as
defined below) equal to the Company matching contributions that would
have been made under the Company's 401(k) savings plan(s) on the
amounts described in Section 4(a) if the Executive had continued in
employment and participated to the fullest extent under such plan(s).
For this purpose, the Company matching contribution rate shall be
determined using the rate of Company matching contribution in effect
at the Change in Control, or the rate in effect on the Termination
Date if greater.
(c) For a period of twelve (12) months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the
Executive with continued medical, group life, and dental benefits
substantially similar, and subject to the same employee contribution
requirement, to those that the Executive was receiving or entitled to
receive immediately prior to the Termination Date (or, if greater,
immediately prior to the Change in Control). If and to the extent that
the Company determines that any benefit described in this Section 4(c)
cannot be paid or provided under any policy, plan, or program or
arrangement of the Company or any Subsidiary, as the case may be, then
the Company will itself make a lump-sum payment to the Executive equal
to the actuarial value of the Company's cost of providing such
benefits. Benefits otherwise receivable by the Executive pursuant to
this Section 4(c) will be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Continuation Period following the Executive's Termination
Date, and any such welfare benefits actually received by the Executive
shall be reported by the Executive to the Company.
Provided, however, notwithstanding any other agreement between the Company
or Subsidiary and the Executive to the contrary, any payments due under
this Section 4 that are rendered non-deductible by the Company (or any
Subsidiary) solely by virtue of the $1,000,000 limit on applicable employee
remuneration established under 162(m) of the Internal Revenue Code of 1986,
as amended, during the tax year of the Change in Control, shall not be
payable until the next following tax year of the Company or its successor.
Such payment shall then be made within ten (10) business days following the
start of such tax year.
5. Excess Parachute Payment Limitations. In the event that the Executive would
be subject to a tax pursuant to Section 4999 of the Internal Revenue Code,
as amended, (the "Code"), as a result of an excess parachute payment, or a
deduction would not be allowed to the Company or any Subsidiary for all or
any part of such payment by reason of Section 280G of the Code, such
payment shall be reduced. In the event such reduction is required, the
amounts payable to the Executive under this Agreement, or any other
agreement, plan or program, of the Company or any Subsidiary, shall be
reduced to an amount such that the present value of all
Exhibit C-6 Page 4
<PAGE>
payments in the nature of compensation which are contingent upon a Change
in Control total an amount not greater than three (3) times the Executive's
base amount less one dollar, as any such terms are defined or applied in
Section 280G of the Code and the proposed regulations thereunder. The
determinations to be made with respect to this Section 5 shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days of being requested to do so by
the Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company.
6. No Mitigation Obligation. The Executive will not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment, nor will any profits, income, earnings or other benefits from
any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Section 4 of this Agreement.
7. Legal Fees and Expenses. If any contest or dispute shall arise under this
Agreement involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall reimburse the
Executive, on a current basis, for all legal fees and expenses, if any,
incurred by the Executive in connection with such contest or dispute
regardless of the result thereof.
8. Non-Solicitation. During the continuance of his employment by the Company
and for a period of twenty-four (24) months after termination of his
employment (the "Non-Solicitation Period"), the Executive 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-Solicitation Period, (ii)
directly or indirectly solicit any customer of the Company as to which the
Executive 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.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
10. Release. Payment of the severance compensation set forth in Section 4
hereto is conditioned upon the Executive executing and delivering to the
Company a general release to be provided by the Company.
11. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company
is required to withhold pursuant to any law or government regulation or
ruling.
12. Successors and Binding Effect. This Agreement is a personal service
agreement and may not be assigned by the Company or the Executive, except
that the Company may assign this Agreement to a successor by merger,
consolidation, sale of assets or other reorganization. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
13. Notices. Any notice required or permitted to be given under this Agreement
shall be directed to the appropriate party in writing and mailed or
delivered, if to the Company, to 555 Seventeenth Street, 14th Floor,
Denver, Colorado 80202 or to the Company's then principal office, if
different, and if to the Executive, to 1542 Mayfield Lane, Longmont,
Colorado 80501.
14. Applicable Law. This Agreement is entered into in the State of Colorado and
for all purposes shall be governed by the laws of the State of Colorado.
Exhibit C-6 Page 5
<PAGE>
15. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
16. 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.
17. Counterparts. This instrument may be executed in one or more counterparts,
each of which shall be deemed an original.
18. Amendment. This Agreement may not be amended except by an instrument in
writing executed by each of the parties hereto.
Exhibit C-6 Page 6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
PMC INTERNATIONAL, INC.
By: /s/ Scott A. MacKillop
Scott A. MacKillop
Title: Executive Vice President/Chief Operating Officer
MAUREEN DOBEL
/s/ Maureen E. Dobel
Exhibit C-6 Page 7
<PAGE>
EXHIBIT C-7
SUMMARY DESCRIPTION OF THE PMCIS STOCK PURCHASE AGREEMENT
PMCIS Acquisition and Financing
On September 24, 1997, the Company completed the acquisition of ADAM Investment
Services, Inc., now known as PMC Investment Services, Inc. ("PMCIS"), a
financial services and investment advisory company headquartered in Atlanta,
Georgia. PMCIS has provided investment consulting services to institutional
investors since 1980. PMCIS's primary services are based around mutual funds.
PMCIS offers 17 model portfolios constructed using no-load mutual funds and
funds available at net asset value. These "standard" portfolios consist of 5
global tactical asset allocation portfolios, 5 global strategic asset allocation
portfolios and 7 asset class portfolios that concentrate on narrow asset class
groups. PMCIS also has 5 strategic asset allocation portfolios constructed
using mutual funds that invest in companies that are identified as operating in
a socially responsible manner. PMCIS's mutual fund portfolios are also offered
as options for use by 401(k) plans and with The Hartford Insurance Company
within a variable life contract. PMCIS had one wholly-owned subsidiary, Optima,
which it acquired in 1995. Optima provides mutual fund wrap services to
clients. Optima was merged into PMCIS in December, 1997.
The agreement providing for the acquisition of PMCIS by the Company provided
that the Company would acquire all of the outstanding capital stock of PMCIS for
up to $9.0 million in cash and up to $200,000 in Common Stock if certain
conditions are met over time. In addition, the Company agreed to assume the
normal operating liabilities of PMCIS at closing of the acquisition, estimated
to be approximately $1.5 million. At the closing of the PMCIS transaction, the
Company paid $5,000,000 in cash and agreed to make two earn-out payments on the
first and second anniversary dates of the closing. The first earn-out payment
will equal 1.0% of PMCIS's standard fee assets under management in excess of
$500 million, determined on the one-year anniversary of the closing of the PMCIS
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 PMCIS's standard fee
assets under management in excess of $700 million, determined on the two-year
anniversary of the closing of the PMCIS acquisition, not to exceed $2.0 million.
PMCIS is now a wholly owned subsidiary of the Company, and the Company
-15-
anticipates that PMCIS will continue to operate as a wholly owned subsidiary of
the Company in the near future.
In connection with the PMCIS acquisition, on September 24, 1997, the Company
sold 1,220,749 shares of its Common Stock in the PMCIS Private Placement at a
price of $6.00 per share. The proceeds from this transaction, after deducting
expenses relating to the issuance of the Common Stock, were approximately
$6,400,000, of which the Company used $5,000,000 to purchase PMCIS at the PMCIS
closing and a substantial amount of the balance for employee severance,
relocation, and related expenses associated with the closing of the Atlanta
facility. The additional $1,400,000 is currently being used by the Company for
working capital purposes.
-16-
<PAGE>
EXHIBIT C-8
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
<PAGE>
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT is made as of the 3rd day
of November, 1998, by and between PMC International, Inc. (the "Company") and
Michael T. Wilkinson, Scott A. MacKillop, Gary A. Miller, Michael J. Flinn,
Jared L. Shope, Graham L. Guy and John W. Burgin (collectively, the "Former ADAM
Shareholders").
WHEREAS, the Company and the Former ADAM Shareholders entered into that
certain Stock Purchase Agreement by and among the Company, the Former ADAM
Shareholders and ADAM Investment Services, Inc., dated as of July 25, 1997 (the
"Stock Purchase Agreement");
WHEREAS, the Initial Purchase Price Adjustment amount has been finally
determined in accordance with the Stock Purchase Agreement in the total amount
of $1,822,311 (the "Amount") plus interest from the Closing Date, as defined in
the Stock Purchase Agreement (the "Closing Date") at an annual rate of 8.5% and
12.0% beginning on November 6, 1998, until full and complete payment is made;
and
WHEREAS, the Company and the Former ADAM Shareholders desire to amend (in
accordance with Section 10.1 of the Stock Purchase Agreement) the payment terms
of the Initial Purchase Price Adjustment.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Definitions. Terms not otherwise defined herein shall have the
meanings assigned to them in the Stock Purchase Agreement.
<PAGE>
2. Amendments. (a) Section 2.3(e) of the Stock Purchase Agreement is
hereby deleted in its entirety and the following inserted in its place.
"(e) If any amount of the Initial Purchase Price Adjustment is not
made when such amount is due and owing hereunder, Buyer (the Company)
shall pay to the Former ADAM Shareholders interest on such unpaid
amount until paid at a rate of 12.0%."
(b) Notwithstanding anything in the Stock Purchase Agreement to the
contrary, the Initial Purchase Price Adjustment shall be paid as follows:
(i) $500,000 of the Initial Purchase Price Adjustment shall be paid on
November 6, 1998 to the account listed hereto as Exhibit A;
(ii) $500,000 of the Initial Purchase Price Adjustment shall be paid
on the earlier of (A) the next business day after the consummation of
the Offer (as such term is defined in that certain Agreement and Plan
of Merger by and among the Company, The Ziegler Companies, Inc. and
ZACQ Corp. (the "Merger Agreement") ), or (B) January 6, 1999 to the
account listed hereto as Exhibit A; and
(iii) the remaining balance of principal and interest of the Initial
Purchase Price Adjustment shall be paid to the account listed hereto
as Exhibit A on the earlier of (A) the Effective Time of the Merger
(as such terms are defined in the Merger Agreement) or (B) March 31,
1999.
(c) Notwithstanding anything in the Stock Purchase Agreement to the
contrary, interest shall be paid on the Amount, which interest shall include:
(i) simple interest at a rate of 8.5% on the
2
<PAGE>
Amount from the Closing Date up through and including November 6, 1998 and (ii)
simple interest at a rate of 12.0% for the remainder of the Amount until paid in
full.
3. Full Force and Effect. Except as explicitly modified herein, the
Stock Purchase Agreement shall remain in full force and effect.
4. Representation. John W. Burgin represents that he is the Shareholder
Representative pursuant to notice dated October 14, 1998, as accepted by the
Company on October 14, 1998 and he has the authority to enter into this binding
Agreement pursuant to Section 10.1 of the Stock Purchase Agreement on behalf of
the Former ADAM Shareholders.
5. Restoration of Rights. In the event the Company does not make the
payments required by paragraph 2(b) hereof and does not cure within five (5)
business days of receiving notice from Shareholders' Representative, such
nonpayment shall constitute a default hereunder, and this First Amendment to the
Stock Purchase Agreement shall become null and void and the rights of the Former
ADAM Shareholders under the Stock Purchase Agreement may be enforced to the full
extent permitted, including but not limited to, the payments required under
Section 2.2 and the interest payments and penalties required under Section
2.3(e).
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
PMC INTERNATIONAL, INC.
/s/ C. R. Tucker
By: ________________________________________
Name: C. R. Tucker
Title: Chief Executive Officer
SHAREHOLDER REPRESENTATIVE
On Behalf of the Former ADAM Shareholders
/s/ John W. Burgin
By: ________________________________________
Name: John W. Burgin
4
<PAGE>
EXHIBIT C-9
CONSULTING AGREEMENT
This Agreement is between PMC International, Inc., a Colorado corporation
("PMC") and C.R. "Sonny" Tucker, an individual resident of New Mexico
("Consultant"), and shall be effective as of August 24,1998.
1. Engagement.
a. Consulting Services. During the term of the this Agreement,
Consultant shall serve as a consultant performing as PMC's Interim Chief
Executive Officer. Consultant's duties shall include those duties normally and
customarily associated with the office of Chief Executive Officer.
b. Best Efforts. Consultant shall at all times, faithfully and to
the best of his abilities and experience, and in accordance with the standards
and ethics of the business in which PMC is engaged, perform all duties that may
be required of him by this Agreement, by PMC's policies and procedures, and by
the directives of PMC's Board of Directors.
c. Indemnification. In addition to the consulting services
described above, during the Term of this Agreement, Consultant shall, at the
request of the Directors of PMC, serve as an officer of PMC; provided, however,
Consultant shall not receive any additional compensation for serving as an
officer of PMC. Consultant shall be indemnified for all acts taken as an officer
of and consultant to the Company to the same extent as PMC's other officers and
Directors (consistent with the Company's charter, as amended from time to time,
which provisions are attached as Schedule A).
2. Compensation and Expenses.
a. Consulting Fee. Consultant's entire compensation shall be $28,350
per month, payable, less withholdings pursuant to Section 2(b), in semi-monthly
installments. Further, Consultant may be paid a bonus from time to time at the
sole discretion of the Board of Directors of the Company.
b. Withholding. Consultant has requested and PMC agrees to withhold
taxes and to pay social security and other taxes on Consultant's behalf,
commencing with the pay period ended October 15, 1998, in the same manner and
amount as PMC would do if Consultant were a PMC employee.
c. Expenses. Subject to the same PMC policies and procedures for the
reimbursement of business expenses to which its executive and management
employees are subject, and subject to PMC's approval and authorization, PMC
shall reimburse Consultant for all reasonable and necessary expenses incurred by
Consultant in connection with his performance of his duties under this
Agreement. Consultant shall document, in a manner reasonably satisfactory to
PMC, all expenses for which he seeks reimbursement under this paragraph.
3. Conflicting Activities. During the term of this Agreement, Consultant
shall not engage in any activity that conflicts with his obligations and
fiduciary responsibilities hereunder or that is detrimental to PMC's best
interests, as determined by PMC in its reasonable discretion.
4. Term and Termination.
a. Term. The initial term of this Agreement shall be two months
commencing August 24, 1998. The term shall be extended for successive periods of
one month, unless either party shall, by written notice to the other party
within 10 days prior to the end of the month, terminate this Agreement.
b. Termination by Consent. This Agreement may be terminated at any
time by the parties' mutual agreement, expressed in writing.
<PAGE>
c. Termination for Cause. PMC may terminate this Agreement effective
immediately, with PMC's only obligation being the payment of salary accrued and
reimbursement of outstanding business expenses, as of the date of termination if
Consultant:
i. violates any term of this Agreement or any PMC policy, procedure
or guideline, or engages in any of the following forms of misconduct: conviction
of any felony or of any misdemeanor involving dishonesty or moral turpitude;
theft or misuse of PMC's property or time; use of alcohol or controlled
substances on PMC's premises or appearing on such premises while intoxicated or
under the influence of drugs not prescribed by a physician, or after having
abused prescribed medications; illegal use of any controlled substance; illegal
gambling on PMC's premises; discriminatory behavior, whether or not illegal
under federal, state or local law; wilful misconduct; or falsifying any document
or making any false or misleading statement relating to Consultant's engagement
by PMC; or
ii. injures the economic or ethical welfare of PMC by Consultant's
misconduct or inattention to Consultant's duties and responsibilities under this
Agreement, or in the judgment of the Board of Directors of PMC, fails to meet
Consultant's performance expectations.
d. Termination Due to Death. If Consultant dies during the term of
this Agreement, this Agreement shall terminate as of the date of Consultant's
death.
e. Termination Due to Disability. If during the term of this
Agreement Consultant becomes disabled, this Agreement shall terminate and PMC
shall have no further obligations hereunder except the payment of accrued, but
unpaid compensation and expenses. For purposes of this Section 4(e), Consultant
shall be "disabled" if he is unable to effectively perform his duties hereunder
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than 15 days.
f. Termination by Consultant. Consultant may terminate this
agreement effective on notice if in the reasonable opinion of Consultant, PMC or
its Board of Directors has failed to act in an ethical and honest manner or
failed to meet its material financial obligations in a commercially reasonable
manner after notice thereof from Consultant.
5. Successors and Assigns. PMC, its successors and assigns may assign
this Agreement to a successor entity in connection with a merger, acquisition,
or consolidation of PMC. This Agreement thereafter shall bind, and inure to the
benefit of, PMC's successor or assign. Consultant shall not assign either this
Agreement or any right or obligation arising thereunder.
6. Miscellaneous.
a. Governing Law. This Agreement, and all other disputes or issues
arising from or relating in any way to PMC's relationship with Consultant, shall
be governed by the internal laws of the State of Colorado, irrespective of the
choice of law rules of any jurisdiction.
b. Severability. If any court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, the remainder of the
Agreement shall remain fully enforceable. To the extent that any court concludes
that any provision of this Agreement is void or voidable, the court shall reform
such provision(s) to render the provision(s) enforceable, but only to the extent
absolutely necessary to render the provision(s) enforceable.
c. Integration. This Agreement constitutes the entire Agreement of
the parties and a complete merger of prior negotiations and agreements and,
except as provided in the preceding subparagraph, shall not be modified except
in a writing signed by Consultant and PMC's President.
e. Waiver. No provision of this Agreement shall be deemed waived, nor
shall there be an estoppel against the enforcement of any such provision, except
by a writing signed by the party charged with the waiver or estoppel. No waiver
shall be deemed continuing unless specifically stated therein, and the written
waiver shall operate only as to the specific term or condition waived, and not
for the future or as to any act other than that specifically waived.
Exhibit C-9 Page 2
<PAGE>
f. Construction. Headings in this Agreement are for convenience only
and shall not control the meaning of this Agreement. Whenever applicable the
singular shall include the plural and the plural shall include the singular. The
parties have reviewed and understand this Agreement, and each has had a full
opportunity to negotiate the Agreement's terms and to consult with counsel of
their own choosing. Therefore, the parties expressly waive all applicable common
law and statutory rules of construction that any provision of this Agreement
should be construed against the Agreement's drafter, and agree that this
Agreement and all amendments thereto shall be construed as a whole, according to
the fair meaning of the language used.
g. Disputes. Any action arising from or relating any way to this
Agreement, or otherwise arising from or relating to Consultant's employment with
PMC, shall be tried only in the state or federal courts situated in Denver,
Colorado. The parties consent to jurisdiction and venue in those courts to the
greatest extent possible under law.
h. References. PMC will, upon request, provide a favorable
recommendation regarding Consultants abilities and performance under this
Agreement unless this Agreement is terminated by PMC under Section 4c.
* * * * *
Exhibit C-9 Page 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Consultant: PMC International, Inc.
/s/ C.R. Tucker /s/ Scott A. MacKillop
________________________________ By: ________________________________
C.R. "Sonny" Tucker Scott A. MacKillop, President
Exhibit C-9 Page 4
<PAGE>
SCHEDULE A
----------
Article V of the Company's Articles of Incorporation requires
indemnification of all directors, officers, employees or agents of the Company,
as follows:
ARTICLE V
---------
Indemnification
---------------
1. This corporation shall, subject to the provisions of this Article V,
indemnify any person who was or is a party or is threatened to be made a party
in any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise
against expenses, including reasonable attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in good faith and in a manner
he reasonably believed to be in the best interest of this corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
2. This corporation shall, subject to the provisions of this Article V,
indemnify any person who was or is a party or is threatened to be made a party
in any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee, or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses, including reasonable attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in the best interest of the corporation; provided, however, no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person has been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation unless and only to the extent
that the court in which the action, suit, or proceeding was brought determines
upon application that, despite the adjudication of liability, in view of all of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses as the court deems proper.
3. Indemnification under paragraphs 1 or 2 of this Article V, unless
ordered by a court, shall be made by the corporation only as authorized in a
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he met the
applicable standards of conduct set forth. Such determination shall be made by
the Board of Directors by a majority vote of a quorum of directors who are not
parties to such action, suit, or proceeding, or if such a quorum is not
obtainable, or even if obtainable, if a disinterested director so directs, by
independent legal counsel in a written opinion or by the shareholders.
Notwithstanding the foregoing, to the extent that a director, officer, employee,
or agent of this corporation has been successful on the merits in defense of any
action, suit, or proceeding referred to in paragraphs 1 or 2 of this Article V,
or in defense of any claim, issue, or matter therein, he shall be indemnified
against all expenses, including attorneys' fees, actually and reasonably
incurred by him in connection therewith.
4. Prior to final disposition of any action, suit, or proceeding, this
corporation may advance monies for expenses incurred by any person who might be
eligible for indemnification hereunder upon receipt of an undertaking by or on
behalf of such person to repay all amounts advanced unless it is ultimately
determined that he is entitled to be indemnified and will be indemnified by the
corporation hereunder.
Exhibit C-9 Page 5
<PAGE>
EXHIBIT C-10
CONFIDENTIALITY/NONSOLICITATION AGREEMENT
This Agreement is between PMC International, Inc., a Colorado
corporation ("PMC") and C.R. "Sonny" Tucker, an individual resident of New
Mexico ("Consultant"), and shall be effective as of August 24,1998.
In consideration of PMC appointing Consultant as Interim Chief
Executive Officer along with compensation, other consideration commensurate with
that position, access to PMC's confidential and proprietary information, the
mutual promises made herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Confidential Information.
a. Nondisclosure and Nonuse of Confidential Information. Consultant
acknowledges that during the course of his engagement for services performed
both prior to the effective date of this Agreement and during this Agreement, he
will acquire Confidential Information, as defined below. Consultant shall not
disclose or use at any time, either during his consulting period with PMC or its
Subsidiaries or thereafter, any Confidential Information of which Consultant is
or becomes aware, whether or not such information is developed by him, except to
the extent that such disclosure or use is directly related to and required by
Consultant's performance of duties assigned to Consultant by PMC or its
Subsidiaries. Consultant shall take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. As used in this Agreement, the term "Confidential
Information" means information that is not generally known to the public and
that is used, developed or obtained by PMC or its Subsidiaries in connection
with their business, including but not limited to (i) products or services, (ii)
fees, costs and pricing structures, (iii) designs, (iv) analysis, (v) drawings,
photographs and reports, (vi) computer software, including operating systems,
applications and program listings, (vii) flow charts, manuals and documentation,
(viii) data bases, (ix) accounting and business methods, (x) inventions,
devices, new developments, methods and processes, whether patentable or
unpatentable and whether or not reduced to practice, (xi) customer and client
information (including customer or client lists), (xii) copyrightable works,
(xiv) all technology and trade secrets, (xv) business plans and financial
models, and (xvi) all similar and related information in whatever form.
Confidential Information shall not include any information that has been
published in a form generally available to the public prior to the date
Consultant proposes to disclose or use such information. Information shall not
be deemed to have been published merely because individual portions of the
information have been separately published, but only if all material features
constituting such information have been published in combination.
b. PMC's Ownership of Intellectual Property.
i. Acknowledgment of PMC Ownership. If Consultant as part of his
activities on behalf of PMC or its Subsidiaries generates, authors or
contributes to any invention, design, new development, device, product, method
or process (whether or not patentable or reduced to practice or constituting
Confidential Information), any copyrightable work (whether or not constituting
Confidential Information) or any other form of Confidential Information relating
directly or indirectly to PMC's and its Subsidiaries' business as now or
hereafter conducted (collectively, "Intellectual Property"), Consultant
acknowledges that such Intellectual Property is the exclusive property of PMC
and hereby assigns all right, title and interest in and to such Intellectual
Property to PMC. Any copyrightable work prepared in whole or in part by
Consultant will be deemed "a work made for hire" under Section 201(b) of the
1976 Copyright Act, and PMC shall own all of the rights comprised by the
copyright therein. Consultant shall promptly and fully disclose all Intellectual
Property to PMC and shall cooperate with PMC to protect PMC's interests in and
rights to such Intellectual Property (including, without limitation, providing
reasonable assistance in securing patent protection and copyright registrations
and executing all documents as reasonably requested by PMC, whether such
requests occur prior to or after termination of Consultant's consulting period
by PMC).
ii. Consultant Invention. Consultant understands that paragraph
(b)(i) of this Section regarding PMC's ownership of Intellectual Property does
not apply to any invention for which no equipment, supplies, facilities or trade
secret information of PMC were used and which was developed entirely on
Consultant's own time, unless (i) the invention relates to the business of PMC
or any of its Subsidiaries or to their actual or demonstrably
<PAGE>
anticipated research or development or (ii) the invention results from any work
performed by Consultant for PMC or any of its Subsidiaries.
c. Return of PMC Property. As requested by PMC from time to time and
upon the termination of Consultant's consulting period with PMC and its
Subsidiaries for any reason, Consultant shall promptly deliver to PMC all copies
and embodiments, in whatever form, of all PMC property in his possession or
control, including without limitation all Confidential Information and
Intellectual Property in Consultant's possession or within his control
(including, but not limited to, written records, notes, photographs, manuals,
notebooks, documentation, program listings, flow charts, magnetic media, disks,
diskettes, tapes and all other materials containing or constituting any
Confidential Information or Intellectual Property) irrespective of the location
or form of such material and, if requested by PMC, shall provide PMC with
written confirmation that all such materials have been delivered to PMC.
Consultant agrees that if he fails to return such property upon PMC's request,
PMC may withhold the value of such unreturned property from any sum otherwise
due consultant.
2. Nonsolicitation. During the term of this Agreement and for a period of
twelve (12) months after termination of this Agreement, Consultant shall not
without PMC's prior written consent, directly or indirectly:
a. solicit or attempt to cause any employee, or cause or attempt to
cause any agent or contractor of PMC or any PMC affiliate, to terminate his or
her consulting period, agency or contractor relationship with PMC or any PMC
affiliate; interfere or attempt to interfere with the relationship between PMC
and any employee, contractor or agent of PMC; or solicit for employment any
employee or hire or attempt to hire any agent or contractor of PMC or any PMC
affiliates.
b. solicit similar business that PMC or any affiliate offers from
any customer or client served by PMC; or interfere or attempt to interfere with
any transaction, agreement or business relationship in which PMC or any
affiliate was involved.
3. Survival. Consultant's obligations under this agreement shall survive
the termination of his employment and shall thereafter be enforceable whether or
not such termination is later claimed or found to be wrongful or to constitute
or result in a breach of any contract or of any other duty owed or claimed to be
owed by PMC to Consultant.
4. Remedies. Consultant acknowledges that upon a breach of any obligation
under this agreement, PMC will suffer immediate and irreparable harm and damage
for which money alone cannot fully compensate PMC. Consultant therefore agrees
that upon such breach or threatened breach of any obligation under this
agreement, PMC shall be entitled to, and Consultant shall not oppose entry of, a
temporary restraining order, preliminary injunction, permanent injunction or
other injunctive relief, without posting any bond or other security, barring
Consultant from violating any such provision. This paragraph shall not be
construed as an election of any remedy, or as a waiver of any right available to
PMC under this agreement or the law, including the right to seek damages from
Consultant for a breach of any provision of this agreement, nor shall this
paragraph be construed to limit the rights or remedies available under Colorado
law for any violation of any provision of this agreement.
5. Employment. This Agreement shall not alter Consultant's employment
status, or any right of PMC or Consultant to terminate the employment
relationship with or without cause, prior notice or other formality.
6. Other Agreements. Before signing this Agreement, Consultant may have
executed other agreements relating to Consultant's employment relationship with
PMC. In the event of any direct conflict between any term of this Agreement and
any term of any other Agreement executed prior to the date of this Agreement,
the terms of this Agreement shall control. However, in the event that Consultant
has, prior to the date of this Agreement, signed any other contract concerning
Consultant's employment relationship with PMC, any provision of any such
agreement that is not in direct conflict with a provision of this Agreement
shall not be affected, modified or superseded by this Agreement, but rather
shall remain fully enforceable according to its terms.
7. Miscellaneous. (a) Heirs and Assigns. This Agreement shall be binding
upon Consultant's heirs, executors, administrators or other legal
representatives, shall inure to the benefit of PMC, its successors or assigns,
and shall be freely assignable by PMC, but not by Consultant; (b) Governing Law.
This agreement and all other disputes
Exhibit C-10 Page 2
<PAGE>
or issues arising from or relating in any way to PMC's relationship with
Consultant, shall be governed by the internal laws of the State of Colorado,
irrespective of the choice of law rules of any jurisdiction. (c) Severability.
If any court of competent jurisdiction declares any provision of this agreement
invalid or unenforceable, the remainder of the agreement shall remain fully
enforceable. To the extent that any court concludes that any provision of this
agreement is void or voidable, the court shall reform such provision(s) to
render the provision(s) enforceable, but only to the extent absolutely necessary
to render the provision(s) enforceable and only in view of the parties' express
desire that PMC be protected to the greatest extent possible under applicable
law from improper competition and/or the misuse or disclosure of trade secrets,
Confidential Documents and/or Confidential Information. (d) Disputes. Any action
arising from or relating any way to this agreement, or otherwise arising from or
relating to Consultant's's employment with PMC, shall be tried only in the state
or federal courts situated in Denver, Colorado. The parties consent to
jurisdiction and venue in those courts to the greatest extent possible under
law. The prevailing party in any action to enforce any provision of this
agreement shall recover all costs and attorneys' fees incurred in connection
with the action. (e) Continuing Obligation. Consultant's obligations under this
Agreement shall be enforceable according to its terms notwithstanding any breach
or alleged breach, or default or alleged default, of PMC under any other
agreement or agreements between Consultant and PMC.
* * * * *
Exhibit C-10 Page 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Consultant: PMC International, Inc.
By:
- ---------------------------------- -----------------------------
C.R. "Sonny" Tucker Scott A. MacKillop, President
Exhibit C-10 Page 4
<PAGE>
EXHIBIT C-11
CONVERTIBLE PROMISSORY NOTE
<PAGE>
CONVERTIBLE PROMISSORY NOTE
$500,000 October 15, 1998
FOR VALUE RECEIVED, PMC INTERNATIONAL, INC., a Colorado corporation (the
"Borrower"), hereby unconditionally and absolutely promises to pay to the order
of THE ZIEGLER COMPANIES, INC., a Wisconsin corporation (the "Lender"), at the
Lender's office at 215 North Main Street, West Bend, Wisconsin 53095 (or at such
other location as the Lender may from time to time designate), in lawful money
of the United States of America and in immediately available funds, the
principal amount of (a) FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($500,000) or,
if less, (b) the aggregate unpaid principal amount of all loans made to the
undersigned by the Lender, together with all accrued and unpaid interest thereon
on the earlier to occur of: (i) December 31, 1998; (ii) an Event of Default (as
that term is defined in that certain Loan Agreement (the "Dundee Loan
Agreement") dated as of July 7, 1998 between the Borrower and Dundee Bancorp
Inc.); or (iii) a default occurs under Section 8 of any of those certain
Security Agreements from Borrower and its subsidiaries in favor of Lender, each
of even date herewith (collectively, the "Security Agreement").
The unpaid principal of this Note shall bear interest from and including
the date hereof until paid in full (both before and after judgment) at a
variable rate equal to the prime rate as published in the Wall Street Journal
(Midwest Edition) and the rate of interest hereunder shall change with each
change in such variable rate. The Borrower promises to pay interest accrued on
the unpaid principal balance of this Note at the Lender's office specified above
(or at such other location as the Lender may from time to time designate) in
like money and funds on the date the principal amount hereof is due and
continuing monthly thereafter until the principal amount of this Note is paid in
full.
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest due hereunder. As used in this Note, "Business Day"
means any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are required or permitted by law to close.
<PAGE>
In the event that any amount of the principal of, or interest on, this Note
is not paid within five (5) calendar days after the date when due, whether at
stated maturity, by acceleration or otherwise, then the entire principal amount
outstanding shall bear interest at an annual rate equal to two percent (2%) in
excess of the otherwise applicable annual rate until all such overdue amounts
are paid in full. All interest and other amounts payable under this Note shall
be computed for the actual number of days elapsed on the basis of a 360-day
year.
In the event that any amount of the interest on this Note is not paid
within five (5) calendar days following Borrower's receipt of written notice
that such interest is overdue, the Lender may declare the entire balance of
principal and accrued interest under this Note immediately due and payable. In
the event that (i) the Borrower takes or fails to take any action which
constitutes an admission of inability to pay its debts as they mature; (ii) the
Borrower makes a general assignment for the benefit of creditors or to an agent
authorized to liquidate any substantial amount of its assets; (iii) the Borrower
becomes the subject of any bankruptcy, reorganization, insolvency or analogous
proceeding;(iv) an order is made by any court for the winding-up of the Borrower
or a resolution is passed by the shareholder of the Borrower for its winding-up
or an administrator is appointed by the Borrower; (v) an Event of Default occurs
under the Dundee Loan Agreement; and/or (vi) a default occurs under Section 8 of
the Security Agreement, then, the entire unpaid principal of, and accrued
interest on, this Note shall automatically become immediately due and payable.
The Borrower hereby agrees to pay all fees and expenses incurred by the Lender
or any subsequent holder, including the reasonable fees of counsel, in
connection with the protection and enforcement of the rights of the Lender or
any subsequent holder of this Note, including without limitation the collection
of any amounts due under this Note and the protection and enforcement of such
rights in any bankruptcy, reorganization, insolvency or analogous proceeding
involving the Borrower and any and all proceedings after the entry of judgment
hereof.
This Note, subordinate only to the Dundee Loan Agreement, is secured, among
other things, pursuant to a General Business Security Agreement from the
Borrower in favor of the Lender and dated as of the date hereof, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements. Lender agrees that the
Note and the security interest securing this Note are subordinate to the note
and security interest securing the note
-2-
<PAGE>
granted by Borrower and its subsidiaries pursuant to the Dundee Loan Agreement.
No provision of this Note is intended to or shall require or permit the
Lender, directly or indirectly, to take, collect or receive in money, goods or
in any other form, any interest (including amounts deemed by law to be interest)
in excess of the maximum rate of interest permitted by applicable law. If any
amount due from or paid by the Borrower shall be determined by a court of
competent jurisdiction to be interest in excess of such maximum rate, the
Borrower shall not be obligated to pay such excess and, if paid, such excess
shall be applied against the unpaid principal balance of this Note or, if and to
the extent that this Note has been paid in full, such excess shall be remitted
to the Borrower.
The Borrower acknowledges that the holder of this Note may assign, transfer
or sell all or a portion of its rights and interests to and under this Note to
an affiliate of the Lender and that such persons or entities shall thereupon
become vested with all of the rights and benefits of the Lender in respect
hereof as to all or that portion of the Note which is so assigned, transferred
or sold.
The Borrower and all other parties that at any time may be liable hereon in
any capacity, jointly or severally, waive presentment, demand, protest and
notice of dishonor. The Borrower further waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the obligations evidenced
hereunder and any requirement that the Lender exhaust any rights or take any
action against any other person or entity or any collateral. The Borrower
further hereby waives notice of or proof of reliance by the Lender upon this
Note, and the obligations evidenced hereby shall conclusively be deemed to have
been created, contracted, incurred, renewed, extended, amended or waived in
reliance upon this Note. The Borrower shall make all payments hereunder without
defense, offset or counterclaim. No failure to exercise and no delay in
exercising any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights. This Note may not be changed orally, but only by an
agreement in writing, which is signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE, WHETHER SOUNDING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED
-3-
<PAGE>
BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) AND
DECISIONS OF THE STATE OF WISCONSIN.
ALL DISPUTES ARISING UNDER OR IN CONNECTION WITH THIS NOTE, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE
AND FEDERAL COURTS LOCATED IN MILWAUKEE, WISCONSIN, AND THE COURTS TO WHICH AN
APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE LENDER SHALL HAVE THE
RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN ANY LOCATION SELECTED BY THE LENDER TO ENABLE THE
LENDER TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE LENDER. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY
THE LENDER. THE BORROWER WAIVES ANY OBJECTION THAT THE BORROWER MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
THE BORROWER AND, BY ITS ACCEPTANCE HEREOF, THE LENDER EACH HEREBY WAIVE TO
THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING ARISING UNDER OR IN CONNECTION WITH THIS NOTE.
At the option of the Lender, this Note (solely for the then outstanding
principal at the time of conversion or such lesser amount as selected by the
Lender in a written notice to the Borrower) may be converted, in whole or in
part, without expense to Lender, into Borrower's $.325 Cumulative Convertible
Series A Preferred Stock ("Preferred Stock"). The conversion price shall be
$2.50 for each share of Preferred Stock, subject to adjustment as set forth
below ("Conversion Price"). Upon conversion, any accrued interest shall be paid
in cash in accordance with the original terms.
The Borrower hereby agrees that at all times the number of shares of
Preferred Stock that will be delivered upon conversion shall be reserved for
exercise of this Note. No fractional shares shall be issued upon conversion of
this Note.
The Lender, by virtue hereof, shall not be entitled to any rights of a
stockholder in the Borrower, until the Note is converted in whole or in part.
In case the Borrower shall effect a stock dividend, stock split or reverse
stock split of the outstanding shares of Common Stock or Preferred Stock, the
Conversion Price shall be
-4-
<PAGE>
proportionately decreased in the case of a stock dividend or stock split or
increased in the case of a reverse stock split (on the date that such
transaction shall become effective) by multiplying the Conversion Price in
effect immediately prior to the stock dividend or stock split by a fraction, the
numerator of which is the number of shares of Preferred Stock outstanding
immediately prior to such stock dividend or stock split, and the denominator of
which is the number of shares of Preferred Stock outstanding immediately after
such stock dividend or stock split.
In case of any consolidation or merger of the Borrower with or into another
corporation (other than a merger with a subsidiary, in which merger the Borrower
is the continuing corporation) or in the case of any sale or conveyance to
another corporation of the property of the Borrower as an entirety or
substantially as an entirety, the Borrower shall cause effective provision to be
made so that the Note holder shall have the right thereafter, by exercising this
Note, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such consolidation, merger, sale or conveyance as
may be issued or payable with respect to or in exchange for the number of Shares
of the Borrower theretofore purchasable upon the exercise of this Note had such
consolidation, merger, sale or conveyance not taken place. The foregoing
provision shall similarly apply to successive consolidations, mergers, sales or
conveyances.
Notwithstanding anything to the contrary, the Borrower shall not be
required to give effect to any adjustment in the Conversion Price unless and
until the net effect of one or more adjustments, determined as above provided,
shall have required a change of the Conversion Price by at least one cent, but
when the cumulative net effect of more than one adjustment so determined shall
be to change the actual Conversion Price by at least one cent, such change in
the Conversion Price thereupon be given effect.
-5-
<PAGE>
Upon any adjustment of the Conversion Price, the Holder of the Note shall
thereafter (until another such adjustment) be entitled to purchase, at the new
Conversion Price, the number of shares, calculated to the nearest full share,
obtained by multiplying the number of Shares initially issuable upon exercise of
this Note by the Conversion Price in effect on the date hereof and dividing the
product so obtained by the new Conversion Price.
PMC INTERNATIONAL, INC.
By: /s/ Scott A. MacKillop
-------------------------------
Title: President
----------------------------
Attest:
/s/ Maureen E. Dobel
-----------------------------------
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<PAGE>
EXHIBIT C-12
CREDIT AGREEMENT
<PAGE>
CREDIT AGREEMENT
BY AND BETWEEN
PMC INTERNATIONAL, INC.
AND
THE ZIEGLER COMPANIES, INC.
DATED AS OF NOVEMBER 3, 1998
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 3, 1998 (the "Agreement"), is
by and between PMC INTERNATIONAL, INC. (the "Borrower") and THE ZIEGLER
COMPANIES, INC. (the "Lender").
R E C I T A L S
WHEREAS, Borrower has requested that the Lender provide a total of up to
$3,500,000 in revolving credit loans for the purposes hereinafter set forth; and
WHEREAS, the Lender has agreed to make the requested loans available to
Borrower on the terms and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
CREDIT FACILITY
1.1 Credit Facility. From time to time prior to March 31, 1999 or the
---------------
earlier termination in full of the Lender's obligation to make Loans hereunder
(in either case, the "Termination Date"), and subject to all of the terms,
conditions and limitations hereof, the Lender agrees to make revolving credit
loans (each a "Loan" and collectively, the "Loans")in an aggregate principal
amount not to exceed THREE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($3,500,000) (the "Maximum Amount"). Within such Maximum Amount, Loans may be
repaid and reborrowed in accordance with the provisions of this Agreement. All
Loans hereunder shall be evidenced by the Note. Although the Note shall be
expressed to be payable in the full Maximum Amount, Borrower shall be obligated
to pay only the amounts actually disbursed hereunder, together with accrued
interest on the outstanding balance at the rates and on and the dates specified
herein and such other fees and charges provided for herein.
1.2 Interest Rate. (a) Except as otherwise provided herein, the unpaid
-------------
balance of the Note will bear interest from and including the date of
disbursement until paid in full (both before and after judgment) at a variable
rate equal to the prime rate as published in the Wall Street Journal (Midwest
-------------------
Edition) and the rate of interest thereunder shall change with each change in
such variable rate. Borrower promises to pay interest accrued on the unpaid
principal balance of the Note in like money and funds on the Termination Date.
<PAGE>
(b) While any Event of Default has occurred and is continuing, Borrower
will, upon demand of the Lender, pay interest during the continuance of the
Event of Default at a per annum rate equal to two percentage points in excess of
the rate of interest specified above on the unpaid balance of the Note.
(c) Interest will be computed on the basis of actual days elapsed and a
year of 360 days.
1.3 Procedure for Borrowing. (a) Borrower will request a Loan hereunder
-----------------------
by written notice delivered in person, by United States mail, by reputable
overnight courier or by facsimile transmission, which notices will be
irrevocable, to the Lender not later than 12:00 p.m., Milwaukee time, on the
proposed Borrowing Date. Each such request will be effective upon receipt by
the Lender and will specify (i) the amount of the requested Loan and (ii) the
proposed Borrowing Date. Upon its receipt of such notice from Borrower, the
Lender will make a Loan to Borrower in such amount and on such Borrowing Date as
are specified in the borrowing notice.
(b) Loans may be prepaid at the option of Borrower in whole or in part at
any time without premium or penalty. Each prepayment of a Loan shall be in a
minimum amount of $50,000 and in integral multiples of $50,000 above such
minimum. All prepayments of a Loan shall be accompanied by interest accrued on
the amount prepaid through the date of prepayment.
(c) Borrower shall have the right, upon five (5) days' prior written
notice to the Lender, to reduce in part the Loan; provided, however, that each
partial reduction of the Loan shall be in the amount of $500,000 or an integral
multiple thereof. Subject to the limitations of the preceding sentence, the
entire Loan may be terminated by Borrower in whole at any time upon five (5)
days' prior written notice to the Lender.
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<PAGE>
ARTICLE II
GENERAL PROVISIONS
2.1 Use of Proceeds. Borrower shall use the proceeds of the Loans to
---------------
retire indebtedness owed to Dundee Bancorp Inc. ("Dundee") arising under that
certain Loan Agreement dated as of July 7, 1998 (the "Dundee Loan Agreement")
and may use the remaining proceeds of the Loans solely for: (i) working capital,
payment of aged payables and other general corporate purposes; (ii) to
compensate investment managers of Borrower and its Subsidiaries; (iii) to make
earnout payments to former shareholders of PMCIS pursuant to the terms of
certain acquisition documents dated on or about September 24, 1997; (iv) to pay
reasonable fees and costs of legal counsel of Borrower; or (v) to pay reasonable
outstanding investment banking fees of Borrower.
2.2 Payment Procedures. All payments of principal, interest, and fees
------------------
hereunder shall be made in immediately available funds to the Lender at the
Lender's address specified pursuant to Section 9.7 hereof by 12:00 p.m.,
Milwaukee, Wisconsin time on the date when due.
2.3 Record keeping. The Lender shall record in its records the date and
--------------
amount of each Loan and each repayment of such Loan. The aggregate amounts so
recorded shall be rebuttable presumptive evidence of the principal and interest
owing and unpaid on the Note. The failure to so record any such amount or any
error in so recording any such amount shall not, however, limit or otherwise
affect the obligations of Borrower under this Agreement or under the Note to
repay the principal amount of the Note together with all interest accruing
thereon.
2.4 Application of Payments. (a) Except as provided herein to the
-----------------------
contrary, all payments of principal, interest and fees under this Agreement and
the Note shall be made to the Lender for the account of the Lender and the
holder of the Note then outstanding, as appropriate, in respect of amounts then
due hereunder, and any portion of the Note so paid shall not be considered
outstanding for any purpose after the date of such payment.
(b) All payments received by the Lender under this Agreement shall be
applied first, to the payment in full of all fees, costs and expenses under this
Agreement and the other Credit Documents to be delivered by Borrower and the
Subsidiaries to the Lender pursuant to this Agreement; second, to payments of
interest required under this Agreement; and third, to payments of the principal
amounts required under this Agreement.
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<PAGE>
ARTICLE III
CONDITIONS
3.1 Deliveries at Closing. This Agreement shall become effective on the
---------------------
date that the Lender shall have received each of the following:
(a) the Note, executed by Borrower and dated the Closing Date;
(b) the Guarantees, executed by PMC, PMCIS and PTS, dated the Closing
Date;
(c) the Security Agreements, executed by Borrower, PMC, PMCIS and PTS,
dated the Closing Date, together with UCC financing statements;
(d) a certificate, signed by a duly authorized officer of Borrower and
PMC, PMCIS and PTS, dated the Closing Date, as to: (i) the incumbency and
signature of the officers of Borrower or the Subsidiary, as the case may be, who
have signed or will sign this Agreement and the other Credit Documents to which
it is a party; (ii) the adoption and continued effect of resolutions of Borrower
or the Subsidiary, as the case may be, authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is a
party; and (iii) the accuracy and completeness of attached copies of the
articles or certificate of incorporation and bylaws of Borrower or the
Subsidiary, as the case may be, as amended to date;
(e) a certificate, signed by a duly authorized officer of Borrower,
stating that on the Closing Date, after giving effect to all amounts outstanding
hereunder: (i) no Default or Event of Default has occurred and is continuing;
and (ii) the representations and warranties contained in this Agreement are true
and correct as of such Closing Date;
(f) a certificate of the Colorado Secretary of State of recent date as
to the existence and good standing of Borrower, Portfolio Management
Consultants, inc. and Portfolio Technology Services, Inc.;
(g) a certificate of the Delaware Secretary of State of recent date as
to the existence and good standing of PMC Investment Services, Inc.;
(h) an opinion letter from Holme Roberts & Owen LLP, counsel to
Borrower and the Subsidiaries, in substantially the form of Exhibit D attached
to this Agreement; and
(i) such additional supporting documents and materials as Lender may
reasonably request on or before the Closing Date.
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<PAGE>
3.2 Deliveries Following Closing. Within five (5) calendar days of the
----------------------------
Closing Date, Borrower shall deliver insurance certificates from Borrower, PMC,
PMCIS and PTS' insurance brokers in form and substance satisfactory to Lender as
to all insurance covering the Collateral and naming the Lender and, if
appropriate, Dundee as an additional insured and lender loss payee thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to the Lender that, except as set
forth on the applicable schedules hereto:
4.1 Organization and Qualification. Each of Borrower and the Subsidiaries
------------------------------
is a corporation duly and validly organized and existing under the Laws of its
jurisdiction of incorporation and has all requisite authority to conduct its
business in each jurisdiction in which its business is conducted, other than in
those jurisdictions where the failure to have such authority would not
reasonably be expected to have a Material Adverse Effect.
4.2 Financial Statements. All of the financial statements of Borrower and
--------------------
the Subsidiaries heretofore furnished to the Lender by Borrower are accurate and
complete and fairly present in all material respects the financial condition and
the results of operations of Borrower and the Subsidiaries for the periods
covered thereby and as of the relevant dates thereof, all in accordance with
generally accepted accounting principles applied on a consistent basis, subject
in the case of interim financial statements to audit and year-end adjustments.
There has been no material adverse change in the business, properties or
condition (financial or otherwise) of Borrower or any Subsidiary since the date
of the latest of such financial statements not previously disclosed in writing
to the Lender (including in any schedules to that certain Agreement and Plan of
Merger of even date herewith by and between the Borrower and the Lender (the
"Merger Agreement")). Borrower has no knowledge of any material liabilities of
any nature of Borrower or any Subsidiary not previously disclosed in writing to
the Lender (including in any schedules to the Merger Agreement).
4.3 Authorization; Enforceability. The making, execution, delivery and
-----------------------------
performance of this Agreement and the other Credit Documents to which it is a
party by Borrower, PMC, PTS and PMCIS have been duly authorized by all necessary
corporate action of Borrower and such Subsidiary. This Agreement and the other
Credit Documents to which it is a party are the valid and binding obligations of
Borrower, PMC, PTS and PMCIS, enforceable against them in accordance with their
respective terms, except to the
-5-
<PAGE>
extent that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally or by general principles of equity, including (without
limitation) concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
4.4 Absence of Conflicting Obligations. The making of the Note, and the
----------------------------------
execution, delivery and performance of this Agreement and the other Credit
Documents to which it is a party by Borrower, PMC, PTS and PMCIS do not violate
any presently existing provision of Law or the articles or certificate of
incorporation or bylaws of Borrower or any such Subsidiary, as the case may be,
or any agreement to which Borrower or any such Subsidiary is a party or by which
Borrower or any such Subsidiary or any of their assets is bound except for the
Dundee Loan Agreement, with respect to which a waiver from Dundee will be
obtained in connection with the transactions contemplated by this Agreement, and
except for any such violations that would not reasonably be expected to have a
Material Adverse Effect.
4.5 Taxes. Borrower and each Subsidiary has filed all federal, state,
-----
foreign and local tax returns which were required to be filed (subject to any
valid extensions of the time for filing), and has paid, or made provision for
the payment of, all taxes owed by it, and no tax deficiencies have been assessed
or, to Borrower's knowledge, proposed against Borrower or any Subsidiary.
4.6 Absence of Litigation. Except as set forth on Schedule 4.6, neither
---------------------
Borrower nor any Subsidiary is a party to, and so far as is known to Borrower
there is no threat of, any litigation or administrative proceeding which would,
if adversely determined, have a Material Adverse Effect.
4.7 Accuracy of Information. All information, certificates or statements
-----------------------
by Borrower or any Subsidiary given in, or pursuant to, this Agreement (whether
in writing, by electronic messaging or otherwise) shall be accurate, true and
complete when given in all material respects.
4.8 Title to Property. Except as set forth on Schedule 4.8, Borrower and
-----------------
each Subsidiary has good title to, or a valid leasehold interest in, or a valid
license to use, all assets and properties necessary to conduct its respective
business as now conducted, and there are no Liens on any of the assets or
properties of Borrower or any Subsidiary other than Permitted Liens. Borrower
and each Subsidiary has all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, reasonably necessary to conduct
its respective business as now conducted, and neither Borrower nor any
Subsidiary
-6-
<PAGE>
knows of any conflict with or violation of any valid rights of others with
respect thereto.
4.9 ERISA. Borrower does not have any knowledge that any Plan is in
-----
noncompliance with the applicable provisions of ERISA or the Internal Revenue
Code. Except as set forth on Schedule 4.9, Borrower does not have any knowledge
of any pending or threatened litigation or governmental proceeding or
investigation against or relating to any Plan, nor any knowledge of any
reasonable basis for any proceedings, claims or actions against or relating to
any Plan. Borrower does not have any knowledge that it has incurred any
"accumulated funding deficiency" within the meaning of Section 302(a)(2) of
ERISA in connection with any Plan. Borrower does not have any knowledge that
there has been any Reportable Event or Prohibited Transaction (as such terms are
defined in ERISA) with respect to any Plan, or that Borrower has incurred any
liability to the PBGC under Section 4062 of ERISA in connection with any Plan.
Notwithstanding any provision to the contrary contained in this Section 4.9,
Borrower shall not be deemed to be in default hereunder solely by reason of
Borrower's failure to be in compliance with the warranties contained in this
Section 4.9 so long as the sum of (i) the cost of complying with the warranties
contained in this Section 4.9 plus (ii) all fines, penalties, fees and other
costs resulting from such noncompliance would not reasonably be expected to have
a Material Adverse Effect.
4.10 Compliance With Laws. Except as set forth on Schedule 4.10, Borrower
--------------------
and each Subsidiary is in compliance with all Laws to which Borrower or such
Subsidiaries are subject, other than such noncompliance as would not reasonably
be expected to have a Material Adverse Effect.
4.11 Regulation U. No part of the proceeds of the Loans will be used,
------------
directly or indirectly, for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or to extend credit to others for the purpose of
purchasing or carrying any such margin stock.
4.12 Subsidiaries. Borrower has no Subsidiaries, other than Portfolio
------------
Management Consultants, Inc., Portfolio Technology Services, Inc., Portfolio
Brokerage Services, Inc. and PMC Investment Services, Inc.
4.13 Full Disclosure. No information, exhibit or report furnished by
---------------
Borrower or any Subsidiary to the Lender in connection with the negotiation or
execution of this Agreement contained any material misstatement of fact as of
the date when made or omitted to state a material fact or any fact necessary to
make the statements contained therein not misleading as of the date when made.
-7-
<PAGE>
4.14 Absence of Default. Except as disclosed on Schedule 4.14 hereto,
------------------
neither Borrower nor any Subsidiary is in default under any note, loan
agreement, indenture, lease, mortgage, security agreement or other contractual
obligation binding upon such party, other than for such defaults as would not
reasonably be expected to have a Material Adverse Effect.
ARTICLE V
NEGATIVE COVENANTS
From and after the date of this Agreement and until the entire amount of
principal of and interest due on the Loans, and all other fees and payments due
under this Agreement and the other Credit Documents are paid in full, Borrower
shall not, and shall not suffer, cause or permit any Subsidiary to, without the
prior written consent of the Lender:
5.1 Liens. Incur, create, assume or permit to be created or allow to
-----
exist any Lien upon or in any of its assets or properties, except Permitted
Liens.
5.2 Indebtedness. Incur, create, assume, permit to exist, guarantee,
------------
endorse or otherwise become directly or indirectly or contingently responsible
or liable for any Indebtedness, except Permitted Indebtedness.
5.3 Consolidation or Merger. Except in a transaction with an Affiliate of
-----------------------
the Lender, consolidate with or merge into any other Person, or permit another
Person to merge into Borrower or any Subsidiary, or acquire substantially all of
the assets of any other Person, whether in one or a series of transactions.
5.4 Disposition of Assets. Sell, lease, assign, transfer or otherwise
---------------------
dispose of all or substantially all of Borrower or any Subsidiary's now owned or
hereafter acquired assets or properties, other than (i) sales of inventory in
the ordinary course of business and (ii) dispositions of assets in an aggregate
amount not to exceed $50,000 (provided that the foregoing limitation shall not
apply if Borrower or the Subsidiary, as the case may be, has entered into a
binding agreement to purchase replacement assets having equal or greater value
for delivery not later than sixty (60) days after the date of such sale, lease
or disposition).
5.5 Sale and Leaseback. Enter into any agreement, directly or indirectly,
------------------
to sell or transfer any real or personal property used in Borrower or a
Subsidiary's business and thereafter to lease back the same or similar property.
5.6 Investments. Make any Investment in or to other Persons, except
-----------
Permitted Investments.
-8-
<PAGE>
5.7 Restricted Payments. Other than with respect to the repurchase of
-------------------
outstanding warrants of Borrower (up to aggregate amount of $10,000):
(a) Declare or pay any dividends or distributions; or
(b) purchase, redeem, or otherwise acquire for value Borrower or any
Subsidiary's capital stock now or hereafter outstanding; or
(c) make any distribution of assets to Borrower or any Subsidiary's
shareholders, whether in cash, assets or in obligations of Borrower or such
Subsidiary; or
(d) allocate or otherwise set apart any sum for payment of any
dividend or distribution on, or for the purchase or redemption of, any shares of
Borrower or any Subsidiary's capital stock.
5.8 Transactions with Affiliates. Engage in any transaction with an
----------------------------
Affiliate on terms materially less favorable to Borrower or a Subsidiary, as the
case may be, than would be available at the time from a Person who is not an
Affiliate.
5.9 Loans and Advances. Make any loan or advance to any Person, except
------------------
(i) extensions of credit in the ordinary course of business by Borrower and its
Subsidiaries to its customers; (ii) advances to officers and employees of
Borrower and its Subsidiaries for travel and other expenses in the ordinary
course of business; and (iii) intercompany loans between Borrower and any
Subsidiary; provided, however, that in no event whatsoever shall Borrower or any
Subsidiary make any loans or advances to Portfolio Brokerage Services, Inc. in
an amount representing a net increase greater than $150,000 over the amount
stated on the Borrower's financial statements dated September 30, 1998, without
the written permission of an officer of the Lender.
5.10 Guarantees. Guarantee the Indebtedness of any Person, except for: (i)
----------
the Guarantees, (ii) the endorsement of instruments for deposit or collection in
the ordinary course of business and (iii) guaranties made pursuant to the Dundee
Loan Agreement.
5.11 Subsidiaries. Form any Subsidiary, other than Portfolio Management
------------
Consultants, Inc., Portfolio Technology Services, Inc., PMC Investment Services,
Inc., and Portfolio Brokerage Services, Inc.
-9-
<PAGE>
ARTICLE VI
AFFIRMATIVE COVENANTS
From and after the date of this Agreement and until the entire amount of
principal of and interest due on the Loans, and all other fees and payments due
under this Agreement and the other Credit Documents are paid in full:
6.1 Payment. Borrower shall timely pay or cause to be paid the principal
-------
of and interest on the Loans and all other amounts due under this Agreement and
Borrower, PMC, PTS and PMCIS shall timely pay all amounts due under the other
Credit Documents to which it is a party.
6.2 Corporate Existence; Properties; Insurance. Borrower and each
------------------------------------------
Subsidiary shall: (a) maintain its existence; (b) conduct its business
substantially as now conducted; (c) maintain all assets (other than assets no
longer used or useful in the conduct of its business) in good repair, working
order and condition, ordinary wear and tear excepted; (d) maintain accurate
records and books of account in accordance with generally accepted principles of
accounting consistently applied throughout all accounting periods; and (e)
maintain insurance of such nature and in such amounts as is customarily
maintained by companies engaged in the same or similar business and as otherwise
required by Section 3.1(h) hereof.
6.3 Licenses. Borrower and each Subsidiary shall maintain in good
--------
standing and in full force and effect each license, permit and franchise granted
or issued by any federal, state or local governmental agency or regulatory
authority that is reasonably necessary to Borrower or such Subsidiary's
business.
6.4 Reporting Requirements. Borrower shall furnish to Lender such
----------------------
information respecting the business, assets and financial condition of Borrower
and its Subsidiaries as the Lender may reasonably request and, without request:
(a) Promptly upon the furnishing thereof to the shareholders of
Borrower, copies of all financial statements, reports and proxy statements so
furnished;
(b) Promptly upon filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which
Borrower or any Subsidiary files with the Securities and Exchange Commission;
and
(c) Such other information as the Lender may from time to time
reasonably request.
6.5 Taxes. Borrower and each Subsidiary shall pay all taxes and
-----
assessments prior to the date on which penalties attach thereto, except for any
tax or assessment which is either not
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delinquent or which is being contested in good faith and by proper proceedings
and against which adequate reserves have been provided.
6.6 Inspection of Properties and Records. Subject to the terms of that
------------------------------------
certain confidentiality agreement between Borrower and Lender, Borrower, PMC,
PTS and PMCIS shall permit the Lender or its agents or representatives to
inspect any of the properties, books and financial records of Borrower and such
Subsidiary, to examine and make copies of the books of accounts and other
financial records of Borrower, and to discuss the affairs, finances and accounts
of Borrower and such Subsidiary with, and to be advised as to the same by,
Borrower's representatives at such reasonable times and intervals as the Lender
may designate.
6.7 Reference in Financial Statements. Borrower shall include, or cause
---------------------------------
to be included, a general reference to this Agreement in all financial
statements of Borrower which are furnished to financial reporting services,
creditors and prospective creditors.
6.8 Compliance with Laws. Except as disclosed on Schedule 6.8, Borrower
--------------------
and each Subsidiary shall: (a) comply with all applicable Environmental Laws and
orders of regulatory and administrative authorities with respect thereto; and
(b) comply with all other Laws applicable to Borrower and its Subsidiaries or
any of their respective assets or operations, in each case, other than for such
noncompliance as would not reasonably be expected to have a Material Adverse
Effect.
6.9 Compliance with Agreements. Except as disclosed on Schedule 6.9,
--------------------------
Borrower, PMC, PTS and PMCIS shall perform and comply in all respects with the
provisions of any agreement (including without limitation any collective
bargaining agreement), license, regulatory approval, permit and franchise
binding upon Borrower, such Subsidiary, or any of its assets or properties,
other than for such nonperformance or noncompliance as would not reasonably be
expected to have a Material Adverse Effect.
6.10 Notices. Borrower shall:
-------
(a) as soon as possible and in any event within five (5) Business Days
after becoming aware of the occurrence of any Default or Event of Default,
notify the Lender in writing of such Default or Event of Default and set forth
the details thereof and the action which is being taken or proposed to be taken
by Borrower with respect thereto;
(b) promptly notify the Lender of the commencement of any litigation
or administrative proceeding that would cause the representation and warranty of
Borrower contained in Section 4.6 of this Agreement to be untrue;
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(c) promptly notify the Lender (i) of the occurrence of any Reportable
Event or Prohibited Transaction (as such terms are defined in ERISA) that has
occurred with respect to any Plan, and (ii) of the institution by the PBGC or
Borrower of proceedings under Title IV of ERISA to terminate any Plan;
(d) promptly notify the Lender, and provide copies, immediately upon
receipt, of any notice, pleading, citation, indictment, complaint, order or
decree from any federal, state or local government agency or regulatory body, or
any other source, asserting or alleging a circumstance or condition that
requires or may require a financial contribution by Borrower or any Subsidiary
under Environmental Laws or an investigation, clean-up, removal, remedial action
or other response by or on the part of Borrower or any Subsidiary under
Environmental Laws or which seeks damages or civil, criminal or punitive
penalties from or against Borrower or any Subsidiary for an alleged violation of
Environmental Laws;
(e) notify the Lender at least thirty (30) days prior to any change of
Borrower or any Subsidiary's name or its respective principal business address;
and
(f) promptly notify the Lender of the commencement of any
investigation, litigation, or administrative or regulatory proceeding by, or the
receipt of any notice, citation, pleading, order, decree or similar document
issued by, any federal, state or local governmental agency or regulatory
authority that results in, or may result in, the termination or suspension of
any license, permit or franchise reasonably necessary to Borrower or any
Subsidiary's business, or that imposes, or may result in the imposition of, a
fine or penalty in excess of $100,000 in the aggregate.
ARTICLE VII
REMEDIES
7.1 Acceleration.
------------
(a) Upon the occurrence of an Automatic Event of Default, then,
without notice or action of any kind by the Lender, the Lender's obligation to
make any Loans hereunder shall immediately terminate and the entire disbursed
unpaid principal of, and accrued interest on, the Note, and any other amount due
under this Agreement and all other Credit Documents to which it is a party by
Borrower or a Subsidiary, as the case may be, pursuant to or in connection
herewith or therewith shall be automatically and immediately due and payable.
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(b) Upon the occurrence of a Notice Event of Default the Lender's
obligation to make any Loans hereunder shall immediately terminate and the
Lender, upon written notice and demand to Borrower, may declare the entire
disbursed unpaid principal of, and accrued interest on, the Note, and any other
amount due under this Agreement, and all other Credit Documents to which it is a
party by Borrower or a Subsidiary, as the case may be, pursuant to or in
connection herewith or therewith immediately due and payable.
7.2 Remedies Not Exclusive. No remedy herein conferred upon the Lender is
----------------------
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement or any Credit Documents to which it is a party by Borrower or a
Subsidiary, as the case may be, pursuant to or in connection herewith or
therewith, or now or hereafter existing at law or in equity. No failure or
delay on the part of the Lender in exercising any right or remedy shall operate
as a waiver thereof nor shall any single or partial exercise of any right
preclude other or further exercise thereof or the exercise of any other right or
remedy.
7.3 Setoff. Borrower agrees that the Lender shall have all rights of
------
setoff provided by applicable Law, and in addition thereto, Borrower agrees that
if at any time any payment or other amount owing by Borrower or any Subsidiary
under this Agreement or any other Credit Document to which it is a party is then
due to the Lender, the Lender may apply to the payment of such payment or other
amount any and all balances, credits, deposits, accounts or moneys of Borrower
or any Subsidiary then or thereafter with the Lender.
ARTICLE VIII
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
8.1 Affiliate shall mean any Person: (a) that directly or indirectly
---------
controls, or is controlled by, or is under common control with Borrower; (b)
that directly or indirectly beneficially owns or holds ten percent (10%) or more
of any class of voting stock of Borrower; (c) ten percent (10%) or more of the
voting stock of which Person is directly or indirectly beneficially owned or
held by Borrower; (d) that is an officer or director of Borrower; (e) of which
an Affiliate is an officer or director; or (f) who is related by blood, adoption
or marriage to an Affiliate. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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<PAGE>
8.2 Agreement shall mean this Credit Agreement, together with the Exhibits
---------
and Schedules attached hereto, as the same may be amended from time to time in
accordance with the terms hereof.
8.3 Automatic Event of Default shall mean any one or more of the
--------------------------
following:
(a) Borrower or any Subsidiary shall make a general assignment for the
benefit of creditors or to an agent authorized to liquidate all or substantially
all of its assets; or
(b) Borrower or any Subsidiary shall become the subject of an "order
for relief" within the meaning of the United States Bankruptcy Code, or shall
file a petition in bankruptcy, for reorganization or to effect a plan or other
arrangement with creditors; or
(c) Borrower or any Subsidiary shall have a petition or application
filed against it in bankruptcy or any similar proceeding, or shall have such a
proceeding commenced against it, and such petition, application or proceeding
shall remain undismissed for a period of sixty (60) days or more, or Borrower or
any Subsidiary shall file an answer to such a petition or application, admitting
the material allegations thereof; or
(d) Borrower or any Subsidiary (i) shall apply to a court for the
appointment of a receiver or custodian for any substantial portion of its assets
or properties, or (ii) shall have a receiver or custodian appointed for any
substantial portion of its assets or properties, with or without consent, and
such receiver shall not be discharged within sixty (60) days after his
appointment; or
(e) Borrower or any Subsidiary shall adopt a plan of dissolution or
liquidation of all or substantially all of its assets; or
(f) An "Event of Default" (as that term is defined in the Dundee Loan
Agreement) shall have occurred under or in respect of the Dundee Loan Agreement
(after giving effect to grace or cure periods, if any, provided under such
Agreement).
8.4 Borrower shall mean PMC International, Inc.
--------
8.5 Borrowing Date shall mean each date on which a Loan is made to
--------------
Borrower.
8.6 Business Day shall mean any day other than a Saturday, Sunday, public
------------
holiday or other day when commercial banks in Wisconsin are authorized or
required by Law to close.
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8.7 Closing shall mean the consummation of the transactions contemplated
-------
by this Agreement.
8.8 Closing Date shall mean November 3, 1998.
------------
8.9 Collateral shall have the meaning specified in each of the Security
----------
Agreements.
8.10 Credit Documents shall mean this Agreement, the Note, the Guarantees,
----------------
the Security Agreements, and all other related agreements and documents issued
or delivered hereunder or thereunder or pursuant hereto or thereto.
8.11 Default shall mean any event which would constitute an Event of
-------
Default but for the requirement that notice be given or time elapse or both.
8.11A Dundee shall have the meaning set forth in Section 2.1.
------
8.11B Dundee Loan Agreement shall have the meaning specified in Section 2.1
---------------------
8.12 Environmental Laws shall mean all Laws, judgments, decrees, permits,
------------------
licenses, agreements and other governmental restrictions, now or at any time
hereafter in effect, relating to (a) the emission, discharge or release of
pollutants, petroleum or petroleum products, chemicals or industrial, toxic or
hazardous substances, materials or wastes into the environment, or (b) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes, or (c) the
investigation, clean-up or remediation thereof. These Environmental Laws shall
include but not be limited to the Federal Solid Waste Disposal Act, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976, the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Superfund Amendments and
Reauthorization Act of 1986, regulations of the Environmental Protection Agency,
regulations of the Nuclear Regulatory Agency, regulations of any state
department of natural resources or state environmental protection agency now or
at any time hereafter in effect and local health department ordinances.
8.13 ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended and as in effect from time to time.
8.14 Event of Default shall mean any Automatic Event of Default or any
----------------
Notice Event of Default.
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8.14A Guarantees shall mean those certain Unlimited Guarantees executed by
----------
each of PMC, PTS and PMCIS in the form of Exhibit A attached hereto, as the same
may be amended from time to time.
8.15 Indebtedness shall mean all liabilities or obligations of Borrower or
------------
any Subsidiary, whether primary or secondary or absolute or contingent: (a) for
borrowed money or for the deferred purchase price of property or services
(excluding trade obligations and accrued expenses, in each case incurred in the
ordinary course of business, which are not the result of any borrowing); (b) as
lessee under leases that have been or should be capitalized according to
generally accepted accounting principles; (c) evidenced by notes, bonds,
debentures or similar obligations; or (d) secured by any Liens on assets of
Borrower or any Subsidiary, whether or not the obligations secured have been
assumed by Borrower or such Subsidiary.
8.16 [Reserved].
8.17 Investment shall mean: (a) any transfer or delivery of cash, stock or
----------
other property or value by such Person in exchange for Indebtedness, stock or
any other security of another Person; (b) any loan, advance or capital
contribution to or in any other Person; (c) any guaranty, creation or assumption
of any liability or obligation of any other Person; and (d) any investment in
any fixed property or fixed assets other than fixed properties and fixed assets
acquired and used in the ordinary course of the business of that Person.
8.18 Law shall mean any federal, state, local or other law, rule,
---
regulation or governmental requirement of any kind, and the rules, regulations,
written interpretations and orders promulgated thereunder.
8.19 Lender shall mean The Ziegler Companies, Inc.
------
8.20 Lien shall mean, with respect to any asset: (a) any mortgage, pledge,
----
lien, charge, security interest or encumbrance of any kind in respect of such
asset; or (b) the interest of a vendor or lessor under any conditional sale
agreement, financing lease or other title retention agreement relating to such
asset.
8.21 Loans shall have the meaning specified in Section 1.1.
-----
8.22 Material Adverse Effect shall mean a material adverse effect on (a)
-----------------------
the business, operations, property or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole, (b) the ability of Borrower or
any Subsidiary to perform its obligations, when such obligations are required to
be performed, under this Agreement or any of the other Credit Documents to which
it is a party or (c) the validity or
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enforceability of the obligations of Borrower and any Subsidiary under this
Agreement or any of the other Credit Documents or the rights or remedies of the
Lender hereunder or thereunder.
8.23 Maximum Amount shall have the meaning specified in Section 1.1.
--------------
8.24 [Reserved].
8.25 Obligations shall mean, without duplication, all of the obligations of
-----------
Borrower to the Lender (including the obligations to pay the principal amount of
or interest on the Loans and to pay certain expenses and the obligations arising
in connection with various indemnities) whenever arising, under this Agreement
or any of the Credit Documents.
8.26 Note shall mean that certain promissory note from Borrower payable to
----
the order of the Lender in the form of Exhibit B attached to this Agreement.
8.27 Notice Event of Default shall mean any one or more of the following:
-----------------------
(a) Borrower or any Subsidiary shall fail to pay when due any
installment of the disbursed principal of, or interest on, the Note or any
expense or other amount due under this Agreement or any other Credit Document to
which it is a party; or
(b) there shall be a default in the performance or observance of any
of the covenants and agreements contained in Article V or Section 6.2(a) of this
Agreement; or
(c) there shall be a default in the performance or observance of any
of the other covenants, agreements or conditions contained in this Agreement or
any other Credit Document, and such default shall have continued for a period of
ten (10) Business Days after written notice from the Lender to Borrower
specifying such default and requiring it to be remedied; or
(d) any representation or warranty made by Borrower or any Subsidiary
in this Agreement or in any other Credit Document to which it is a party or
financial statement delivered pursuant to or in connection with this Agreement
shall prove to have been false in any material respect as of the time when made
or given; or
(e) any final judgment shall be entered against Borrower or any
Subsidiary which, when aggregated with other final judgments against Borrower
and its Subsidiaries, exceeds $100,000 in the aggregate, and shall remain
outstanding and unsatisfied, unbonded or unstayed after thirty (30) days from
the date of entry thereof; provided that no final judgment shall be included in
the calculation under this subsection to the extent that the claim
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underlying such judgment is covered by insurance and the defense of such claim
has been tendered to and accepted by the insurer without reservation; or
(f) (i) any Reportable Event (as defined in ERISA) shall have occurred
which constitutes grounds for the termination of any Plan by the PBGC or for the
appointment of a trustee to administer any Plan, or any Plan shall be terminated
within the meaning of Title IV of ERISA, or a trustee shall be appointed by the
appropriate court to administer any Plan, or the PBGC shall institute
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan, or Borrower or any trade or business which together with Borrower would be
treated as a single employer under Section 4001 of ERISA shall withdraw in whole
or in part from a multiemployer Plan, and (ii) the aggregate amount of
Borrower's liabilities for all such occurrences, whether to a Plan, the PBGC or
otherwise, is reasonably likely to have a Material Adverse Effect, and such
liability is not covered for the benefit of Borrower by insurance.
8.28 PBGC shall mean Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
8.29 Permitted Indebtedness shall mean: (a) Indebtedness of Borrower or
----------------------
any Subsidiary to the Lender; (b) unsecured accounts payable and other unsecured
obligations (including aged payables) of Borrower or a Subsidiary incurred in
the ordinary course of business of Borrower or such Subsidiary and not as a
result of any borrowing; (c) Indebtedness arising out of the lease or purchase
of goods constituting equipment and either unsecured or secured only by a
purchase money security interest securing such purchase money indebtedness in an
amount which does not exceed $100,000 at any time outstanding in the aggregate
for Borrower and its Subsidiaries; (d) Indebtedness outstanding as of the
Closing Date, and shown on the financial statements referred to in Section 4.2
hereof, provided that such Indebtedness shall not be renewed, extended or
increased; and (e) other Indebtedness of Borrower and its Subsidiaries which
does not exceed $150,000 in the aggregate at any time outstanding.
8.30 Permitted Investments shall mean:
---------------------
(a) Investments in prime commercial paper, rated either P-1 by Moody's
Investors Service or A-1 by Standard & Poor's Corporation, maturing within
thirty (30) days of the date of acquisition, certificates of deposit, overnight
bank deposits and bankers acceptances (each with a maturity of one year or
less), or in commercial bank accounts of any commercial bank having capital and
surplus in excess of $100,000,000;
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(b) Investments in obligations of a governmental body, rated "A" or
better, or fully guaranteed or insured by the United States or any agency
thereof, in each case maturing within one year of the date of acquisition;
(c) endorsement of instruments for deposit or collection in the
ordinary course of business; and
(d) subject to the restrictions set forth in Section 5.9, intercompany
loans and advances.
8.31 Permitted Liens shall mean:
---------------
(a) Liens in favor of the Lender; and
(b) Liens for taxes, assessments, or governmental charges, or levies
that are not yet due and payable or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established;
and
(c) easements, restrictions, minor title irregularities and similar
matters which have no Material Adverse Effect as a practical matter upon the
ownership and use of the affected property; and
(d) Liens or deposits in connection with workers' compensation,
unemployment insurance, social security, ERISA or similar legislation or to
secure customs' duties, public or statutory obligations in lieu of surety, stay
or appeal bonds, or to secure performance of contracts or bids (other than
contracts for the payment of borrowed money) or deposits required by law as a
condition to the transaction of business or other liens or deposits of a like
nature made in the ordinary course of business; and
(e) A purchase money security interest securing Indebtedness permitted
to be outstanding or incurred under Section 8.29(c); and
(f) Liens incurred in connection with Permitted Indebtedness, provided
that no such Lien shall be amended to cover any additional property after the
Closing Date and the amount of Indebtedness secured thereby shall not be
increased; and
(g) attachment or judgment Liens, where the attachment or judgment
which gave rise to such Liens does not constitute an Event of Default hereunder;
and
(h) landlords' or warehousemen's Liens arising by operation of law;
and
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(i) lessors' interests under capitalized leases; and
(j) liens in favor of Citywide Bank/Aurora National Bank pursuant to a
promissory note and security agreement.
8.32 Person shall mean and include an individual, partnership, corporation,
------
trust, unincorporated association and any unit, department or agency of
government.
8.33 Plan shall mean each pension, profit sharing, stock bonus, thrift,
----
savings and employee stock ownership plan established or maintained, or to which
contributions have been made, by Borrower or any Subsidiary or any trade or
business which together with Borrower would be treated as a single employer
under Section 4001 of ERISA.
8.34 Security Agreements shall mean those certain General Business Security
-------------------
Agreements executed by Borrower, PMC, PMCIS and PTS in favor of the Lender as of
the Closing Date, in the form of Exhibit C attached to this Agreement, as the
same may be amended from time to time.
8.35 Subsidiary shall mean: (i) on the Closing Date, Portfolio Management
----------
Consultants, Inc. ("PMC"), Portfolio Technology Services, Inc. ("PTS"), PMC
Investment Services, Inc. ("PMCIS") and Portfolio Brokerage Services, Inc. and
(ii) any corporation, more than fifty percent (50%) of the outstanding stock of
which (of any class or classes, however designated, having ordinary voting power
for the election of at least a majority of the members of the board of directors
of such corporation, other than stock having such power only by reason of the
happening of a contingency) is owned by Borrower.
8.36 Termination Date shall have the meaning specified in Section 1.1.
----------------
ARTICLE IX
MISCELLANEOUS
9.1 Expenses and Attorneys' Fees. Borrower shall pay all reasonable fees
----------------------------
and expenses incurred by the Lender, including the reasonable fees of counsel,
in connection with the preparation, issuance, maintenance and amendment of this
Agreement and all other Credit Documents to be executed, delivered and performed
by Borrower or any Subsidiary pursuant to or in connection herewith or
therewith, and the consummation of the transactions contemplated herein or
therein, and the administration, protection and enforcement of the Lender's
rights under this Agreement and all other Credit Documents to be executed,
delivered and performed by Borrower or any Subsidiary pursuant to or in
connection herewith or therewith, including without limitation the protection
and
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enforcement of such rights in any bankruptcy, reorganization or insolvency
proceeding involving Borrower or any Subsidiary and any and all proceedings
after the entry of judgment hereon. Borrower further agrees to pay on demand all
reasonable audit fees and accountants' fees incurred by the Lender in connection
with the maintenance and enforcement of this Agreement and all other Credit
Documents to be executed, delivered and performed by Borrower or any Subsidiary
pursuant to or in connection herewith or therewith.
9.2 Assignability; Successors. The respective rights, liabilities and
-------------------------
obligations of Borrower under this Agreement are not assignable or delegable, in
whole or in part, without the prior written consent of the Lender. The Lender
agrees that it shall not assign its respective rights, liabilities and
obligations to any party that is not an Affiliate of the Lender without
Borrower's prior written consent, which consent shall not be unreasonably
withheld. The provisions of this Agreement shall inure to the benefit of and be
binding upon the permitted successors and assigns of the parties.
9.3 Survival. All covenants, agreements, representations and warranties
--------
made in this Agreement or in any document delivered pursuant to this Agreement
shall survive the execution and delivery of this Agreement, the issuance of the
Note, the delivery of any such document and the repayment of the Loans pursuant
to the terms of this Agreement.
9.4 Governing Law. This Agreement and the other Credit Documents issued
-------------
pursuant to or in connection herewith or therewith shall be governed by, and
construed and interpreted in accordance with, the internal Laws of the State of
Wisconsin without giving effect to its conflicts of law provisions.
9.5 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement. The article and
section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
9.6 Entire Agreement. This Agreement and the other Credit Documents
----------------
referred to herein and therein contain the entire understanding of the parties
with respect to the subject matter hereof. There are no restrictions, promises,
warranties, covenants or undertakings other than those expressly set forth in
this Agreement. This Agreement supersedes all prior negotiations, agreements
and undertakings between the parties with respect to such subject matter.
9.7 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed
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to have been given (a) upon delivery if hand delivered, or (b) upon deposit in
the United States mail, postage prepaid, or with a nationally recognized
overnight commercial carrier, airbill prepaid, or (c) upon transmission if by
facsimile, provided that such transmission is promptly confirmed by hand
delivery, mail or as otherwise expressly provided herein, and each such
communication or notice shall be addressed as follows, unless and until any
party notifies the other in accordance with this Section of a change of address:
If to Borrower: PMC International, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: President
If to Lender: The Ziegler Companies, Inc.
215 North Main Street
West Bend, Wisconsin 53095
Attention: Dennis Wallestad
Jeffrey Vredenbregt
9.8 Amendment. No amendment of this Agreement shall be effective unless
---------
in writing and signed by Borrower and the Lender.
9.9 Taxes. If any transfer or documentary taxes, assessments or charges
-----
levied by any governmental authority shall be payable by reason of the
execution, delivery or recording of this Agreement or any other Credit Document
issued or delivered pursuant hereto or thereto, Borrower shall pay all such
taxes, assessments and charges, including interest and penalties, and hereby
indemnifies the Lender against any liability therefor.
9.10 Accounting Terms. All accounting terms used in this Agreement shall
----------------
be construed in accordance with generally accepted accounting principles
consistent with those used in the preparation of the financial statements
referred to in Section 4.2 hereof.
9.11 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement in such jurisdiction or affecting the
validity or enforceability of any provision in any other jurisdiction.
9.12 Indemnification. In consideration of the execution and delivery of
---------------
this Agreement by the Lender and the agreement to extend the credit provided
hereunder, Borrower hereby agrees to indemnify, exonerate and hold the Lender
and each of the officers, directors, employees, agents and attorneys of the
Lender (collectively, the "Lender Parties") free and harmless from and against
any and all actions, causes of action, suits, losses, liabilities, damages and
expenses, including without limitation,
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reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Lender Parties or any of them as a result of, or
arising out of, or relating to (a) the execution, delivery, performance,
enforcement or administration of this Agreement or any other Credit Document
executed or delivered in connection with this Agreement, or (b) the non-
compliance by Borrower or any Subsidiary or by any property of Borrower or any
Subsidiary with Environmental Laws or Borrower or a Subsidiary's liabilities
under such Laws. To the extent that the foregoing undertaking may be
unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable Law. All indemnities set forth
in this Agreement shall survive the execution and delivery of this Agreement and
the Note and the repayment of the Loans.
9.13 Cross Collateral. All of the Collateral shall serve as collateral
----------------
for all of the Obligations under this Agreement and all other Credit Documents
executed in connection herewith and therewith, and Borrower hereby grants a
security interest in the Collateral to the Lender, to the extent of Borrower's
interest in the Collateral, to secure all such Obligations.
9.14 Waiver of Jury Trial. THE LENDER AND BORROWER HEREBY KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTE, THE SECURITY AGREEMENTS, OR ANY OTHER
CREDIT DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE LENDER OR BORROWER. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
9.15 Conversion. At the option of the Lender, the Note (for the then
----------
outstanding principal and, if desired by Lender, the then outstanding interest,
in part or in whole, at the time of conversion or such lesser amount as selected
by the Lender in a written notice to the Borrower) may be converted, in whole or
in part, without expense to Lender, into Borrower's Common Stock, par value
$.01, ("Common Stock"). The conversion price shall be $.60 for each share of
Common Stock, subject to adjustment as set forth below ("Conversion Price").
The Borrower hereby agrees that at all times the number of shares of Common
Stock that will be delivered upon conversion shall be reserved for exercise. No
fractional shares shall be issued upon conversion.
The Lender, by virtue hereof, shall not be entitled to any rights of a
stockholder in the Borrower, until the Note is converted in whole or in part.
-23-
<PAGE>
In case the Borrower shall effect a stock dividend, stock split or reverse
stock split of the outstanding shares of Common Stock or Preferred Stock, the
Conversion Price shall be proportionately decreased in the case of a stock
dividend or stock split or increased in the case of a reverse stock split (on
the date that such transaction shall become effective) by multiplying the
Conversion Price in effect immediately prior to the stock dividend or stock
split by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately prior to such stock dividend or stock split, and
the denominator of which is the number of shares of Common Stock outstanding
immediately after such stock dividend or stock split.
In case of any consolidation or merger of the Borrower with or into another
corporation (other than a merger with a subsidiary, in which merger the Borrower
is the continuing corporation) or in the case of any sale or conveyance to
another corporation of the property of the Borrower as an entirety or
substantially as an entirety, the Borrower shall cause effective provision to be
made so that the Note holder shall have the right thereafter, by exercising this
Note, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such consolidation, merger, sale or conveyance as
may be issued or payable with respect to or in exchange for the number of shares
of the common stock of the Borrower theretofore purchasable upon the exercise of
the Note had such consolidation, merger, sale or conveyance not taken place.
The foregoing provision shall similarly apply to successive consolidations,
mergers, sales or conveyances.
Notwithstanding anything to the contrary, the Borrower shall not be
required to give effect to any adjustment in the Conversion Price unless and
until the net effect of one or more adjustments, determined as above provided,
shall have required a change of the Conversion Price by at least one cent, but
when the cumulative net effect of more than one adjustment so determined shall
be to change the actual Conversion Price by at least one cent, such change in
the Conversion Price thereupon be given effect.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Credit Agreement
as of the day and year first above written.
PMC INTERNATIONAL, INC.
By: /s/ C.R. Tucker
------------------------------
Title: CEO
---------------------------
THE ZIEGLER COMPANIES, INC.
By: /s/ Dennis Wallestad
------------------------------
Title: CFO
---------------------------
-25-
<PAGE>
EXHIBIT C-13
STOCK OPTION AGREEMENT (PREFERRED)
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 15, 1998 by and among The
Ziegler Companies, Inc., a Wisconsin corporation ("Ziegler"), and PMC
International, Inc., a Colorado corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties are entering into a convertible promissory note.
WHEREAS, as a condition to Ziegler's willingness to enter into the
convertible promissory note, Ziegler has requested that the Company agree, and
the Company has so agreed, to grant to Ziegler an option with respect to certain
shares of the Company's $0.325 Cumulative Convertible Series A Preferred Stock,
no value ("Preferred Stock"), on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, to induce Ziegler to enter into the convertible promissory
note, and in consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Ziegler an irrevocable
option (the "Company Option") to purchase 111,818 shares of Preferred Stock as
of the date hereof, subject to adjustment as provided in Section 7 (such shares
being referred to herein as the "Company Shares"), of the Company (the "Company
Preferred Stock") in the manner set forth below at a price (the "Exercise
Price") per Company Share of $2.50 payable in cash.
2. Exercise of Option. The Company Option may be exercised by Ziegler, in
whole or in part, at any time or from time to time until the Company Option
expires, without expense to Ziegler. In the event Ziegler wishes to exercise the
Company Option, Ziegler shall deliver to the Company a written notice (an
"Exercise Notice") specifying the total number of Company Shares it wishes to
purchase. Each closing of a purchase of Company Shares (a "Closing") shall occur
at a place, on a date and at a time designated by Ziegler in an Exercise Notice
delivered at least two business days prior to the date of the Closing. The
Company Option shall terminate December 31, 1999. Upon the giving by Ziegler to
the Company of the Exercise Notice and the tender of the applicable aggregate
Exercise Price, Ziegler shall be deemed to be the holder of record of the
Company Shares issuable upon such exercise, notwithstanding that the stock
<PAGE>
transfer books of the Company shall then be closed or that certificates
representing such Company Shares shall not then be actually delivered to
Ziegler.
3. Closing. At any Closing, (a) the Company will deliver to Ziegler or
its designee a single certificate in definitive form representing the number of
the Company Shares designated by Ziegler in its Exercise Notice, such
certificate to be registered in the name of Ziegler and to bear the legend set
forth in Section 8, and (b) Ziegler will deliver to the Company the aggregate
purchase price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. The Company shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates in the name of Ziegler or its designee.
4. Representations and Warranties of the Company. The Company represents
and warrants to Ziegler that (a) the Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado
and has the corporate power and authority to enter into this Agreement, and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
the Company, constitutes a valid and binding obligation of the Company and,
assuming this Agreement constitutes a valid and binding obligation of Ziegler,
is enforceable against the Company in accordance with its terms, (d) the Company
has taken all necessary corporate action to authorize and reserve for issuance
and to permit it to issue, upon exercise of the Company Option, and at all times
from the date hereof through the expiration of the Company Option will have
reserved, authorized and unissued Company Shares equal to 111,818 of the
outstanding Shares of Preferred Stock dated hereof, such amount being subject to
adjustment as provided in Section 7, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, (e) upon delivery of the Company Shares to Ziegler
upon the exercise of the Company Option, Ziegler will acquire the Company Shares
free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever, (f) the execution and delivery of this
Agreement by the Company does not, and the consummation by the Company of the
transactions contemplated hereby will not, violate, conflict with, or result in
a breach of any provision of, or constitute a default (with or without notice or
lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material benefit under or the
creation of a lien, pledge, security interest or other encumbrance on assets of
the Company or any of its subsidiaries.
-2-
<PAGE>
5. Representations and Warranties of Ziegler. Ziegler represents and
warrants to the Company that (a) Ziegler is a corporation duly organized,
validly existing and in good standing under the laws of the State of Wisconsin
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Ziegler and the consummation by Ziegler of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Ziegler and no other corporate proceedings on the part of Ziegler
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Ziegler and constitutes a valid and binding obligation of Ziegler, and, assuming
this Agreement constitutes a valid and binding obligation of Company, is
enforceable against Ziegler in accordance with its terms.
6. Voting of Shares. Ziegler shall vote any shares of capital stock
acquired by such party pursuant to this Agreement, or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act")) as it sees fit.
7. Adjustment Upon Changes in Capitalization. Without limitation to any
restriction on the Company contained in this Agreement, in the event of any
change in Company Preferred Stock by reason of stock dividends, splitups,
mergers, recapitalizations, combinations, exchange of shares or the like, or the
sale of Preferred Stock or the grant of any option to anyone other than Ziegler,
the type and number of shares or securities subject to the Company Option, and
the purchase price per share provided in Section 1, shall be adjusted
appropriately to restore to Ziegler its rights hereunder to purchase the
remaining amount of such Preferred Stock.
8. Restrictive Legends. Each certificate representing shares of Company
Preferred Stock issued to Ziegler pursuant to the Option, shall include a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Ziegler shall have delivered
to the Company a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such legend is not required for
purposes of the Securities Act; and (ii) the reference to the provisions
-3-
<PAGE>
to this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference. In addition,
such certificates shall bear any other legend as may be required by law.
9. Binding Effect; No Assignment; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or the
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party. nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement.
10. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate or irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
11. Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
thereof.
12. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary or in order to consummate the transactions contemplated hereby.
13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regulatory agency
determines that Ziegler is not permitted to acquire the full number of shares of
Company
-4-
<PAGE>
Preferred Stock provided in Section 1 hereof (as the same may be adjusted), it
is the express intention of the Company to allow Ziegler to acquire or to
require the Company to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
14. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (i) delivered personally, or (ii) sent by
reputable overnight courier service, or (iii) telecopies (which is confirmed),
or (iv) five days after being mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
-5-
<PAGE>
A. If to Ziegler, to:
The Ziegler Companies, Inc.
215 N. Main Street
West Bend, WI 53095-3317
Attention: S. Charles O'Meara, Esq.
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202-4497
Attention: Conrad G. Goodkind, Esq.
B. If to the Company, to:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, CO 80202
Attention: C.R. Tucker
with a copy to:
Holme Roberts & Owen LLP
Suite 4100, 1700 Lincoln
Denver, CO 80203
Attention: Francis R. Wheeler, Esq.
15. Governing Law; Choice of Forum. This Agreement shall be governed by
and construed in accordance with the laws of the State of Wisconsin applicable
to agreements made and to be performed within such State.
16. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. 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 descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
-6-
<PAGE>
17. Expenses. Except as otherwise expressly provided herein, all costs
and expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
18. Extension of Time Periods. The time periods for exercise of certain
rights under the Agreement shall be extended to the extent necessary to avoid
any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
19. Replacement of Company Option. Upon receipt by the Company of
evidence reasonably satisfactory to it on the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, the Company will execute and deliver a new
Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
THE ZIEGLER COMPANIES, INC.
By: /s/ S. Charles O'Meara
-------------------------------
Name: S. Charles O'Meara
-----------------------
Title: General Counsel
-----------------------
PMC INTERNATIONAL, INC.
By: /s/ C.R. Tucker
-------------------------------
Name: C.R. Tucker
-----------------------
Title: CEO
-----------------------
-7-
<PAGE>
EXHIBIT C-14
STOCK OPTION AGREEMENT (COMMON)
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 3, 1998 by and between The
Ziegler Companies, Inc., a Wisconsin corporation ("Ziegler"), and PMC
International, Inc., a Colorado corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties are entering into a $3.5 million credit facility.
WHEREAS, as a condition to Ziegler's willingness to enter into the $3.5
million credit facility, Ziegler has requested that the Company agree, and the
Company has so agreed, to grant to Ziegler an option with respect to certain
shares of the Company's Common Stock, $.01 par value ("Common Stock"), on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce Ziegler to enter into the $3.5 million credit
facility, and in consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants as of the date hereof
to Ziegler an irrevocable option (the "Company Option") to purchase 4,500,000
shares of Common Stock, subject to adjustment as provided in Section 7 (such
shares being referred to herein as the "Company Shares"), in the manner set
forth below at a price (the "Exercise Price") per Company Share of $.60 payable
in cash. The Company Option shall expire on the later of (1) March 31, 1999, or
(2) fifteen (15) days after the date all loans (and interest) from Ziegler and
its affiliates to the Company have been repaid in full and all amounts due to
Ziegler under the Agreement and Plan of Merger have been paid in full ("the
"Expiration Date").
2. Exercise of Option. The Company Option may be exercised by
Ziegler, in whole or in part, at any time or from time to time until the Company
Option expires, without expense to Ziegler. In the event Ziegler wishes to
exercise the Company Option, Ziegler shall deliver to the Company a written
notice (an "Exercise Notice") specifying the total number of Company Shares it
wishes to purchase. Each closing of a purchase of Company Shares (a "Closing")
shall occur at a place, on a date and at a time designated by Ziegler in an
Exercise Notice delivered at least two business days prior to the date of the
Closing. Upon the delivery by Ziegler to the Company of the Exercise Notice and
the applicable aggregate Exercise Price, Ziegler shall be deemed to be the
<PAGE>
holder of record of the Company Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company may then be closed
or that certificates representing such Company Shares may not then be actually
delivered to Ziegler.
3. Closing. At any Closing, (a) the Company will deliver to Ziegler
or its designee a single certificate in definitive form representing the number
of the Company Shares designated by Ziegler in its Exercise Notice, such
certificate to be registered in the name of Ziegler and to bear the legend set
forth in Section 8, and (b) Ziegler will deliver to the Company the aggregate
purchase price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. The Company shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates in the name of Ziegler or its designee.
4. Representations and Warranties of the Company. The Company
represents and warrants to Ziegler that (a) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has the corporate power and authority to enter into this Agreement,
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Company, constitutes a valid and binding obligation of the
Company and, assuming this Agreement constitutes a valid and binding obligation
of Ziegler, is enforceable against the Company in accordance with its terms, (d)
the Company has taken all necessary corporate action to authorize and reserve
for issuance and to permit it to issue, upon exercise of the Company Option, and
at all times from the date hereof through the expiration of the Company Option
will have reserved, authorized and unissued Company Shares equal to 4,500,000 of
the outstanding Shares of Common Stock, such amount being subject to adjustment
as provided in Section 7, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable, (e) upon delivery of the Company Shares to Ziegler against
full payment thereof, Ziegler will acquire the Company Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (f) the execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under or the creation of a lien,
pledge, security interest or other encumbrance on assets of the Company or any
of its subsidiaries.
-2-
<PAGE>
5. Representations and Warranties of Ziegler. Ziegler represents
and warrants to the Company that (a) Ziegler is a corporation duly organized,
validly existing under the laws of the State of Wisconsin and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by
Ziegler and the consummation by Ziegler of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Ziegler and no other corporate proceedings on the part of Ziegler are necessary
to authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Ziegler and constitutes a
valid and binding obligation of Ziegler, and, assuming this Agreement
constitutes a valid and binding obligation of Company, is enforceable against
Ziegler in accordance with its terms.
6. Voting of Shares. Ziegler shall vote any shares of capital stock
acquired by it pursuant to this Agreement, or otherwise beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act")) as it sees fit.
7. Adjustment Upon Changes in Capitalization. Without limitation to
any restriction on the Company contained in the Agreement and Plan of Merger,
dated October 29, 1998, among Ziegler, ZACQ Corp., a Colorado corporation and
wholly owned subsidiary of Ziegler, and the Company, in the event of any change
in the Common Stock by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Company Option, and the Exercise
Price per share provided in Section 1, shall be adjusted appropriately to
restore to Ziegler its rights hereunder. Notwithstanding any other provision of
this Agreement, from the date hereof to the Expiration Date, the Company shall
not, without the prior written consent of Ziegler, issue or sell, or authorize
or propose the issuance or sale of any shares of Common Stock, or securities
convertible into any shares of Common Stock, or any rights, warrants or options
to acquire any shares of Common Stock.
8. Restrictive Legends. Each certificate representing shares of
Company Common Stock issued to Ziegler pursuant to the Option, shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s)
-3-
<PAGE>
without such reference if Ziegler shall have delivered to the Company a copy of
a letter from the staff of the Securities and Exchange Commission, or an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such legend is not required for purposes of the Securities Act; and
(ii) the reference to the provisions to this Agreement in the above legend shall
be removed by delivery of substitute certificate(s) without such reference if
the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference. In addition, such certificates shall bear any other legend as may be
required by law.
9. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation of
law, or with the written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement.
10. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate or
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
11. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
12. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary to consummate the transactions contemplated hereby.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery
-4-
<PAGE>
of an amendment to this Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof. If for any
reason any such court or regulatory agency determines that Ziegler is not
permitted to acquire the full number of shares of Company Common Stock provided
in Section 1 hereof (as the same may be adjusted), it is the express intention
of the Company to allow Ziegler to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including but not limited to money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the result
of such holding or order.
14. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) upon delivery if delivered personally,
or (ii) the next business day if sent by reputable overnight courier service, or
(iii) upon sending if sent by telecopy (which is confirmed), or (iv) five days
after being mailed by registered or certified mail (return receipt requested),
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
A. If to Ziegler, to:
The Ziegler Companies, Inc.
215 N. Main Street
West Bend, WI 53095-3317
Attention: S. Charles O'Meara, Esq.
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202-4497
Attention: Conrad G. Goodkind, Esq.
-5-
<PAGE>
B. If to the Company, to:
PMC International, Inc.
555 17th Street, 14th Floor
Denver, CO 80202
Attention: C.R. Tucker and Scott A. MacKillop
with a copy to:
Holme Roberts & Owen LLP
Suite 4100, 1700 Lincoln
Denver, CO 80203
Attention: Francis R. Wheeler, Esq.
15. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of Wisconsin
applicable to agreements made and to be performed within such State.
16. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. 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 descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
17. Expenses. Except as otherwise expressly provided herein, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
18. Extension of Time Periods. The time periods for exercise of
certain rights under the Agreement shall be extended to the extent necessary to
avoid any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
19. Replacement of Company Option. Upon receipt by the Company of
evidence reasonably satisfactory to it on the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, the Company will execute and deliver a new
Agreement of like tenor and date.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
THE ZIEGLER COMPANIES, INC.
By: /s/ Dennis Wallestad
-------------------------
Name: Dennis Wallestad
-------------------
Title: CFO
------------------
PMC INTERNATIONAL, INC.
By: /s/ C.R. Tucker
-------------------------
Name: C.R. Tucker
-------------------
Title: CEO
------------------
-7-
<PAGE>
EXHIBIT C-15
SHAREHOLDER TENDER AGREEMENT
This Shareholder Tender Agreement (the "Agreement") is made and entered
into as of the _____ day of _______, 1998, by and between The Ziegler Companies,
Inc., a Wisconsin corporation ("Ziegler"), and ______________________________
("Shareholder"), a shareholder of PMC International, Inc., a Colorado
corporation (the "Company").
WHEREAS, Ziegler has entered into negotiations with the Company and,
subject to entering into a definitive merger agreement, proposes to offer to
purchase all of the outstanding shares of the Company's common stock, par value
$.01 per share (the "Common Stock") at a price of at least $__________ per share
in a tender offer and proceed with a subsequent merger; and
WHEREAS, Ziegler desires the tender of Shareholder's shares of Common Stock
in the tender offer, and Shareholder is willing to tender [his/her/its] shares
of Common Stock in the tender offer at a price of at least $__________ per
share;
NOW, THEREFORE, in consideration of inducing Ziegler to proceed with
negotiating a definitive merger agreement and a tender offer and the premises
and the mutual covenants and agreements set forth herein and for other
consideration, the validity and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Shareholder Tender. Shareholder agrees to tender as promptly as
practicable after Ziegler commences (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended) an offer to purchase all
outstanding shares of Common Stock at a price of at least $__________ per share
(the "Offer"), to Ziegler or an affiliate all shares of Common Stock which are
outstanding and beneficially owned by Shareholder as of this date (_______
shares) and all shares subsequently acquired by Shareholder, pursuant to and in
accordance with the terms and conditions of the Offer and to not withdraw such
shares.
2. Termination. If any of the conditions set forth in the Offer have not
been satisfied or waived by Ziegler by December 31, 1998 (or earlier, if
required by law), this Agreement shall terminate and Ziegler shall return all
shares of Common Stock, if any, tendered by Shareholder.
3. Effect of Termination. In the event this Agreement is terminated
pursuant to Section 2 hereof, this Agreement shall become void and have no
effect, without any liability on the part of any party or its directors,
officers or shareholders.
4. Legality. The parties stipulate and agree that the provisions
contained herein are reasonable and are not known or believed to be in violation
of any federal or state law or regulation. In the event a court of competent
jurisdiction finds any provision contained herein to be illegal or
unenforceable, such court may modify such provision to make it valid and
enforceable. Such modification shall not affect the remainder of this Agreement,
which shall continue at all times to be valid and enforceable.
5. Entire Agreement. This Agreement contains the entire understanding of
the parties relative to the matters contained herein and therein, and may be
assigned to a wholly owned subsidiary of Ziegler, at Ziegler's option.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Wisconsin.
7. Counterparts. This Agreement may be executed in two counterparts,
manually or in facsimile, each of which shall be deemed to be an original, but
both of which, taken together, shall constitute one and the same instrument.
8. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
<PAGE>
9. No Liability. This Agreement does not constitute and will not give
rise to any legally binding obligation on the part of Ziegler or its affiliates
to enter into a definitive merger agreement or proceed with the Offer, and no
past or future action, course of conduct, or failure to act relating to the
negotiation of the terms of any definitive merger agreement, will give rise to
or serve as a basis for any obligation or other liability on the part of Ziegler
or its affiliates.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
------------------------------------
[Name of Shareholder]
The Ziegler Companies, Inc.
By:
--------------------------------
Its
--------------------------------
Exhibit C-15 Page 2
<PAGE>
SIGNED SHAREHOLDER TENDER AGREEMENTS
10/29/98
<TABLE>
<CAPTION>
SHAREHOLDER NAME # of SHARES
<S> <C>
Berry, Evelyn Custodian for Kimberly 2,500
Berry, Joseph J. 5,000
Berry, Joseph S. Trust, Evelyn trustee 2,500
Berry, Todd P. Trust, Evelyn trustee 2,500
Brown, Robert and Judith Thomson 3,100
Cuthbertson, Philip J. 5,000
Daly, Emmett J. 7,562
Daly, Emmett/Regina 17,437
Dobel, Maureen E. 1,039.67
Duffy, John c/f Kara Duffy 250
Duffy, John c/f Kevin T. 150
Flinn, Michael 5,500
Keefe, Bruyette & Woods 123,166.5
Lewis, Adam J. 6,666.5
Lortcher, Peggy 1,762.5
Lott, Charles H. 4,037
Lott, James C. ITF Kathleen 1,500
Lott, James/Mary 8,500
Lott, Mary E. V. Brown Estate Securities 3,462
MacKillop, Scott A. 5,500
Michaud, Emily L. 5,750
Michaud, Thomas 3,250
Miller, Gary 5,500
Nevcorp 1,000
Selzer, Geoffrey 16,500
Shepard, Kate 2,643.75
Thomas, J. W. Nevil 1,500
Thomas, Susanne E. 2,500
Vadas, Bradley H. 5,000
Van Arkel, Geremy 10,000
Woelk, Guy 1,500
262,276.92
</TABLE>
<PAGE>
EXHIBIT C-16
WARRANT PURCHASE AGREEMENT
The undersigned ("Holder") is the holder of certain warrants to purchase
shares of common stock, par value $.01 per share, of PMC International, Inc., a
Colorado corporation (the "Company"). Holder hereby accepts the Company's offer
to purchase from Holder the number of such warrants indicated below, at a
purchase price of $.05 per warrant share.
Number of Warrants: _______________
Date: _____________________________
HOLDER (If an entity) HOLDER (If an individual)
__________________________________ ___________________________________
Print: __________________________ Print: ___________________________
By: __________________________
Print: __________________________
Its: __________________________
<PAGE>
SIGNED WARRANT PURCHASE AGREEMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------
WARRANTHOLDER NAME # OF SHARES
- ------------------------------------------------------
<S> <C>
Bedford Capital Financial Corporation 32,500
- -----------------------------------------------------
Bedford Capital Financial, Inc. 1,563
- -----------------------------------------------------
Emmett J. Daly 31,250
- -----------------------------------------------------
Maureen Dobel 313
- -----------------------------------------------------
Keefe, Bruyette & Woods 34,375
- -----------------------------------------------------
Ladenburg, Thalmann & Co., Inc. 50,000
- -----------------------------------------------------
TOTAL 150,001
- ------------------------------------------------------
</TABLE>
<PAGE>
CONTINUING GUARANTY (Unlimited)
(For Consumer or Business Transactions)
Dated October 15, 1998
GUARANTY. For value received, and to induce The Ziegler Companies, Inc. of
West Bend, Wisconsin ("Lender"), to extend credit or to grant or continue other
credit accommodations to PMC International, Inc. ("Debtor"), the undersigned
jointly and severally guarantee payment of the Obligations defined below when
due or, to the extent not prohibited by law, at the time any Debtor becomes the
subject of bankruptcy or other insolvency proceedings. "Obligations" means all
loans, drafts, overdrafts, checks, notes, and all other debts, obligations and
liabilities of every kind and description, whether of the same or a different
nature, arising out of credit previously granted, credit contemporaneously
granted or credit granted in the future by Lender to any Debtor, to any Debtor
and another, or to another guaranteed or endorsed by any Debtor. Obligations
include interest and charges and the amount of payments made to Lender or
another by or on behalf of any Debtor which are recovered from Lender by a
trustee, receiver, creditor or other party pursuant to applicable federal or
state law, and to the extent not prohibited by law, all costs, expenses and
attorneys' fees at any time paid or incurred before and after judgement in
endeavoring to collect all or part of any of the above, or to realize upon this
Guaranty, or any collateral securing any of the above, including those incurred
in successful defense or settlement of any counterclaim brought by Debtor or the
undersigned or incident to any action or proceeding involving Debtor or the
undersigned brought pursuant to the United States Bankruptcy Code. Unless a
lien would be prohibited by law or would render a nontaxable account taxable,
the undersigned grant to Lender a security interest and lien in any deposit
account any of the undersigned may at any time have with Lender. Lender may, at
any time after the occurrence of an event of default and notice and opportunity
to cure, if required by (S)425.105, Wis. Stats., set-off any amount unpaid on
the Obligations against any deposit balances any of the undersigned may at any
time have with Lender, or other money now or hereafter owed any of the
undersigned by Lender. This Guaranty is also secured (to the extent not
prohibited by law) by all existing and future security agreements between Lender
and any of the undersigned and by any mortgage stating it secures guaranties of
any of the undersigned. This Guaranty is valid and enforceable against the
undersigned even though any Obligation is
<PAGE>
invalid or unenforceable against any Debtor.
WAIVER. To the extent not prohibited by law the undersigned expressly
waive notice of the acceptance of this Guaranty, the creation of any present or
future Obligation, default under any Obligation, proceedings to collect from any
Debtor or anyone else, all diligence of collection and presentment, demand,
notice and protest and any right to disclosures from Lender regarding the
financial condition of any Debtor or guarantor of the Obligations or the
enforceability of the Obligations. No claim, including a claim for
reimbursement, subrogation, contribution or indemnification which any of the
undersigned may, as a guarantor of the Obligations, have against a co-guarantor
of any of the Obligations or against any Debtor shall be enforced nor any
payment accepted until the Obligations are paid in full and no payments to or
collections by Lender are subject to any right of recovery.
CONSENT. With respect to any of the Obligations, Lender may from time to
time before or after revocation of this Guaranty without notice to the
undersigned and without affecting the liability of the undersigned (a)
surrender, release, impair, sell or otherwise dispose of any security or
collateral for the Obligations, (b) release or agree not to sue any guarantor or
surety, (c) fail to perfect its security interest in or realize upon any
security or collateral, (d) fail to realize upon any of the Obligations or to
proceed against any Debtor or any guarantor or surety, (e) renew or extend the
time of payment, (f) increase or decrease the rate of interest or the amount of
the Obligations, (g) accept additional security or collateral, (h) determine the
allocation and application of payments and credits and accept partial payments,
(i) determine what, if anything, may at any time be done with reference to any
security or collateral, and (j) settle or compromise the amount due or owing or
claimed to be due or owing from any Debtor, guarantor or surety, which
settlement or compromise shall not affect the undersigned's liability for the
full amount of the unpaid Obligations. The undersigned expressly consent to and
waive notice of all of the above. To the extent not prohibited by law, the
undersigned consent that venue for any legal proceeding relating to the
collection of this Guaranty shall be, at Lender's option, the county in which
Lender has its principal office in this state, the county in which any of the
undersigned resides or the county in which this Guaranty was executed by the
undersigned.
PERSONS BOUND. This Guaranty benefits Lender, its successors and assigns,
and binds the undersigned, their respective heirs, personal representatives,
successors and
<PAGE>
assigns.
ENTIRE AGREEMENT. This Guaranty is intended by the undersigned and Lender
as a final expression of this Guaranty and as a complete and exclusive statement
of its terms, there being no conditions to the full effectiveness of this
Guaranty. This Guaranty may not be supplemented or modified except in writing.
This Guaranty includes additional provision on the reverse side.
NOTICE TO GUARANTOR
You are being asked to guarantee the past, present and future Obligations
of Debtor. If Debtor does not pay, you will have to. You may also have to pay
collection costs. Lender can collect the Obligations from you without first
trying to collect from Debtor or another guarantor.
For Wisconsin Married Residents Only: Each guarantor who signs above
represents that this obligation is incurred in the interest of his or her
marriage or family.
X X
<PAGE>
ADDITIONAL PROVISIONS
REPRESENTATIONS. The undersigned acknowledge and agree that Lender (a) has not
made any representations or warranties with respect to, (b) does not assume any
responsibility to the undersigned for, and (c) has no duty to provide
information to the undersigned regarding, the enforceability of any of the
Obligations or the financial condition of any Debtor or guarantor. The
undersigned has independently determined the creditworthiness of Debtor and the
enforceability of the Obligations and until the Obligations are paid in full
will independently and without reliance on Lender continue to make such
determinations.
REVOCATION. This is a continuing guaranty and shall remain in full force and
effect until Lender receives written notice of its revocation signed by the
undersigned or actual notice of the death of the undersigned. Upon revocation
by written notice or actual notice of death, this Guaranty shall continue in
full force and effect as to all renewal, extension or increase in the interest
rate of any such Obligation, whether made before or after revocation, shall
constitute an Obligation contracted for or incurred before revocation.
Obligations contracted for or incurred before revocation shall also include
credit extended after revocation pursuant to commitments made before revocation.
Revocation by one of the undersigned shall not affect any of the liabilities or
obligations of any of the other undersigned and this Guaranty shall continue in
full force and effect with respect to them.
X PMC Investment Services, Inc.(Seal) X (Seal)
By: /s/ C.R. Tucker
555 17th Street, 14th Floor
Denver, Colorado 80202
(Address) (Address)
ACKNOWLEDGEMENT
STATE OF COLORADO)
COUNTY OF DENVER)ss.
This instrument was acknowledged before me on October 15, 1998, by C.R. Tucker
(as Chief Executive Officer of PMC Investment Services, Inc.)
/s/ Donna Jean Flemming
Notary Public, Denver County, CO
My Commission (Expires) (Is) 10/12/2002
<PAGE>
CONTINUING GUARANTY (Unlimited)
(For Consumer or Business Transactions)
Dated October 15, 1998
GUARANTY. For value received, and to induce The Ziegler Companies, Inc. of
West Bend, Wisconsin ("Lender"), to extend credit or to grant or continue other
credit accommodations to PMC International, Inc. ("Debtor"), the undersigned
jointly and severally guarantee payment of the Obligations defined below when
due or, to the extent not prohibited by law, at the time any Debtor becomes the
subject of bankruptcy or other insolvency proceedings. "Obligations" means all
loans, drafts, overdrafts, checks, notes, and all other debts, obligations and
liabilities of every kind and description, whether of the same or a different
nature, arising out of credit previously granted, credit contemporaneously
granted or credit granted in the future by Lender to any Debtor, to any Debtor
and another, or to another guaranteed or endorsed by any Debtor. Obligations
include interest and charges and the amount of payments made to Lender or
another by or on behalf of any Debtor which are recovered from Lender by a
trustee, receiver, creditor or other party pursuant to applicable federal or
state law, and to the extent not prohibited by law, all costs, expenses and
attorneys' fees at any time paid or incurred before and after judgement in
endeavoring to collect all or part of any of the above, or to realize upon this
Guaranty, or any collateral securing any of the above, including those incurred
in successful defense or settlement of any counterclaim brought by Debtor or the
undersigned or incident to any action or proceeding involving Debtor or the
undersigned brought pursuant to the United States Bankruptcy Code. Unless a lien
would be prohibited by law or would render a nontaxable account taxable, the
undersigned grant to Lender a security interest and lien in any deposit account
any of the undersigned may at any time have with Lender. Lender may, at any time
after the occurrence of an event of default and notice and opportunity to cure,
if required by (S)425.105, Wis. Stats., set-off any amount unpaid on the
Obligations against any deposit balances any of the undersigned may at any time
have with Lender, or other money now or hereafter owed any of the undersigned by
Lender. This Guaranty is also secured (to the extent not prohibited by law) by
all existing and future security agreements between Lender and any of the
undersigned and by any mortgage stating it secures guaranties of any of the
undersigned. This Guaranty is valid and enforceable against the undersigned even
though any Obligation is
<PAGE>
invalid or unenforceable against any Debtor.
WAIVER. To the extent not prohibited by law the undersigned expressly
waive notice of the acceptance of this Guaranty, the creation of any present or
future Obligation, default under any Obligation, proceedings to collect from any
Debtor or anyone else, all diligence of collection and presentment, demand,
notice and protest and any right to disclosures from Lender regarding the
financial condition of any Debtor or guarantor of the Obligations or the
enforceability of the Obligations. No claim, including a claim for
reimbursement, subrogation, contribution or indemnification which any of the
undersigned may, as a guarantor of the Obligations, have against a co-guarantor
of any of the Obligations or against any Debtor shall be enforced nor any
payment accepted until the Obligations are paid in full and no payments to or
collections by Lender are subject to any right of recovery.
CONSENT. With respect to any of the Obligations, Lender may from time to
time before or after revocation of this Guaranty without notice to the
undersigned and without affecting the liability of the undersigned (a)
surrender, release, impair, sell or otherwise dispose of any security or
collateral for the Obligations, (b) release or agree not to sue any guarantor or
surety, (c) fail to perfect its security interest in or realize upon any
security or collateral, (d) fail to realize upon any of the Obligations or to
proceed against any Debtor or any guarantor or surety, (e) renew or extend the
time of payment, (f) increase or decrease the rate of interest or the amount of
the Obligations, (g) accept additional security or collateral, (h) determine the
allocation and application of payments and credits and accept partial payments,
(i) determine what, if anything, may at any time be done with reference to any
security or collateral, and (j) settle or compromise the amount due or owing or
claimed to be due or owing from any Debtor, guarantor or surety, which
settlement or compromise shall not affect the undersigned's liability for the
full amount of the unpaid Obligations. The undersigned expressly consent to and
waive notice of all of the above. To the extent not prohibited by law, the
undersigned consent that venue for any legal proceeding relating to the
collection of this Guaranty shall be, at Lender's option, the county in which
Lender has its principal office in this state, the county in which any of the
undersigned resides or the county in which this Guaranty was executed by the
undersigned.
PERSONS BOUND. This Guaranty benefits Lender, its successors and assigns,
and binds the undersigned, their respective heirs, personal representatives,
successors and
<PAGE>
assigns.
ENTIRE AGREEMENT. This Guaranty is intended by the undersigned and Lender
as a final expression of this Guaranty and as a complete and exclusive statement
of its terms, there being no conditions to the full effectiveness of this
Guaranty. This Guaranty may not be supplemented or modified except in writing.
This Guaranty includes additional provision on the reverse side.
NOTICE TO GUARANTOR
You are being asked to guarantee the past, present and future Obligations
of Debtor. If Debtor does not pay, you will have to. You may also have to pay
collection costs. Lender can collect the Obligations from you without first
trying to collect from Debtor or another guarantor.
For Wisconsin Married Residents Only: Each guarantor who signs above
represents that this obligation is incurred in the interest of his or her
marriage or family.
X X
<PAGE>
ADDITIONAL PROVISIONS
REPRESENTATIONS. The undersigned acknowledge and agree that Lender (a) has not
made any representations or warranties with respect to, (b) does not assume any
responsibility to the undersigned for, and (c) has no duty to provide
information to the undersigned regarding, the enforceability of any of the
Obligations or the financial condition of any Debtor or guarantor. The
undersigned has independently determined the creditworthiness of Debtor and the
enforceability of the Obligations and until the Obligations are paid in full
will independently and without reliance on Lender continue to make such
determinations.
REVOCATION. This is a continuing guaranty and shall remain in full force and
effect until Lender receives written notice of its revocation signed by the
undersigned or actual notice of the death of the undersigned. Upon revocation by
written notice or actual notice of death, this Guaranty shall continue in full
force and effect as to all renewal, extension or increase in the interest rate
of any such Obligation, whether made before or after revocation, shall
constitute an Obligation contracted for or incurred before revocation.
Obligations contracted for or incurred before revocation shall also include
credit extended after revocation pursuant to commitments made before revocation.
Revocation by one of the undersigned shall not affect any of the liabilities or
obligations of any of the other undersigned and this Guaranty shall continue in
full force and effect with respect to them.
X Portfolio Technology Services, Inc.(Seal) X (Seal)
By: /s/ Scott A. MacKillop
555 17th Street, 14th Floor
Denver, Colorado 80202
(Address) (Address)
ACKNOWLEDGEMENT
STATE OF COLORADO )
COUNTY OF DENVER ) ss.
This instrument was acknowledged before me on October 15, 1998, by Scott A.
MacKillop(as President of Portfolio Technology Services, Inc.)
/s/ Donna Jean Flemming
Notary Public, Denver County, CO
My Commission (Expires) (Is) 10/12/2002
<PAGE>
CONTINUING GUARANTY (Unlimited)
(For Consumer or Business Transactions)
Dated October 15, 1998
GUARANTY. For value received, and to induce The Ziegler Companies, Inc. of
West Bend, Wisconsin ("Lender"), to extend credit or to grant or continue other
credit accommodations to PMC International, Inc. ("Debtor"), the undersigned
jointly and severally guarantee payment of the Obligations defined below when
due or, to the extent not prohibited by law, at the time any Debtor becomes the
subject of bankruptcy or other insolvency proceedings. "Obligations" means all
loans, drafts, overdrafts, checks, notes, and all other debts, obligations and
liabilities of every kind and description, whether of the same or a different
nature, arising out of credit previously granted, credit contemporaneously
granted or credit granted in the future by Lender to any Debtor, to any Debtor
and another, or to another guaranteed or endorsed by any Debtor. Obligations
include interest and charges and the amount of payments made to Lender or
another by or on behalf of any Debtor which are recovered from Lender by a
trustee, receiver, creditor or other party pursuant to applicable federal or
state law, and to the extent not prohibited by law, all costs, expenses and
attorneys' fees at any time paid or incurred before and after judgement in
endeavoring to collect all or part of any of the above, or to realize upon this
Guaranty, or any collateral securing any of the above, including those incurred
in successful defense or settlement of any counterclaim brought by Debtor or the
undersigned or incident to any action or proceeding involving Debtor or the
undersigned brought pursuant to the United States Bankruptcy Code. Unless a lien
would be prohibited by law or would render a nontaxable account taxable, the
undersigned grant to Lender a security interest and lien in any deposit account
any of the undersigned may at any time have with Lender. Lender may, at any time
after the occurrence of an event of default and notice and opportunity to cure,
if required by (S)425.105, Wis. Stats., set-off any amount unpaid on the
Obligations against any deposit balances any of the undersigned may at any time
have with Lender, or other money now or hereafter owed any of the undersigned by
Lender. This Guaranty is also secured (to the extent not prohibited by law) by
all existing and future security agreements between Lender and any of the
undersigned and by any mortgage stating it secures guaranties of any of the
undersigned. This Guaranty is valid and enforceable against the undersigned even
though any Obligation is
<PAGE>
invalid or unenforceable against any Debtor.
WAIVER. To the extent not prohibited by law the undersigned expressly waive
notice of the acceptance of this Guaranty, the creation of any present or future
Obligation, default under any Obligation, proceedings to collect from any Debtor
or anyone else, all diligence of collection and presentment, demand, notice and
protest and any right to disclosures from Lender regarding the financial
condition of any Debtor or guarantor of the Obligations or the enforceability of
the Obligations. No claim, including a claim for reimbursement, subrogation,
contribution or indemnification which any of the undersigned may, as a guarantor
of the Obligations, have against a co-guarantor of any of the Obligations or
against any Debtor shall be enforced nor any payment accepted until the
Obligations are paid in full and no payments to or collections by Lender are
subject to any right of recovery.
CONSENT. With respect to any of the Obligations, Lender may from time to
time before or after revocation of this Guaranty without notice to the
undersigned and without affecting the liability of the undersigned (a)
surrender, release, impair, sell or otherwise dispose of any security or
collateral for the Obligations, (b) release or agree not to sue any guarantor or
surety, (c) fail to perfect its security interest in or realize upon any
security or collateral, (d) fail to realize upon any of the Obligations or to
proceed against any Debtor or any guarantor or surety, (e) renew or extend the
time of payment, (f) increase or decrease the rate of interest or the amount of
the Obligations, (g) accept additional security or collateral, (h) determine the
allocation and application of payments and credits and accept partial payments,
(i) determine what, if anything, may at any time be done with reference to any
security or collateral, and (j) settle or compromise the amount due or owing or
claimed to be due or owing from any Debtor, guarantor or surety, which
settlement or compromise shall not affect the undersigned's liability for the
full amount of the unpaid Obligations. The undersigned expressly consent to and
waive notice of all of the above. To the extent not prohibited by law, the
undersigned consent that venue for any legal proceeding relating to the
collection of this Guaranty shall be, at Lender's option, the county in which
Lender has its principal office in this state, the county in which any of the
undersigned resides or the county in which this Guaranty was executed by the
undersigned.
PERSONS BOUND. This Guaranty benefits Lender, its successors and assigns,
and binds the undersigned, their respective heirs, personal representatives,
successors and
<PAGE>
assigns.
ENTIRE AGREEMENT. This Guaranty is intended by the undersigned and Lender
as a final expression of this Guaranty and as a complete and exclusive statement
of its terms, there being no conditions to the full effectiveness of this
Guaranty. This Guaranty may not be supplemented or modified except in writing.
This Guaranty includes additional provision on the reverse side.
NOTICE TO GUARANTOR
You are being asked to guarantee the past, present and future Obligations
of Debtor. If Debtor does not pay, you will have to. You may also have to pay
collection costs. Lender can collect the Obligations from you without first
trying to collect from Debtor or another guarantor.
For Wisconsin Married Residents Only: Each guarantor who signs above
represents that this obligation is incurred in the interest of his or her
marriage or family.
X X
<PAGE>
ADDITIONAL PROVISIONS
REPRESENTATIONS. The undersigned acknowledge and agree that Lender (a) has not
made any representations or warranties with respect to, (b) does not assume any
responsibility to the undersigned for, and (c) has no duty to provide
information to the undersigned regarding, the enforceability of any of the
Obligations or the financial condition of any Debtor or guarantor. The
undersigned has independently determined the creditworthiness of Debtor and the
enforceability of the Obligations and until the Obligations are paid in full
will independently and without reliance on Lender continue to make such
determinations.
REVOCATION. This is a continuing guaranty and shall remain in full force and
effect until Lender receives written notice of its revocation signed by the
undersigned or actual notice of the death of the undersigned. Upon revocation by
written notice or actual notice of death, this Guaranty shall continue in full
force and effect as to all renewal, extension or increase in the interest rate
of any such Obligation, whether made before or after revocation, shall
constitute an Obligation contracted for or incurred before revocation.
Obligations contracted for or incurred before revocation shall also include
credit extended after revocation pursuant to commitments made before revocation.
Revocation by one of the undersigned shall not affect any of the liabilities or
obligations of any of the other undersigned and this Guaranty shall continue in
full force and effect with respect to them.
X Portfolio Management Consultants, Inc.(Seal) X (Seal)
By: /s/ Scott A. MacKillop
555 17th Street, 14th Floor
Denver, Colorado 80202
(Address) (Address)
ACKNOWLEDGEMENT
STATE OF COLORADO)
COUNTY OF DENVER)ss.
This instrument was acknowledged before me on October 15, 1998, by Scott A.
MacKillop (as President of Portfolio Management Consultants, Inc.)
/s/ Donna Jean Flemming
Notary Public, Denver County, CO
My Commission (Expires) (Is) 10/12/2002
<PAGE>
GENERAL BUSINESS SECURITY AGREEMENT
1. SECURITY INTEREST
Dated October 15, 1998
The undersigned ("Debtor", whether one or more) grants The Ziegler
Companies, Inc. ("Lender") a security interest in all equipment, fixtures,
inventory (including all goods held for sale, lease or demonstration or to be
furnished under contracts of service, goods leased to others, trade-ins and
repossessions, raw materials, work in process and materials or supplies used or
consumed in Debtor's business), documents relating to inventory, general
intangibles, accounts, contract rights, chattel paper and instruments, now owned
or hereafter acquired by Debtor and all additions and accessions to, all spare
and repair parts, special tools, equipment and replacements for, all returned or
repossessed goods the sale of which gave rise to, and all proceeds and products
of the foregoing ("Collateral"), wherever located, to secure all debts,
obligations and liabilities of any Debtor to Lender arising out of credit
previously granted, credit contemporaneously granted and credit granted in the
future by Lender to any Debtor, to any Debtor and another, or to another
guaranteed or indorsed by any Debtor ("Obligations").
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) Ownership. Debtor owns the Collateral free of all encumbrances and
security interests (except Lender's security interest)*. Chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement (other than Lender's)** is on file covering the Collateral
or any of it. Debtor, acting alone, may grant a security interest in the
Collateral.
(b) Sale of goods or services rendered. Each account and chattel paper
constituting Collateral as of this date arose from the performance of services
by Debtor or from a bona fide sale or lease of goods, which have been delivered
or shipped to the account debtor and for which Debtor has genuine invoices,
shipping documents or receipts.
(c) Enforceability. Each account, contract right and chattel paper
constituting Collateral as of this date is genuine and enforceable against the
account debtor according to its
<PAGE>
terms. It and the transaction out of which it arose comply with all applicable
laws and regulations. The amount represented by Debtor to Lender as owing by
each account debtor is the amount actually owing and is not subject to setoff,
credit, allowance or adjustment, except discount for prompt payment, nor has any
account debtor returned the goods or disputed his liability.
(d) Due date. There has been no default as of this date according to the
terms of any Collateral and no step has been taken to foreclose the security
interest it evidences or otherwise enforce its payment.
(e) Financial condition of account debtor. As of this date Debtor has no
notice or knowledge of anything which might impair the credit standing of any
account debtor.
(f) Valid organization. If a corporation, limited liability company or
partnership, Debtor is duly organized, validly existing and in good standing
under the laws of the state of organization and is authorized to do business in
Wisconsin.
(g) Other agreements. Debtor is not in default under any agreement for
the payment of money.
(h) Authority to contract. The execution and delivery of this Agreement
and any instruments evidencing Obligations will not violate or constitute a
breach of Debtor's articles of incorporation or organization, by-laws,
partnership agreement, operating agreement or any other agreement or restriction
to which Debtor is a party or is subject.
(i) Accuracy of information. All information, certificates or statements
given to Lender pursuant to this Agreement shall be true and complete when
given.
(j) Addresses. The address of the Debtor's residence, or if a
corporation, limited liability company or partnership, the address of Debtor's
place of business, or if Debtor has more than one place of business, then the
address of Debtor's chief executive office, is shown opposite Debtor's
signature. The address where the Collateral will be kept, if different from that
appearing opposite Debtor's signature, is . Such locations
shall not be changed without prior written consent of Lender, but the parties
intend that the Collateral, wherever located, is covered by this Agreement.
(k) Change of name or address. Debtor shall immediately advise Lender in
writing of any change in name or address.
(l) Environmental laws. (i) No substance has been, is or will be present,
used, stored, deposited, treated, recycled or disposed of on, under, in or about
any real estate now or at any time owned or occupied by Debtor ("Property")
during the period of Debtor's ownership or use of the Property in a form,
quantity
<PAGE>
or manner which if known to be present on, under, in or about the Property would
require clean-up, removal or some other remedial action ("Hazardous Substance")
under any federal, state or local laws, regulations, ordinances, codes or rules
("Environmental Laws"), (ii) Debtor has no knowledge, after due inquiry, of any
prior use or existence of any Hazardous Substance on the Property by any prior
owner of or person using the Property, (iii) without limiting the generality of
the foregoing, Debtor has no knowledge, after due inquiry, that the Property
contains asbestos, polychlorinated biphenyl components (PCBs) or underground
storage tanks, (iv) there are no conditions existing currently or likely to
exist during the term of this Agreement which would subject Debtor to an
damages, penalties, injunctive relief or clean-up costs in any governmental or
regulatory action or third-party claim relating to any Hazardous Substance, (v)
Debtor is not subject to any court or administrative proceeding, judgment,
decree, order or citation relating to any such substance, and (vi) Debtor in the
past has been, at the present is, and in the future will remain in compliance
with all Environmental Laws. Debtor shall indemnify and hold harmless Lender,
its directors, officers, employees and agents from all loss, cost (including
reasonable attorneys' fees and legal expenses), liability and damage whatsoever
directly or indirectly resulting from, arising out of, or based upon (1) the
presence, use, storage, deposit, treatment, recycling or disposal, at any time,
of any Hazardous Substance on, under, in or about the Property, or the
transportation of any such substance to or from the Property, (2) the violation
or alleged violation of any Environmental Law, permit, judgment or license
relating to the presence, use, storage, deposit, treatment, recycling or
disposal of any Hazardous Substance on, under, in or about the Property, or the
transportation of any Hazardous Substance to or from Property, or (3) the
imposition of any governmental lien for the recovery of environmental clean-up
costs expended under any Environmental Law. Debtor shall immediately notify
Lender in writing of any governmental or regulatory action or third-party claim
instituted or threatened in connection with any Hazardous Substance described
above on, in, under or about the Property.
(m) Fixtures. If any of the Collateral is affixed to real estate, the
legal description of the real estate set forth in each UCC Financing Statement
signed by Debtor is true and correct.
3. SHIPPERS
Shippers authorized to draw drafts on Lender under section
<PAGE>
7(c) are: NA
4. PERSONS BOUND AND OTHER PROVISIONS
The obligations hereunder of all Debtors are joint and several. This
Agreement benefits Lender, its successors and assigns, and binds Debtor(s) and
their respective heirs, personal representatives, successors and assigns. THIS
AGREEMENT INCLUDES ADDITIONAL PROVISIONS ON REVERSE SIDE.
* and the security interest of
Dundee Bancorp Inc. against the
Collateral
** and the financing statements
of Dundee Bancorp Inc.
<PAGE>
ADDITIONAL PROVISIONS
5. SALE AND COLLECTIONS
(a) Sale of inventory. So long as no default exists under any of the
Obligations of this Agreement, Debtor may (a) sell inventory in the ordinary
course of Debtor's business for cash or on terms customary in the trade, at
prices not less than any minimum sale price shown on instruments evidencing
Obligations and describing inventory, or (b) lease inventory on terms customary
in the trade.
(b) Verification and notification. Lender may verify Collateral in any
manner, and Debtor shall assist Lender in so doing. Upon default Lender may at
any time and Debtor shall, upon request of Lender, notify the account debtors to
make payment directly to Lender and Lender may enforce collection of, settle,
compromise, extend or renew the indebtedness of such account debtors. Until
account debtors are so notified, Debtor as agent of Lender, shall make
collections on the Collateral. Lender may at any time notify the bailee of any
Collateral of Lender's security interest.
(c) Deposit with Lender. At any time Lender may require that all proceeds
of Collateral received by Debtor shall be held by Debtor upon an express trust
for Lender, shall not be commingled with any other funds or property of Debtor
and shall be turned over to Lender in precisely the form received (but endorsed
by Debtor if necessary for collection) not later than the business day following
the day of their receipt. All proceeds of Collateral received by Lender directly
or from Debtor shall be applied against the Obligations in such order and at
such times as Lender shall determine.
6. DEBTOR'S COVENANTS
(a) Maintenance of Collateral. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired; keep it free
from all liens, encumbrances and security interests (other than Lender's
security interest); defend it against all claims and legal proceedings by
persons other than Lender; pay and discharge when due all taxes, license fees,
levies and other charges upon it; not sell, lease or otherwise dispose of it or
permit it to become a fixture or an accession to other goods, except for sales
or leases of inventory as provided in this Agreement, not permit it to be used
in violation of any applicable law, regulation or policy of insurance; and, as
to Collateral consisting of instruments and chattel paper, preserve rights in it
against prior parties. Loss of or damage to the Collateral shall not release
Debtor from any
<PAGE>
of the Obligations.
(b) Insurance. Debtor shall keep the Collateral and Lender's interest in
it insured under policies with such provisions, for such amounts and by such
insurers as shall be satisfactory to Lender from time to time, and shall furnish
evidence of such insurance satisfactory to Lender. Subject to Lender's
satisfaction, Debtor is free to select the insurance agent or insurer through
which the insurance is obtained. Debtor assigns (and directs any insurer to pay)
to Lender the proceeds of all such insurance and any premium refund, and
authorizes Lender to indorse in the name of Debtor any instruments for such
proceeds or refunds and, at the option of Lender, to apply such proceeds and
refunds to any unpaid balance of the Obligations, whether or not due, and/or to
restoration of the Collateral, returning any excess to Debtor. Lender is
authorized, in the name of Debtor or otherwise, to make, adjust and/or settle
claims under any credit insurance financed by Lender or any insurance on the
Collateral, or cancel the same after the occurrence of an event of default.
(c) Maintenance of security interest. Debtor shall pay all expenses and
upon request, take any action reasonably deemed advisable by Lender to preserve
the Collateral or to establish, determine priority of, perfect, continue
perfected, terminate and/or enforce Lender's interest in it or rights under this
Agreement.
(d) Taxes and other charges. Pay and discharge all lawful taxes,
assessments and government charges upon Debtor or against its properties prior
to the date on which penalties attach, unless and to the extent only that such
taxes, assessments and charges are contested in good faith and by appropriate
proceedings by Debtor.
(e) Records and statements. Debtor shall furnish to Lender financial
statements at least annually and such other financial information respecting
Debtor at such times and in such form as Lender may request. Debtor shall keep
accurate and complete records respecting the Collateral in such form as Lender
may approve. At such times as Lender may require, Debtor shall furnish to Lender
a statement certified by Debtor and in such form and containing such information
as may be prescribed by Lender, showing the current status and value of the
Collateral.
(f) Inspection of Collateral. At reasonable times Lender may examine the
Collateral and Debtor's records pertaining to it, wherever located, and make
copies of records. Debtor shall assist Lender in so doing.
(g) Service charge. In addition to the required payments
<PAGE>
under the Obligations and this Agreement, Debtor shall pay Lender's then current
service charges for servicing and auditing in connection with this Agreement.
(h) Chattel paper. Lender may require that chattel paper constituting
Collateral shall be on forms approved by Lender. Debtor shall promptly mark all
chattel paper constituting Collateral, and all copies, to indicate conspicuously
the Lender's interest and, upon request, deliver them to Lender.
(i) United State contracts. If any accounts or contract rights
constituting Collateral arose out of contracts with the United States or any of
its departments, agencies or instrumentalities, Debtor will notify Lender and
execute writings required by Lender in order that all money due or to become due
under such contracts shall be assigned to Lender and proper notice of the
assignment given under the Federal Assignment of Claims Act.
(j) Modifications. Without the prior written consent of Lender, Debtor
shall not alter, modify, extend, renew or cancel any accounts or chattel paper
constituting Collateral or any Collateral constituting part of the Debtor's
borrowing base.
(k) Returns and repossessions. Debtor shall promptly notify Lender of the
return to or repossession by Debtor of goods underlying any Collateral and
Debtor shall hold and dispose of them only as Lender directs.
7. RIGHTS OF LENDER
(a) Authority to perform for Debtor. Upon the occurrence of an event of
default or if Debtor fails to perform any of Debtor's duties set forth in this
Agreement or in any evidence of or document relating to the Obligations, Lender
is authorized, in Debtor's name or otherwise, to take any such action including
without limitation signing Debtor's name or paying any amount so required, and
the cost shall be one of the Obligations secured by this Agreement and shall be
payable by Debtor upon demand with interest from the date of payment by Lender
at the highest rate stated in any evidence of any Obligation but not in excess
of the maximum rate permitted by law.
(b) Charging Debtor's credit balance. Unless a lien would be prohibited
by law or would render a nontaxable account taxable, Debtor grants Lender, as
further security for the Obligations, a security interest and lien in any
deposit account Debtor may at any time have with Lender and other money now or
hereafter owed Debtor by Lender and, in addition, agrees that Lender may, at any
time after the occurrence of an event of default, without prior notice or
demand, set-off all or any part of the unpaid balance of the Obligations against
any deposit
<PAGE>
balances or other money now or hereafter owed Debtor by Lender.
(c) Power of attorney. Debtor irrevocably appoints any officer of Lender
as Debtor's attorney, with power after an event of default to receive, open and
dispose of all mail addressed to Debtor; to notify the Post Office authorities
to change the address for delivery of all mail addressed to Debtor to such
address as Lender may designate; and to endorse the name of Debtor upon any
instruments which may come into Lender's possession. Debtor agrees that
Obligations may be created by drafts drawn on Lender by shippers of inventory
named in section 3. Debtor authorizes Lender to honor any such draft accompanied
by invoices aggregating the amount of the draft and describing inventory to be
shipped to Debtor and to pay any such invoices not accompanied by drafts. Debtor
appoints any employee of Lender as Debtor's attorney, with full power to sign
Debtor's name on any instrument evidencing an Obligation, or any renewals or
extensions, or the amount of such drafts honored by Lender and such instruments
may be payable at fixed times or on demand, shall bear interest at the rate from
time to time fixed by Lender and Debtor agrees, upon request of Lender, to
execute any such instruments. This power of attorney to execute instruments may
be revoked by Debtor only by written notice to Lender and no such revocation
shall affect any instruments executed prior to the receipt by Lender of such
notice. All acts of such attorney are ratified and approved and such attorney is
not liable for any act or omission or for any error of judgment or mistake of
fact or law.
(d) Non-liability of Lender. Lender has no duty to determine the validity
of any invoice, the authority of any shipper named in section 3 to ship goods to
Debtor or compliance with any order of Debtor. Lender has no duty to protect,
insure, collect or realize upon the Collateral or preserve rights in it against
prior parties. Debtor releases Lender from any liability for any act or omission
relating to the Obligations, the Collateral or this Agreement, except Lender's
willful misconduct.
8. DEFAULT
Upon the occurrence of one or more of the following events of default:
Nonperformance. Debtor fails to pay when due any of the Obligations or to
perform, or rectify breach of, any warranty or other undertaking by Debtor in
this Agreement or in any evidence of or document relating to the Obligations;
Inability to Perform. Debtor, Debtor's spouse or a surety for any of the
Obligation dies, ceases to exist, becomes insolvent or the subject of bankruptcy
or insolvency proceedings;
<PAGE>
Misrepresentation. Any representation made to induce Lender to extend
credit to Debtor, under this Agreement or otherwise, is false in any material
respect when made; or
Insecurity. Any other event which causes Lender in good faith to deem
itself insecure; all of the Obligations shall, at the option of Lender and
without notice or demand, become immediately payable; and Lender shall have all
rights and remedies for default provided by the Wisconsin Uniform Commercial
Code, as well as any other applicable law and any evidence of or document
relating to any Obligation. With respect to such rights and remedies:
(a) Repossession. Lender may take possession of Collateral without notice
or hearing, which Debtor waives;
(b) Assembling collateral. Lender may require Debtor to assemble the
Collateral and to make it available to Lender at any convenient place designated
by Lender;
(c) Notice of disposition. Written notice, when required by law, sent to
any address of Debtor in this Agreement at least 10 calendar days (counting the
day of sending) before the date of a proposed disposition of the Collateral is
reasonable notice;
(d) Expenses and application of proceeds. Debtor shall reimburse Lender
for any expense incurred by Lender in protecting or enforcing its rights under
this Agreement before and after judgment, including, without limitation,
reasonable attorneys' fees and legal expenses of taking possession, holding,
preparing for disposition and disposing of Collateral. After deduction of such
expenses, Lender may apply the proceeds of disposition to the Obligations in
such order and amounts as it elects; and
(e) Waiver. Lender may permit Debtor to remedy and default without
waiving the default so remedied, and Lender may waive any default without
waiving any other subsequent or prior default by Debtor.
9. INTERPRETATION
The validity, construction and enforcement of this Agreement are governed
by the internal laws of Wisconsin. All terms not otherwise defined have the
meanings assigned to them by the Wisconsin Uniform Commercial Code. Invalidity
of any provision of this Agreement shall not affect the validity of any other
provision. This Agreement is intended by Debtor and Lender as a final expression
of this Agreement and as a complete and exclusive statement of its terms, there
being no conditions to the enforceability of this Agreement. This Agreement may
not be supplemented or modified except in writing.
<PAGE>
PMC International, Inc. (SEAL)
a Colorado corporation
By: /s/ C.R. Tucker
CEO
Address: 555 17th Street By:
14th Floor
Denver, Colorado 80202
(County) Denver
<PAGE>
GENERAL BUSINESS SECURITY AGREEMENT
1. SECURITY INTEREST
Dated October 15, 1998
The undersigned ("Debtor", whether one or more) grants The Ziegler
Companies, Inc. ("Lender") a security interest in all equipment, fixtures,
inventory (including all goods held for sale, lease or demonstration or to be
furnished under contracts of service, goods leased to others, trade-ins and
repossessions, raw materials, work in process and materials or supplies used or
consumed in Debtor's business), documents relating to inventory, general
intangibles, accounts, contract rights, chattel paper and instruments, now owned
or hereafter acquired by Debtor and all additions and accessions to, all spare
and repair parts, special tools, equipment and replacements for, all returned or
repossessed goods the sale of which gave rise to, and all proceeds and products
of the foregoing ("Collateral"), wherever located, to secure all debts,
obligations and liabilities of any Debtor to Lender arising out of credit
previously granted, credit contemporaneously granted and credit granted in the
future by Lender to any Debtor, to any Debtor and another, or to another
guaranteed or indorsed by any Debtor ("Obligations").
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) Ownership. Debtor owns the Collateral free of all encumbrances and
security interests (except Lender's security interest)*. Chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement (other than Lender's)** is on file covering the Collateral
or any of it. Debtor, acting alone, may grant a security interest in the
Collateral.
(b) Sale of goods or services rendered. Each account and chattel paper
constituting Collateral as of this date arose from the performance of services
by Debtor or from a bona fide sale or lease of goods, which have been delivered
or shipped to the account debtor and for which Debtor has genuine invoices,
shipping documents or receipts.
(c) Enforceability. Each account, contract right and chattel paper
constituting Collateral as of this date is genuine and enforceable against the
account debtor according to its
<PAGE>
terms. It and the transaction out of which it arose comply with all applicable
laws and regulations. The amount represented by Debtor to Lender as owing by
each account debtor is the amount actually owing and is not subject to setoff,
credit, allowance or adjustment, except discount for prompt payment, nor has any
account debtor returned the goods or disputed his liability.
(d) Due date. There has been no default as of this date according to the
terms of any Collateral and no step has been taken to foreclose the security
interest it evidences or otherwise enforce its payment.
(e) Financial condition of account debtor. As of this date Debtor has no
notice or knowledge of anything which might impair the credit standing of any
account debtor.
(f) Valid organization. If a corporation, limited liability company or
partnership, Debtor is duly organized, validly existing and in good standing
under the laws of the state of organization and is authorized to do business in
Wisconsin.
(g) Other agreements. Debtor is not in default under any agreement for the
payment of money.
(h) Authority to contract. The execution and delivery of this Agreement
and any instruments evidencing Obligations will not violate or constitute a
breach of Debtor's articles of incorporation or organization, by-laws,
partnership agreement, operating agreement or any other agreement or restriction
to which Debtor is a party or is subject.
(i) Accuracy of information. All information, certificates or statements
given to Lender pursuant to this Agreement shall be true and complete when
given.
(j) Addresses. The address of the Debtor's residence, or if a corporation,
limited liability company or partnership, the address of Debtor's place of
business, or if Debtor has more than one place of business, then the address of
Debtor's chief executive office, is shown opposite Debtor's signature. The
address where the Collateral will be kept, if different from that appearing
opposite Debtor's signature, is . Such locations shall not be
changed without prior written consent of Lender, but the parties intend that the
Collateral, wherever located, is covered by this Agreement.
(k) Change of name or address. Debtor shall immediately advise Lender in
writing of any change in name or address.
(l) Environmental laws. (i) No substance has been, is or will be present,
used, stored, deposited, treated, recycled or disposed of on, under, in or about
any real estate now or at any time owned or occupied by Debtor ("Property")
during the period of Debtor's ownership or use of the Property in a form,
quantity
<PAGE>
or manner which if known to be present on, under, in or about the Property would
require clean-up, removal or some other remedial action ("Hazardous Substance")
under any federal, state or local laws, regulations, ordinances, codes or rules
("Environmental Laws"), (ii) Debtor has no knowledge, after due inquiry, of any
prior use or existence of any Hazardous Substance on the Property by any prior
owner of or person using the Property, (iii) without limiting the generality of
the foregoing, Debtor has no knowledge, after due inquiry, that the Property
contains asbestos, polychlorinated biphenyl components (PCBs) or underground
storage tanks, (iv) there are no conditions existing currently or likely to
exist during the term of this Agreement which would subject Debtor to an
damages, penalties, injunctive relief or clean-up costs in any governmental or
regulatory action or third-party claim relating to any Hazardous Substance, (v)
Debtor is not subject to any court or administrative proceeding, judgment,
decree, order or citation relating to any such substance, and (vi) Debtor in the
past has been, at the present is, and in the future will remain in compliance
with all Environmental Laws. Debtor shall indemnify and hold harmless Lender,
its directors, officers, employees and agents from all loss, cost (including
reasonable attorneys' fees and legal expenses), liability and damage whatsoever
directly or indirectly resulting from, arising out of, or based upon (1) the
presence, use, storage, deposit, treatment, recycling or disposal, at any time,
of any Hazardous Substance on, under, in or about the Property, or the
transportation of any such substance to or from the Property, (2) the violation
or alleged violation of any Environmental Law, permit, judgment or license
relating to the presence, use, storage, deposit, treatment, recycling or
disposal of any Hazardous Substance on, under, in or about the Property, or the
transportation of any Hazardous Substance to or from Property, or (3) the
imposition of any governmental lien for the recovery of environmental clean-up
costs expended under any Environmental Law. Debtor shall immediately notify
Lender in writing of any governmental or regulatory action or third-party claim
instituted or threatened in connection with any Hazardous Substance described
above on, in, under or about the Property.
(m) Fixtures. If any of the Collateral is affixed to real estate, the
legal description of the real estate set forth in each UCC Financing Statement
signed by Debtor is true and correct.
3. SHIPPERS
Shippers authorized to draw drafts on Lender under section
<PAGE>
7(c) are: NA
4. PERSONS BOUND AND OTHER PROVISIONS
The obligations hereunder of all Debtors are joint and several. This
Agreement benefits Lender, its successors and assigns, and binds Debtor(s) and
their respective heirs, personal representatives, successors and assigns. THIS
AGREEMENT INCLUDES ADDITIONAL PROVISIONS ON REVERSE SIDE.
* and the security interest of
Dundee Bancorp Inc. against the
Collateral
** and the financing statements
of Dundee Bancorp Inc.
<PAGE>
ADDITIONAL PROVISIONS
5. SALE AND COLLECTIONS
(a) Sale of inventory. So long as no default exists under any of the
Obligations of this Agreement, Debtor may (a) sell inventory in the ordinary
course of Debtor's business for cash or on terms customary in the trade, at
prices not less than any minimum sale price shown on instruments evidencing
Obligations and describing inventory, or (b) lease inventory on terms customary
in the trade.
(b) Verification and notification. Lender may verify Collateral in any
manner, and Debtor shall assist Lender in so doing. Upon default Lender may at
any time and Debtor shall, upon request of Lender, notify the account debtors to
make payment directly to Lender and Lender may enforce collection of, settle,
compromise, extend or renew the indebtedness of such account debtors. Until
account debtors are so notified, Debtor as agent of Lender, shall make
collections on the Collateral. Lender may at any time notify the bailee of any
Collateral of Lender's security interest.
(c) Deposit with Lender. At any time Lender may require that all proceeds
of Collateral received by Debtor shall be held by Debtor upon an express trust
for Lender, shall not be commingled with any other funds or property of Debtor
and shall be turned over to Lender in precisely the form received (but endorsed
by Debtor if necessary for collection) not later than the business day following
the day of their receipt. All proceeds of Collateral received by Lender
directly or from Debtor shall be applied against the Obligations in such order
and at such times as Lender shall determine.
6. DEBTOR'S COVENANTS
(a) Maintenance of Collateral. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired; keep it free
from all liens, encumbrances and security interests (other than Lender's
security interest); defend it against all claims and legal proceedings by
persons other than Lender; pay and discharge when due all taxes, license fees,
levies and other charges upon it; not sell, lease or otherwise dispose of it or
permit it to become a fixture or an accession to other goods, except for sales
or leases of inventory as provided in this Agreement, not permit it to be used
in violation of any applicable law, regulation or policy of insurance; and, as
to Collateral consisting of instruments and chattel paper, preserve rights in it
against prior parties. Loss of or damage to the Collateral shall not release
Debtor from any
<PAGE>
of the Obligations.
(b) Insurance. Debtor shall keep the Collateral and Lender's interest in
it insured under policies with such provisions, for such amounts and by such
insurers as shall be satisfactory to Lender from time to time, and shall furnish
evidence of such insurance satisfactory to Lender. Subject to Lender's
satisfaction, Debtor is free to select the insurance agent or insurer through
which the insurance is obtained. Debtor assigns (and directs any insurer to
pay) to Lender the proceeds of all such insurance and any premium refund, and
authorizes Lender to indorse in the name of Debtor any instruments for such
proceeds or refunds and, at the option of Lender, to apply such proceeds and
refunds to any unpaid balance of the Obligations, whether or not due, and/or to
restoration of the Collateral, returning any excess to Debtor. Lender is
authorized, in the name of Debtor or otherwise, to make, adjust and/or settle
claims under any credit insurance financed by Lender or any insurance on the
Collateral, or cancel the same after the occurrence of an event of default.
(c) Maintenance of security interest. Debtor shall pay all expenses and
upon request, take any action reasonably deemed advisable by Lender to preserve
the Collateral or to establish, determine priority of, perfect, continue
perfected, terminate and/or enforce Lender's interest in it or rights under this
Agreement.
(d) Taxes and other charges. Pay and discharge all lawful taxes,
assessments and government charges upon Debtor or against its properties prior
to the date on which penalties attach, unless and to the extent only that such
taxes, assessments and charges are contested in good faith and by appropriate
proceedings by Debtor.
(e) Records and statements. Debtor shall furnish to Lender financial
statements at least annually and such other financial information respecting
Debtor at such times and in such form as Lender may request. Debtor shall keep
accurate and complete records respecting the Collateral in such form as Lender
may approve. At such times as Lender may require, Debtor shall furnish to
Lender a statement certified by Debtor and in such form and containing such
information as may be prescribed by Lender, showing the current status and value
of the Collateral.
(f) Inspection of Collateral. At reasonable times Lender may examine the
Collateral and Debtor's records pertaining to it, wherever located, and make
copies of records. Debtor shall assist Lender in so doing.
(g) Service charge. In addition to the required payments
<PAGE>
under the Obligations and this Agreement, Debtor shall pay Lender's then current
service charges for servicing and auditing in connection with this Agreement.
(h) Chattel paper. Lender may require that chattel paper constituting
Collateral shall be on forms approved by Lender. Debtor shall promptly mark all
chattel paper constituting Collateral, and all copies, to indicate conspicuously
the Lender's interest and, upon request, deliver them to Lender.
(i) United State contracts. If any accounts or contract rights
constituting Collateral arose out of contracts with the United States or any of
its departments, agencies or instrumentalities, Debtor will notify Lender and
execute writings required by Lender in order that all money due or to become due
under such contracts shall be assigned to Lender and proper notice of the
assignment given under the Federal Assignment of Claims Act.
(j) Modifications. Without the prior written consent of Lender, Debtor
shall not alter, modify, extend, renew or cancel any accounts or chattel paper
constituting Collateral or any Collateral constituting part of the Debtor's
borrowing base.
(k) Returns and repossessions. Debtor shall promptly notify Lender of the
return to or repossession by Debtor of goods underlying any Collateral and
Debtor shall hold and dispose of them only as Lender directs.
7. RIGHTS OF LENDER
(a) Authority to perform for Debtor. Upon the occurrence of an event of
default or if Debtor fails to perform any of Debtor's duties set forth in this
Agreement or in any evidence of or document relating to the Obligations, Lender
is authorized, in Debtor's name or otherwise, to take any such action including
without limitation signing Debtor's name or paying any amount so required, and
the cost shall be one of the Obligations secured by this Agreement and shall be
payable by Debtor upon demand with interest from the date of payment by Lender
at the highest rate stated in any evidence of any Obligation but not in excess
of the maximum rate permitted by law.
(b) Charging Debtor's credit balance. Unless a lien would be prohibited by
law or would render a nontaxable account taxable, Debtor grants Lender, as
further security for the Obligations, a security interest and lien in any
deposit account Debtor may at any time have with Lender and other money now or
hereafter owed Debtor by Lender and, in addition, agrees that Lender may, at any
time after the occurrence of an event of default, without prior notice or
demand, set-off all or any part of the unpaid balance of the Obligations against
any deposit
<PAGE>
balances or other money now or hereafter owed Debtor by Lender.
(c) Power of attorney. Debtor irrevocably appoints any officer of Lender
as Debtor's attorney, with power after an event of default to receive, open and
dispose of all mail addressed to Debtor; to notify the Post Office authorities
to change the address for delivery of all mail addressed to Debtor to such
address as Lender may designate; and to endorse the name of Debtor upon any
instruments which may come into Lender's possession. Debtor agrees that
Obligations may be created by drafts drawn on Lender by shippers of inventory
named in section 3. Debtor authorizes Lender to honor any such draft
accompanied by invoices aggregating the amount of the draft and describing
inventory to be shipped to Debtor and to pay any such invoices not accompanied
by drafts. Debtor appoints any employee of Lender as Debtor's attorney, with
full power to sign Debtor's name on any instrument evidencing an Obligation, or
any renewals or extensions, or the amount of such drafts honored by Lender and
such instruments may be payable at fixed times or on demand, shall bear interest
at the rate from time to time fixed by Lender and Debtor agrees, upon request of
Lender, to execute any such instruments. This power of attorney to execute
instruments may be revoked by Debtor only by written notice to Lender and no
such revocation shall affect any instruments executed prior to the receipt by
Lender of such notice. All acts of such attorney are ratified and approved and
such attorney is not liable for any act or omission or for any error of judgment
or mistake of fact or law.
(d) Non-liability of Lender. Lender has no duty to determine the validity
of any invoice, the authority of any shipper named in section 3 to ship goods to
Debtor or compliance with any order of Debtor. Lender has no duty to protect,
insure, collect or realize upon the Collateral or preserve rights in it against
prior parties. Debtor releases Lender from any liability for any act or
omission relating to the Obligations, the Collateral or this Agreement, except
Lender's willful misconduct.
8. DEFAULT
Upon the occurrence of one or more of the following events of default:
Nonperformance. Debtor fails to pay when due any of the Obligations or to
perform, or rectify breach of, any warranty or other undertaking by Debtor in
this Agreement or in any evidence of or document relating to the Obligations;
Inability to Perform. Debtor, Debtor's spouse or a surety for any of the
Obligation dies, ceases to exist, becomes insolvent or the subject of bankruptcy
or insolvency proceedings;
<PAGE>
Misrepresentation. Any representation made to induce Lender to extend
credit to Debtor, under this Agreement or otherwise, is false in any material
respect when made; or
Insecurity. Any other event which causes Lender in good faith to deem
itself insecure; all of the Obligations shall, at the option of Lender and
without notice or demand, become immediately payable; and Lender shall have all
rights and remedies for default provided by the Wisconsin Uniform Commercial
Code, as well as any other applicable law and any evidence of or document
relating to any Obligation. With respect to such rights and remedies:
(a) Repossession. Lender may take possession of Collateral without notice
or hearing, which Debtor waives;
(b) Assembling collateral. Lender may require Debtor to assemble the
Collateral and to make it available to Lender at any convenient place designated
by Lender;
(c) Notice of disposition. Written notice, when required by law, sent to
any address of Debtor in this Agreement at least 10 calendar days (counting the
day of sending) before the date of a proposed disposition of the Collateral is
reasonable notice;
(d) Expenses and application of proceeds. Debtor shall reimburse Lender
for any expense incurred by Lender in protecting or enforcing its rights under
this Agreement before and after judgment, including, without limitation,
reasonable attorneys' fees and legal expenses of taking possession, holding,
preparing for disposition and disposing of Collateral. After deduction of such
expenses, Lender may apply the proceeds of disposition to the Obligations in
such order and amounts as it elects; and
(e) Waiver. Lender may permit Debtor to remedy any default without waiving
the default so remedied, and Lender may waive any default without waiving any
other subsequent or prior default by Debtor.
9. INTERPRETATION
The validity, construction and enforcement of this Agreement are governed
by the internal laws of Wisconsin. All terms not otherwise defined have the
meanings assigned to them by the Wisconsin Uniform Commercial Code. Invalidity
of any provision of this Agreement shall not affect the validity of any other
provision. This Agreement is intended by Debtor and Lender as a final
expression of this Agreement and as a complete and exclusive statement of its
terms, there being no conditions to the enforceability of this Agreement. This
Agreement may not be supplemented or modified except in writing.
<PAGE>
PMC Investment Services, Inc.
(SEAL)
a Delaware corporation
By: /s/ Scott A. MacKillop
President
Address: 555 17th Street By:
14th Floor
Denver, Colorado 80202
(County) Denver
<PAGE>
GENERAL BUSINESS SECURITY AGREEMENT
1. SECURITY INTEREST
Dated October 15, 1998
The undersigned ("Debtor", whether one or more) grants The Ziegler
Companies, Inc. ("Lender") a security interest in all equipment, fixtures,
inventory (including all goods held for sale, lease or demonstration or to be
furnished under contracts of service, goods leased to others, trade-ins and
repossessions, raw materials, work in process and materials or supplies used or
consumed in Debtor's business), documents relating to inventory, general
intangibles, accounts, contract rights, chattel paper and instruments, now owned
or hereafter acquired by Debtor and all additions and accessions to, all spare
and repair parts, special tools, equipment and replacements for, all returned or
repossessed goods the sale of which gave rise to, and all proceeds and products
of the foregoing ("Collateral"), wherever located, to secure all debts,
obligations and liabilities of any Debtor to Lender arising out of credit
previously granted, credit contemporaneously granted and credit granted in the
future by Lender to any Debtor, to any Debtor and another, or to another
guaranteed or indorsed by any Debtor ("Obligations").
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) Ownership. Debtor owns the Collateral free of all encumbrances and
security interests (except Lender's security interest)*. Chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement (other than Lender's)** is on file covering the Collateral
or any of it. Debtor, acting alone, may grant a security interest in the
Collateral.
(b) Sale of goods or services rendered. Each account and chattel paper
constituting Collateral as of this date arose from the performance of services
by Debtor or from a bona fide sale or lease of goods, which have been delivered
or shipped to the account debtor and for which Debtor has genuine invoices,
shipping documents or receipts.
(c) Enforceability. Each account, contract right and chattel paper
constituting Collateral as of this date is genuine and enforceable against the
account debtor according to its
<PAGE>
terms. It and the transaction out of which it arose comply with all applicable
laws and regulations. The amount represented by Debtor to Lender as owing by
each account debtor is the amount actually owing and is not subject to setoff,
credit, allowance or adjustment, except discount for prompt payment, nor has any
account debtor returned the goods or disputed his liability.
(d) Due date. There has been no default as of this date according to the
terms of any Collateral and no step has been taken to foreclose the security
interest it evidences or otherwise enforce its payment.
(e) Financial condition of account debtor. As of this date Debtor has no
notice or knowledge of anything which might impair the credit standing of any
account debtor.
(f) Valid organization. If a corporation, limited liability company or
partnership, Debtor is duly organized, validly existing and in good standing
under the laws of the state of organization and is authorized to do business in
Wisconsin.
(g) Other agreements. Debtor is not in default under any agreement for
the payment of money.
(h) Authority to contract. The execution and delivery of this Agreement
and any instruments evidencing Obligations will not violate or constitute a
breach of Debtor's articles of incorporation or organization, by-laws,
partnership agreement, operating agreement or any other agreement or restriction
to which Debtor is a party or is subject.
(i) Accuracy of information. All information, certificates or statements
given to Lender pursuant to this Agreement shall be true and complete when
given.
(j) Addresses. The address of the Debtor's residence, or if a
corporation, limited liability company or partnership, the address of Debtor's
place of business, or if Debtor has more than one place of business, then the
address of Debtor's chief executive office, is shown opposite Debtor's
signature. The address where the Collateral will be kept, if different from that
appearing opposite Debtor's signature, is . Such locations shall not be changed
without prior written consent of Lender, but the parties intend that the
Collateral, wherever located, is covered by this Agreement.
(k) Change of name or address. Debtor shall immediately advise Lender in
writing of any change in name or address.
(l) Environmental laws. (i) No substance has been, is or will be present,
used, stored, deposited, treated, recycled or disposed of on, under, in or about
any real estate now or at any time owned or occupied by Debtor ("Property")
during the period of Debtor's ownership or use of the Property in a form,
quantity
<PAGE>
or manner which if known to be present on, under, in or about the Property would
require clean-up, removal or some other remedial action ("Hazardous Substance")
under any federal, state or local laws, regulations, ordinances, codes or rules
("Environmental Laws"), (ii) Debtor has no knowledge, after due inquiry, of any
prior use or existence of any Hazardous Substance on the Property by any prior
owner of or person using the Property, (iii) without limiting the generality of
the foregoing, Debtor has no knowledge, after due inquiry, that the Property
contains asbestos, polychlorinated biphenyl components (PCBs) or underground
storage tanks, (iv) there are no conditions existing currently or likely to
exist during the term of this Agreement which would subject Debtor to an
damages, penalties, injunctive relief or clean-up costs in any governmental or
regulatory action or third-party claim relating to any Hazardous Substance, (v)
Debtor is not subject to any court or administrative proceeding, judgment,
decree, order or citation relating to any such substance, and (vi) Debtor in the
past has been, at the present is, and in the future will remain in compliance
with all Environmental Laws. Debtor shall indemnify and hold harmless Lender,
its directors, officers, employees and agents from all loss, cost (including
reasonable attorneys' fees and legal expenses), liability and damage whatsoever
directly or indirectly resulting from, arising out of, or based upon (1) the
presence, use, storage, deposit, treatment, recycling or disposal, at any time,
of any Hazardous Substance on, under, in or about the Property, or the
transportation of any such substance to or from the Property, (2) the violation
or alleged violation of any Environmental Law, permit, judgment or license
relating to the presence, use, storage, deposit, treatment, recycling or
disposal of any Hazardous Substance on, under, in or about the Property, or the
transportation of any Hazardous Substance to or from Property, or (3) the
imposition of any governmental lien for the recovery of environmental clean-up
costs expended under any Environmental Law. Debtor shall immediately notify
Lender in writing of any governmental or regulatory action or third-party claim
instituted or threatened in connection with any Hazardous Substance described
above on, in, under or about the Property.
(m) Fixtures. If any of the Collateral is affixed to real estate, the
legal description of the real estate set forth in each UCC Financing Statement
signed by Debtor is true and correct.
3. SHIPPERS
Shippers authorized to draw drafts on Lender under section
<PAGE>
7(c) are: NA
4. PERSONS BOUND AND OTHER PROVISIONS
The obligations hereunder of all Debtors are joint and several. This
Agreement benefits Lender, its successors and assigns, and binds Debtor(s) and
their respective heirs, personal representatives, successors and assigns. THIS
AGREEMENT INCLUDES ADDITIONAL PROVISIONS ON REVERSE SIDE.
* and the security interest of
Dundee Bancorp Inc. against the
Collateral
** and the financing statements
of Dundee Bancorp Inc.
<PAGE>
ADDITIONAL PROVISIONS
5. SALE AND COLLECTIONS
(a) Sale of inventory. So long as no default exists under any of the
Obligations of this Agreement, Debtor may (a) sell inventory in the ordinary
course of Debtor's business for cash or on terms customary in the trade, at
prices not less than any minimum sale price shown on instruments evidencing
Obligations and describing inventory, or (b) lease inventory on terms customary
in the trade.
(b) Verification and notification. Lender may verify Collateral in any
manner, and Debtor shall assist Lender in so doing. Upon default Lender may at
any time and Debtor shall, upon request of Lender, notify the account debtors to
make payment directly to Lender and Lender may enforce collection of, settle,
compromise, extend or renew the indebtedness of such account debtors. Until
account debtors are so notified, Debtor as agent of Lender, shall make
collections on the Collateral. Lender may at any time notify the bailee of any
Collateral of Lender's security interest.
(c) Deposit with Lender. At any time Lender may require that all proceeds
of Collateral received by Debtor shall be held by Debtor upon an express trust
for Lender, shall not be commingled with any other funds or property of Debtor
and shall be turned over to Lender in precisely the form received (but endorsed
by Debtor if necessary for collection) not later than the business day following
the day of their receipt. All proceeds of Collateral received by Lender directly
or from Debtor shall be applied against the Obligations in such order and at
such times as Lender shall determine.
6. DEBTOR'S COVENANTS
(a) Maintenance of Collateral. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired; keep it free
from all liens, encumbrances and security interests (other than Lender's
security interest); defend it against all claims and legal proceedings by
persons other than Lender; pay and discharge when due all taxes, license fees,
levies and other charges upon it; not sell, lease or otherwise dispose of it or
permit it to become a fixture or an accession to other goods, except for sales
or leases of inventory as provided in this Agreement, not permit it to be used
in violation of any applicable law, regulation or policy of insurance; and, as
to Collateral consisting of instruments and chattel paper, preserve rights in it
against prior parties. Loss of or damage to the Collateral shall not release
Debtor from any
<PAGE>
of the Obligations.
(b) Insurance. Debtor shall keep the Collateral and Lender's interest in
it insured under policies with such provisions, for such amounts and by such
insurers as shall be satisfactory to Lender from time to time, and shall furnish
evidence of such insurance satisfactory to Lender. Subject to Lender's
satisfaction, Debtor is free to select the insurance agent or insurer through
which the insurance is obtained. Debtor assigns (and directs any insurer to pay)
to Lender the proceeds of all such insurance and any premium refund, and
authorizes Lender to indorse in the name of Debtor any instruments for such
proceeds or refunds and, at the option of Lender, to apply such proceeds and
refunds to any unpaid balance of the Obligations, whether or not due, and/or to
restoration of the Collateral, returning any excess to Debtor. Lender is
authorized, in the name of Debtor or otherwise, to make, adjust and/or settle
claims under any credit insurance financed by Lender or any insurance on the
Collateral, or cancel the same after the occurrence of an event of default.
(c) Maintenance of security interest. Debtor shall pay all expenses and
upon request, take any action reasonably deemed advisable by Lender to preserve
the Collateral or to establish, determine priority of, perfect, continue
perfected, terminate and/or enforce Lender's interest in it or rights under this
Agreement.
(d) Taxes and other charges. Pay and discharge all lawful taxes,
assessments and government charges upon Debtor or against its properties prior
to the date on which penalties attach, unless and to the extent only that such
taxes, assessments and charges are contested in good faith and by appropriate
proceedings by Debtor.
(e) Records and statements. Debtor shall furnish to Lender financial
statements at least annually and such other financial information respecting
Debtor at such times and in such form as Lender may request. Debtor shall keep
accurate and complete records respecting the Collateral in such form as Lender
may approve. At such times as Lender may require, Debtor shall furnish to Lender
a statement certified by Debtor and in such form and containing such information
as may be prescribed by Lender, showing the current status and value of the
Collateral.
(f) Inspection of Collateral. At reasonable times Lender may examine the
Collateral and Debtor's records pertaining to it, wherever located, and make
copies of records. Debtor shall assist Lender in so doing.
(g) Service charge. In addition to the required payments
<PAGE>
under the Obligations and this Agreement, Debtor shall pay Lender's then current
service charges for servicing and auditing in connection with this Agreement.
(h) Chattel paper. Lender may require that chattel paper constituting
Collateral shall be on forms approved by Lender. Debtor shall promptly mark all
chattel paper constituting Collateral, and all copies, to indicate conspicuously
the Lender's interest and, upon request, deliver them to Lender.
(i) United State contracts. If any accounts or contract rights
constituting Collateral arose out of contracts with the United States or any of
its departments, agencies or instrumentalities, Debtor will notify Lender and
execute writings required by Lender in order that all money due or to become due
under such contracts shall be assigned to Lender and proper notice of the
assignment given under the Federal Assignment of Claims Act.
(j) Modifications. Without the prior written consent of Lender, Debtor
shall not alter, modify, extend, renew or cancel any accounts or chattel paper
constituting Collateral or any Collateral constituting part of the Debtor's
borrowing base.
(k) Returns and repossessions. Debtor shall promptly notify Lender of the
return to or repossession by Debtor of goods underlying any Collateral and
Debtor shall hold and dispose of them only as Lender directs.
7. RIGHTS OF LENDER
(a) Authority to perform for Debtor. Upon the occurrence of an event of
default or if Debtor fails to perform any of Debtor's duties set forth in this
Agreement or in any evidence of or document relating to the Obligations, Lender
is authorized, in Debtor's name or otherwise, to take any such action including
without limitation signing Debtor's name or paying any amount so required, and
the cost shall be one of the Obligations secured by this Agreement and shall be
payable by Debtor upon demand with interest from the date of payment by Lender
at the highest rate stated in any evidence of any Obligation but not in excess
of the maximum rate permitted by law.
(b) Charging Debtor's credit balance. Unless a lien would be prohibited
by law or would render a nontaxable account taxable, Debtor grants Lender, as
further security for the Obligations, a security interest and lien in any
deposit account Debtor may at any time have with Lender and other money now or
hereafter owed Debtor by Lender and, in addition, agrees that Lender may, at any
time after the occurrence of an event of default, without prior notice or
demand, set-off all or any part of the unpaid balance of the Obligations against
any deposit
<PAGE>
balances or other money now or hereafter owed Debtor by Lender.
(c) Power of attorney. Debtor irrevocably appoints any officer of Lender
as Debtor's attorney, with power after an event of default to receive, open and
dispose of all mail addressed to Debtor; to notify the Post Office authorities
to change the address for delivery of all mail addressed to Debtor to such
address as Lender may designate; and to endorse the name of Debtor upon any
instruments which may come into Lender's possession. Debtor agrees that
Obligations may be created by drafts drawn on Lender by shippers of inventory
named in section 3. Debtor authorizes Lender to honor any such draft accompanied
by invoices aggregating the amount of the draft and describing inventory to be
shipped to Debtor and to pay any such invoices not accompanied by drafts. Debtor
appoints any employee of Lender as Debtor's attorney, with full power to sign
Debtor's name on any instrument evidencing an Obligation, or any renewals or
extensions, or the amount of such drafts honored by Lender and such instruments
may be payable at fixed times or on demand, shall bear interest at the rate from
time to time fixed by Lender and Debtor agrees, upon request of Lender, to
execute any such instruments. This power of attorney to execute instruments may
be revoked by Debtor only by written notice to Lender and no such revocation
shall affect any instruments executed prior to the receipt by Lender of such
notice. All acts of such attorney are ratified and approved and such attorney is
not liable for any act or omission or for any error of judgment or mistake of
fact or law.
(d) Non-liability of Lender. Lender has no duty to determine the validity
of any invoice, the authority of any shipper named in section 3 to ship goods to
Debtor or compliance with any order of Debtor. Lender has no duty to protect,
insure, collect or realize upon the Collateral or preserve rights in it against
prior parties. Debtor releases Lender from any liability for any act or omission
relating to the Obligations, the Collateral or this Agreement, except Lender's
willful misconduct.
8. DEFAULT
Upon the occurrence of one or more of the following events of default:
Nonperformance. Debtor fails to pay when due any of the Obligations or to
perform, or rectify breach of, any warranty or other undertaking by Debtor in
this Agreement or in any evidence of or document relating to the Obligations;
Inability to Perform. Debtor, Debtor's spouse or a surety for any of the
Obligation dies, ceases to exist, becomes insolvent or the subject of bankruptcy
or insolvency proceedings;
<PAGE>
Misrepresentation. Any representation made to induce Lender to extend
credit to Debtor, under this Agreement or otherwise, is false in any material
respect when made; or
Insecurity. Any other event which causes Lender in good faith to deem
itself insecure; all of the Obligations shall, at the option of Lender and
without notice or demand, become immediately payable; and Lender shall have all
rights and remedies for default provided by the Wisconsin Uniform Commercial
Code, as well as any other applicable law and any evidence of or document
relating to any Obligation. With respect to such rights and remedies:
(a) Repossession. Lender may take possession of Collateral without notice
or hearing, which Debtor waives;
(b) Assembling collateral. Lender may require Debtor to assemble the
Collateral and to make it available to Lender at any convenient place designated
by Lender;
(c) Notice of disposition. Written notice, when required by law, sent to
any address of Debtor in this Agreement at least 10 calendar days (counting the
day of sending) before the date of a proposed disposition of the Collateral is
reasonable notice;
(d) Expenses and application of proceeds. Debtor shall reimburse Lender
for any expense incurred by Lender in protecting or enforcing its rights under
this Agreement before and after judgment, including, without limitation,
reasonable attorneys' fees and legal expenses of taking possession, holding,
preparing for disposition and disposing of Collateral. After deduction of such
expenses, Lender may apply the proceeds of disposition to the Obligations in
such order and amounts as it elects; and
(e) Waiver. Lender may permit Debtor to remedy any default without
waiving the default so remedied, and Lender may waive any default without
waiving any other subsequent or prior default by Debtor.
9. INTERPRETATION
The validity, construction and enforcement of this Agreement are governed
by the internal laws of Wisconsin. All terms not otherwise defined have the
meanings assigned to them by the Wisconsin Uniform Commercial Code. Invalidity
of any provision of this Agreement shall not affect the validity of any other
provision. This Agreement is intended by Debtor and Lender as a final expression
of this Agreement and as a complete and exclusive statement of its terms, there
being no conditions to the enforceability of this Agreement. This Agreement may
not be supplemented or modified except in writing.
<PAGE>
Portfolio Technology Services,
Inc. (SEAL)
a Colorado corporation
By: /s/ Scott A. MacKillop
President
Address: 555 17th Street By:
14th Floor
Denver, Colorado 80202
(County) Denver
<PAGE>
GENERAL BUSINESS SECURITY AGREEMENT
1. SECURITY INTEREST
Dated October 15, 1998
The undersigned ("Debtor", whether one or more) grants The Ziegler
Companies, Inc. ("Lender") a security interest in all equipment, fixtures,
inventory (including all goods held for sale, lease or demonstration or to be
furnished under contracts of service, goods leased to others, trade-ins and
repossessions, raw materials, work in process and materials or supplies used or
consumed in Debtor's business), documents relating to inventory, general
intangibles, accounts, contract rights, chattel paper and instruments, now owned
or hereafter acquired by Debtor and all additions and accessions to, all spare
and repair parts, special tools, equipment and replacements for, all returned or
repossessed goods the sale of which gave rise to, and all proceeds and products
of the foregoing ("Collateral"), wherever located, to secure all debts,
obligations and liabilities of any Debtor to Lender arising out of credit
previously granted, credit contemporaneously granted and credit granted in the
future by Lender to any Debtor, to any Debtor and another, or to another
guaranteed or indorsed by any Debtor ("Obligations").
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) Ownership. Debtor owns the Collateral free of all encumbrances and
security interests (except Lender's security interest)*. Chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement (other than Lender's)** is on file covering the Collateral
or any of it. Debtor, acting alone, may grant a security interest in the
Collateral.
(b) Sale of goods or services rendered. Each account and chattel paper
constituting Collateral as of this date arose from the performance of services
by Debtor or from a bona fide sale or lease of goods, which have been delivered
or shipped to the account debtor and for which Debtor has genuine invoices,
shipping documents or receipts.
(c) Enforceability. Each account, contract right and chattel paper
constituting Collateral as of this date is genuine and enforceable against the
account debtor according to its
<PAGE>
terms. It and the transaction out of which it arose comply with all applicable
laws and regulations. The amount represented by Debtor to Lender as owing by
each account debtor is the amount actually owing and is not subject to setoff,
credit, allowance or adjustment, except discount for prompt payment, nor has any
account debtor returned the goods or disputed his liability.
(d) Due date. There has been no default as of this date according to the
terms of any Collateral and no step has been taken to foreclose the security
interest it evidences or otherwise enforce its payment.
(e) Financial condition of account debtor. As of this date Debtor has no
notice or knowledge of anything which might impair the credit standing of any
account debtor.
(f) Valid organization. If a corporation, limited liability company or
partnership, Debtor is duly organized, validly existing and in good standing
under the laws of the state of organization and is authorized to do business in
Wisconsin.
(g) Other agreements. Debtor is not in default under any agreement for
the payment of money.
(h) Authority to contract. The execution and delivery of this Agreement
and any instruments evidencing Obligations will not violate or constitute a
breach of Debtor's articles of incorporation or organization, by-laws,
partnership agreement, operating agreement or any other agreement or restriction
to which Debtor is a party or is subject.
(i) Accuracy of information. All information, certificates or statements
given to Lender pursuant to this Agreement shall be true and complete when
given.
(j) Addresses. The address of the Debtor's residence, or if a
corporation, limited liability company or partnership, the address of Debtor's
place of business, or if Debtor has more than one place of business, then the
address of Debtor's chief executive office, is shown opposite Debtor's
signature. The address where the Collateral will be kept, if different from that
appearing opposite Debtor's signature, is . Such locations shall
not be changed without prior written consent of Lender, but the parties intend
that the Collateral, wherever located, is covered by this Agreement.
(k) Change of name or address. Debtor shall immediately advise Lender in
writing of any change in name or address.
(l) Environmental laws. (i) No substance has been, is or will be present,
used, stored, deposited, treated, recycled or disposed of on, under, in or about
any real estate now or at any time owned or occupied by Debtor ("Property")
during the period of Debtor's ownership or use of the Property in a form,
quantity
<PAGE>
or manner which if known to be present on, under, in or about the Property would
require clean-up, removal or some other remedial action ("Hazardous Substance")
under any federal, state or local laws, regulations, ordinances, codes or rules
("Environmental Laws"), (ii) Debtor has no knowledge, after due inquiry, of any
prior use or existence of any Hazardous Substance on the Property by any prior
owner of or person using the Property, (iii) without limiting the generality of
the foregoing, Debtor has no knowledge, after due inquiry, that the Property
contains asbestos, polychlorinated biphenyl components (PCBs) or underground
storage tanks, (iv) there are no conditions existing currently or likely to
exist during the term of this Agreement which would subject Debtor to an
damages, penalties, injunctive relief or clean-up costs in any governmental or
regulatory action or third-party claim relating to any Hazardous Substance, (v)
Debtor is not subject to any court or administrative proceeding, judgment,
decree, order or citation relating to any such substance, and (vi) Debtor in the
past has been, at the present is, and in the future will remain in compliance
with all Environmental Laws. Debtor shall indemnify and hold harmless Lender,
its directors, officers, employees and agents from all loss, cost (including
reasonable attorneys' fees and legal expenses), liability and damage whatsoever
directly or indirectly resulting from, arising out of, or based upon (1) the
presence, use, storage, deposit, treatment, recycling or disposal, at any time,
of any Hazardous Substance on, under, in or about the Property, or the
transportation of any such substance to or from the Property, (2) the violation
or alleged violation of any Environmental Law, permit, judgment or license
relating to the presence, use, storage, deposit, treatment, recycling or
disposal of any Hazardous Substance on, under, in or about the Property, or the
transportation of any Hazardous Substance to or from Property, or (3) the
imposition of any governmental lien for the recovery of environmental clean-up
costs expended under any Environmental Law. Debtor shall immediately notify
Lender in writing of any governmental or regulatory action or third-party claim
instituted or threatened in connection with any Hazardous Substance described
above on, in, under or about the Property.
(m) Fixtures. If any of the Collateral is affixed to real estate, the
legal description of the real estate set forth in each UCC Financing Statement
signed by Debtor is true and correct.
3. SHIPPERS
Shippers authorized to draw drafts on Lender under section
<PAGE>
7(c) are: NA
4. PERSONS BOUND AND OTHER PROVISIONS
The obligations hereunder of all Debtors are joint and several. This
Agreement benefits Lender, its successors and assigns, and binds Debtor(s) and
their respective heirs, personal representatives, successors and assigns. THIS
AGREEMENT INCLUDES ADDITIONAL PROVISIONS ON REVERSE SIDE.
* and the security interest of
Dundee Bancorp Inc. against the
Collateral, and the security
interest of Bank of Aurora
against certain of Debtor's
accounts receivable
** and the financing statements
of Dundee Bancorp Inc. and Bank
of Aurora
<PAGE>
ADDITIONAL PROVISIONS
5. SALE AND COLLECTIONS
(a) Sale of inventory. So long as no default exists under any of the
Obligations of this Agreement, Debtor may (a) sell inventory in the ordinary
course of Debtor's business for cash or on terms customary in the trade, at
prices not less than any minimum sale price shown on instruments evidencing
Obligations and describing inventory, or (b) lease inventory on terms customary
in the trade.
(b) Verification and notification. Lender may verify Collateral in any
manner, and Debtor shall assist Lender in so doing. Upon default Lender may at
any time and Debtor shall, upon request of Lender, notify the account debtors to
make payment directly to Lender and Lender may enforce collection of, settle,
compromise, extend or renew the indebtedness of such account debtors. Until
account debtors are so notified, Debtor as agent of Lender, shall make
collections on the Collateral. Lender may at any time notify the bailee of any
Collateral of Lender's security interest.
(c) Deposit with Lender. At any time Lender may require that all proceeds
of Collateral received by Debtor shall be held by Debtor upon an express trust
for Lender, shall not be commingled with any other funds or property of Debtor
and shall be turned over to Lender in precisely the form received (but endorsed
by Debtor if necessary for collection) not later than the business day following
the day of their receipt. All proceeds of Collateral received by Lender directly
or from Debtor shall be applied against the Obligations in such order and at
such times as Lender shall determine.
6. DEBTOR'S COVENANTS
(a) Maintenance of Collateral. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired; keep it free
from all liens, encumbrances and security interests (other than Lender's
security interest); defend it against all claims and legal proceedings by
persons other than Lender; pay and discharge when due all taxes, license fees,
levies and other charges upon it; not sell, lease or otherwise dispose of it or
permit it to become a fixture or an accession to other goods, except for sales
or leases of inventory as provided in this Agreement, not permit it to be used
in violation of any applicable law, regulation or policy of insurance; and, as
to Collateral consisting of instruments and chattel paper, preserve rights in it
against prior parties. Loss of or damage to the Collateral shall not release
Debtor from any
<PAGE>
of the Obligations.
(b) Insurance. Debtor shall keep the Collateral and Lender's interest in
it insured under policies with such provisions, for such amounts and by such
insurers as shall be satisfactory to Lender from time to time, and shall furnish
evidence of such insurance satisfactory to Lender. Subject to Lender's
satisfaction, Debtor is free to select the insurance agent or insurer through
which the insurance is obtained. Debtor assigns (and directs any insurer to pay)
to Lender the proceeds of all such insurance and any premium refund, and
authorizes Lender to indorse in the name of Debtor any instruments for such
proceeds or refunds and, at the option of Lender, to apply such proceeds and
refunds to any unpaid balance of the Obligations, whether or not due, and/or to
restoration of the Collateral, returning any excess to Debtor. Lender is
authorized, in the name of Debtor or otherwise, to make, adjust and/or settle
claims under any credit insurance financed by Lender or any insurance on the
Collateral, or cancel the same after the occurrence of an event of default.
(c) Maintenance of security interest. Debtor shall pay all expenses and
upon request, take any action reasonably deemed advisable by Lender to preserve
the Collateral or to establish, determine priority of, perfect, continue
perfected, terminate and/or enforce Lender's interest in it or rights under this
Agreement.
(d) Taxes and other charges. Pay and discharge all lawful taxes,
assessments and government charges upon Debtor or against its properties prior
to the date on which penalties attach, unless and to the extent only that such
taxes, assessments and charges are contested in good faith and by appropriate
proceedings by Debtor.
(e) Records and statements. Debtor shall furnish to Lender financial
statements at least annually and such other financial information respecting
Debtor at such times and in such form as Lender may request. Debtor shall keep
accurate and complete records respecting the Collateral in such form as Lender
may approve. At such times as Lender may require, Debtor shall furnish to Lender
a statement certified by Debtor and in such form and containing such information
as may be prescribed by Lender, showing the current status and value of the
Collateral.
(f) Inspection of Collateral. At reasonable times Lender may examine the
Collateral and Debtor's records pertaining to it, wherever located, and make
copies of records. Debtor shall assist Lender in so doing.
(g) Service charge. In addition to the required payments
<PAGE>
under the Obligations and this Agreement, Debtor shall pay Lender's then current
service charges for servicing and auditing in connection with this Agreement.
(h) Chattel paper. Lender may require that chattel paper constituting
Collateral shall be on forms approved by Lender. Debtor shall promptly mark all
chattel paper constituting Collateral, and all copies, to indicate conspicuously
the Lender's interest and, upon request, deliver them to Lender.
(i) United State contracts. If any accounts or contract rights
constituting Collateral arose out of contracts with the United States or any of
its departments, agencies or instrumentalities, Debtor will notify Lender and
execute writings required by Lender in order that all money due or to become due
under such contracts shall be assigned to Lender and proper notice of the
assignment given under the Federal Assignment of Claims Act.
(j) Modifications. Without the prior written consent of Lender, Debtor
shall not alter, modify, extend, renew or cancel any accounts or chattel paper
constituting Collateral or any Collateral constituting part of the Debtor's
borrowing base.
(k) Returns and repossessions. Debtor shall promptly notify Lender of the
return to or repossession by Debtor of goods underlying any Collateral and
Debtor shall hold and dispose of them only as Lender directs.
7. RIGHTS OF LENDER
(a) Authority to perform for Debtor. Upon the occurrence of an event of
default or if Debtor fails to perform any of Debtor's duties set forth in this
Agreement or in any evidence of or document relating to the Obligations, Lender
is authorized, in Debtor's name or otherwise, to take any such action including
without limitation signing Debtor's name or paying any amount so required, and
the cost shall be one of the Obligations secured by this Agreement and shall be
payable by Debtor upon demand with interest from the date of payment by Lender
at the highest rate stated in any evidence of any Obligation but not in excess
of the maximum rate permitted by law.
(b) Charging Debtor's credit balance. Unless a lien would be prohibited
by law or would render a nontaxable account taxable, Debtor grants Lender, as
further security for the Obligations, a security interest and lien in any
deposit account Debtor may at any time have with Lender and other money now or
hereafter owed Debtor by Lender and, in addition, agrees that Lender may, at any
time after the occurrence of an event of default, without prior notice or
demand, set-off all or any part of the unpaid balance of the Obligations against
any deposit
<PAGE>
balances or other money now or hereafter owed Debtor by Lender.
(c) Power of attorney. Debtor irrevocably appoints any officer of Lender
as Debtor's attorney, with power after an event of default to receive, open and
dispose of all mail addressed to Debtor; to notify the Post Office authorities
to change the address for delivery of all mail addressed to Debtor to such
address as Lender may designate; and to endorse the name of Debtor upon any
instruments which may come into Lender's possession. Debtor agrees that
Obligations may be created by drafts drawn on Lender by shippers of inventory
named in section 3. Debtor authorizes Lender to honor any such draft accompanied
by invoices aggregating the amount of the draft and describing inventory to be
shipped to Debtor and to pay any such invoices not accompanied by drafts. Debtor
appoints any employee of Lender as Debtor's attorney, with full power to sign
Debtor's name on any instrument evidencing an Obligation, or any renewals or
extensions, or the amount of such drafts honored by Lender and such instruments
may be payable at fixed times or on demand, shall bear interest at the rate from
time to time fixed by Lender and Debtor agrees, upon request of Lender, to
execute any such instruments. This power of attorney to execute instruments may
be revoked by Debtor only by written notice to Lender and no such revocation
shall affect any instruments executed prior to the receipt by Lender of such
notice. All acts of such attorney are ratified and approved and such attorney is
not liable for any act or omission or for any error of judgment or mistake of
fact or law.
(d) Non-liability of Lender. Lender has no duty to determine the validity
of any invoice, the authority of any shipper named in section 3 to ship goods to
Debtor or compliance with any order of Debtor. Lender has no duty to protect,
insure, collect or realize upon the Collateral or preserve rights in it against
prior parties. Debtor releases Lender from any liability for any act or omission
relating to the Obligations, the Collateral or this Agreement, except Lender's
willful misconduct.
8. DEFAULT
Upon the occurrence of one or more of the following events of default:
Nonperformance. Debtor fails to pay when due any of the Obligations or to
perform, or rectify breach of, any warranty or other undertaking by Debtor in
this Agreement or in any evidence of or document relating to the Obligations;
Inability to Perform. Debtor, Debtor's spouse or a surety for any of the
Obligation dies, ceases to exist, becomes insolvent or the subject of bankruptcy
or insolvency proceedings;
<PAGE>
Misrepresentation. Any representation made to induce Lender to extend
credit to Debtor, under this Agreement or otherwise, is false in any material
respect when made; or
Insecurity. Any other event which causes Lender in good faith to deem
itself insecure; all of the Obligations shall, at the option of Lender and
without notice or demand, become immediately payable; and Lender shall have all
rights and remedies for default provided by the Wisconsin Uniform Commercial
Code, as well as any other applicable law and any evidence of or document
relating to any Obligation. With respect to such rights and remedies:
(a) Repossession. Lender may take possession of Collateral without notice
or hearing, which Debtor waives;
(b) Assembling collateral. Lender may require Debtor to assemble the
Collateral and to make it available to Lender at any convenient place designated
by Lender;
(c) Notice of disposition. Written notice, when required by law, sent to
any address of Debtor in this Agreement at least 10 calendar days (counting the
day of sending) before the date of a proposed disposition of the Collateral is
reasonable notice;
(d) Expenses and application of proceeds. Debtor shall reimburse Lender
for any expense incurred by Lender in protecting or enforcing its rights under
this Agreement before and after judgment, including, without limitation,
reasonable attorneys' fees and legal expenses of taking possession, holding,
preparing for disposition and disposing of Collateral. After deduction of such
expenses, Lender may apply the proceeds of disposition to the Obligations in
such order and amounts as it elects; and
(e) Waiver. Lender may permit Debtor to remedy any default without
waiving the default so remedied, and Lender may waive any default without
waiving any other subsequent or prior default by Debtor.
9. INTERPRETATION
The validity, construction and enforcement of this Agreement are governed
by the internal laws of Wisconsin. All terms not otherwise defined have the
meanings assigned to them by the Wisconsin Uniform Commercial Code. Invalidity
of any provision of this Agreement shall not affect the validity of any other
provision. This Agreement is intended by Debtor and Lender as a final expression
of this Agreement and as a complete and exclusive statement of its terms, there
being no conditions to the enforceability of this Agreement. This Agreement may
not be supplemented or modified except in writing.
<PAGE>
Portfolio Management
Consultants, Inc. (SEAL)
a Colorado corporation
By: /s/ Scott A. MacKillop
President
Address: 555 17th Street By:
14th Floor
Denver, Colorado 80202
(County) Denver
