U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14937
PMC INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0627374
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
555 17th Street, 14th Floor, Denver, Colorado 80202
(Address of principal executive offices)
(303) 292-1177
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X . No .
As of August 13, 1998, the issuer had outstanding 4,857,803 shares of
Common Stock, par value $.01 per share.
Transitional Small Business Disclosure Format
Yes No X .
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
PMC International, Inc. (the "Company or the "Registrant") hereby
amends its Quarterly Report on Form 10-QSB for the quarterly period
ended June 30, 1998, by amending its response to Part I, Item 2,
contained in its original filing by deleting the subsection entitled
"Corporate Restructuring" and replacing it in its entirety
and by amending its response to Part II, Item 6A contained
in its original filing by adding Exhibits
10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12, and 10.13.
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Corporate Restructuring
During the second quarter of 1998, the Company committed substantial
resources and efforts in seeking to find a strategic partner to assist
the Company with its capital needs as well as strengthen its positions
in the financial services arena. To this end, the Company engaged the
investment banking firm of Putnam, Lovell, de Guardiola & Thornton. On
July 7, 1998, after an extensive negotiation period, the Company
entered into a Letter of Intent with Dundee Bancorp Inc. ("Dundee"), a
Canadian investment management firm, for a proposed equity investment
in the Company of $24 million. In connection with the execution of the
Letter of Intent, Dundee provided a loan to the Company of $1.5 million
for working capital purposes. The loan is secured by the assets of
the Company and by a pledge of the stock of each of
the Company's subsidiaries and is guaranteed by PMC, PMCIS, and PTS.
The loan is due on September 30, 1998, unless extended by mutual agreement.
On August 7, 1998, the Company
and Dundee mutually agreed to terminate the Letter of Intent,
principally as a result of an internal change in Dundee's priorities.
Dundee concluded that a license for the use of the Company's products
and services in Canada, or other similar arrangements, may better suit
its business plan and strategic goals. The Company and Dundee are in
discussions regarding such an arrangement, however there can be no
assurance that an agreement will be reached. The Company continues to
seek out strategic relationships and sources of capital to meet the
Company's working capital needs.
In order to address its working capital deficit and capital needs, the
Company is implementing a wide reaching corporate restructuring. The
Company is reorganizing its executive management and 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 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. At the option of Mr. Phillips, the
non-compete restrictions may be terminated after one year
and the Company would have no further severance payment obligation to him.
In addition, Mr. Phillips' Employment Agreement and Change of
Control Severance Agreement were terminated and the Shareholders
Agreement dated as of December 24, 1996, among the Company,
Mr. Phillips and certain other
shareholders, which included a voting agreement among the parties, was
effectively terminated as to Mr. Phillips and KP3, LLC (a
Colorado limited liability company controlled by Mr. Phillips).
Pursuant to the separation agreement, the Company and Mr. Phillips agreed
to conclude the relationship between the Company and KP3. Mr. Phillips
agreed to apply all funds held by KP3 towards the prepayment of the KP3
Loans and the Company agreed to allow the bank to apply the collateral it
pledged as security (including a portion of accrued interest therein)
in the amount of approximately $1,766,000, to the payment of principal
and interest on the KP3 Loan. The Company will forgive accounts receivable
from KP3 in the amount of approximately $234,000, with the combined
assistance to KP3 not exceeding $2 million.
As a result of the application of the pledged collateral to the KP3 Loan and
pursuant to the terms of the Reimbursement and Pledge Agreement between the
Company and KP3, the Company will exercise its rights thereunder in respect
of the 410,961 shares of PMCI common stock pledged by KP3, and will take
such shares into its treasury.
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
The Company named Mr. Scott A. MacKillop, the Company's Executive Vice
President and Chief Operating Officer, President and named Mr. C.R.
(Sonny) Tucker, a consultant for the Company, Interim Chief Executive
Officer. Mr. Tucker has held positions as Chief Executive Officer of
Shell Middle East and CFO/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.
The Company has established an executive management team consisting of
Mssrs. Tucker, MacKillop and Mr. Robert Brown, Executive Vice President
of the Company's subsidiary Portfolio Management Consultants, Inc.
("PMC"), to implement the Company's restructuring plans. An internal
leadership team of approximately 20 employees, including senior and
middle managers, has been created to make recommendations to the
executive management team and implement tactical changes to the
Company's method of operations. The goal of these teams is to
restructure and refocus the Company's efforts and to achieve profitable
operations. The Company intends to achieve this result by focusing on
and increasing profitable business channels, eliminating unprofitable
business channels, gaining efficiencies in operations and reducing
expenses.
As a result of this restructuring, the Company anticipates one-time
charges and write-offs in the third quarter of 1998 of approximately
$2,500,000.
In addition, the Company has taken or intends to take the following
actions:
Due to the PMCIS integration and related corporate reorganizations,
20 non-critical employees have departed the Company or are expected
to depart in the second half of 1998. The Company does not intend
to replace those employees.
In the second quarter of 1998, the Company outsourced the portfolio
accounting function for its separate account business. The Company
believes this outsourcing will allow it to deploy capital into other
areas and into supporting new business. This outsourcing decision
is expected to create annual savings by reducing system support,
payroll, licensing and maintenance fees, telecommunications and
pricing feeds.
The Company has implemented measures to control costs in all areas
and has made strategic improvements in promotion and advertising
spending.
The reorganization of its executive management and executive pay
cuts it intends to implement will reduce payroll and related
expenses.
The Company's Atlanta lease obligation terminates in April 1999.
The Company believes that all staff will have relocated to Denver
or will have left the Company at that time. The Company expects
there will be a reduction in one-time relocation, training and
employment agency fees and expenses.
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. (cont'd)
The Company's sales and marketing group has been strategically
reorganized. The customer service area has been reengineered and
customers will benefit from more timely and efficient support. The
Company expects to benefit from a re-energized sales effort and
lower payroll and travel costs as a result of the reorganization.
The Company has also gained capacity as a result of process flow
improvements.
In connection with head count reductions, the Company is evaluating
its Denver office space options in order to further reduce costs.
While Management believes that the implementation of the restructuring
plans will move the Company towards its goal of near term
profitability, there is no assurance that the plan will be successful
or that the Company will achieve profitable operations within the proposed
time frame or at all.
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.5 Letter of Intent between the Company and Dundee Bancorp Inc.,
dated July 7, 1998
10.6 Loan Agreement between the Company and Dundee Bancorp Inc., dated
July 7, 1998
10.7 Borrower Security Agreement between the Company and Dundee
Bancorp Inc., dated July 9, 1998
10.8 Subsidiary Security Agreement among PMC, PMCIS, PTS and Dundee
Bancorp Inc., dated July 9, 1998
10.9 Guarantee Agreement among PMC, PMCIS, PTS and Dundee Bancorp Inc.,
dated July 9, 1998
10.10 Pledge Agreement between the Company and Dundee Bancorp Inc.,
dated July 9, 1998
10.11 Promissory Note made by the Company, dated July 10, 1998
10.12 Separation Agreement between the Company and Kenneth S. Phillips,
dated August 24, 1998
10.13 Amendment to Reimbursement and Pledge Agreement dated August 24,
1998
<PAGE>
PMC INTERNATIONAL, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PMC INTERNATIONAL, INC.
REGISTRANT
Date: September 14, 1998 /S/ Scott A. MacKillop
Scott A.MmacKillop
President
<PAGE>
EXHIBIT INDEX
A. NUMBER EXHIBIT
10.5 Letter of Intent between the Company and Dundee Bancorp Inc.,
dated July 7, 1998
10.6 Loan Agreement between the Company and Dundee Bancorp Inc.,
dated July 7, 1998
10.7 Borrower Security Agreement between the Company and Dundee
Bancorp Inc., dated July 9, 1998
10.8 Subsidiary Security Agreement among PMC, PMCIS, PTS and Dundee
Bancorp Inc., dated July 9, 1998
10.9 Guarantee Agreement among PMC, PMCIS, PTS and Dundee Bancorp
Inc., dated July 9, 1998
10.10 Pledge Agreement between the Company and Dundee Bancorp Inc.,
dated July 9, 1998
10.11 Promissory Note made by the Company, dated July 10, 1998
10.12 Separation Agreement between the Company and Kenneth S. Phillips,
dated August 24, 1998
10.13 Amendment to the Reimbursement and Pledge Agreement, dated August
24, 1998
<PAGE>
EXHIBIT 10.5
July 7, 1998
PMC International, Inc.
c/o Joseph R. Hershberger
Putnam Lovell de Guardiola & Thornton
19 Fulton Street
South Street Sea Port
New York, New York 10038
Dear Sirs:
This letter confirms that, subject to the terms and
conditions set forth in this letter, Dundee Bancorp Inc.
("Dundee") wishes to provide to PMC International, Inc. ("PMC")
equity financing in the amount of approximately US$24,000,000 and
interim bridge loan financing of US$1,500,000 pending the Closing
of the equity financing. The terms and conditions on which
Dundee is willing to proceed are as follows:
1. On the Closing Date (as defined below), PMC shall
issue to Dundee that number of shares of voting
common stock, par value $.01 per share, of PMC
(the "Dundee Shares") at a subscription price of
US$4.00 per share, which shall represent not less
than 50.5% of the common stock of PMC on a
fully-diluted basis and not less than 55% of the
outstanding common stock of PMC, in each case
determined as of the Closing Date (as defined
below) (the "Equity Financing").
2. Dundee shall make available to PMC by 5:00 p.m.
(Toronto time) on the third business day (the
"Advance Date") after the date on <PAGE>
which a
definitive Loan Agreement with respect to the Debt
Financing (the "Loan Agreement" and, together with
the Subscription Agreement (as defined below), the
"Definitive Agreements") is entered into by and
between Dundee and PMC, on the terms and subject
to satisfaction of the conditions contained in the
Loan Agreement for such loan, a bridge loan in the
principal amount of US$1,500,000 (the "Debt
Financing"). The outstanding principal amount of
the Debt Financing, and any overdue interest,
shall bear interest at a rate of 12% per annum,
calculated daily from and including the Advance
Date to but excluding the date on which such
principal amount, together with all interest
thereon, is repaid in full.
3. (a) Subject to section 3(b) below, the
principal amount of the Debt Financing, and
all accrued interest thereon, shall be repaid
in full on December 31, 1998 or, if earlier,
the Closing Date.
(b) Notwithstanding subsection 3(a), the
principal amount of the Debt Financing, and
all accrued interest thereon shall be repaid
in full on the earliest to occur of (i)
September 30, 1998, if for any reason
whatsoever PMC fails to complete the
transactions contemplated by the Subscription
Agreement in accordance with the terms
thereof by such date, other than solely as a
result of material breach of Dundee's
obligations thereunder or Dundee's exercising
its right not to close pursuant to the Due
Diligence Condition (as defined below), (ii)
August 31, 1998, if a definitive Subscription
Agreement with respect to the Dundee Shares
(the "Subscription Agreement") shall not have
been entered into by such date, and (iii) the
date on which the Subscription Agreement is
terminated (other than by PMC for material
breach by Dundee of its obligations
thereunder or by Dundee pursuant to the Due
Diligence Condition). Notwithstanding
anything in this Section 3(b) to the
contrary, if Dundee terminates the
transactions contemplated by this letter of
intent for any reason (other than a breach by
PMC of its obligations hereunder), the Debt
Financing and all accrued interest thereon
shall not be due for 30 days from the date of
such termination.
(c) Repayment of the Debt Financing shall be made
by PMC, at the option of Dundee, by certified
check or by wire transfer to such account as
is directed in writing by Dundee.
4. The Debt Financing shall be evidenced by a
promissory note (the "Note") issued pursuant to
the Loan Agreement, which shall contain such
representations and warranties, covenants and
conditions as are mutually agreed by the parties,
and shall be <PAGE>
secured by a general security
agreement registered against all of the assets of
PMC (the "PMC Security"). In addition, the
repayment of the Debt Financing shall be
guaranteed by each of the subsidiaries of PMC
(other than Portfolio Brokerage Services Inc.
("PBSI")), as evidenced by their respective
guaranties (the "Guaranties") and such Guaranties
shall be secured by general security agreements
registered against the respective assets of each
of the subsidiaries of PMC (other than PBSI) (the
"Subsidiary Security") and such repayment shall be
further secured by pledges of the stock of the
subsidiaries (including PBSI) (the "Subsidiary
Pledges"), in each case in form and substance
satisfactory to Dundee.
5. PMC shall pay to Dundee a fee in the amount of
US$2,000,000 (the "Termination Fee") in the event
(i) PMC gives notice of termination of this
Letter of Intent in order to accept a
Superior Proposal as contemplated by
paragraph 12 of this letter of intent;
(ii) there is a breach of PMC's obligations under
paragraph 12 of this letter of intent; or
(iii)PMC terminates this letter of intent or a
definitive Subscription Agreement is not
entered into by August 31, 1998 (other than
as a result of a breach by Dundee of its
obligations under the binding terms of this
Letter of Intent or the Loan Agreement) and
within 12 months thereafter, PMC enters into
an agreement with respect to a Competing
Transaction (as defined below), provided that
PMC will not be required to pay the
Termination Fee pursuant to this clause
(iii), if (A) prior to the execution of the
Subscription Agreement, Dundee notifies PMC
pursuant to paragraph 12 of this Letter of
Intent that it no longer intends to proceed
with this transaction, and (B) within 12
months thereafter, PMC enters into an
agreement with respect to a Competing
Transaction with a person or persons with
whom PMC or its Representatives (as defined
below) had not discussed or negotiated, or
from whom PMC or its Representatives had
<PAGE>
not received any proposal with respect
to, a Competing Transaction at any time prior
to Dundee's notification that it no longer
intends to proceed with this transaction.
The Termination Fee shall be payable on the first
to occur of (x) the date PMC gives notice as
contemplated by clause (i) of the immediately
preceding sentence, (y) upon demand, in the event
PMC breaches its obligation under paragraph 12 of
this letter of intent, and (z) immediately upon
entry by PMC into such agreement with respect to a
Competing Transaction, in case the Termination Fee
is payable under clause (iii) of the immediately
preceding sentence.
6. The closing of the Equity Financing shall take
place on or before September 30, 1998 (the
"Closing Date") at the offices of Dundee located
at 40 King Street West, Suite 5500, Scotia Plaza,
Toronto, Ontario, or at such other time and place
as is agreed upon by Dundee and PMC.
Notwithstanding the foregoing, if PMC is unable or
unwilling to complete the transactions
contemplated in the Subscription Agreement in
accordance with the terms thereof on the Closing
Date, Dundee shall be entitled, but not obligated,
at its sole option, to extend the Closing Date for
a specified period of time which shall not exceed
three months, upon not less than 5 days' written
notice by Dundee to PMC at any time prior to the
expiry of the Closing Date, and in such event, all
references herein to the Closing Date shall refer
to the amended date of closing.
7. Dundee's obligation to complete the Equity
Financing shall be subject to the satisfaction of
the following conditions and such other conditions
as may be contained in the Subscription Agreement:
(a) Dundee's technical and legal due diligence
investigation of PMC and its subsidiaries and
affiliates, and all matters relating thereto,
shall have been completed to the satisfaction
of Dundee, it being the expectation that
Dundee will complete its due diligence
investigation by not later than August 15,
1998 (the "Due Diligence Condition"), and no
event shall have occurred and no information
(financial <PAGE>
or otherwise) shall have
been disclosed to Dundee which, in the sole
opinion of Dundee, materially and adversely
affects the business, assets, liabilities,
condition (financial or otherwise) or
prospects of PMC and its subsidiaries or the
Equity Financing;
(b) Dundee shall be satisfied that each director
on the board of directors of PMC and its
subsidiaries shall have resigned, effective
on or before the Closing Date, other than
Kenneth Phillips and Scott MacKillop and that
simultaneously with the Closing, nominees
designated by Dundee shall have been elected
and qualified and constitute a majority of
the Board of Directors;
(c) Dundee and PMC shall have entered into a
registration rights agreement providing
Dundee demand and piggyback registration
rights in form and substance satisfactory to
Dundee;
(d) on the Closing Date (after giving effect to
any adjustment to outstanding incentives
contemplated by clause (ii) of subparagraph
(e) of this paragraph 7), the Dundee Shares
shall represent not less than 50.5% of the
common stock of PMC determined on a
fully-diluted basis and not less than 55% of
the outstanding common stock;
(e) all necessary formal documentation shall be
executed and delivered to Dundee, in form and
content reasonably satisfactory to Dundee,
including without limitation:
(i) a subscription agreement which shall
contain comprehensive representations,
warranties, conditions, covenants and
indemnification in respect of PMC and
its subsidiaries;
(ii) an amended employment agreement between
PMC and Kenneth Phillips, which shall
include, without limitation, appropriate
incentives with respect to equity
participation and an appropriate non-
<PAGE>
competition covenant by Kenneth
Phillips in favor of PMC and its
subsidiaries; and
(iii)favorable legal opinion from legal
counsel to PMC, addressed to Dundee.
(f) receipt of all necessary consents and
approvals from all third parties, including,
without limitation, any required approval of
PMC's shareholders for the issuance of the
Dundee Shares, any necessary approvals of
PMC's investment advisory contracts arising
as a result of any change in control of PMC,
and the approval of all applicable regulatory
authorities; and
(g) such other documents, agreements and
instruments as Dundee may reasonably require.
8. During the period from the date hereof to and
including the Closing Date, PMC shall provide or
cause to be provided Dundee and its counsel,
accountants, consultants and other representatives
full access to the properties, books and records,
contracts, facilities and personnel of PMC and its
subsidiaries and to which PMC and its subsidiaries
have access (e.g., accountants and other
consultants) with respect to PMC and its
subsidiaries in connection with the transactions
contemplated hereby, including, without
limitation, analysis and review of financial
statements and projections, accounting methods,
auditors' workpapers, assets, liabilities,
operations, business plans and prospects, and a
reasonable opportunity to discuss the affairs,
finances and operations of PMC and its
subsidiaries with officers, directors, management,
employees, accountants and other appropriate
personnel and shall furnish or cause to be
furnished to Dundee and such representatives all
such information about PMC and its subsidiaries as
may be reasonably requested.
9. During the period from and including the date
hereof to and including the Closing Date, PMC
shall, and PMC shall ensure that its subsidiaries,
conduct their business solely in the ordinary
course consistent with past practice and, without
limiting the generality of the foregoing, shall
not, without Dundee's prior written consent:
<PAGE>
(a) issue or agree to issue any shares in the
capital stock of PMC or any subsidiary of PMC
or any security convertible or exchangeable
for any such shares or grant or agree to
grant any option, warrant or other right to
acquire any such shares or securities, or
otherwise enter into any arrangement having
substantially the same effect, except for
issuances of stock in the ordinary course
pursuant to the exercise of options or
warrants outstanding on the date hereof;
(b) acquire or agree to acquire any assets or
properties, or dispose or agree to dispose of
any assets or properties, except in the
ordinary course of business consistent with
past practice;
(c) increase the level of compensation of any
employee, officer, director or consultant,
grant any bonuses, benefits, severance or
other forms of direct or indirect
compensation to any employee, officer,
director or consultant or adopt, increase,
terminate, amend or otherwise modify any plan
for the benefit of employees, directors or
officers, except as may be required by
applicable law or normal increases in salary
payable to employees and the provision of
normal benefits under plans existing on the
date hereof, in each case in the ordinary
course of business consistent with past
practice;
(d) enter into, modify, amend or terminate any
contract or agreement with any Affiliate or,
except in the ordinary course of business
consistent with past practice, any other
material contract or agreement;
(e) compromise or settle any material claim or
litigation;
(f) pay any dividends, redeem or repurchase any
securities, or otherwise cause assets to be
distributed to any of its stockholders; <PAGE>
(g) borrow any funds, under existing lines of
credit or otherwise, except as reasonably
necessary for the ordinary operation of the
Company's business in a manner, and in
amounts, consistent with past practice;
(h) make any loan, advance or investment to any
officer, director or shareholder or, except
in the ordinary course consistent with past
practice, to or in any other person (other
than payments consistent with past practice
to an affiliate of PMC's President not to
exceed $60,000 in the aggregate); or
(i) merge or consolidate with any person or
commit to any such merger or consolidation.
10. PMC agrees that, at any time prior to the Closing
Date, Dundee may assign all or any part of its
rights and obligations under this letter to any
one or more affiliates of Dundee, upon written
notice to, but without the approval of, PMC,
including without limitation, the advance of the
Debt Financing by Dundee.
11. All expenses incurred by PMC and Dundee shall be
paid by the party incurring such expense, and
without limiting the foregoing, any brokerage fees
or finder's fees payable by PMC in connection with
this transaction shall be paid by PMC, and PMC
shall indemnify Dundee in respect of any liability
in connection therewith.
12. Upon acceptance of this letter by PMC and until
the earlier of (i) the date on which Dundee
notifies PMC that it does not intend to proceed
with this transaction (Dundee agreeing that it
will notify PMC of its intention not to proceed
with the transaction promptly upon reaching such
decision) and (ii) the Closing Date, neither PMC
nor any subsidiary nor any of their respective
directors, officers, employees, representatives or
agents (collectively, "Representatives") shall
solicit, initiate or encourage the submission of
any contact, inquiry or offer from, or engage in
any discussion or negotiation with, any person
relating to the acquisition of all or any material
portion of PMC's or any of its <PAGE>
subsidiaries' assets or of any equity interest in
PMC or any subsidiary or any business combination
with PMC or any subsidiary or the provision of any
material financing to PMC or any subsidiary (any
such acquisition, business combination or
financing a "Competing Transaction"), or provide
any non-public information relating to PMC or any
subsidiary to any person (other than for the
ordinary course of business and consistent with
past practice, or to governmental authorities or
its counsel or accountants). It is acknowledged
and agreed that a Competing Transaction shall not
include any financing transaction (x) for an
amount not exceeding $1.5 million and the proceeds
of which are used solely to repay the Debt
Financing, (y) for an amount not exceeding $1.5
million and the proceeds of which are used solely
for working capital purposes, or (z) for an amount
not exceeding $2.5 million and the proceeds of
which are used solely to pay and discharge the
Company's obligations with respect to the matters
set forth in Schedule 5.1 to the Loan Agreement.
In the event that PMC or any Representative
receives any contact, inquiry or offer in respect
of a Competing Transaction, PMC shall immediately
advise Dundee of the receipt of such contact,
inquiry or offer (and of any amendment thereof or
supplement thereto), the identity of the person
making such contact, inquiry or offer and the
substance of such contact, inquiry or offer
(including, in the case of any offer, the price
and other terms and conditions thereof).
Notwithstanding the foregoing, nothing shall
prevent PMC from furnishing information to, or
entering into discussions or negotiations with,
any person from and after August 15, 1998 in
connection with an offer made without such
solicitation, initiation or encouragement if and
to the extent that PMC is advised in writing by
outside legal counsel that its Board of Directors
has a fiduciary duty to do so. In the event the
Board of Directors of PMC receives a proposal in
respect of a Competing Transaction and the Board
of Directors determines that such Competing
Transaction is reasonably likely to be consummated
and that the Board of Directors has a fiduciary
obligation to accept such proposal (a "Superior
Proposal"), then if PMC shall have repaid the
Debt Financing in full and paid Dundee the
Termination Fee, PMC may terminate this Letter of
Intent or the Subscription Agreement, as
applicable, and enter into an agreement with
respect to such Superior Proposal. The parties
<PAGE>
agree that payment of the Termination Fee
for a breach of PMC's obligations under this
paragraph 12 shall constitute liquidated damages,
and not penalty, for such breach.
13. The terms and conditions of this letter are
confidential and will not be released or discussed
by either party to or with any other person,
without the prior written consent of the other
party or as otherwise required by applicable law;
and, notwithstanding the foregoing, upon
acceptance of this letter by PMC and delivery to
Dundee of evidence of approval of this letter of
intent by PMC's Board of Directors or other
evidence, satisfactory to Dundee, that this letter
of intent has been duly authorized, executed and
delivered by PMC and constitutes a valid and
binding obligation of PMC to the extent provided
in paragraph 14 hereof, PMC may issue a press
release in respect of this transaction, subject to
the prior review and approval of such press
release by Dundee, and Dundee may issue a press
release in respect of this transaction, subject to
prior review and approval of such press release by
PMC.
14. This letter constitutes a statement of the present
intentions of the parties and does not constitute
a binding obligation to consummate the
transactions contemplated hereby. A binding
commitment with respect to such transactions will
exist upon the execution of a definitive
Subscription Agreement and Loan Agreement.
Notwithstanding the foregoing, the provisions of
paragraphs 5, 8, 9, 11, 12, 13 and 15 shall be
binding upon the parties hereto. Either party may
terminate this letter of intent by written notice
to the other in the event a definitive
Subscription Agreement has not been entered into
by July 31, 1998, in which event this letter of
intent will be of no further force and effect,
except that the provisions of paragraphs 5, 11,
12, 13 and 15 shall survive such termination. In
addition, the parties hereby confirm that the
terms and conditions of the Confidentiality
Agreement, dated April 13, 1998, remain in full
force and effect.
15. This letter shall be governed by and construed in
accordance with the laws of the State of New
York. The parties hereto agree that any suit,
action or proceeding seeking to enforce any
provision of, or based on any matter arising out
of or in connection with, this <PAGE>
Letter of
Intent or the transactions contemplated hereby
shall be brought in the United States District
Court for the Southern District of New York or any
other New York State Court sitting in New York
City, and each of the parties hereby consents to
the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any
such suit, action or proceedings and irrevocably
waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have
to the laying of the venue of any such suit,
action or proceeding in any such court or that any
such suit, action or proceeding with is brought in
any such court has been brought in an inconvenient
forum. Process in any such suit, action or
proceeding may be served on any party anywhere in
the world, whether within or without the
jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of
process on such party by first-class mail or
overnight courier, postage or delivery charges
prepaid, at its principal executive office
addressed to the attention of its General Counsel
shall be deemed effective service of process on
such party. This letter may not be amended,
modified or waived orally, but only by an
instrument in writing signed by the parties. This
letter may be executed in two or more
counterparts, each of which shall be an original,
but all of which together shall constitute one and
the same letter.
16. Dundee intends that the Subscription Agreement
will contemplate that after the Closing PMC will
use reasonable efforts to obtain a listing of its
stock on NASDAQ NMS and that Dundee will use
reasonable efforts to facilitate such listing,
provided that Dundee shall not be obligated to
approve any additional issuance of shares or to
make any further investment in PMC or to reduce
its representation on the Board of Directors below
that representing a majority of the Board. <PAGE>
If you are in agreement with the foregoing, please
execute this letter where indicated below and return a copy
thereof by telecopier to Dundee (Attention: Ray Benzinger) prior
to 11:30 p.m. (Toronto time) on the date of this letter (the
"Expiry Time"). This offer shall expire and be null and void if
Dundee does not receive a copy hereof duly executed by PMC prior
to the Expiry Time.
Yours very truly,
DUNDEE BANCORP INC.
By:/S/ Ray Benzinger
Ray Benzinger
Executive Vice President
PMC International, Inc. hereby agrees to be
bound by the foregoing terms and conditions.
Dated July 7, 1998
PMC INTERNATIONAL, INC.
By:/S/ Scott A. MacKillop
<PAGE>
EXHIBIT 10.6
LOAN AGREEMENT
LOAN AGREEMENT, dated as of July 7, 1998, between PMC
INTERNATIONAL, INC., a Colorado corporation (the "Borrower"), and
DUNDEE BANCORP INC., an Ontario corporation (the "Lender").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The
following terms, as used herein, have the following meanings:
"Affiliate" means, as to any Person, any other Person
directly or indirectly controlling, or controlled by or under
common control with such Person, including without limitation any
Person owning 5% or more of any class of voting securities of
such Person ("control" meaning the power to direct the management
of a Person, whether by the ownership of securities or by
contract or otherwise).
"Agreement" means this Agreement, as the same may be
amended, modified or supplemented from time to time.
"Applicable Law" means all applicable laws, treaties,
judgments, decrees, injunctions, writs and orders of any court,
governmental agency or authority and rules, regulations, orders,
directives, licenses and permits of any governmental body,
instrumentality, agency or authority.
"Board" means the Board of Directors of the Borrower or
a committee of directors lawfully exercising relevant powers of
the Board.
"Borrower" has the meaning set forth in the first
paragraph of this Agreement.
"Borrower Security Agreement" shall mean the security
agreement, dated as of the Closing Date, made by the Borrower in
favor of the Lender, as the same may from time to time be
amended, modified or supplemented. <PAGE>
"Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in Denver, Colorado,
New York, New York or Toronto, Canada are authorized by law to
close.
"Closing Date" shall mean the date on which all of the
conditions set forth in Section 3.1 are satisfied.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such
Person as lessee under capital leases, (v) all Debt of others
secured by a Lien on any asset of such Person, whether or not
such Debt is assumed by such Person and (vi) all Debt of others
Guaranteed by such Person.
"Default" means any condition or event that constitutes
an Event of Default or that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Dollars," "United States dollars," "U.S.$" or "$"
means United States of America dollars.
"Due Diligence Condition" means a condition to Lender's
obligation to consummate the closing under the Subscription
Agreement that permits the Lender not to close under the
Subscription Agreement in its sole discretion based on its
investigation of Borrower and its business without regard to
whether any matter discovered during such investigation would
otherwise provide grounds for Lender not to close under the
Subscription Agreement.
"Event of Default" has the meaning set forth in
Section 6.1.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof
<PAGE>
and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee Agreement" shall mean the Guarantee
Agreement, dated as of the Closing Date made by the Guarantors in
favor of the Lender, as the same may from time to time be
amended, modified or supplemented.
"Guarantors" shall mean each of Portfolio Management
Consultants, Inc., a Colorado corporation, PMC Investment
Services, Inc., a Delaware corporation, and Portfolio Technology
Services, Inc., a Colorado corporation; each a wholly owned
subsidiary of the Borrower.
"Guaranty" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether
arising by virtue of partnership arrangements or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term
Guaranty shall not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as
a verb has a corresponding meaning.
"Lender" has the meaning set forth in the first
paragraph of this Agreement.
"Letter of Intent" means that certain Letter of Intent,
dated the date hereof, between the Borrower and the Lender, as
the same may from time to time be amended, modified or
supplemented.
"Lien" means, with respect to any asset or property,
any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset or property.
<PAGE>
"Loan" shall have the meaning set forth in Section 2.1.
"Loan Documents" means (i) this Agreement, (ii) the
Guarantee Agreement, (iii) the Note, (iv) the Security
Agreements, (v) the Pledge Agreement, and (vi) any other agreement
entered into pursuant to Section 5.9 hereof or Section 4 of the
Security Agreements, in each case as the same may from time to
time be amended, modified or supplemented, and "Loan Document"
means any one of them.
"Note" shall mean a promissory note of the Borrower in
the form of Exhibit A hereto, as the same may from time to time
be amended, modified or supplemented.
"Officer's Certificate" means a certificate signed by
the president, a vice president, the secretary or the treasurer
of the Borrower.
"Permitted Liens" shall have the meaning set forth in
Section 5.11.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Pledge Agreement" means the Pledge Agreement, dated as
of the Closing Date, made by the Borrower in favor of Lender, as
the same may from time to time be amended, modified or
supplemented.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from time
to time.
"Responsible Officer" means, with respect to any
Person, the president or any vice president of such Person.
"SEC" means the U.S. Securities and Exchange Commission.
"SEC Reports" shall mean the annual report on Form
10-KSB of Borrower for its fiscal year ended December 31, 1997
<PAGE>
(as amended prior to the date hereof), the quarterly
report on Form 10-QSB of Borrower for its fiscal quarter ended
March 31, 1998, the definitive proxy statement on Schedule 14A
filed by the Borrower with respect to its annual meeting of
shareholders held December 15, 1997 and any other report,
registration statement, proxy statement or other filing with the
SEC made after December 31, 1997 and prior to the date hereof.
"Security Agreements" shall mean the Borrower Security
Agreement and the Subsidiary Security Agreement.
"Stockholder" shall mean each of the Persons owning
capital stock of the Borrower.
"Subscription Agreement" means the Subscription
Agreement, between the Borrower and the Lender, providing for the
subscription by the Lender for shares of common stock of the
Borrower representing not less than 50.5% of such common stock on
a fully diluted basis and to be entered into between the Borrower
and the Lender as contemplated by the Letter of Intent, as the
same may from time to time be amended, modified or supplemented.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by
such Person.
"Subsidiary Security Agreement" shall mean the security
agreement, dated as of the Closing Date made by the Guarantors in
favor of the Lender, as the same may from time to time be
amended, modified or supplemented.
SECTION 1.2 Accounting Terms and
Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time
to time, applied on a consistent basis. <PAGE>
ARTICLE II
THE LOAN
SECTION 2.1 Term Loan. The
Lender agrees, on the terms and subject to the conditions set
forth in this Agreement, to make a term loan (the "Loan") to the
Borrower on the Closing Date in the principal amount of
$1,500,000. The Loan will be made available to or at the written
direction of the Borrower in immediately available funds.
SECTION 2.2 The Note; Repayment of Principal. The
obligation of the
Borrower to repay the unpaid principal amount of the Loan shall
be evidenced by the Note in the form of Exhibit A hereto, payable
to the Lender and its registered assigns, duly executed and
delivered by the Borrower to the Lender and bearing interest,
maturing and subject to optional and mandatory prepayment as
provided herein. The Borrower shall repay the Loan, together
with all accrued interest thereon, on December 31, 1998, subject
to earlier mandatory prepayment as provided in Section 2.5 hereof.
SECTION 2.3 Loan Record.
(a) The Lender shall maintain a loan record in which it shall
record the date and amount of each payment or prepayment of
principal of the Loan and the interest paid with respect thereto.
(b) The failure of the Lender to make an entry in the
loan register or any error made in any such entry shall not in
any way affect the obligations of the Borrower under this
Agreement or any other Loan Document, including without
limitation the Borrower's obligation to repay the principal
amount of the Loan and the interest accrued from the actual date
on which the Loan is made. The Borrower shall not be bound by
any entry in the loan register not made in accordance with the
terms hereof.
SECTION 2.4 Interest Rate.
(a) The Loan shall bear
interest on the outstanding
principal amount at a rate of 12% per annum. Interest on the
Loan shall be payable in arrears on each date that principal
becomes due, whether at maturity, by acceleration or by
prepayment. Interest shall be calculated on the basis of a 365
(or 366, as the case may be) day year for the actual days
elapsed. <PAGE>
(b) Any overdue principal of and overdue interest on
the Loan or any other overdue amount payable under this Agreement
shall bear interest, payable on demand, for each day until paid
(to the extent permitted by applicable law after as well as
before judgment) at a rate per annum equal to 2% above the
interest rate otherwise payable for such day pursuant to
Section 2.4(a).
SECTION 2.5 Mandatory Prepayment of the Loan. The
Borrower shall
prepay the Loan in whole, together with all accrued interest
thereon, on the first to occur of: (a) the occurrence of the
closing under the Subscription Agreement, (b) September 30, 1998,
in the event that the closing under the Subscription Agreement
shall not have occurred by such date other than solely as a
result of a material breach by Lender of its obligations under
the Subscription Agreement or as a result of Lender's exercising
its right not to close under the Subscription Agreement pursuant
to the Due Diligence Condition, if such Condition is contained in
the Subscription Agreement, (c) the date on which the
Subscription Agreement is terminated (other than by Borrower for
material breach by Lender of its obligations thereunder or by
Lender pursuant to the Due Diligence Condition, if such Condition
is contained in the Subscription Agreement), (d) August 31, 1998,
if the Subscription Agreement shall not have been entered into
and be in full force and effect on such date and (e) the date on
which Borrower terminates the Letter of Intent; provided, that if
the Lender notifies the Borrower that it is terminating the
Letter of Intent or (if the Subscription Agreement has been
executed and delivered) the Subscription Agreement other than for
a breach by the Borrower of its obligations thereunder, the
Borrower shall repay the Loan in whole, together with all accrued
interest thereon, on the later of 30 days from the notice of such
termination by the Lender and the date that Loan and all accrued
interest thereon would have otherwise been due and payable
pursuant to this Section 2.5.
SECTION 2.6 Optional Prepayments of the Loan. The
Borrower may prepay
the Loan, in whole at any time or from time to time in part,
without premium or penalty, upon at least two Business Days'
irrevocable notice to the Lender, specifying the date and amount
of prepayment. If such notice is given, the Borrower shall make
such prepayment and the payment amount specified in such notice
shall be due and <PAGE>
payable on the date specified therein,
together with all accrued interest to such date on the amount
prepaid.
SECTION 2.7 Manner and Time of Payments.
(a) All payments of principal,
interest and all other amounts payable hereunder shall be in
United States dollars in Federal or other immediately available
funds and shall be made not later than 1:00 p.m. (New York time)
on the date due to the Lender at such account of such bank as the
Lender may from time to time designate. Funds received by the
Lender after such time shall be deemed to have been paid by the
Borrower on the next succeeding Business Day.
(b) Whenever any payment to be made hereunder shall be
stated to be due on a day which 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 payment of interest hereunder.
SECTION 2.8 Use of Proceeds. The Borrower shall use
the proceeds of the Loan only
for working capital of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS
SECTION 3.1 Conditions Precedent to the Loan. The
obligation of the
Lender to make the Loan to be made by it hereunder is subject to
the satisfaction of the following conditions precedent (or the
waiver thereof in accordance with Section 7.4 hereof):
(a) The Lender shall have received the Note,
conforming to the requirements hereof and duly executed and
delivered by a duly authorized Responsible Officer of the
Borrower;
(b) The representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents and
those otherwise made in writing by or on behalf of the
Borrower in connection with the transactions contemplated by
this Agreement shall be correct in all material respects
when made and at and as <PAGE>
of the Closing Date, as if
made at and as of the Closing Date; no Event of Default or
Default shall have occurred and be continuing; and the
Borrower shall have delivered to the Lender a certificate of
a Responsible Officer of the Borrower, dated the Closing
Date, certifying that the conditions specified in this
paragraph (b) have been fulfilled;
(c) The Lender shall have received an opinion of
counsel to the Borrower, which counsel is satisfactory to
the Lender, in form and substance satisfactory to the Lender
and covering such matters incident to the transactions
contemplated by this Agreement and the other Loan Documents
as the Lender may reasonably request, addressed to the
Lender and dated the Closing Date;
(d) The Lender shall have received the Borrower
Security Agreement in the form of Exhibit B hereto, duly
executed and delivered on behalf of the Borrower by a duly
authorized Responsible Officer of the Borrower, and a
Subsidiary Security Agreement in the form of Exhibit C
hereto, duly executed and delivered on behalf of each
Guarantor by a duly authorized Responsible Officer of such
Guarantor; and such Security Agreements shall be in full
force and effect;
(e) The Lender shall have received the Guarantee
Agreement in the form of Exhibit D hereto, duly executed and
delivered on behalf of each Guarantor by a duly authorized
Responsible Officer of such Guarantor; and such Guarantee
Agreement shall be in full force and effect;
(f) The Lender shall have received the Pledge
Agreement in the form of Exhibit E hereto, duly executed and
delivered on behalf of the Borrower by a duly authorized
Responsible Officer of the Borrower; and such Pledge
Agreement shall be in full force and effect; and
(g) The Lender shall have received all documents it
may reasonably request relating to the existence of the
Borrower and its Subsidiaries, the corporate authority for
and the validity of this Agreement and the other Loan
Documents and any other matters relevant <PAGE>
hereto, all
in form and substance satisfactory to the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
SECTION 4.1 Corporate Organization, Etc.
(a) The Borrower is a corporation duly
organized and validly existing and in good standing under the
laws of the State of Colorado, and has the corporate power and
authority to own or hold under lease its properties and to enter
into and perform its obligations under this Agreement and all
other Loan Documents.
(b) The Borrower is duly qualified to do business as a
foreign corporation in each state of the United States in which
it has an office or in which failure so to qualify would,
individually or in the aggregate, have a material adverse effect
on the business, assets, liabilities, condition (financial or
otherwise) or prospects of Borrower and its Subsidiaries taken as
a whole or on its ability to perform its obligations under this
Agreement, the Note or any other Loan Document (a "Material
Adverse Effect").
(c) Each Subsidiary of Borrower is a corporation duly
organized and validly existing and in good standing under the
laws of the state of its incorporation, and has the corporate
power and authority to own or hold under lease its properties and
assets and to enter into and perform its obligations under each
of the Loan Documents to which it is a party. Each such
Subsidiary is duly qualified to do business as a foreign
corporation in each state of the United States in which it has an
office or in which the failure to be so qualified would have a
Material Adverse Effect.
(d) Set forth on Schedule 4.1 is a list of all of the
Subsidiaries of the Borrower and a true and correct description
of the authorized, issued and outstanding capital stock of each
such Subsidiary. The Borrower owns all of the outstanding
capital stock of each such Subsidiary, free and clear of any
Liens, except as specified in Schedule 4.1. <PAGE>
SECTION 4.2 Due Authorization. The execution,
delivery and performance by the
Borrower of this Agreement and the Note, and the execution,
delivery and performance by the Borrower and the Guarantors of
each of the other Loan Documents to which any of them is a party:
(a) have been duly authorized by all necessary
corporate action and do not require any stockholder approval
or the approval or consent of or notice to any trustee or
holder of any indebtedness or obligations of the Borrower or
any Subsidiary;
(b) do not conflict with or result in any violation of
the certificate of incorporation or by-laws of the Borrower
or any Subsidiary;
(c) do not and will not contravene any Applicable Law
or conflict with or constitute a default under, or result in
the creation of any Lien (other than as permitted under this
Agreement or the Security Agreement) upon the property of
the Borrower or any Subsidiary under any indenture,
mortgage, lease, instrument or other agreement to which the
Borrower or any Subsidiary is a party or by which it may be
bound or affected; and
(d) do not require the authorization, consent or
approval of, the giving of notice to, the registration with
or the taking of any other action by or in respect of, any
Federal, state or foreign governmental authority, agency or
judicial body, or the taking of any other action under any
Applicable Law, except for those that have been or, on or
before the Closing Date, will have been, duly made, given or
accomplished, including without limitation the filing of
Uniform Commercial Code financing statements referred to in
the Security Agreements.
SECTION 4.3 Litigation.
Except as disclosed in its SEC Reports, complete and correct
copies of which have been furnished to the Lender, there are no
pending or, to the knowledge of the Borrower, threatened actions,
suits, proceedings or investigations before any court or
administrative agency or arbitrator which would, if adversely
determined, individually or in the aggregate, have a Material
Adverse Effect.
<PAGE>
SECTION 4.4 Absence of Undisclosed Liabilities. Except
as disclosed in
the SEC Reports or in Schedule 4.4 hereto and for liabilities
arising since March 31, 1998 in the ordinary course of business
and consistent with past practice, none of which have had or
could reasonably be expected to have any Material Adverse Effect,
neither Borrower nor any of its Subsidiaries has any liability,
obligation, claim or cause of action of any kind or nature
whatsoever, whether absolute, accrued, contingent or other, known
or unknown.
SECTION 4.5 Taxes. Each of the
Borrower and its Subsidiaries has filed or caused to be filed all
material tax returns which are required to be filed by it and has
paid or caused to be paid all taxes which have been shown to be
due and payable by such returns or (except to the extent being
contested in good faith and for the payment of which adequate
reserves have been provided) tax assessments received by the
Borrower or such Subsidiary to the extent that such taxes have
become due and payable.
SECTION 4.6 Title to Certain Properties. Each of
the Borrower and the
Guarantors has good and marketable title to all of its material
properties and assets free and clear of any Lien, except as
disclosed on Schedule 4.6 hereto.
SECTION 4.7 No Default. No
Event of Default or Default has occurred and is continuing or has
occurred or will occur as a result of the execution and delivery
of this Agreement or the other Loan Documents or the consummation
of the transactions contemplated hereby or thereby.
SECTION 4.8 Investment Company. Neither the
Borrower nor any Guarantor is an
"investment company" or a company controlled by an "investment
company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.9 Legal, Valid and Binding
Agreements. This
Agreement, the Note and each other Loan Document constitute or,
when executed and delivered by each of the Borrower and the
Guarantors which is a party thereto, will constitute, the legal,
valid and binding obligation of each of the Borrower and the
Guarantors which is a party thereto, enforceable against the
Borrower or such Guarantor, as the case may be, in accordance with
the respective terms hereof and <PAGE>
thereof, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of
creditors generally and by general principles of equity.
SECTION 4.10 Compliance with ERISA. Neither the
Borrower nor any Subsidiary
has breached the fiduciary rules of ERISA or engaged in any
prohibited transaction in connection with which the Borrower or
such Subsidiary could be subjected to (in the case of any such
breach) liability for damages or (in the case of any such
prohibited transaction) either a civil penalty assessed under
ERISA or a tax, which liability, penalty or tax, in any case,
would reasonably be expected to have a Material Adverse Effect.
SECTION 4.11 Disclosure; Financial Statements.
(a) The SEC Reports
do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading.
(b) The consolidated balance sheets of Borrower and
its consolidated Subsidiaries and the related consolidated
statements of operations, changes in shareholders' equity and
cash flows contained in the SEC Reports, present fairly the
financial condition of the Borrower and its Subsidiaries as at
the dates thereof, and the consolidated results of its
operations, changes in shareholders, equity and cash flows for
the periods presented therein in accordance with generally
accepted accounting principles consistently applied. There has
been no material adverse change in the business, operations,
assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole
from that reflected on the most recent consolidated balance sheet
of the Borrower and its subsidiaries contained in the SEC reports.
SECTION 4.12 Compliance with Law. Each of the
Borrower and its subsidiaries
is in compliance with all Applicable Law, except to the extent
that the failure to comply therewith would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 4.13 Consents. No
consent of any other Person and no consent or authorization of,
filing with or <PAGE>
other act by or in respect of any
Governmental Authority is required in connection with the
borrowing hereunder or with the execution, delivery or
performance by Borrower or any Guarantor, or the validity or
enforceability of, this Agreement or any other Loan Document,
except as set forth on Schedule 4.13 hereto and except for such
consents, authorizations, filings or acts the failure of which to
obtain or to undertake would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.14 Patents, Copyrights, Permits and
Trademarks. Each of Borrower and its Subsidiaries owns, or has a
valid license or sublicense in, all domestic and foreign letters
patent, patents, patent applications, and know-how, licenses,
inventions, technology, permits, trademark registrations and
applications, trademarks, tradenames, trade secrets, service
marks, copyrights, product designs, applications, formulae,
computer software and programs, processes and industrial property
rights (collectively "proprietary rights") used in the operation
of its business in the manner in which it is currently being
conducted and which are material to the business, operations,
assets, liabilities, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole.
Neither the Borrower nor any of its Subsidiaries is aware of any
existing or threatened infringement or misappropriation of any
proprietary rights of others by the Borrower or any of its
Subsidiaries or of any proprietary rights of the Borrower or any
of its Subsidiaries by others, except for such as would not,
individually or in the aggregate, have Material Adverse Effect.
ARTICLE V
COVENANTS
The Borrower covenants and agrees that, so long as this
Agreement shall be in effect or any amount payable hereunder
shall remain unpaid or any obligation required to be performed
hereunder shall remain unperformed, and unless the Lender shall
otherwise consent in writing:
SECTION 5.1 Performance of Obligations. (a) The
Borrower shall perform, and
shall cause each Guarantor to <PAGE>
perform, promptly and
faithfully all of its obligations under this Agreement, the Note
and the other Loan Documents.
(b) The Borrower shall, and shall cause each Subsidiary
to, pay and discharge, at or before maturity, all of its material
obligations and liabilities, including, without limitation, tax
liabilities, except where the same may be contested in good faith
by appropriate proceedings, and maintain in accordance with
generally accepted accounting principles appropriate reserves for
the accrual of any of the same; provided that the inability of
the Borrower and its Subsidiaries to pay and discharge their
obligations or liabilities with respect to the matters set forth
in Schedule 5.1 hereto or to pay and discharge their accounts
payable within 120 days of their presentment to the Borrower or
its Subsidiaries shall not be deemed a breach or nonperformance
by the Borrower of its covenants in this Section 5.1(b).
SECTION 5.2 Compliance with Laws. The Borrower
shall, and shall cause each
Subsidiary to, comply in all material respects with all
Applicable Laws except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.3 Notice of Default and Event of
Default. No
later than ten Business Days after becoming aware of the
existence of any condition or event which constitutes a Default
or an Event of Default hereunder, the Borrower shall provide the
Lender with an Officer's Certificate specifying the nature and
period of existence thereof and what action the Borrower is
taking or proposes to take with respect thereto. <PAGE>
SECTION 5.4 Report on Proceedings. No later than ten
Business Days after becoming
aware of any investigation of the Borrower or any Subsidiary by
any governmental authority or agency or any court or
administrative proceeding or arbitration which, if adversely
determined, would reasonably involve a possibility of an adverse
effect on the ability of the Borrower to perform its obligations
under this Agreement, the Note or any other Loan Document, the
Borrower shall provide the Lender with an Officer's Certificate
specifying the nature of such investigation or proceeding and
what action the Borrower is taking or proposes to take with
respect thereto.
SECTION 5.5 Financial Statements and Other
Reports. The
Borrower shall furnish to the Lender the following described
financial statements, reports, notices and information:
(a) Monthly Financial Statements. Within 25 days
after the end of the month, consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries at the
end of such month and the related consolidated and
consolidating statements of income of the Borrower and its
Subsidiaries for such month, and the general ledger trial
balance of the Borrower and its Subsidiaries for such month,
all in reasonable detail and in form reasonably satisfactory
to the Lender, together with such other information as is
customarily prepared by Borrower as part of its monthly
report to management.
(b) Quarterly Financial Statements. Within 45 days
after the end of each fiscal quarter of the Borrower,
consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries at the end of such quarter and
the related consolidated and consolidating statements of
income, stockholders' equity and cash flow of the Borrower
and its Subsidiaries for such fiscal quarter, setting forth,
in the case of the consolidated statements, in comparative
form the figures for the previous quarter of the Borrower,
all in reasonable detail and certified by a principal
financial officer of the Borrower as presenting fairly the
financial position of the Borrower and its Subsidiaries as
of the dates indicated and the results of their operations,
changes in shareholders' equity and cash flows for the
periods indicated in conformity with generally accepted
accounting principles applied on a consistent basis with
prior periods (except as otherwise stated therein); provided
that the delivery of the Borrower's Quarterly Report on Form
10-QSB for such fiscal quarter prepared in accordance with
the requirements of the SEC and U.S. securities regulations
shall be sufficient to satisfy the Borrower's obligations
under this Section 5.5(b).
(c) Other Reports. Promptly upon their becoming
available, copies of all other financial statements,
reports, notices and proxy statements sent or made available
<PAGE>
by the Borrower to its shareholders or filed with the SEC.
(d) Officer's Certificate. Together with each
delivery of financial statements or reports required by
clauses (a) and (b) above, a certificate from a Responsible
Officer of the Borrower to the effect that the signer is
familiar with or has reviewed the relevant terms of this
Agreement and has made, or caused to be made under his or
her supervision, a review of the transactions and condition
of the Borrower during the period covered by such financial
statements, and that such review has not disclosed the
existence during such period, nor does the signer have
knowledge of the existence as at the date of such
certificate, of any condition or event that constitutes an
Event of Default or Default hereunder or, if any such
condition or event existed or exists, specifying the nature
and period of existence thereof and what action the Borrower
has taken, is taking or proposes to take with respect
thereto.
(e) Other Information. Such other data or information
regarding the business affairs or financial condition of the
Borrower as the Lender may from time to time reasonably
request, promptly upon receipt of such request.
SECTION 5.6 Conduct of Business and Preservation of
Corporate Existence, Etc. (a) The Borrower shall, and shall
cause each Subsidiary to, maintain and preserve at all times its
corporate existence.
(b) The Borrower shall, and shall cause each
Subsidiary to, continue to engage in business of the same general
type as now conducted by the Borrower or such Subsidiary and will
do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its corporate existence and its
rights, powers, privileges and franchises, except for any
corporate right, power, privilege or franchise that it determines
is no longer necessary or desirable in the conduct of its
business.
(c) The Borrower shall not, without the prior written
consent of the Lender, enter into the ownership, active
management or operation of any business other than <PAGE>
businesses presently conducted in the geographic locations
presently conducted (and except as otherwise permitted hereby the
Borrower shall not effect or permit a change in its corporate
organization existing on the date hereof).
(d) The Borrower shall not, and shall not permit any
Subsidiary to, amend or modify its Certificate of Incorporation
or By-laws without the prior written consent of the Lender (which
consent will not be unreasonably withheld).
SECTION 5.7 Inspection of Property; Books and
Records.
The Borrower shall, and shall cause each Subsidiary to, keep
proper books of record and account in which full, true and
correct entries are made in accordance with generally accepted
accounting principles and all Applicable Laws; and shall permit
representatives of the Lender to visit and inspect any of its
properties, and examine and make abstracts from any of its books
and records at the Borrower's expense, at any reasonable time and
as often as may reasonably be requested, and to discuss the
business, operations, properties and financial and other
condition of the Borrower and its Subsidiaries with officers and
employees of the Borrower and its Subsidiaries.
SECTION 5.8 Maintenance of Property; Insurance. The
Borrower shall, and
shall cause each Subsidiary to, keep all property useful and
necessary in its business in good working order and condition,
and maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts
and against such risks as are usually insured against in the same
general area by Persons engaged in the same or a similar business.
SECTION 5.9 Further Assurances; Additional Collateral
Security. The Borrower shall, and shall cause each Subsidiary
to, execute and file all such further documents and instruments,
and perform such other acts, as the Lender may reasonably
determine are necessary or advisable to maintain or perfect the
Liens granted to the Lender in connection with this Agreement and
the other Loan Documents and to maintain the priority and
perfection of such Liens purported to be granted pursuant to this
Agreement and the other Loan Documents (including any Liens on
property rights (as defined in Section 4.14 hereof)). With
respect to any real property, fixtures, equipment or securities
identified as collateral <PAGE>
under any Security Agreement
acquired and held by the Borrower or any Guarantor at any time
after the Closing Date, upon request of the Lender, the Borrower
shall, or shall cause such Guarantor to, grant the Lender a Lien
of record on all such real property, fixtures and equipment and a
pledge of all such securities, upon the terms set forth in the
applicable Security Agreement, as appropriate, and satisfactory
in form and substance to the Lender.
SECTION 5.10 Indebtedness.
The Borrower shall not, and shall not permit any Subsidiary to,
create, incur, assume, Guarantee or suffer to exist any Debt
except:
(a) Debt under the Loan Documents;
(b) Debt listed on Schedule 5.10 hereto;
(c) In addition to Debt permitted under clause (b),
Debt for borrowed money, the proceeds of which are used
solely for working capital purposes, in an aggregate amount
outstanding not in excess of $1.5 million;
(d) In addition to Debt permitted under clause (b),
Debt representing the deferred purchase price of property or
capital leases incurred in the ordinary course of business
consistent with past practice, in an aggregate amount
outstanding not in excess of $500,000;
(e) Debt for borrowed money, the proceeds are which
are applied to repay the entire outstanding principal of and
accrued interest on the Loan and to discharge the Borrower's
payment obligations under the Loan Documents; and
(f) Debt for borrowed money, the proceeds of which are
used solely to pay and discharge the Company's obligations
and liabilities with respect to the matters set forth in
Schedule 5.1 hereto; provided that the aggregate amount
outstanding of such Debt does not exceed $2.5 million at any
time.
SECTION 5.11 Limitation on Liens. The Borrower
shall not and shall not permit
any Subsidiary to, create, incur, assume or suffer to exist any
Lien on any of its <PAGE>
property, assets or revenues, whether
now owned or hereafter acquired, except the following (the
"Permitted Liens"):
(a) Liens in favor of the Lender and under the Loan
Documents;
(b) Liens existing on the date hereof and set forth on
Schedule 5.11 hereto;
(c) (i) Liens securing Debt permitted under
Section 5.10(d); and (ii) Liens securing Debt permitted
under Sections 5.10(c), (e) and (f), but only if such Liens
represent security interests that are subordinated to the
Liens in favor of the Lender under the Loan Documents;
(d) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any
Lien permitted by any of the foregoing clauses of this
Section 5.11; provided that (i) the interest rate on, and
other terms and conditions of, such Debt are no less
favorable to the Borrower than those which would be obtained
by similarly-situated Persons from banks and other
institutions; (ii) such Debt matures after December 31,
1998, except when such Debt renews or refunds Debt that
would have otherwise matured (other than as a result of the
acceleration thereof by the lender or the occurrence of an
event or circumstance that would have resulted in a
mandatory prepayment thereof) on or prior to December 31,
1998, and (iii) the principal amount of such Debt does not
exceed the principal amount of, and accrued and unpaid
interest on, the Debt so refunded;
(e) Liens for taxes and special assessments not yet
due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower in
accordance with generally accepted accounting principles;
(f) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business which are not overdue for a
period of more than 90 days or which are being contested in
good faith by appropriate proceedings;
<PAGE>
(g) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social
security legislation or to secure the performance of
tenders, statutory obligations, surety and appeal bonds,
performance and return-of-money bonds and similar
obligations;
(h) Liens resulting from judgments of any court or
governmental proceeding; provided that such judgments in the
aggregate do not constitute an Event of Default under
Section 6.1(k); and
(i) Liens of landlords or of mortgagees of landlords,
arising solely by operation of law, on fixtures located on
premises leased in the ordinary course of business; provided
that the rental payments secured thereby are not more than
30 days over due.
SECTION 5.12 No Dividends.
The Borrower shall not, and shall not permit any Subsidiary to,
declare any dividends on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the
purchase, redemption, retirement or other acquisition of, any
shares of any class of stock of the Borrower, whether now or
hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or
property or in obligations of the Borrower or any Subsidiary.
SECTION 5.13 Limitation on Investments. The Borrower
shall not, and shall not
permit any Subsidiary to, make or permit to exist any loans or
cash advances to, or capital investments in, any other Person,
including any Affiliate, except that:
(a) the Borrower and any Subsidiary may make cash
advances to, or investments in, any wholly-owned Subsidiary
of the Borrower or, in the case of advances or investments
by any Subsidiary, the Borrower;
(b) the Borrower and any Subsidiary may purchase or
otherwise acquire and own (i) securities with maturities of
one year or less from the date of acquisition issued or
fully guaranteed or insured by the United States of America
or any agency thereof, <PAGE>
(ii) commercial paper issued
by domestic issuers rated at least A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc. or
(iii) certificates of deposit, Eurodollar time deposits,
overnight bank deposits and bankers acceptances, each with
maturities of one year or less from the date of the
acquisition thereof, of any commercial bank having capital
and surplus in excess of $100,000,000;
(c) the Borrower and its Subsidiaries may acquire
investments in notes and other securities received in
settlement of overdue debts and accounts payable in the
ordinary course of business; and
(d) the Borrower and its Subsidiary may make Loans to
KP3 LLC; provided that the aggregate outstanding amount of
such Loans made after the date hereof may not exceed $60,000
at any time.
SECTION 5.14 Contingent Liabilities. The Borrower
shall not, and shall not
permit any Subsidiary to, become liable for any Guaranties,
except for (i) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business, (ii) Guaranties existing as of the date
hereof and listed on Schedule 5.14, (iii) Guaranties in respect
of Debt permitted under Section 5.10 or Liens permitted under
Section 5.11 and (iv) Guaranties (other than Guaranties of Debt)
arising in the ordinary course of business of the Borrowers and
the Subsidiaries consistent with past practice.
SECTION 5.15 Limitation on Leases. The Borrower
shall not, and shall not
permit any Subsidiary to, enter into any agreement, or become
liable under any agreement, for the lease, hire or use of any
real or personal property for a period in excess of one year and
an aggregate rental or other payment in excess of $500,000,
except with the prior written approval of the Lender, such
approval not to be unreasonably withheld.
SECTION 5.16 Prohibition on Sale of Assets. The Borrower
shall not, and
shall not permit any Subsidiary to, except as permitted or
contemplated under this Agreement or any other Loan Document,
sell, lease, assign, transfer or otherwise dispose of any of its
assets, whether now owned or <PAGE>
hereafter acquired, except
for dispositions of assets in the ordinary course of business
consistent with past practice that, taken together, do not
constitute any material portion of the assets of the Borrower or
any Subsidiary.
SECTION 5.17 Limitation on Prepayments of Debt. The Borrower
shall not,
and shall not permit any Subsidiary to, directly or indirectly
prepay, purchase, redeem, retain or otherwise acquire any of its
Debt except for prepayments of the Note in accordance with the
terms of this Agreement and except as otherwise expressly
provided herein; provided, however, that discharges of Debt by
mandatory prepayments or by scheduled installments and payments
in full at their stated maturities and prepayments of working
capital financing permitted under Section 5.10(c) shall not be
deemed to violate this subsection.
SECTION 5.18 Subsidiaries.
The Borrower shall not, and shall not permit any Subsidiary to,
without the prior written consent of the Lender, create any
Subsidiary.
SECTION 5.19 Mergers, Disposition of Assets,
Etc. The Borrower shall not,
and shall not permit any Subsidiary to, merge, combine or
consolidate with or into any Person, or sell, assign, lease or
otherwise dispose of (whether in one transaction or in a series
of transactions, whether or not related) all or any substantial
portion of its assets (whether now owned or hereafter acquired)
to any Person, except with the prior written approval of the
Lender, such approval not to be unreasonably withheld.
SECTION 5.20 Fiscal Year.
The Borrower shall not, and shall not permit any Subsidiary to,
permit its fiscal year to end on a day other than December 31
without the prior written consent of the Lender.
SECTION 5.21 No Inconsistent Agreements. The Borrower
shall not, and shall
not permit any Subsidiary to, enter into any agreement containing
any term or provision which will be violated, contravened or
breached by (i) the Borrower's execution or delivery of this
Agreement or any Loan Document, (ii) the Borrower's performance
of its obligations hereunder or (iii) the consummation of the
transactions contemplated hereby. <PAGE>
SECTION 5.22 Use of Proceeds. The Borrower agrees
to apply the proceeds of the Loan
solely and exclusively for working capital purposes of the
Borrower and its Subsidiaries.
SECTION 5.23 Transactions with Affiliates. The Borrower
shall not, and shall
not permit any Subsidiary to, directly or indirectly, enter into
or, except for such existing transactions as are disclosed in the
SEC Reports or Schedule 5.23 hereto, permit to exist any
transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any
service) with any Affiliate of the Borrower (other than its
wholly-owned Subsidiaries) or any director or executive officer
of the Borrower or its Subsidiaries, on terms that are less
favorable to the Borrower or such Subsidiary than those which
might be obtained at the time from Persons who are not
Affiliates, directors or executive officers.
ARTICLE VI
DEFAULTS
SECTION 6.1 Events of Default. If one or more of the
following events ("Events of
Default") shall have occurred and be continuing:
(a) the Borrower shall fail to make any payment of any
principal of the Loan required to be made under this
Agreement when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by
acceleration or otherwise;
(b) the Borrower shall fail to make any payment of any
other amount payable under this Agreement or the Note for
more than five Business Days after the same becomes due and
payable;
(c) the Borrower shall fail to perform or comply with
any covenant set forth in Section 5.3 ("Notice of Default or
Event of Default"), 5.6 ("Conduct of Business and
Preservation of Corporate Existence, Etc."), 5.12 ("No
Dividends"), 5.17 ("Limitation on Prepayments of Debt"),
5.19 ("Mergers, Disposition of Assets, Etc."), or 5.22 ("Use
of Proceeds"); <PAGE>
(d) the Borrower shall fail to perform or comply with
any other covenant or agreement to be performed or observed
by it under this Agreement or any other Loan Document and
such failure shall continue unremedied for a period of
30 days after written notice thereof shall have been given
by the Lender to the Borrower;
(e) any representation or warranty of the Borrower or
any Guarantor contained in this Agreement or any other Loan
Document or in any document or certificate delivered in
connection herewith or therewith or pursuant hereto or
thereto shall at any time prove to have been incorrect or
incomplete in any material respect at the time made or
deemed to have been made, shall remain material at the time
in question and shall either be incapable of being cured or
shall not be cured within 20 days after notice thereof by
the Lender to the Borrower;
(f) the Borrower or any Subsidiary shall consent to
the appointment of or taking possession by a receiver,
assignee, custodian, sequestrator, trustee or liquidator (or
other similar official) of itself or of a substantial part
of its property; or the Borrower or any Subsidiary shall
admit in writing (to any creditor, governmental authority or
judicial court or tribunal) its inability to pay its debts
generally as they come due or shall fail generally to pay
its debts as they become due (except to the extent
contemplated by the proviso clause of Section 5.1(b)
hereof), or shall make a general assignment for the benefit
of its creditors; or the Borrower or any Subsidiary shall
file a voluntary petition in bankruptcy or a voluntary
petition or answer seeking liquidation, reorganization or
other relief with respect to itself or its debts under the
Federal bankruptcy laws, as now or hereafter constituted or
any other applicable Federal or State bankruptcy, insolvency
or other similar law, or shall consent to the entry of an
order for relief in an involuntary case under any such law;
or the Borrower or any Subsidiary shall file an answer
admitting the material allegations of a petition filed
against the Borrower in any such proceeding, or otherwise
seek relief under the provisions of any existing or future
Federal or State bankruptcy, insolvency or other similar law
providing for the reorganization or winding-up of
corporations, or providing for an arrangement, agreement,
<PAGE>
composition, extension or adjustment with its
creditors; or the Borrower or any Subsidiary shall take or
publicly announce its intention to take corporate action in
furtherance of any of the foregoing;
(g) an order, judgment or decree shall be entered in
any proceeding by any court of competent jurisdiction
appointing, without the consent of the Borrower, a receiver,
trustee or liquidator of the Borrower or any Subsidiary or
of any substantial part of its property, or any substantial
part of the property of the Borrower or any Subsidiary shall
be sequestered, and any such order, judgment or decree of
appointment or sequestration shall remain in force
undismissed, unstayed or unvacated for a period of 60 days
after the date of entry thereof;
(h) a petition against the Borrower or any Subsidiary
in a proceeding under the Federal bankruptcy laws or other
insolvency laws, as now or hereafter in effect, shall be
filed and shall not be withdrawn or dismissed within 60 days
thereafter, or a decree or order for relief in respect of
the Borrower or any Subsidiary shall be entered by a court
of competent jurisdiction in an involuntary case under the
Federal bankruptcy laws, as now or hereafter constituted,
and such decree or order shall remain unstayed and in effect
for a period of 60 days, or, under the provisions of any law
providing for reorganization or winding-up of corporations
which may apply to the Borrower, any court of competent
jurisdiction shall assume jurisdiction, custody or control
of the Borrower or any Subsidiary or of any substantial part
of its property and such jurisdiction, custody or control
shall remain in force unrelinquished, unstayed or
unterminated for a period of 60 days;
(i) any event, condition or circumstance shall have
occurred which results in the cancellation or termination of
the Subscription Agreement or the Letter of Intent, other
than by virtue of entering into the Subscription Agreement
or solely as a result of a material breach by the Lender of
its obligations thereunder or as a result of Lender's
exercising its right not to close under the Subscription
Agreement pursuant to the Due Diligence Condition (if such
Condition is contained in the Subscription Agreement); <PAGE>
(j) the Borrower or any Subsidiary shall fail to pay
when due and payable (after any applicable grace period) the
principal of or interest on any Debt in excess of $100,000
in respect of which it is obligated to make payment (other
than Debt under this Agreement or the Note) or the maturity
of such Debt shall have been accelerated in accordance with
the provisions of the instrument providing for the creation
of or concerning such Debt, or any event shall have occurred
or failed to occur and be continuing which, with the giving
of notice or the passage of time or both, would permit any
holder or holders thereof or any agent or trustee on its or
their behalf to accelerate such maturity;
(k) an uninsured final judgment in the amount, or
final judgments in related proceedings in an aggregate
amount, in excess of $100,000 shall be entered against the
Borrower or any Subsidiary and such judgment shall continue
unsatisfied and unstayed for a period of ten days;
(l) the Borrower or any Subsidiary shall fail to pay
when due an amount or amounts aggregating in excess of
$100,000 which it shall have become liable to pay to the
Pension Benefit Guaranty Corporation ("PBGC") or to an
employee benefit plan under Title IV of ERISA; or notice of
intent to terminate a plan or plans having aggregate
unfunded vested liabilities in excess of $100,000 shall be
filed under Title IV of ERISA by the Borrower or any
Subsidiary, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or cause a trustee to be
appointed to administer an employee benefit plan; or a
proceeding shall be instituted by a fiduciary of any
employee benefit plan against the Borrower or any Subsidiary
to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating
that any plan must be terminated; or
(m) any Loan Document shall cease for any reason to be
in full force and effect in accordance with its <PAGE>
terms or the Borrower or any Subsidiary shall so assert in writing
or the Borrower or any Subsidiary shall in any way
challenge, or any proceedings shall be brought to challenge,
the validity, binding effect or enforceability of such Loan
Document or any of the Liens purported to be granted
pursuant to any Loan Document shall cease for any reason to
be legal, valid and enforceable Liens on the collateral
purported to be covered thereby or to have the priority
purported to be granted thereby;
then, and in every such event, the Lender may by notice to the
Borrower declare the Loan to be, and the Loan shall thereupon
become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (f), (g) or (h) above,
without any notice to the Borrower or any other act by the
Lender, the Loan shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Notices. All
notices, requests and other communications to any party hereunder
shall be in writing (including bank wire, facsimile transmission
or similar writing) and shall be given to such party at its
address or facsimile number set forth below:
If to the Lender:
Dundee Bancorp Inc.
40 King Street West
Scotia Plaza -- 55th Floor
Toronto, Canada M5H 4A9
Attention: Ray Benzinger
TEL: (416) 365-5113
FAX: (416) 363-4536
<PAGE>
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Steven Ostner
TEL: 212-909-6000
FAX: 212-909-6836
If to the Borrower:
PMC International Inc.
555 17th Street - 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips
Scott A. McKillop
TEL: 303-292-1177
FAX: 303-293-2152
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln Street
Denver, Colorado 80203
Attention: Linda K. Wackwitz
TEL: 303-861-7000
FAX: 303-866-0200
or such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the other party.
Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means, when
delivered at the address specified in this Section 7.1.
SECTION 7.2 No Waivers; Remedies Cumulative. No
failure or delay by
the Lender in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
<PAGE>
SECTION 7.3 Expenses; Documentary Taxes;
Indemnification. (a) The Borrower shall be liable to pay on
demand (i) all out-of-pocket expenses of the Lender, including
the fees and disbursements of counsel to the Lender, in
connection with the preparation of any waiver or consent under the
Loan Documents or any amendment of any of the Loan Documents, or
any Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the
Lender, including fees and disbursements of counsel, in
connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting
therefrom. The Borrower shall indemnify the Lender from and hold
it harmless against any transfer taxes, documentary taxes,
assessments or other similar charges made by any governmental
authority by reason of the execution and delivery of any Loan
Document.
(b) The Borrower shall indemnify the Lender and hold
it harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of counsel,
that may be incurred by the Lender in connection with any
investigative, administrative or judicial proceeding (whether or
not the Lender shall be designated a party thereto) relating to
or arising out of any Loan Document or any actual or proposed use
of the proceeds of any Loan hereunder; provided that the Lender
shall not have the right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court
of competent jurisdiction.
SECTION 7.4 Amendments and Waivers. Neither this
Agreement nor any provision
hereof may be amended, modified, waived or supplemented except by
an instrument in writing signed by the Borrower and the Lender.
SECTION 7.5 Successors and Assigns.
The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights
under this Agreement without the prior written consent of the
Lender. <PAGE>
SECTION 7.6 GOVERNING LAW; VENUE AND
JURISDICTION.
THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION
AND ENFORCEMENT HEREOF AND THE RIGHTS OF THE PARTIES HERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE BORROWER
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND EACH OTHER "LOAN DOCUMENT" SHALL BE TRIED AND
LITIGATED IN FEDERAL OR, IN THE ABSENCE OF FEDERAL SUBJECT MATTER
JURISDICTION, STATE COURTS LOCATED IN THE STATE OF NEW YORK
UNLESS SUCH ACTIONS OR PROCEEDINGS ARE REQUIRED TO BE BROUGHT IN
ANOTHER COURT TO OBTAIN SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY. EACH OF THE BORROWER AND THE LENDER
WAIVES, TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE IN ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THE
IMMEDIATELY PRECEDING SENTENCE. SERVICE OF PROCESS, SUFFICIENT
FOR PERSONAL JURISDICTION IN ANY ACTION AGAINST THE BORROWER, MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ITS ADDRESS INDICATED IN SECTION 7.1.
SECTION 7.7 WAIVER OF JURY TRIAL.
EACH OF THE LENDER AND THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER "LOAN DOCUMENTS" OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
SECTION 7.8 Limitation on Interest. Each provision
in this Agreement and
each other Loan Document is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid,
by the Borrower for the use, forbearance or detention of the
proceeds of the Loan under this Agreement or any other Loan
Document or otherwise (including any sums paid as required by any
covenant or obligation contained herein or in any other Loan
Document which are for the use, forbearance or detention of such
money), exceed that amount of money which would cause the
effective rate of interest to exceed the highest lawful rate
permitted by applicable law (the "Highest Lawful Rate"), and all
amounts owed under this Agreement and each other Loan Document
shall be held to be subject to reduction to the effect that such
amounts so paid or agreed to be paid which <PAGE>
are for the
use, forbearance or detention of money under this Agreement or
such Loan Document shall in no event exceed that amount of money
which would cause the effective rate of interest to exceed the
Highest Lawful Rate. Notwithstanding any provision in this
Agreement or any other Loan Document to the contrary, if the
maturity of the Loan or the Note is accelerated for any reason,
or in the event of any prepayment of all or any portion of the
Loan or the Note by the Borrower or in any other event, earned
interest on the Loan or the Note may never exceed the Highest
Lawful Rate, and any unearned interest otherwise payable under
the Note that is in excess of the Highest Lawful Rate shall be
canceled automatically as of the date of such acceleration or
prepayment or other such event and, if theretofore paid, shall,
at the option of the holder of the Note, be either refunded to
the Borrower or credited to the principal of the Note. In
determining whether or not the interest paid or payable, under
any specific contingency, exceeds the Highest Lawful Rate, the
Borrower and the Lender shall, to the maximum extent permitted by
Applicable Law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all
interest at any time contracted for, charged, received or
reserved in connection with this Agreement.
SECTION 7.9 Severability. Any provision of this
Agreement which is illegal, invalid, prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity,
prohibition or unenforceability without invalidating or impairing
the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 7.10 Counterparts; Integration; Section
Headings. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all
prior agreements and understandings, oral or written, relating to
the subject matter hereof. Except as otherwise indicated,
references herein to any "Section" means a "Section" of this
Agreement, and the table of contents and section headings in this
Agreement are for <PAGE>
purposes of reference only and shall not
limit or define the meaning hereof.
SECTION 7.11. Confidentiality of Information. The
Lender agrees (for
itself as a Lender hereunder and in its capacity as collateral
agent or pledgee under any other Loan Document and for any
assignee of the Lender's rights hereunder or under any other Loan
Documents) that any information concerning the Borrower or any of
its Subsidiaries furnished to the Lender (including in its
capacity as collateral agent or pledgee under any other Loan
Documents) by or on behalf of the Borrower or any of its
Subsidiaries pursuant to the terms of this Agreement or any other
Loan Document will be kept strictly confidential; provided that
the foregoing shall not apply to information which (i) is already
in possession of the Lender, if such information is not known to
the Lender to be subject to another confidentiality agreement
with or another obligation of secrecy to the Borrower, any of its
Subsidiaries or another Person (including the Confidentiality
Agreement dated April 13, 1998 between the Lender and the
Borrower), (ii) is or becomes generally available to the public
other than as a result of a disclosure by the Lender or any of
its directors, officers, employees, agents, representatives or
advisers, (iii) becomes available to the Lender on a
non-confidential basis from a source other than the Borrower or
any of its Subsidiaries or their respective directors, officers,
employees, agents, representatives or advisers, if such source is
not known by the Lender to be bound by a confidentiality
agreement with or other obligation of secrecy to the Borrower or
any of their Subsidiaries, or another Person, or (iv) is
disclosed to a prospective assignee of the Lender in connection
with the transfer or assignment of the Loans or any rights of
the Lender under the Loan Documents, provided that such
prospective transferee agree in advance to keep such information
strictly confidential in accordance with the provisions of this
Section 7.11 and, if applicable, the Confidentiality Agreement
dated April 13, 1998 between the Lender and the Borrower.
Notwithstanding the foregoing, the Borrower acknowledges that the
Lender disclose such information or portions thereof, and if so
required, will disclose such information (A) at the request of
governmental or self-regulatory agencies or other authorities,
(B) pursuant to subpoena or other court process, (C) to its
independent auditors or (D) otherwise as required by law;
provided that if the Lender is requested or required to disclose
any such <PAGE>
information to governmental or self-regulatory
agencies or other authorities, pursuant to subpoena or other
court process or otherwise as required by law, the Lender shall,
if and to the extent reasonably practicable, provide the Borrower
with prompt notice of such request or requirement, so that the
Borrower may seek an appropriate protective order or other relief
from such request or requirement. <PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
PMC INTERNATIONAL, INC.
By: /S/ Scott A. MacKillop
Name:
Title:
DUNDEE BANCORP INC.
By: /S/ Ray Benzinger
Name:
Title:
<PAGE>
- ----------------------------------------------------------
PMC INTERNATIONAL, INC.,
as Borrower,
and
DUNDEE BANCORP INC.,
as Lender
LOAN AGREEMENT
$1,500,000
_______________
Dated as of July 7, 1998
_______________
- ----------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions.....................................1
SECTION 1.2 Accounting Terms and Determinations.............6
ARTICLE II THE LOAN
SECTION 2.1 Term Loan.......................................6
SECTION 2.2 The Note; Repayment of Principal................6
SECTION 2.3 Loan Record.....................................7
SECTION 2.4 Interest Rate...................................7
SECTION 2.5 Mandatory Prepayment of the Loan................7
SECTION 2.6 Optional Prepayments of the Loan................8
SECTION 2.7 Manner and Time of Payments.....................8
SECTION 2.8 Use of Proceeds.................................8
ARTICLE III CONDITIONS
SECTION 3.1 Conditions Precedent to the Loan................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Corporate Organization, Etc....................10
SECTION 4.2 Due Authorization..............................11
SECTION 4.3 Litigation.....................................12
SECTION 4.4 Absence of Undisclosed Liabilities.............12
SECTION 4.5 Taxes..........................................13
SECTION 4.6 Title to Certain Properties....................13
SECTION 4.7 No Default.....................................13
SECTION 4.8 Investment Company.............................13
SECTION 4.9 Legal, Valid and Binding Agreements............13
SECTION 4.10 Compliance with ERISA.........................14
SECTION 4.11 Disclosure; Financial Statements..............14
SECTION 4.12 Compliance with Law...........................14
SECTION 4.13 Consents......................................14
SECTION 4.14 Patents, Copyrights, Permits and Trademarks...15
ARTICLE V COVENANTS
SECTION 5.1 Performance of Obligations.....................16
SECTION 5.2 Compliance with Laws...........................16
SECTION 5.3 Notice of Default and Event of Default.........16
SECTION 5.4 Report on Proceedings..........................16
SECTION 5.5 Financial Statements and Other Reports.........17
<PAGE>
SECTION 5.6 Conduct of Business and Preservation of Corporate
Existence, Etc..............................................18
SECTION 5.7 Inspection of Property; Books and Records......19
SECTION 5.8 Maintenance of Property; Insurance.............19
SECTION 5.9 Further Assurances; Additional
Collateral Security............................20
SECTION 5.10 Indebtedness..................................20
SECTION 5.11 Limitation on Liens...........................21
SECTION 5.12 No Dividends..................................23
SECTION 5.13 Limitation on Investments.....................23
SECTION 5.14 Contingent Liabilities........................24
SECTION 5.15 Limitation on Leases..........................24
SECTION 5.16 Prohibition on Sale of Assets.................24
SECTION 5.17 Limitation on Prepayments of Debt.............24
SECTION 5.18 Subsidiaries..................................25
SECTION 5.19 Mergers, Disposition of Assets, Etc...........25
SECTION 5.20 Fiscal Year...................................25
SECTION 5.21 No Inconsistent Agreements....................25
SECTION 5.22 Use of Proceeds...............................25
SECTION 5.23 Transactions with Affiliates..................25
<PAGE>
ARTICLE VI DEFAULTS
SECTION 6.1 Events of Default..............................26
ARTICLE VII MISCELLANEOUS
SECTION 7.1 Notices........................................30
SECTION 7.2 No Waivers; Remedies Cumulative................32
SECTION 7.3 Expenses; Documentary Taxes; Indemnification...32
SECTION 7.4 Amendments and Waivers.........................33
SECTION 7.5 Successors and Assigns.........................33
SECTION 7.6 GOVERNING LAW; VENUE AND JURISDICTION..........33
SECTION 7.7 WAIVER OF JURY TRIAL...........................33
SECTION 7.8 Limitation on Interest.........................33
SECTION 7.10 Counterparts; Integration; Section Headings...35
SECTION 7.11. Confidentiality of Information................35
<PAGE>
SCHEDULES:
Schedule 4.1 - Subsidiaries
Schedule 4.4 - Certain Liabilities
Schedule 4.6 - Existing Liens
Schedule 4.13 - Consents
Schedule 5.1 - Certain Contingent Obligations
Schedule 5.10 - Existing Debt
Schedule 5.11 - Existing Liens
Schedule 5.14 - Guaranties
Schedule 5.23 - Affiliate Transactions
EXHIBITS:
Exhibit A - Form of Note
Exhibit B - Form of Borrower Security Agreement
Exhibit C - Form of Subsidiary Security Agreement
Exhibit D - Form of Guarantee Agreement
Exhibit E - Form of Pledge Agreement
<PAGE>
EXHIBIT 10.7
BORROWER SECURITY AGREEMENT
BORROWER SECURITY AGREEMENT, dated as of July 9,
1998, between PMC International, Inc., a Colorado
corporation (the "Company"), and Dundee Bancorp Inc., an
Ontario corporation, as collateral agent (the "Collateral
Agent").
RECITALS
A. Pursuant to the Loan Agreement, dated as of
July __, 1998 (as the same may be modified, supplemented or
restated from time to time, the "Loan Agreement"), between
the Company, as borrower, and Dundee Bancorp Inc., as lender
(in such capacity, the "Lender"), the Lender has agreed to
extend to the Company a loan in the amount of $1.5 million
(the "Loan"), subject to the terms and conditions set forth
in the Loan Agreement.
B. In order to induce the Lender to enter into
the Loan Agreement and to extend the Loan, the Company has
agreed to enter into this Agreement to grant to the
Collateral Agent a continuing perfected security interest in
the Collateral (as defined in Section 1) to secure the
performance of its obligations under the Loan Agreement, all
upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company hereby agrees with the
Collateral Agent as follows:
Section 1. Definitions. Capitalized terms used
in this Agreement without definition have the meanings given
to them in the Loan Agreement. The following terms, as used
in this Agreement, have the following meanings:
"Existing Liens" means the Liens existing on the
Collateral as of the date hereof identified on Schedule
5.11 to the Loan Agreement, as granted to the Persons and
pursuant to the agreements or instruments listed on such
Schedule 5.11 .
"Secured Obligations" means (i) the full and
prompt payment of the principal of and premium and interest
on the Loan (including, without limitation, interest
accruing after the date of any filing by the Company of any
petition in bankruptcy or the commencement of any
bankruptcy, insolvency or similar proceeding with respect to
the Company), as and when the same becomes due and payable
in accordance with the terms of the Loan Agreement, (ii) the
payment of all other indebtedness and other amounts payable
by the Company under the Loan Agreement, the Note, this
Agreement
<PAGE>
(including, without limitation, amounts due under
Sections 10, 13 and 15 of this Agreement), and the other
Loan Documents (including, without limitation, interest
accruing after the date of any filing by the Company of any
petition in bankruptcy or the commencement of any
bankruptcy, insolvency or similar proceeding with respect to
the Company), (iii) the due and punctual performance by the
Company of and compliance by the Company with all its
obligations under the Loan Agreement, the Note, this
Agreement and all other Loan Documents, and (iv) any
renewals or extensions of any of the foregoing.
"Secured Parties" means Lender and each assignee
of the Loan, as obligees of any or all of the Secured
Obligations, and their respective successors, and the
Collateral Agent.
"Security Interests" means the security interests
in the Collateral granted pursuant to this Agreement
securing the Secured Obligations.
"Supplemental Documentation" means agreements,
instruments, documents, financing statements, warehouse
receipts, bills of lading, notices of assignment of
accounts, schedules of accounts assigned, mortgages,
writings, filings and any other written matter requested
(whether or not required) by the Collateral Agent to perfect
and maintain a perfected Lien upon, and (if applicable) a
perfected first priority security interest in, any
Collateral, and to assist the Collateral Agent's realization
thereon (including, without limitation, the right to
receive, endorse, and collect all instruments made payable
to the Company representing any dividend, interest payment
or other distribution or proceeds in respect of any
Collateral).
"UCC" means the Uniform Commercial Code as in
effect on the date hereof in the State of New York;
provided, that if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection
of the security interest granted hereunder in any Collateral
is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New York, "UCC" shall mean the
Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
Section 2. Grant of Security Interest. In order
to secure full and timely
<PAGE>
payment of the Secured
Obligations, and to secure the performance of all of the
other obligations of the Company under the Loan Documents,
the Company hereby mortgages, pledges and assigns and
transfers to the Collateral Agent and grants to the
Collateral Agent, for the benefit of the Collateral Agent
and the other Secured Parties, a continuing perfected
security interest in, and a lien upon, all of the following
property of the Company, in each case whether now
owned or hereafter acquired or arising and regardless of
where located (collectively, the "Collateral"), subject to
no Liens other than Permitted Liens:
(a) All "accounts" (as defined in the UCC),
including all accounts receivable, contract rights,
book debts, notes, drafts and other obligations or
indebtedness owing to the Company arising from the
sale, lease or exchange of goods or other property by
it and/or the performance of services by it (including,
without limitation, any such obligation that might be
characterized as an account, contract right or general
intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all of the Company's rights
in, to and under all purchase orders for goods,
services or other property, and all of the Company's
rights to any goods, services or other property
represented by any of the foregoing and all monies due
to or to become due to the Company under all contracts
for the sale, lease or exchange of goods or other
property and/or the performance of services by it
(whether or not yet earned by performance on the part
of the Company), including, without limitation, the
right to receive the proceeds of said purchase orders
and contracts and all collateral security and
guarantees of any kind given by any Person with respect
to any of the foregoing (collectively, "Accounts");
(b) All goods, merchandise, and other personal
property that may at any time be held for sale or lease
or to be furnished under any contract of service, be so
leased or furnished, or constitute raw materials, work
in process, finished goods, supplies or materials and
all other "inventory" (as defined in the UCC) of
whatsoever kind and nature that are or might be used or
consumed in business or in connection with the
manufacture, packing, shipping, advertising, selling,
leasing or finishing of such goods, merchandise and
other personal property, together with all attachments,
accessories, replacements, substitutions, additions and
improvements to any of the foregoing (collectively,
"Inventory");
<PAGE>
(c) All "general intangibles" (as defined in the
UCC) including, without limitation, (i) all obligations
or indebtedness owing to the Company (other than
Accounts and Instruments (as hereinafter defined)) from
whatever source arising, (ii) all rights or claims in
respect of refunds for taxes paid, (iii) all rights in
business or operating licenses and permits, to the
extent permitted by law, (iv) all rights,
whether by contract or otherwise, to receive or obtain
water, electricity, natural gas or any other resource
or utility, (v) all warranty, indemnification, or
contractual rights and claims of any sort and (vi) all
choses or things in action, goodwill, licenses, leases,
computer programs, tapes or discs, and tax refund
claims;
(d) All "documents" (as defined in the UCC) or
receipts covering, evidencing or representing goods;
(e) All "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC)
evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts,
including, without limitation, promissory notes,
drafts, bills of exchange and trade acceptances
(collectively, "Instruments");
(f) All "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Company, including,
without limitation, all machinery, equipment, tools,
furniture, fixtures, and any other goods other than
Inventory, together with any and all additions,
substitutions and replacements of any of the foregoing,
and all attachments, components, parts (including spare
parts), equipment and accessories installed thereon or
affixed thereto;
(g) All patents, copyrights, service marks,
trademarks and trade names, including registrations and
applications to register or renew the registration of
any of the foregoing, and inventions, processes,
designs, formulae, trade secrets, know-how,
confidential information, computer software and
programs (including source codes), data and
documentation, and all similar intellectual property
rights, tangible embodiments of any of the foregoing
(in any medium, including electronic media), and
licenses of any of the foregoing; other than source
codes for computer software and programs designed for
clients or customers of the
<PAGE>
Borrower or its
Subsidiaries that have been placed in escrow or similar
arrangement for the benefit of such clients or
customers or may be so placed in the ordinary course of
business consistent with past practice;
(h) All rights and claims of the Company in, to
or under all policies of insurance covering any
of the Collateral, including, but not limited to,
insurance for fire, damage, loss, and casualty,
together with the proceeds, products, renewals, and
replacements thereof, including prepaid or unearned
premiums;
(i) All books and records (including, but not
limited to, credit files, computer programs, printouts
and other computer materials and records) relating to
any of the foregoing and all customer lists and
advertising materials relating to the Company's
business; and
(j) Without in any way limiting the foregoing and
to the extent not otherwise included in the foregoing,
(x) any and all products and proceeds of any of the
foregoing (including, but not limited to, any claims of
the Company against third parties relating to or in
connection with the Collateral), whether derived from
voluntary or involuntary disposition, and all renewals,
replacements, substitutions, additions, accessions,
rents, issues, royalties, and profits of any of the
foregoing, and (y) all cash and bank deposit accounts,
wherever located.
Section 3. Warranties, Covenants and Agreements
of the Company. The Company represents, warrants and
covenants that:
(a) Except for the Security Interests and the
Existing Liens and except as permitted by the Loan
Agreement, the Company is the owner and holder of, and has
rights in and good title to, the Collateral free from any
Lien of any Person, other than the Collateral Agent, and at
all times the Collateral shall be and remain free of all
such Liens.
(b) The Company has requisite corporate power and
authority to execute and deliver this Agreement and to sell,
assign and transfer, as the case may be, the Collateral to
the Collateral Agent and to grant to the Collateral Agent a
valid, perfected security interest in the Collateral as
contemplated by this Agreement, subject to no Liens other
than Permitted Liens; the execution and delivery of this
Agreement and
<PAGE>
the sale, assignment and transfer, as the case
may be, of the Collateral and the grant of a valid,
perfected security interest in the Collateral as
contemplated by this Agreement, have been duly authorized by
all necessary corporate action; this Agreement and all
related documents executed by or on behalf of the Company
pursuant to this Agreement have been duly executed
and delivered by the Company; and the Company shall defend
the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein.
(c) Except for the financing statements and
security agreements identified on Schedule 5.11 to the
Loan Agreement with respect to the Existing Liens, the
Company has not heretofore signed any financing statement or
security agreement that covers any of the Collateral, and no
such financing statement or security agreement is now on
file in any public office in any jurisdiction.
(d) As long as any amount remains unpaid on any
of the Secured Obligations, the Company shall not enter into
or execute, or permit to be on file in any public office in
any jurisdiction, any security agreement or financing
statement covering the Collateral, other than any
(i) security agreements and financing statements in favor of
the Secured Parties hereunder and (ii) security agreements
and financing statements in respect of Permitted Liens.
(e) The Company authorizes the Collateral Agent
to file, in the Collateral Agent's discretion and at the
Company's expense, in jurisdictions where this authorization
will be given effect, financing statements and continuation
statements covering the Collateral signed only by the
Collateral Agent, and hereby appoints the Collateral Agent
as the Company's attorney-in-fact to sign and file any such
financing statements and continuation statements covering
the Collateral. The Company shall, at its expense, execute,
deliver, file and record any such documents, assignments,
agreements, or statements (including, without limitation,
financing and continuation statements under the UCC) and
take any other action that from time to time may be
necessary or desirable, or that the Collateral Agent may
request, in order to create, preserve, perfect, confirm or
validate the Security Interests granted hereunder or to
enable the Secured Parties to obtain the full benefits of,
or to enforce their rights, powers and remedies under, this
Agreement; and the Collateral Agent may, at any time or
times, file as a financing statement any counterpart, copy
or reproduction of this Agreement.
<PAGE>
(f) Except for the Accounts identified on
Schedule 5.11 to the Loan Agreement as being subject to a
Lien, the Company shall not transfer, sell or hypothecate
any Account except upon the prior written consent of the
Collateral Agent.
(g) The Company's chief executive office and
principal place of business is in Denver, Colorado and
Inventory and all books and records relating to the
Collateral (including, but not limited to, credit files,
computer programs, printouts, other computer materials, and
records, and all customer lists, advertising materials and
reservations systems) are located only at the locations set
forth in Schedule I to this Agreement. The Company shall
not change its name, the location of its chief executive
office or principal place of business, or remove Collateral
or such books and records to locations that are not set
forth in such Schedule I, unless the Company shall have
given the Collateral Agent prior written notice thereof and
taken all action (or made arrangements to take such action
substantially simultaneously with such change if it is
impracticable to take such action in advance) necessary or
reasonably requested by the Collateral Agent to amend each
financing statement or continuation statement so that it is
not seriously misleading, or so as to cause the Collateral
Agent to continue to maintain its lien on, and security
interest in, the Collateral subject only to Permitted
Liens. Notwithstanding the foregoing, if for any reason
Inventory is at any time kept or located at locations other
than those specified in Schedule I to this Agreement or
which may hereafter be consented to by the Collateral Agent,
the Collateral Agent shall nevertheless have and retain a
security interest therein.
(h) With respect to products and proceeds
included in the Collateral, any and all material amounts of
cash included in the Collateral shall promptly be deposited
only into such accounts at banking institutions with offices
in Denver, Colorado (i) as the Company may from time to time
designate and (ii) at all times following the date which is
30 days after receipt of a written request to that effect
from the Collateral Agent, which request is made after a
default or an Event of Default shall have occurred and be
continuing, as shall have a lock-box agreement, in form
reasonably satisfactory to the Collateral Agent (a "Lock-Box
Agreement"), in full force and effect. Upon receipt of such
request, the Company shall promptly enter into deposit
arrangements and a Lock-Box Agreement with a banking
institution reasonably acceptable to the Collateral Agent.
<PAGE>
(i) Except for Permitted Liens and the asset
dispositions permitted under Section 5.16 of the Loan
Agreement (and then only to the extent permitted under the
Loan Agreement), the Company shall not sell or otherwise
transfer or encumber or dispose of the Collateral or
any interest therein without the prior written consent of
the Collateral Agent.
(j) The Company shall not release or surrender
any guarantee, suretyship agreement or security for any
Accounts at any time or times except in the ordinary course
of business consistent with historical collection practices.
(k) If any certificates of title or similar
documents are at any time issued or outstanding with respect
to any Inventory, the Company shall promptly advise the
Collateral Agent thereof, and the Company shall promptly
cause the interest of the Collateral Agent to be properly
noted thereon, and if any certificates of title or similar
documents are so issued or outstanding at the time this
Agreement is executed by or on behalf of the Company, then
the Company shall have caused the interest of the Collateral
Agent so to have been properly noted at or before the time
of such execution; and the Company shall further promptly
deliver to the Collateral Agent any such certificate of
title or similar document.
(l) The Company shall promptly deliver or cause
to be delivered to the Collateral Agent, duly endorsed in a
manner reasonably satisfactory to the Collateral Agent, all
Instruments, if any, at any time representing all or any of
the Collateral to be held as Collateral pursuant to this
Agreement.
(m) The Company shall use diligent commercially
reasonable efforts consistent with past practice to cause to
be collected from their respective account debtors, as and
when due, any and all amounts owing under or on account of
each Account (including, without limitation, Accounts that
are delinquent, such Accounts to be collected in accordance
with lawful collection procedures) and shall apply forthwith
upon receipt thereof all such amounts as are so collected to
the outstanding balance of such Account. Subject to the
rights of the Collateral Agent and the other Secured
Parties, if no Event of Default has occurred and is
continuing, the Company may allow, in the ordinary course of
business as adjustments to amounts owing under such
Accounts, (i) an
<PAGE>
extension or renewal of the time or times
of payment, or settlement for less than the total unpaid
balance, which the Company finds appropriate in accordance
with sound business judgment and (ii) a refund or credit due
as a result of returned or damaged merchandise or
inadequately rendered service, all in accordance with the
Company's ordinary course of business consistent with
historical collection practices. The costs and expenses
(including, without limitation, attorneys' fees) of
collection, whether incurred by the Company or the
Collateral Agent, shall be borne by the Company.
(n) The Company shall not amend, modify,
terminate or waive any provision of any agreement, contract
or other instrument giving rise to an Account or otherwise
constituting Collateral, except for amendments,
modifications, terminations or waivers which would not
adversely affect the Secured Parties and except that the
Company may amend, modify, terminate or waive provisions of
agreements, contracts or other instruments giving rise to
Accounts or otherwise constituting collateral in the
ordinary course of business.
Section 4. Further Assurances as to the
Collateral; Collateral Agent as Attorney-In-Fact. At the
Collateral Agent's request, the Company shall execute and
deliver to the Collateral Agent, at any time or times
hereafter, all Supplemental Documentation, in form and
substance reasonably acceptable to the Collateral Agent, and
the Company shall pay the costs of any recording or filing
thereof. The Company hereby irrevocably makes, constitutes,
and appoints the Collateral Agent (and all Persons
designated by the Collateral Agent for that purpose) as the
Company's true and lawful attorney (and agent-in-fact) to
sign the name of the Company on any Supplemental
Documentation and to deliver any Supplemental Documentation
to such Persons as the Collateral Agent, in its sole
discretion, may elect; provided, that if no Event of Default
shall have occurred and be continuing the Collateral Agent
shall not, in the case of Supplemental Documentation other
than financing statements, exercise the power of attorney
granted in this Section 4 to sign and deliver such
Supplemental Documentation unless the Company has failed to
sign and deliver such Supplemental Documentation promptly
after the Collateral Agent has reasonably requested it to do
so. The Company agrees that a photocopy or other
reproduction of this Agreement or of a financing statement
is sufficient as a financing statement.
Section 5. Assignment of Security Interest. If
at any time the Company
<PAGE>
shall take and perfect a security
interest in any property of an Account debtor or any other
Person to secure payment and performance of an Account, the
Company shall promptly assign such security interest to the
Collateral Agent. Such assignment need not be filed of
public record unless necessary to continue the perfected
status of the security interest against creditors of
and transferees from the Account debtor or other Person
granting the security interest.
Section 6. Maintenance of Records; Additional
Information. (a) The Company will keep and maintain, at
its own cost and expense, satisfactory and complete records
of the Collateral.
(b) The Company shall furnish to the Collateral
Agent from time to time such additional information and
copies of such documents relating to this Agreement, the
Collateral, the Secured Obligations and the Company's
financial condition as the Collateral Agent may reasonably
request. The Company will promptly report to the Collateral
Agent any occurrence or condition known to or which becomes
known to the Company having any material adverse effect upon
the fair market value of the Inventory or the Accounts.
Section 7. Inspection and Verification. The
Collateral Agent and such Persons as the Collateral Agent
may reasonably designate shall have the right, in connection
with the Loan or the Secured Parties' security interest in
the Collateral, during the Company's usual business hours
upon reasonable prior notice and as often as may be
reasonably requested, subject to any confidentiality
agreements existing between the Borrower and third parties,
(i) to inspect the Collateral, all books and records related
thereto (and to make extracts and copies from such records,
subject to reasonable objection by the Company and the
terms of Section 7.11 of the Loan Agreement), and the
premises upon which any of the Collateral is located, (ii)
to discuss the Company's affairs with the officers of the
Company and its independent accountants, and (iii) to
verify under reasonable procedures the validity, amount,
quality, quantity, value and condition of or any other
matter relating to the Collateral (including, without
limitation, Collateral in the possession of a third Person
and contacting Account debtors or a third Person possessing
such Collateral for the purpose of making such a
verification); provided, that reimbursement of expenses
incurred by or on behalf of the Collateral Agent in
connection therewith shall be governed by Section 7.3 of the
Loan Agreement;
<PAGE>
provided, further, that so long as a Default
or an Event of Default has not occurred and is not
continuing, the Collateral Agent may contact the creditors,
customers and clients of the Borrower and its Subsidiaries
only with the prior consent of the Borrower (which consent
will not be unreasonably withheld). The Collateral Agent
shall have the absolute right to share any information
it gains from such inspection or verification with any other
Secured Party, subject to the terms of Section 7.11 of the
Loan Agreement.
Section 8. Rights and Remedies Upon Default. If
an Event of Default has occurred and is continuing:
(a) The Collateral Agent shall have and may
exercise in respect of the Collateral and the Secured
Obligations any or all of the rights and remedies of a
secured party under the UCC, and as otherwise granted in
this Agreement or under any other Applicable Law or under
any other agreement of the Company now or hereafter in
effect, including, without limitation, the right and power
to sell, at public or private sale or sales, or otherwise
dispose of, or otherwise utilize the Collateral and any part
or parts thereof in any manner authorized or permitted under
the UCC after default by a debtor, and to apply the proceeds
thereof as specified in Section 9 of this Agreement.
Without limiting the foregoing, the Collateral Agent shall
have the right to take possession of all or any part of the
Collateral (including, without limitation, all books,
records, papers and documents of the Company or in the
Company's possession or control relating to the Collateral
which are not already in the Collateral Agent's possession),
and for such purpose may enter upon any premises upon which
any of the foregoing are situated and remove the same
therefrom without any liability for trespass or damages
thereby occasioned. To the extent permitted by Applicable
Law, the Company expressly waives any notice of sale or
other disposition of the Collateral; and to the extent any
such notice is required and cannot be waived, the Company
agrees that if such notice is given in the manner provided
in Section 26 hereof at least 15 days before the time of
the sale or disposition, such notice shall be deemed
reasonable and shall fully satisfy any requirement for
giving of said notice. The Collateral Agent may impose any
limitations and conditions in connection with any such sale
or disposition as the Collateral Agent deems advisable or
necessary to comply with Applicable Law; and the Collateral
Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given and may
adjourn any public or private sale. The Collateral Agent
reserves the right to reject any and all bids at such sale
that in its commercially reasonable discretion it shall deem
inadequate. The
<PAGE>
Company shall execute and deliver such
documents as the Collateral Agent deems advisable or
necessary in order that any such sale or disposition be made
in compliance with Applicable Law.
(b) The Company hereby waives all rights to
marshall the assets of the Company, including any such right
with respect to the Collateral.
(c) All recitals in any instrument of assignment
or any other instrument executed by the Collateral Agent
incident to sale, lease, transfer, assignment or other
disposition, lease or utilization of the Collateral or any
part thereof hereunder shall be sufficient proof of the
matters stated therein and no other proof shall be requisite
to establish full legal propriety of the sale or other
action taken by the Collateral Agent or of any fact,
condition or thing incident thereto and all prerequisites of
such sale or other action or of any fact, condition or thing
incident thereto shall be presumed to have been performed or
to have occurred.
(d)(i) The Collateral Agent shall have the
right to take control of all proceeds of the Collateral
(whether cash proceeds or non-cash proceeds) and to
notify any and all account debtors, lessees, or other
obligors to make payment on any and all accounts,
leases, or obligations directly to the Collateral
Agent; and, in such circumstances, the Company shall,
upon the request of the Collateral Agent, likewise
notify any and all such account debtors, lessees or
other obligors to make payment directly to the
Collateral Agent. Upon demand by the Collateral Agent
at any time following the occurrence of an Event of
Default, all proceeds of Accounts, whether such
proceeds be cash proceeds or non-cash proceeds,
received by the Company and not otherwise deposited in
an account provided for in Section 3(h)(ii), shall be
held in trust by the Company for the account of the
Collateral Agent, shall not be commingled with any
other funds, accounts, monies or property of the
Company, and shall be accounted for, paid over,
transmitted and delivered to the Collateral Agent in
the form as received by the Company promptly upon
receipt thereof by the Company.
(ii) At any time after demand as hereinabove
provided, and in any event without demand, after any of
the Secured Obligations shall become due, whether by
acceleration or otherwise, the Collateral Agent shall
have the right in
<PAGE>
its own name or in the name of the
Company to demand, collect, receive, sue for, compound
and give acquittance for, any and all amounts due or to
become due on the Accounts and to endorse the name of
the Company on all checks, drafts, commercial paper and
other instruments given in payment or part payment
thereof, and in its discretion to settle,
compromise, prosecute or defend any action, claim or
proceeding with respect thereto which the Collateral
Agent may deem necessary or appropriate to protect and
preserve and realize upon the Security Interest and
collateral assignment of the Collateral Agent in the
Accounts and the proceeds thereof and security therefor
including, without limitation, the right to sell,
assign, pledge, transfer and make any agreement
respecting or otherwise deal with the Accounts and to
exercise all rights of the Company thereunder.
(e) All proceeds of Inventory, whether cash
proceeds or non-cash proceeds, including, without
limitation, proceeds that constitute Accounts or that are
included in the Collateral as Accounts, and proceeds that
represent the proceeds of Accounts, received by the Company
and not otherwise deposited in an account provided for in
Section 3(h)(ii), shall be held in trust by the Company for
the account of the Collateral Agent, shall not be commingled
with any other funds, accounts, monies or property of the
Company, and shall be accounted for, paid over, transmitted
and delivered to the Collateral Agent in the form as
received by the Company promptly upon receipt thereof by the
Company.
Section 9. Application of Proceeds. Any monies
or property actually received by the Collateral Agent
pursuant to the exercise of any rights or remedies referred
to in Section 8 of this Agreement (including the sale or
other disposition of any portion of the Collateral) shall be
applied in the following order:
First, to payment of the costs and expenses of
such sale or other realization, including reasonable
compensation to agents and counsel for the Collateral
Agent, and all expenses, liabilities and advances
incurred or made by the Collateral Agent in connection
therewith, and any other unreimbursed expenses for
which the Collateral Agent or any Secured Party is to
be reimbursed pursuant to the Loan Agreement or Section
10, 13 or 15 of this Agreement;
Second, to the ratable payment of accrued but
unpaid interest on the
<PAGE>
Secured Obligations in
accordance with the provisions of the Loan Agreement;
Third, to the ratable payment of unpaid principal
of the Secured Obligations;
Fourth, to the ratable payment of all other
Secured Obligations, until all Secured Obligations
shall have been paid in full;
Fifth, to the ratable payment of such amounts, if
any, as shall be required to be paid pursuant to
Section 9-504(1)(c) of the UCC and any similar
provision of Applicable Law; and
Finally, to payment to Company or its successors
or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
Section 10. Reimbursement of Collateral Agent.
The Company shall forthwith upon demand pay to the
Collateral Agent:
(a) The amount of any taxes that the Collateral
Agent may have been required to pay by reason of the
Security Interests or to free any of the Collateral
from any Lien thereon; provided, that so long as no
Event of Default has occurred and is continuing,
Company shall not be obligated to pay or discharge any
such tax or Lien so long as the amount, validity or
applicability thereof is contested diligently in good
faith and by appropriate proceedings and so long as any
reserves or other appropriate provisions as may be
required by generally accepted accounting principles
shall have been made therefor.
(b) The amount of any and all costs and expenses,
including the reasonable fees and disbursements of
counsel and of any other experts, that the Collateral
Agent reasonably may incur in connection with (i) the
administration or enforcement of this Agreement,
including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection,
rank and value of any Security Interest, (ii) the
collection, sale or any other disposition of any of the
Collateral, (iii) the exercise by the Collateral Agent
of any of the rights conferred
<PAGE>
upon it hereunder or
(iv) any default or Event of Default.
Any such amount not paid within five Business Days
following written demand therefor shall bear interest
at a rate equal to the rate specified in Section 2.4(b) of
the Loan Agreement. This Section 10 shall survive the
termination of this Agreement.
Section 11. Exculpatory Provisions. (a)Neither
the Collateral Agent nor any of its officers, directors,
employees or agents shall be liable to the Company for any
action lawfully taken or omitted to be taken by them under
or in connection with this Agreement. The Collateral Agent
shall not be responsible in any manner to any of the other
Secured Parties for the value, validity, due execution,
genuineness, effectiveness, legality, enforceability or
sufficiency of this Agreement, the Loan Agreement or all or
any portion of the Collateral, or any of the certificates,
documents or instruments contemplated by the foregoing, or
for the failure of the Company or any other party to perform
its obligations under them or for any recitals, statements,
representations or warranties made by the Company in this
Agreement or for the value, sufficiency, title or condition
of all or any portion of the Collateral. The Collateral
Agent shall not be under any obligation to any of the other
Secured Parties to ascertain or to inquire as to the
performance or observance on the part of the Company of any
of the terms, covenants or conditions of any agreements or
to inspect the properties, books or records of the Company
or to ascertain or to inquire as to the financial condition
of the Company.
(b) The Collateral Agent shall not be responsible
to any Person for the existence, genuineness or value of any
of the Collateral or for the validity, perfection, priority
or enforceability of the Security Interests in any of the
Collateral, whether impaired by operation of law or by
reason of any action or omission to act on its part
hereunder. The Collateral Agent shall have no duty to any
Person to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the
Company.
(c) The Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being
understood that neither the Collateral Agent nor any other
Secured Party shall have any responsibility for (i)
ascertaining or taking action with respect to
<PAGE>
exchanges,
maturities, tenders or other matters relative to any
Instruments, whether or not the Collateral Agent has or is
deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against any
parties with respect to any portion of the Collateral.
Section 12. Secured Parties' Right of Set-Off and
Bankers' Lien. The Company recognizes and agrees that with
respect to any time or other deposit, certificate of deposit
or any other balance of account standing to the credit of
the Company on the books of the Collateral Agent or any
other Secured Party, the Collateral Agent or the Collateral
Agent through a Secured Party has a right of set-off and, to
the extent any Secured Party is a banking institution or of
a character otherwise qualified to assert the same, a
bankers' lien to the full extent permitted by law. The
Company further agrees that the Secured Parties may exercise
such right of set-off or bankers' lien at any time when an
Event of Default shall have occurred and is continuing,
regardless of the stated maturity of any time deposit or
other such credit balance.
Section 13. Other Expenses. (a) In the event
the Company fails to pay or obtain the discharge of any
claim or Lien asserted against any material portion of the
Collateral, other than a Permitted Lien, the Company shall
so notify the Collateral Agent in writing and, regardless of
whether such notice is given, the Collateral Agent may, at
any time or times, in its discretion and without waiving any
Event of Default or waiving or releasing any obligation or
duty of the Company under this Agreement or any Supplemental
Documentation, the Loan Agreement or any other Loan
Document, make such payment or any part thereof or obtain
such discharge or take any other action with respect thereto
that the Collateral Agent deems advisable.
(b) In the event that the Company fails to comply
with any provision of the Loan Agreement, this Agreement or
any other Loan Document, such that the value of any
Collateral or the validity, perfection, rank or value of any
security interest granted hereunder is thereby diminished or
put at risk, the Collateral Agent may, but shall not be
required to, effect such compliance on behalf of the Company.
(c) In the event the Company fails to pay
promptly all insurance expenses relating to the Collateral,
any and all expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping the
Collateral, any
<PAGE>
and all excise, property, sales and use
taxes imposed by any state, federal or local authority on
any of the Collateral other than taxes that are being
contested as permitted by Section 10(a) hereof, or any
and all expenses in respect of the sale or other disposition
of the Collateral, the Collateral Agent may, at its option,
but shall not be required to, pay the same.
(d) The Company shall reimburse the Collateral
Agent on demand for all amounts so paid, incurred or
advanced by the Collateral Agent pursuant to
subsections (a), (b) and (c) of this Section 13, for any and
all other sums for which the Company may become liable
hereunder, and for all costs, fees and expenses (including
reasonable attorneys' fees, legal expenses and court costs)
incurred by the Collateral Agent in enforcing or protecting
the Security Interests granted hereunder or any of the
Collateral Agent's rights or remedies on behalf of the
Secured Parties under this Agreement, and all such amounts,
sums, costs, fees and expenses, together with interest
thereon at the rate required by Section 2.4(a) of the Loan
Agreement, shall, until paid to the Collateral Agent, be
additional Secured Obligations hereunder.
Section 14. Absolute Interest. (a) All
rights of the Collateral Agent hereunder, and all
obligations of the Company hereunder, shall be absolute and
unconditional irrespective of (i) any lack of validity or
enforceability of any provision of the Loan Agreement or any
other Loan Document, any agreement with respect to the
Secured Obligations or any other agreement or instrument
relating to any of the foregoing, (ii) any change in the
time, manner or place of payment of or in any other term of,
all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from
the Loan Agreement, any other Loan Document or any other
agreement or instrument or (iii) any exchange, release or
nonperfection of any Collateral, or any release or amendment
or waiver of or any consent to or departure from any
guarantee, for all or any of the Secured Obligations or this
Agreement.
(b) This Agreement shall not be construed as
relieving the Company from full liability on the Secured
Obligations or any and all future and other indebtedness
secured hereby or for any deficiency thereon.
(c) Following an Event of Default, the Collateral
Agent shall be subrogated to all of the Company's interests,
rights and remedies in respect to the
<PAGE>
Collateral and all
security now or hereafter existing with respect thereto and
all guaranties and endorsements thereof and with respect
thereto.
Section 15. Indemnity. (a) In addition to the
payments pursuant to Sections 10 and 13, the Company shall
indemnify, defend and hold harmless the Collateral Agent and
the other Secured Parties and the officers, directors,
employees and agents of the Secured Parties (collectively,
the "Indemnitees") from and against, and pay or reimburse
the Indemnitees for, (i) any and all taxes, and all other
assessments or charges made by any governmental authority,
relating to the execution and delivery of this Agreement,
and (ii) any and all liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of
any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of a
single counsel) in connection with (A) any breach of a
representation, warranty or covenant hereunder or (B) any
investigative, administrative or judicial proceeding,
whether or not such Indemnitee shall be designated a party
thereto, which may be imposed on, incurred by or asserted
against such Indemnitee, in any manner relating to or
arising out of or in connection with this Agreement
(collectively, the "Indemnified Liabilities"), and to
reimburse each Indemnitee, upon its demand as incurred for
any cost or expenses (including, without limitation, the
reasonable fees, expenses and disbursements of a single
counsel) incurred in connection with investigating,
defending or preparing to defend or participating (including
as a witness) in any investigative, administrative or
judicial proceeding whether or not such Indemnitee shall be
designated a party thereto, whether commenced or threatened,
with respect to any such actual, alleged or threatened
liability, loss, damage, penalty, judgment, suit, claim,
cost or expense; provided that no Indemnitee shall have a
right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of
competent jurisdiction.
(b)(i) The Collateral Agent shall or shall
cause each Indemnitee to notify the Company promptly of
each event of which it has knowledge which may give
rise to a claim under the indemnification provisions of
this Section 15; provided, that the failure so to
notify the Company shall not impair the Company's
obligations under this Section 15 except to the extent
the defense of such claim is actually prejudiced
thereby.
(ii) If any investigative, judicial or
administrative proceeding or arbitration arising from
any of the foregoing is brought against any
Indemnitee, the Company shall assume the defense
thereof on behalf of such Indemnitee,
<PAGE>
including
the employment of counsel reasonably satisfactory to
such Indemnitee and payment of all expenses relating
thereto. The Indemnitee shall have the right to employ
separate counsel in any such proceeding or arbitration
and participate in the defense thereof; provided, that
the fees and expenses of such separate counsel shall be
at the expense of the Indemnitee, rather than the
Company, unless (A) the employment of such separate
counsel has been specifically authorized by the Company
or (B) the named parties to any such action (or any
impleaded parties), or the Indemnitee, shall have been
advised by its counsel that there may be one or more
legal defenses available to the Indemnitee which are
different from or additional to those available to the
Company. If the provisions of clause (B) immediately
above are met, the Company shall not have the right to
assume the defense of such action on behalf of the
Indemnitee. The Company shall not be liable for any
settlement of any such proceeding effected without the
written consent of the Company, but if settled with the
written consent of the Company or if there is a final
judgment for the plaintiff in any such action, the
Company shall indemnify and hold harmless the
Indemnitee from and against any loss or liability by
reason of such settlement or judgment. The Company
shall not enter into any settlement of, or consent to
the entry of any judgment with respect to, any actual
or alleged Indemnified Liabilities without the prior
written consent of the Indemnitee, unless such
settlement or judgement (x) includes an unconditional
release of the Indemnitees from all liabilities arising
out of such actual or alleged Indemnified Liability and
(y) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on
behalf of any Indemnitee.
(iii)At any time after the Company has assumed the
defense of any proceeding in respect of which indemnity
has been sought hereunder against the Company, the
Indemnitee may elect, by written notice to the Company,
to withdraw its request for indemnity and thereafter
the defense of such proceeding shall be maintained by
counsel of the Indemnitee's choosing and at the
Indemnitee's expense.
(iv) To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the
preceding provisions may be unenforceable because it is
violative of any law or public policy, the Company
shall make the maximum
<PAGE>
contribution to the payment and
satisfaction of each of the Indemnified Liabilities
which is permissible under Applicable Law. All
Indemnified Liabilities shall be payable on demand.
(c) The obligations of the Company under this
Section 15 shall survive the termination of this Agreement
and the discharge of the Company's other obligations
hereunder.
Section 16. No Waiver; Cumulative Remedies. No
action or inaction of the Collateral Agent will be deemed to
waive any of the rights, powers or remedies of the
Collateral Agent hereunder except pursuant to a writing,
signed by the Collateral Agent, and then only to the extent
expressly set forth therein. A waiver by the Collateral
Agent of any right, power or remedy on any one occasion will
not bar the exercise of any right, power or remedy hereunder
on any future occasion. No failure of the Collateral Agent
to exercise nor delay of the Collateral Agent in exercising
any right, power or remedy will preclude the exercise of any
other right, power or remedy. If the Collateral Agent
accepts payment of any amount secured hereby after its due
date, it will not thereby be deemed to have waived its right
to require prompt payment when due of all other amounts
payable hereunder. Each right, power and remedy of the
Collateral Agent provided for in this Agreement or now or
hereafter existing at law or equity or by statute or
otherwise is cumulative and concurrent and is in addition to
every other such right, power or remedy of the Collateral
Agent, and the exercise of any one or more of any such
rights, powers or remedies with respect to any of the
Collateral will not preclude the simultaneous or later
exercise by the Collateral Agent of any other right, power
or remedy with respect to any other Collateral.
Section 17. Appointment of Co-Agents. At any
time or times, in order to comply with any legal requirement
in any jurisdiction, the Collateral Agent may appoint a bank
or trust company or one or more other Persons, either to act
as co-agent or co-agents, jointly with the Collateral Agent,
or to act as separate, agent or agents on behalf of the
Secured Parties with such power and authority as may be
necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment
(which may, in the discretion of the Collateral Agent,
include provisions for the protection of such co-agent or
separate agent).
<PAGE>
Section 18. Termination of Security Interests;
Release of Collateral. (a) Upon the payment in full of the
outstanding principal amount of, and all premium, if any,
and accrued interest on the Loan in accordance with the Loan
Agreement and payment or satisfaction of all other Secured
Obligations, the Security Interests shall terminate and all
rights to the Collateral shall revert to the Company. Upon
any such termination of the Security Interests, the
Collateral Agent will, at the expense of the Company,
execute and deliver to the Company such documents, and take
such other actions, as the Company shall reasonably request
to effect or evidence the termination of the Security
Interests or the release of such Collateral, as the case may
be.
(b) If at any time a payment of the Loan or any
of the other Secured Obligations is rescinded or must
otherwise be returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the provisions
of this Agreement and the security interest created hereby
shall continue to be effective or be reinstated, as the case
may be, all as though such payment had not been made.
Section 19. Contracts Not Assignable. Any
provision in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement to assign
or grant a security interest in any agreement, if an
attempted assignment thereof or grant of security interest
therein, without the consent of a third party thereto, would
constitute a termination or breach thereof (including,
without limitation, any contract for investment advisory
services that would be so terminated or breached). From
time to time at the request of the Collateral Agent, the
Company shall use its best efforts to obtain the consent to
the assignment and the Lien granted or purported to be
granted hereunder of the parties to such agreements. If
such consent is not obtained, or if an attempted assignment
thereof or grant of security interest therein would not be
effective or would affect the rights of the Company
thereunder so that the Secured Parties would not in fact
receive the benefit of the Lien granted or purported to be
granted hereunder, the Company will cooperate with the
Collateral Agent in any arrangement designed to provide such
benefits for the Secured Parties, including enforcement for
the benefit of the Secured Parties of any and all rights of
the Company against a third party thereto arising out of the
breach or cancellation by such third party or otherwise.
Section 20. Amendments, Etc. No amendment,
modification, supplement, termination, consent or waiver of
this Agreement or any term or provision of
<PAGE>
this Agreement
shall be effective and binding unless in writing and signed
by the Collateral Agent. Any such waiver will be effective
only in the specific instance and for the specific purpose
for which it is given.
Section 21. Successors and Assigns. This
Agreement and the Lien in the Collateral created hereunder
are for the benefit of the Collateral Agent and the Lender
and their successors, assigns and participants, and in the
event of an assignment of or the granting of a participation
in all or any of the Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so
assigned or participated out, may be transferred with such
indebtedness. This Agreement shall be binding on the
Company and its successors and assigns.
Section 22. Severability. Any provision of this
Agreement which is illegal, invalid, prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
illegality, invalidity, prohibition or unenforceability
without invalidating or impairing the remaining provisions
hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 23. WAIVER OF JURY TRIAL. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE OTHER "LOAN DOCUMENTS" OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY OR THE RELATIONSHIP ESTABLISHED HEREUNDER
OR THEREUNDER.
Section 24. GOVERNING LAW; VENUE AND
JURISDICTION. THE VALIDITY OF THIS AGREEMENT, THE
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT HEREOF AND THE
RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK. THE COMPANY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND EACH OTHER "LOAN DOCUMENT" SHALL BE TRIED AND
LITIGATED IN FEDERAL OR, IN THE ABSENCE OF FEDERAL SUBJECT
MATTER JURISDICTION, STATE COURTS
<PAGE>
LOCATED IN THE STATE OF
NEW YORK UNLESS SUCH ACTIONS OR PROCEEDINGS ARE REQUIRED TO
BE BROUGHT IN ANOTHER COURT TO OBTAIN SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE
PARTIES WAIVES, TO THE FULLEST EXTENT PERMISSIBLE UNDER
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE IN ANY PROCEEDING BROUGHT
IN ACCORDANCE WITH THE IMMEDIATELY PRECEDING SENTENCE.
SERVICE OF PROCESS, SUFFICIENT FOR PERSONAL JURISDICTION IN
ANY ACTION AGAINST THE COMPANY, MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS
INDICATED IN SECTION 26.
Section 25. Agreement May Constitute Financing
Statement. The Company consents to the filing of this
Agreement or a photocopy thereof as a financing statement
under the UCC as in effect in any jurisdiction in which the
Collateral Agent may determine such filing to be necessary
or desirable.
Section 26. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing and shall be given to such party at the following
address or facsimile number, or such other address or
facsimile number as such party may hereafter specify for the
purpose by notice to the other party. (a) if to the
Collateral Agent, Dundee Bancorp Inc., 40 King Street West,
Scotia Plaza, 55th Floor, Toronto, Canada M5H 4A9,
attention: Ray Benzinger, tel: (416) 365-5113, fax: (416)
363-4536; with a copy to Debevoise & Plimpton, 875 Third
Avenue, New York, New York 10022, attention: Steven Ostner,
tel: (212) 909-6000, fax: (212) 909-6836; and (b) if to the
Company, PMC International Inc., 555 17th Street, 14th
Floor, Denver, Colorado 80202, attention: Kenneth S.
Phillips and Scott A. McKillop, tel: (303) 292-1177, fax:
(303) 293-2152; with a copy to Holme Roberts & Owen LLP,
1700 Lincoln Street, Denver, Colorado 80203, attention:
Linda K. Wackwitz, tel: (303) 861-7000, fax: (303) 866-0200.
Each such notice, request or other communication shall be
effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (ii) if given by
any other means, when delivered at the address specified in
this Section 26.
<PAGE>
Section 27. Counterparts; Section Headings. This
Agreement may be executed in any number of counterparts,
each of which is an original, but all of which together
constitute but one instrument. Except as otherwise
indicated, references herein to any "Section" means a
"Section" of this Agreement, and the section headings in
this Agreement are for purposes of reference only and shall
not limit or define the meaning hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first above
written.
PMC INTERNATIONAL, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
DUNDEE BANCORP INC.,
as Collateral Agent
By /s/ Ray Benzinger
Name:
Title:
Business Locations
PMC International, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
<PAGE>
EXHIBIT 10.8
SUBSIDIARY SECURITY AGREEMENT
SUBSIDIARY SECURITY AGREEMENT, dated as of July 9, 1998, between
PMC Investment Services, Inc., a Delaware corporation ("PIS"), Portfolio
Technology Services, Inc., a Colorado corporation ("PTS"), and Portfolio
Management Consultants, Inc., a Colorado corporation ("PMC" and each of PIS,
PTS and PMC, a "Guarantor"), and Dundee Bancorp Inc., an Ontario corporation,
as collateral agent (the "Collateral Agent").
RECITALS
A. PMC International, Inc., a Colorado corporation (the
"Company"), and Dundee Bancorp Inc., as lender (in such capacity, the
"Lender"), have entered into a Loan Agreement, dated as of July __, 1998 (as
the same may be modified, supplemented or restated from time to time, the
"Loan Agreement"), pursuant to which the Lender has agreed to extend to the
Company a loan in the amount of $1.5 million, subject to the terms and
conditions set forth in the Loan Agreement.
B. The Company owns, beneficially and of record, all of the issued
and outstanding capital stock of each of the Guarantors.
C. The obligation of the Lender to extend the loan to the Company
pursuant to the Loan Agreement is conditioned upon the execution and delivery
by each of the Guarantors of (i) a Guarantee Agreement to guarantee the
performance by the Company of its obligations under the Loan Agreement and
(ii) this Agreement to secure the performance by the Company of its
obligations under the Loan Agreement and the performance by the Guarantors of
their obligations under the Guarantee Agreement.
D. In order to induce Lender to enter into the Loan Agreement and
to extend to the Company the loan provided for thereunder, each Guarantor is
willing to enter into this Agreement to grant to the Collateral Agent a
continuing perfected security interest in and to the Collateral (as defined
in Section 1) to secure the Secured Obligations (as defined in Section 1).
NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the Guarantors hereby agree
with the Collateral Agent as follows:
<PAGE>
Section 1. Definitions. Capitalized terms used in this Agreement
without definition have the meanings given to them in the Loan Agreement.
The following terms, as used in this Agreement, have the following meanings:
"Existing Liens" means the Liens existing on the Collateral as of
the date hereof identified on Schedule 5.11 to the Loan Agreement, as
granted to the Persons and pursuant to the agreements or instruments listed
on such Schedule 5.11.
"Secured Obligations" means (i) the full and prompt payment of the
principal of and premium and interest on the Loan (including, without
limitation, interest accruing after the date of any filing by the Company of
any petition in bankruptcy or the commencement of any bankruptcy, insolvency
or similar proceeding with respect to the Company), as and when the same
becomes due and payable in accordance with the terms of the Loan Agreement,
(ii) the payment of all other indebtedness and other amounts payable by the
Company under the Loan Agreement, the Note and the other Loan Documents,
(iii) the due and punctual performance by the Company of and compliance by the
Company with all its obligations under the Loan Agreement, the Note, and all
other Loan Documents, (iv) the full and prompt payment when due of all
indebtedness and amounts payable by the Guarantors under the Guarantee
Agreement and hereunder (including, without limitation, amounts due under
Sections 10, 13 and 15 of this Agreement) and the due and punctual performance
by the Guarantors of and compliance by the Guarantors with all their
obligations under the Guarantee Agreement and hereunder, (including, without
limitation, interest accruing after the date of any filing by any Guarantor
of any petition in bankruptcy or the commencement of bankruptcy, insolvency
or similar proceeding with respect to any Guarantor) and (v) any renewals or
extensions of any of the foregoing.
"Secured Parties" means Lender and each assignee of the Loan, as
obligees of any or all of the Secured Obligations, and their respective
successors, and the Collateral Agent.
"Security Interests" means the security interests in the Collateral
granted pursuant to this Agreement securing the Secured Obligations.
<PAGE>
"Supplemental Documentation" means agreements, instruments,
documents, financing statements, warehouse receipts, bills of lading, notices
of assignment of accounts, schedules of accounts assigned, mortgages,
writings, filings and any other written matter requested (whether or not
required) by the Collateral Agent to perfect and maintain a perfected Lien
upon, and (if applicable) a perfected first priority security interest in,
any Collateral, and to assist the Collateral Agent's realization thereon
(including, without limitation, the right to receive, endorse, and collect
all instruments made payable to any Guarantor representing any dividend,
interest payment or other distribution or proceeds in respect of any
Collateral).
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of New York; provided, that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest granted hereunder in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection.
Section 2. Grant of Security Interest. In order to secure full
and timely payment of the Secured Obligations, and to secure the performance
of all of the other obligations of the Company and such Guarantor under the
Loan Documents, each Guarantor hereby mortgages, pledges and assigns and
transfers to the Collateral Agent and grants to the Collateral Agent, for the
benefit of the Collateral Agent and the other Secured Parties, a continuing
perfected security interest in, and a lien upon, all of the following
property of such Guarantor, in each case whether now owned or hereafter
acquired or arising and regardless of where located (collectively, the
"Collateral"), subject to no Liens other than Permitted Liens:
(a) All "accounts" (as defined in the UCC), including all accounts
receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to such Guarantor arising from the
sale, lease or exchange of goods or other property by it and/or the
performance of services by it (including, without limitation, any such
obligation that might be characterized as an account, contract right or
general intangible under the Uniform Commercial Code in effect in any
jurisdiction) and all of such Guarantor's rights in, to and under all
purchase orders for goods, services or other property, and all of such
Guarantor's rights to any goods, services or other property represented
by any of the foregoing and all monies due to or to become due to such
Guarantor under all contracts for the sale, lease or exchange of goods
or other property and/or the performance of services by it (whether or
not yet earned by performance on the part of the Guarantor), including,
without limitation, the right to receive the proceeds of said purchase
orders and contracts and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing
(collectively, "Accounts");
<PAGE>
(b) All goods, merchandise, and other personal property that may
at any time be held for sale or lease or to be furnished under any
contract of service, be so leased or furnished, or constitute raw
materials, work in process, finished goods, supplies or materials and
all other "inventory" (as defined in the UCC) of whatsoever kind and
nature that are or might be used or consumed in business or in
connection with the manufacture, packing, shipping, advertising,
selling, leasing or finishing of such goods, merchandise and other
personal property, together with all attachments, accessories,
replacements, substitutions, additions and improvements to any of the
foregoing (collectively, "Inventory");
(c) All "general intangibles" (as defined in the UCC) including,
without limitation, (i) all obligations or indebtedness owing to such
Guarantor (other than Accounts and Instruments (as hereinafter defined))
from whatever source arising, (ii) all rights or claims in respect of
refunds for taxes paid, (iii) all rights in business or operating
licenses and permits, to the extent permitted by law, (iv) all rights,
whether by contract or otherwise, to receive or obtain water,
electricity, natural gas or any other resource or utility, (v) all
warranty, indemnification, or contractual rights and claims of any sort
and (vi) all choices or things in action, goodwill, licenses, leases,
computer programs, tapes or discs, and tax refund claims;
(d) All "documents" (as defined in the UCC) or receipts covering,
evidencing or representing goods;
(e) All "instruments", "chattel paper" or "letters of credit"
(each as defined in the UCC) evidencing, representing, arising from or
existing in respect of, relating to, securing or otherwise supporting
the payment of, any of the Accounts, including, without limitation,
promissory notes, drafts, bills of exchange and trade acceptances
(collectively, "Instruments");
(f) All "equipment" (as defined in the UCC) now owned or hereafter
acquired by such Guarantor, including, without limitation, all
machinery, equipment, tools, furniture, fixtures, and any other goods
other than Inventory, together with any and all additions, substitutions
and replacements of any of the foregoing, and all attachments,
components, parts (including spare parts), equipment and accessories
installed thereon or affixed thereto;
<PAGE>
(g) All patents, copyrights, service marks, trademarks and trade
names, including registrations and applications to register or renew the
registration of any of the foregoing, of such Guarantor, and inventions,
processes, designs, formulae, trade secrets, know-how, confidential
information, computer software and programs (including source codes),
data and documentation of such Guarantor, and all similar intellectual
property rights, tangible embodiments of any of the foregoing (in any
medium, including electronic media), and licenses of any of the
foregoing; other than source codes for computer software and programs
designed for clients or customers of the Guarantors that have been
placed in escrow or similar arrangement for the benefit of such clients
or customers or may be so placed in the ordinary course of business
consistent with past practice;
(h) All rights and claims of such Guarantor in, to or under all
policies of insurance covering any of the Collateral, including, but not
limited to, insurance for fire, damage, loss, and casualty, together
with the proceeds, products, renewals, and replacements thereof,
including prepaid or unearned premiums;
(i) All books and records (including, but not limited to, credit
files, computer programs, printouts and other computer materials and
records) relating to any of the foregoing and all customer lists and
advertising materials relating to such Guarantor's business; and
(j) Without in any way limiting the foregoing and to the extent
not otherwise included in the foregoing, (x) any and all products and
proceeds of any of the foregoing (including, but not limited to, any
claims of such Guarantor against third parties relating to or in
connection with the Collateral), whether derived from voluntary or
involuntary disposition, and all renewals, replacements, substitutions,
additions, accessions, rents, issues, royalties, and profits of any of
the foregoing and (y) all cash and bank deposit accounts, wherever
located.
Section 3. Warranties, Covenants and Agreements of the Guarantor.
Each Guarantor, jointly and severally with the other Guarantors, represents,
warrants and covenants that:
(a) Except for the Security Interests and the Existing Liens and
except as permitted by the Loan Agreement, the Guarantor is the owner and
holder of, and has rights in and good title to, the Collateral of such
Guarantor free from any Lien of any Person, other than the Collateral Agent,
and at all times the Collateral shall be and remain free of all such Liens.
<PAGE>
(b) The Guarantor has requisite corporate power and authority to
execute and deliver this Agreement and to sell, assign and transfer, as the
case may be, the Collateral of such Guarantor to the Collateral Agent and to
grant to the Collateral Agent a valid, perfected security interest in such
Collateral as contemplated by this Agreement, subject to no Liens other than
Permitted Liens; the execution and delivery of this Agreement and the sale,
assignment and transfer, as the case may be, of the Collateral and the grant
of a valid, perfected security interest in the Collateral of such Guarantor
as contemplated by this Agreement, have been duly authorized by all necessary
corporate action; this Agreement and all related documents executed by or on
behalf of such Guarantor pursuant hereto have been duly executed and
delivered by such Guarantor; the execution and delivery and the performance
of this Agreement by such Guarantor are not in contravention of, and do not
constitute a default under, any provision of such Guarantor's certificate of
incorporation or by-laws or of any indenture, agreement or undertaking to
which such Guarantor is a party or by which such Guarantor or any of its
properties is bound; this Agreement constitutes the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms; and such Guarantor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any
interest therein.
(c) Except for the financing statements and security agreements
identified on Schedule 5.11 to the Loan Agreement with respect to the
Existing Liens, such Guarantor has not heretofore signed any financing
statement or security agreement that covers any of the Collateral of such
Guarantor, and no such financing statement or security agreement is now on
file in any public office in any jurisdiction.
(d) As long as any amount remains unpaid on any of the Secured
Obligations, such Guarantor shall not enter into or execute, or permit to be
on file in any public office in any jurisdiction, any security agreement or
financing statement covering the Collateral of such Guarantor, other than any
(i) security agreements and financing statements in favor of the Secured
Parties hereunder and (ii) security agreements and financing statements in
respect of Permitted Liens.
(e) Such Guarantor authorizes the Collateral Agent to file, in the
Collateral Agent's discretion and at the Guarantor's expense, in
jurisdictions where this authorization will be given effect, financing
statements and continuation statements covering the Collateral signed only by
the Collateral Agent, and hereby appoints the Collateral Agent as the
Guarantor's attorney-in-fact to sign and file any such financing statements
and continuation statements covering the Collateral of such Guarantor. Such
Guarantor shall, at its expense, execute, deliver, file and record any such
documents, assignments, agreements, or statements (including, without
limitation, financing and continuation statements under the UCC) and take any
other action that from time to time may be necessary or desirable, or that
the Collateral Agent may request, in order to create, preserve, perfect,
confirm or validate the Security Interests granted hereunder or to enable the
Secured Parties to obtain the full benefits of, or to enforce their rights,
powers and remedies under, this Agreement; and the Collateral Agent may, at
any time or times, file as a financing statement any counterpart, copy or
reproduction of this Agreement.
(f) Except for the accounts identified on Schedule 5.11 to the
Loan Agreement as being subject to a Lien, such Guarantor shall not transfer,
sell or hypothecate any Account except upon the prior written consent of the
Collateral Agent.
<PAGE>
(g) Such Guarantor's chief executive office and principal place of
business is in Denver, Colorado and Inventory and all books and records
relating to the Collateral of such Guarantor (including, but not limited to,
credit files, computer programs, printouts, other computer materials, and
records, and all customer lists, advertising materials and reservations
systems) are located only at the locations set forth in Schedule II to this
Agreement. Such Guarantor shall not change its name, the location of its
chief executive office or principal place of business, or remove Collateral
or such books and records to locations not set forth in such Schedule II,
unless it shall have given the Collateral Agent prior written notice thereof
and taken all action (or made arrangements to take such action substantially
simultaneously with such change if it is impracticable to take such action in
advance) necessary or reasonably requested by the Collateral Agent to amend
each financing statement or continuation statement so that it is not
seriously misleading, or so as to cause the Collateral Agent to continue to
maintain its lien on, and security interest in, the Collateral subject only
to Permitted Liens. Notwithstanding the foregoing, if for any reason
Inventory is at any time kept or located at locations other than those
specified in Schedule II to this Agreement or which may hereafter be
consented to by the Collateral Agent, the Collateral Agent shall nevertheless
have and retain a security interest therein.
(h) With respect to products and proceeds included in the
Collateral, any and all material amounts of cash included in the Collateral
of such Guarantor shall promptly be deposited only into such accounts at
banking institutions with offices in New York, New York (i) as the Guarantor
may from time to time designate and (ii) at all times following the date
which is 30 days after receipt of a written request to that effect from the
Collateral Agent, which request is made after a Default or an Event of
Default shall have occurred and be continuing, as shall have a lock-box
agreement, in form reasonably satisfactory to the Collateral Agent (a
"Lock-Box Agreement"), in full force and effect. Upon receipt of such
request, each Guarantor shall promptly enter into deposit arrangements and a
Lock-Box Agreement with a banking institution reasonably acceptable to the
Collateral Agent.
(i) Except for Permitted Liens and the asset dispositions
permitted under Section 5.16 of the Loan Agreement (and then only to the
extent permitted under the Loan Agreement), such Guarantor shall not sell or
otherwise transfer or encumber or dispose of the Collateral or any interest
therein without the prior written consent of the Collateral Agent.
(j) Such Guarantor shall not release or surrender any guarantee,
suretyship agreement or security for any Accounts at any time or times except
in the ordinary course of business consistent with historical collection
practices.
<PAGE>
(k) If any certificates of title or similar documents are at any
time issued or outstanding with respect to any Inventory of such Guarantor,
the Guarantor shall promptly advise the Collateral Agent thereof, and shall
promptly cause the interest of the Collateral Agent to be properly noted
thereon, and if any certificates of title or similar documents are so issued
or outstanding at the time this Agreement is executed by or on behalf of such
Guarantor, then the Guarantor shall have caused the interest of the
Collateral Agent so to have been properly noted at or before the time of such
execution; and the Guarantor shall further promptly deliver to the Collateral
Agent any such certificate of title or similar document.
(l) Such Guarantor shall promptly deliver or cause to be delivered
to the Collateral Agent, duly endorsed in a manner reasonably satisfactory to
the Collateral Agent, all Instruments, if any, at any time representing all
or any of the Collateral to be held as Collateral pursuant to this Agreement.
(m) Such Guarantor shall use diligent commercially reasonable
efforts consistent with past practice to cause to be collected from their
respective account debtors, as and when due, any and all amounts owing under
or on account of each Account (including, without limitation, Accounts that
are delinquent, such Accounts to be collected in accordance with lawful
collection procedures) and shall apply forthwith upon receipt thereof all
such amounts as are so collected to the outstanding balance of such Account.
Subject to the rights of the Collateral Agent and the other Secured Parties
hereunder, if no Event of Default has occurred and is continuing, the Company
may allow, in the ordinary course of business as adjustments to amounts owing
under such Accounts, (i) an extension or renewal of the time or times of
payment, or settlement for less than the total unpaid balance, which the
Company finds appropriate in accordance with sound business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
inadequately rendered service, all in accordance with the Guarantor's
ordinary course of business consistent with historical collection practices.
The costs and expenses (including, without limitation, attorneys' fees) of
collection, whether incurred by the Guarantor or the Collateral Agent, shall
be borne by the Guarantor.
(n) No Guarantor shall not amend, modify, terminate or waive any
provision of any agreement, contract or other instrument giving rise to an
Account or otherwise constituting Collateral, except for amendments,
modifications, terminations or waivers which would not adversely affect the
Secured Parties and except that the Guarantors may amend, modify, terminate
or waive provisions of agreements, contracts or other instruments giving rise
to Accounts or otherwise constituting collateral in the ordinary course of
business.
<PAGE>
Section 4. Further Assurances as to the Collateral; Collateral
Agent as Attorney-In-Fact. At the Collateral Agent's request, each Guarantor
shall execute and deliver to the Collateral Agent, at any time or times
hereafter, all Supplemental Documentation, in form and substance reasonably
acceptable to the Collateral Agent, and the Guarantors shall pay the costs of
any recording or filing thereof. Each Guarantor hereby irrevocably makes,
constitutes, and appoints the Collateral Agent (and all Persons designated by
the Collateral Agent for that purpose) as such Guarantor's true and lawful
attorney (and agent-in-fact) to sign the name of such Guarantor on any
Supplemental Documentation and to deliver any Supplemental Documentation to
such Persons as the Collateral Agent, in its sole discretion, may elect;
provided, that if no Event of Default shall have occurred and be continuing
the Collateral Agent shall not, in the case of Supplemental Documentation
other than financing statements, exercise the power of attorney granted in
this Section 4 to sign and deliver such Supplemental Documentation unless the
Guarantor has failed to sign and deliver such Supplemental Documentation
promptly after the Collateral Agent has reasonably requested it to do so.
Each Guarantor agrees that a photocopy or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
Section 5. Assignment of Security Interest. If at any time any
Guarantor shall take and perfect a security interest in any property of an
Account debtor or any other Person to secure payment and performance of an
Account, such Guarantor shall promptly assign such security interest to the
Collateral Agent. Such assignment need not be filed of public record unless
necessary to continue the perfected status of the security interest against
creditors of and transferees from the Account debtor or other Person granting
the security interest.
Section 6. Maintenance of Records; Additional Information. (a)
Each Guarantor will keep and maintain, at its own cost and expense,
satisfactory and complete records of the Collateral.
(b) Each Guarantor shall furnish to the Collateral Agent from time
to time such additional information and copies of such documents relating to
this Agreement, the Collateral, the Secured Obligations and such Guarantor's
financial condition as the Collateral Agent may reasonably request. Each
Guarantor will promptly report to the Collateral Agent any occurrence or
condition known to or which becomes known to any Guarantor having any
material adverse effect upon the fair market value of the Inventory or the
Accounts.
<PAGE>
Section 7. Inspection and Verification. The Collateral Agent and
such Persons as the Collateral Agent may reasonably designate shall have the
right, in connection with the Loan or the Secured Parties' security interest
in the Collateral, during any Guarantor's usual business hours upon
reasonable prior notice and as often as may be reasonably requested, subject
to any confidentiality agreements between the Guarantor and third parties,
(i) to inspect the Collateral, all books and records related thereto (and to
make extracts and copies from such books and records, subject to reasonable
objection by such Guarantor and the terms of Section 7.11 of the Loan
Agreement), and the premises upon which any of the Collateral is located,
(ii) to discuss the Guarantor's affairs with the officers of the Guarantor
and its independent accountants , and (iii) to verify under reasonable
procedures the validity, amount, quality, quantity, value and condition of or
any other matter relating to the Collateral (including, without limitation,
Collateral in the possession of a third Person and contacting Account debtors
or a third Person possessing such Collateral for the purpose of making such a
verification); provided, that reimbursement of expenses incurred by or on
behalf of the Collateral Agent in connection therewith shall be governed by
Section 7.3 of the Loan Agreement; provided, further, that so long as a
Default or Event of Default has not occurred and is not continuing, the
Collateral Agent may contact the creditors, customers and clients of the
Borrower and its Subsidiary only with the prior consent of the Borrower
(which consent will not be unreasonably withheld). The Collateral Agent
shall have the absolute right to share any information it gains from such
inspection or verification with any other Secured Party, subject to the terms
of Section 7.11 of the Loan Agreement.
Section 8. Rights and Remedies Upon Default. If an Event of
Default has occurred and is continuing:
<PAGE>
(a) The Collateral Agent shall have and may exercise in respect of
the Collateral and the Secured Obligations any or all of the rights and
remedies of a secured party under the UCC, and as otherwise granted in this
Agreement or under any other Applicable Law or under any other agreement of
any Guarantor now or hereafter in effect, including, without limitation, the
right and power to sell, at public or private sale or sales, or otherwise
dispose of, or otherwise utilize the Collateral and any part or parts thereof
in any manner authorized or permitted under said UCC after default by a
debtor, and to apply the proceeds thereof as specified in Section 9 of this
Agreement. Without limiting the foregoing, the Collateral Agent shall have
the right to take possession of all or any part of the Collateral (including,
without limitation, all books, records, papers and documents of each
Guarantor or in any Guarantor's possession or control relating to the
Collateral which are not already in the Collateral Agent's possession), and
for such purpose may enter upon any premises upon which any of the foregoing
are situated and remove the same therefrom without any liability for trespass
or damages thereby occasioned. To the extent permitted by Applicable Law,
each Guarantor expressly waives any notice of sale or other disposition of
the Collateral; and to the extent any such notice is required and cannot be
waived, each Guarantor agrees that if such notice is given in the manner
provided in Section 26 hereof at least 15 days before the time of the sale
or disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirement for giving of said notice. The Collateral Agent may
impose any limitations and conditions in connection with any such sale or
disposition as the Collateral Agent deems advisable or necessary to comply
with Applicable Law; and the Collateral Agent shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given and may
adjourn any public or private sale. The Collateral Agent reserves the right
to reject any and all bids at such sale that in its commercially reasonable
discretion it shall deem inadequate. Each Guarantor shall execute and
deliver such documents as the Collateral Agent deems advisable or necessary
in order that any such sale or disposition be made in compliance with
Applicable Law.
(b) Each Guarantor hereby waives all rights to marshall the assets
of such Guarantor, including any such right with respect to the Collateral.
(c) All recitals in any instrument of assignment or any other
instrument executed by the Collateral Agent incident to sale, lease, transfer,
assignment or other disposition, lease or utilization of the Collateral or
any part thereof hereunder shall be sufficient proof of the matters stated
therein and no other proof shall be requisite to establish full legal
propriety of the sale or other action taken by the Collateral Agent or of any
fact, condition or thing incident thereto and all prerequisites of such sale
or other action or of any fact, condition or thing incident thereto shall be
presumed to have been performed or to have occurred.
(d)(i) The Collateral Agent shall have the right to take control
of all proceeds of the Collateral (whether cash proceeds or non-cash
proceeds) and to notify any and all account debtors, lessees, or other
obligors to make payment on any and all accounts, leases, or obligations
directly to the Collateral Agent; and, in such circumstances, each
Guarantor shall, upon the request of the Collateral Agent, likewise
notify any and all such account debtors, lessees or other obligors to
make payment directly to the Collateral Agent. Upon demand by the
Collateral Agent at any time following the occurrence of an Event of
Default, all proceeds of Accounts, whether such proceeds be cash
proceeds or non-cash proceeds, received by any Guarantor and not
otherwise deposited in an account provided for in Section 3(h)(ii),
shall be held in trust by such Guarantor for the account of the
Collateral Agent, shall not be commingled with any other funds,
accounts, monies or property of such Guarantor, and shall be accounted
for, paid over, transmitted and delivered to the Collateral Agent in the
form as received by such Guarantor promptly upon receipt thereof by such
Guarantor.
<PAGE>
(ii) At any time after demand as hereinabove provided, and in any
event without demand after any of the Secured Obligations shall become
due, whether by acceleration or otherwise, the Collateral Agent shall
have the right in its own name or in the name of each Guarantor to
demand, collect, receive, sue for, compound and give acquittance for,
any and all amounts due or to become due on the Accounts and to endorse
the name of each Guarantor on all checks, drafts, commercial paper and
other instruments given in payment or part payment thereof, and in its
discretion to settle, compromise, prosecute or defend any action, claim
or proceeding with respect thereto which the Collateral Agent may deem
necessary or appropriate to protect and preserve and realize upon the
Security Interest and collateral assignment of the Collateral Agent in
the Accounts and the proceeds thereof and security therefor including,
without limitation, the right to sell, assign, pledge, transfer and make
any agreement respecting or otherwise deal with the Accounts and to
exercise all rights of any Guarantor thereunder.
(e) All proceeds of Inventory, whether cash proceeds or non-cash
proceeds, including, without limitation, proceeds that constitute Accounts or
that are included in the Collateral as Accounts, and proceeds that represent
the proceeds of Accounts, received by any Guarantor and not otherwise
deposited in an account provided for in Section 3(h)(ii), shall be held in
trust by such Guarantor for the account of the Collateral Agent, shall not be
commingled with any other funds, accounts, monies or property of such
Guarantor, and shall be accounted for, paid over, transmitted and delivered
to the Collateral Agent in the form as received by such Guarantor promptly
upon receipt thereof by such Guarantor.
Section 9. Application of Proceeds. Any monies or property
actually received by the Collateral Agent pursuant to the exercise of any
rights or remedies referred to in Section 8 of this Agreement (including the
sale or other disposition of any portion of the Collateral) shall be applied
in the following order:
First, to payment of the costs and expenses of such sale or other
realization, including reasonable compensation to agents and counsel for
the Collateral Agent, and all expenses, liabilities and advances
incurred or made by the Collateral Agent in connection therewith, and
any other unreimbursed expenses for which the Collateral Agent or any
Secured Party is to be reimbursed pursuant to the Loan Agreement or
Section 10, 13 or 15 of this Agreement;
Second, to the ratable payment of accrued but unpaid interest on
the Secured Obligations in accordance with the provisions of the Loan
Agreement;
Third, to the ratable payment of unpaid principal of the Secured
Obligations;
<PAGE>
Fourth, to the ratable payment of all other Secured Obligations,
until all Secured Obligations shall have been paid in full;
Fifth, to the ratable payment of such amounts, if any, as shall be
required to be paid pursuant to Section 9-504(1)(c) of the UCC and any
similar provision of Applicable Law; and
Finally, to payment to the Guarantors or their respective
successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
Section 10. Reimbursement of Collateral Agent. Each Guarantor
shall forthwith upon demand pay to the Collateral Agent:
(a) The amount of any taxes that the Collateral Agent may have
been required to pay by reason of the Security Interests or to free any
of the Collateral from any Lien thereon; provided, that so long as no
Event of Default has occurred and is continuing, the Guarantors shall
not be obligated to pay or discharge any such tax or Lien so long as the
amount, validity or applicability thereof is contested diligently in
good faith and by appropriate proceedings and so long as any reserves or
other appropriate provisions as may be required by generally accepted
accounting principles shall have been made therefor.
(b) The amount of any and all costs and expenses, including the
reasonable fees and disbursements of counsel and of any other experts,
that the Collateral Agent reasonably may incur in connection with
(i) the administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, rank and value of any Security Interest, (ii) the
collection, sale or any other disposition of any of the Collateral,
(iii) the exercise by the Collateral Agent of any of the rights
conferred upon it hereunder or (iv) any default or Event of Default.
Any such amount not paid within five Business Days following
written demand therefor shall bear interest at a rate equal to the rate
specified in Section 2.4(b) of the Loan Agreement. This Section 10 shall
survive the termination of this Agreement.
<PAGE>
Section 11. Exculpatory Provisions. (a)Neither the Collateral
Agent nor any of its officers, directors, employees or agents shall be liable
to any Guarantor for any action lawfully taken or omitted to be taken by them
under or in connection with this Agreement. The Collateral Agent shall not
be responsible in any manner to any of the other Secured Parties for the
value, validity, due execution, genuineness, effectiveness, legality,
enforceability or sufficiency of this Agreement, the Loan Agreement or all or
any portion of the Collateral, or any of the certificates, documents or
instruments contemplated by the foregoing, or for the failure of the
Guarantor or any other party to perform its obligations under them or for any
recitals, statements, representations or warranties made by the Guarantor in
this Agreement or for the value, sufficiency, title or condition of all or
any portion of the Collateral. The Collateral Agent shall not be under any
obligation to any of the other Secured Parties to ascertain or to inquire as
to the performance or observance on the part of the Company of any of the
terms, covenants or conditions of any agreements or to inspect the
properties, books or records of the Guarantor or to ascertain or to inquire
as to the financial condition of the Guarantors.
(b) The Collateral Agent shall not be responsible to any Person
for the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security Interests in
any of the Collateral, whether impaired by operation of law or by reason of
any action or omission to act on its part hereunder. The Collateral Agent
shall have no duty to any Person to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by the
Company.
(c) The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to
that which the Collateral Agent accords its own property, it being understood
that neither the Collateral Agent nor any other Secured Party shall have any
responsibility for (i) ascertaining or taking action with respect to
exchanges, maturities, tenders or other matters relative to any Instruments,
whether or not the Collateral Agent has or is deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against
any parties with respect to any portion of the Collateral.
Section 12. Secured Parties' Right of Set-Off and Bankers' Lien.
Each Guarantor recognizes and agrees that with respect to any time or other
deposit, certificate of deposit or any other balance of account standing to
the credit of such Guarantor on the books of the Collateral Agent or any
other Secured Party, the Collateral Agent or the Collateral Agent through a
Secured Party has a right of set-off and, to the extent any Secured Party is
a banking institution or of a character otherwise qualified to assert the
same, a bankers' lien to the full extent permitted by law. Each Guarantor
further agrees that the Secured Parties may exercise such right of set-off or
bankers' lien at any time when an Event of Default shall have occurred and is
continuing, regardless of the stated maturity of any time deposit or other
such credit balance.
<PAGE>
Section 13. Other Expenses. (a) In the event a Guarantor fails
to pay or obtain the discharge of any claim or Lien asserted against any
material portion of the Collateral, other than a Permitted Lien, the
Guarantors shall so notify the Collateral Agent in writing and, regardless of
whether such notice is given, the Collateral Agent may, at any time or times,
hereafter, in its discretion and without waiving any Event of Default or
waiving or releasing any obligation or duty of the Guarantors under this
Agreement, any Supplemental Documentation, the Loan Agreement or any other
Loan Document, make such payment or any part thereof or obtain such discharge
or take any other action with respect thereto that the Collateral Agent deems
advisable.
(b) In the event that a Guarantor fails to comply with any
provision of the Loan Agreement, this Agreement or any other Loan Document,
such that the value of any Collateral or the validity, perfection, rank or
value of any security interest granted hereunder is thereby diminished or put
at risk, the Collateral Agent may, but shall not be required to, effect such
compliance on behalf of the Guarantors.
(c) In the event a Guarantor fails to pay promptly all insurance
expenses relating to the Collateral, any and all expenses of protecting,
storing, warehousing, appraising, insuring, handling, maintaining and
shipping the Collateral, any and all excise, property, sales and use taxes
imposed by any state, federal or local authority on any of the Collateral
other than taxes that are being contested as permitted by Section 10(a)
hereof, or any and all expenses in respect of the sale or other disposition
of the Collateral, the Collateral Agent may, at its option, but shall not be
required to, pay the same.
(d) Each Guarantor shall, jointly and severally, reimburse the
Collateral Agent on demand for all amounts so paid, incurred or advanced by
the Collateral Agent pursuant to subsections (a), (b) and (c) of this
Section 13, for any and all other sums for which any Guarantor may become
liable hereunder, and for all costs, fees and expenses (including reasonable
attorneys' fees, legal expenses and court costs) incurred by the Collateral
Agent in enforcing or protecting the Security Interests granted hereunder or
any of the Collateral Agent's rights or remedies on behalf of the Secured
Parties under this Agreement, and all such amounts, sums, costs, fees and
expenses, together with interest thereon at the rate required by Section
2.4(a) of the Loan Agreement, shall, until paid to the Collateral Agent, be
additional Secured Obligations hereunder.
<PAGE>
Section 14. Absolute Interest. (a) All rights of the Collateral
Agent hereunder, and all obligations of each Guarantor hereunder, shall be
absolute and unconditional irrespective of (i) any lack of validity or
enforceability of any provision of the Loan Agreement or any other Loan
Document, any agreement with respect to the Secured Obligations or any other
agreement or instrument relating to any of the foregoing, (ii) any change in
the time, manner or place of payment of or in any other term of, all or any
of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Loan Agreement, any other Loan Document or
any other agreement or instrument or (iii) any exchange, release or
nonperfection of any Collateral, or any release or amendment or waiver of or
any consent to or departure from any guarantee, for all or any of the Secured
Obligations or this Agreement.
(b) This Agreement shall not be construed as relieving the
Guarantor from full liability on the Secured Obligations or any and all
future and other indebtedness secured hereby or for any deficiency thereon.
(c) Following an Event of Default, the Collateral Agent shall be
subrogated to all of the Guarantors' interests, rights and remedies in
respect to the Collateral and all security now or hereafter existing with
respect thereto and all guaranties and endorsements thereof and with respect
thereto.
<PAGE>
Section 15. Indemnity. (a) In addition to the payments pursuant
to Sections 10 and 13, each Guarantor shall indemnify, defend and hold
harmless the Collateral Agent and the other Secured Parties and the officers,
directors, employees and agents of the Secured Parties (collectively, the
"Indemnitees") from and against, and pay or reimburse the Indemnitees for,
(i) any and all taxes, and all other assessments or charges made by any
governmental authority, relating to the execution and delivery of this
Agreement, and (ii) any and all liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of a
single counsel) in connection with (A) any breach of a representation,
warranty or covenant hereunder or (B) any investigative, administrative or
judicial proceeding, whether or not such Indemnitee shall be designated a
party thereto, which may be imposed on, incurred by or asserted against such
Indemnitee, in any manner relating to or arising out of or in connection with
this Agreement (collectively, the "Indemnified Liabilities"), and to
reimburse each Indemnitee, upon its demand as incurred for any cost or
expenses (including, without limitation, the reasonable fees, expenses and
disbursements of a single counsel) incurred in connection with investigating,
defending or preparing to defend or participating (including as a witness) in
any investigative, administrative or judicial proceeding whether or not such
Indemnitee shall be designated a party thereto, whether commenced or
threatened, with respect to any such actual, alleged or threatened liability,
loss, damage, penalty, judgment, suit, claim, cost or expense; provided that
no Indemnitee shall have a right to be indemnified hereunder for its own
gross negligence or willful misconduct as determined by a court of competent
jurisdiction.
(b)(i) The Collateral Agent shall or shall cause each Indemnitee
to notify the Guarantors promptly of each event of which it has
knowledge which may give rise to a claim under the indemnification
provisions of this Section 15; provided, that the failure so to notify
the Guarantors shall not impair any Guarantor's obligations under this
Section 15 except to the extent the defense of such claim is actually
prejudiced thereby.
(ii) If any investigative, judicial or administrative proceeding or
arbitration arising from any of the foregoing is brought against any
Indemnitee, each Guarantor shall assume the defense thereof on behalf of
such Indemnitee, including the employment of counsel reasonably
satisfactory to such Indemnitee and payment of all expenses relating
thereto. The Indemnitee shall have the right to employ separate counsel
in any such proceeding or arbitration and participate in the defense
thereof; provided, that the fees and expenses of such separate counsel
shall be at the expense of the Indemnitee, rather than the Guarantors,
unless (A) the employment of such separate counsel has been specifically
authorized by any Guarantors or (B) the named parties to any such action
(or any impleaded parties), or the Indemnitee, shall have been advised
by its counsel that there may be one or more legal defenses available to
the Indemnitee which are different from or additional to those available
to the Guarantors. If the provisions of clause (B) immediately above are
met, the Company shall not have the right to assume the defense of such
action on behalf of the Indemnitee. The Guarantor shall not be liable
for any settlement of any such proceeding effected without the written
consent of the Guarantor, but if settled with the written consent of the
Company or if there is a final judgment for the plaintiff in any such
action, the Guarantor shall indemnify and hold harmless the Indemnitee
from and against any loss or liability by reason of such settlement or
judgment. The Guarantors shall not enter into any settlement of, or
consent to the entry of any judgment with respect to, any actual or
alleged Indemnified Liabilities without the prior written consent of the
Indemnitee, unless such settlement or judgement (x) includes an
unconditional release of the Indemnitees from all liabilities arising
out of such actual or alleged Indemnified Liability and (y) does not
include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnitee.
<PAGE>
(iii)At any time after any Guarantor has assumed the defense of any
proceeding in respect of which indemnity has been sought hereunder
against the Guarantors, the Indemnitee may elect, by written notice to
the Guarantors, to withdraw its request for indemnity and thereafter the
defense of such proceeding shall be maintained by counsel of the
Indemnitee's choosing and at the Indemnitee's expense.
(iv) To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding provisions may be unenforceable
because it is violative of any law or public policy, each Guarantor
shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under
Applicable Law. All Indemnified Liabilities shall be payable on demand.
(c) The obligations of each Guarantor under this Section 15 shall
survive the termination of this Agreement and the discharge of the
Guarantor's other obligations hereunder.
Section 16. No Waiver; Cumulative Remedies. No action or
inaction of the Collateral Agent will be deemed to waive any of the rights,
powers or remedies of the Collateral Agent hereunder except pursuant to a
writing, signed by the Collateral Agent, and then only to the extent
expressly set forth therein. A waiver by the Collateral Agent of any right,
power or remedy on any one occasion will not bar the exercise of any right,
power or remedy hereunder on any future occasion. No failure of the
Collateral Agent to exercise nor delay of the Collateral Agent in exercising
any right, power or remedy will preclude the exercise of any other right,
power or remedy. If the Collateral Agent accepts payment of any amount
secured hereby after its due date, it will not thereby be deemed to have
waived its right to require prompt payment when due of all other amounts
payable hereunder. Each right, power and remedy of the Collateral Agent
provided for in this Agreement or now or hereafter existing at law or equity
or by statute or otherwise is cumulative and concurrent and is in addition to
every other such right, power or remedy of the Collateral Agent, and the
exercise of any one or more of any such rights, powers or remedies with
respect to any of the Collateral will not preclude the simultaneous or later
exercise by the Collateral Agent of any other right, power or remedy with
respect to any other Collateral.
Section 17. Appointment of Co-Agents. At any time or times, in
order to comply with any legal requirement in any jurisdiction, the
Collateral Agent may appoint a bank or trust company or one or more other
Persons, either to act as co-agent or co-agents, jointly with the Collateral
Agent, or to act as separate, agent or agents on behalf of the Secured
Parties with such power and authority as may be necessary for the effectual
operation of the provisions hereof and may be specified in the instrument of
appointment (which may, in the discretion of the Collateral Agent, include
provisions for the protection of such co-agent or separate agent).
<PAGE>
Section 18. Termination of Security Interests; Release of
Collateral. (a) Upon the payment in full of the outstanding principal
amount of, and all premium, if any, and accrued interest on the Loan in
accordance with the Loan Agreement and payment or satisfaction of all other
Secured Obligations, the Security Interests shall terminate and all rights to
the Collateral shall revert to the Guarantors. Upon any such termination of
the Security Interests, the Collateral Agent will, at the expense of the
Guarantors, execute and deliver to the Guarantors such documents, and take
such other actions, as the Guarantors shall reasonably request to effect or
evidence the termination of the Security Interests or the release of such
Collateral, as the case may be.
(b) If at any time a payment of the Loan or any of the other
Secured Obligations is rescinded or must otherwise be returned upon the
insolvency, bankruptcy or reorganization of the Company, any Guarantor or
otherwise, the provisions of this Agreement and the security interest created
hereby shall continue to be effective or be reinstated, as the case may be,
all as though such payment had not been made.
Section 19. Contracts Not Assignable. Any provision in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign or grant a security interest in any
agreement, if an attempted assignment thereof or grant of security interest
therein, without the consent of a third party thereto, would constitute a
termination or breach thereof (including, without limitation, any contract
for investment advisory services that would be so terminated or breached).
From time to time at the request of the Collateral Agent, each Guarantor
shall use its best efforts to obtain the consent to the assignment and the
Lien granted or purported to be granted hereunder of the parties to such
agreements. If such consent is not obtained, or if an attempted assignment
thereof or grant of security interest therein would not be effective or would
affect the rights of a Guarantor thereunder so that the Secured Parties would
not in fact receive the benefit of the Lien granted or purported to be
granted hereunder, each Guarantor will cooperate with the Collateral Agent in
any arrangement designed to provide such benefits for the Secured Parties,
including enforcement for the benefit of the Secured Parties of any and all
rights of the Guarantors against a third party thereto arising out of the
breach or cancellation by such third party or otherwise.
Section 20. Amendments, Etc. No amendment, modification,
supplement, termination, consent or waiver of this Agreement or any term or
provision of this Agreement shall be effective and binding unless in writing
and signed by the Collateral Agent. Any such waiver will be effective only
in the specific instance and for the specific purpose for which it is given.
<PAGE>
Section 21. Successors and Assigns. This Agreement and the Lien
in the Collateral created hereunder are for the benefit of the Collateral
Agent and the Lender and their successors, assigns and participants, and in
the event of an assignment of or the granting of a participation in all or
any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned or participated out, may be
transferred with such indebtedness. This Agreement shall be binding on the
Guarantors and their respective successors and assigns.
Section 22. Severability. Any provision of this Agreement which
is illegal, invalid, prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such illegality,
invalidity, prohibition or unenforceability without invalidating or impairing
the remaining provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 23. WAIVER OF JURY TRIAL. EACH OF THE GUARANTORS AND THE
COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER "LOAN DOCUMENTS" OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER.
<PAGE>
Section 24. GOVERNING LAW; VENUE AND JURISDICTION. THE VALIDITY
OF THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION AND ENFORCEMENT HEREOF
AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
EACH GUARANTOR AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND EACH OTHER "LOAN DOCUMENT" SHALL BE TRIED AND
LITIGATED IN FEDERAL OR, IN THE ABSENCE OF FEDERAL SUBJECT MATTER
JURISDICTION, STATE COURTS LOCATED IN THE STATE OF NEW YORK UNLESS SUCH
ACTIONS OR PROCEEDINGS ARE REQUIRED TO BE BROUGHT IN ANOTHER COURT TO OBTAIN
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE
GUARANTORS AND THE COLLATERAL AGENT WAIVES, TO THE FULLEST EXTENT PERMISSIBLE
UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE IN ANY PROCEEDING BROUGHT IN ACCORDANCE WITH THE IMMEDIATELY PRECEDING
SENTENCE. SERVICE OF PROCESS, SUFFICIENT FOR PERSONAL JURISDICTION IN ANY
ACTION AGAINST ANY GUARANTOR, MAY BE MADE BY REGISTERED OR CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, TO ITS ADDRESS INDICATED IN SECTION 26.
Section 25. Agreement May Constitute Financing Statement. Each
Guarantor consents to the filing of this Agreement or a photocopy thereof as
a financing statement under the UCC as in effect in any jurisdiction in which
the Collateral Agent may determine such filing to be necessary or desirable.
Section 26. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be given
to such party at the address or facsimile number set forth on Schedule I to
this Agreement, or such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the other party. Each such
notice, request or other communication shall be effective (i) if given by
mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address specified in this Schedule I to this
Agreement.
Section 27. Counterparts; Section Headings. This Agreement may be
executed in any number of counterparts, each of which is an original, but all
of which together constitute but one instrument. Except as otherwise
indicated, references herein to any "Section" means a "Section" of this
Agreement, and the section headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
PMC INVESTMENT SERVICES, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
PORTFOLIO TECHNOLOGY SERVICES, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
PORTFOLIO MANAGEMENT
CONSULTANTS, INC.
By /s/ Kenneth S. Phillips
<PAGE>
DUNDEE BANCORP INC.,
as Collateral Agent
By /s/ Ray Benzinger
Name:
Title:
<PAGE>
Schedule I
to the
Subsidiary Security Agreement
Notices
Guarantors:
If to PMC Investment Services, Inc.:
PMC Investment Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention:Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
If to Portfolio Technology Services, Inc.
Portfolio Technology Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention:Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
If to Portfolio Management Consultants, Inc.
Portfolio Management Consultants, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention:Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
<PAGE>
In the case of each Guarantor, with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln Street
Denver, Colorado 80203
Attention: Linda K. Wackwitz
Tel: (303) 861-7000
Fax: (303) 866-0200
If to Dundee Bancorp Inc.:
Dundee Bancorp Inc.
40 King Street West
Scotia Plaza - 55th Floor
Toronto, Canada M5H 4A9
Attention: Ray Benzinger
Tel: (416) 365-5113
Fax: (416) 363-4536
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Steven Ostner
Tel: (212) 909-6000
Fax: (212) 909-6836
<PAGE>
Schedule III
to the
Subsidiary Security Agreement
Business Locations
Portfolio Management Consultants, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Portfolio Technology Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
PMC Investment Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
and
100 Galleria Pkwy, Suite 1200
Atlanta, Georgia
<PAGE>
EXHIBIT 10.9
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT, dated as of July 9, 1998, between PMC
Investment Services, Inc., a Delaware corporation ("PIS"), Portfolio
Technology Services, Inc., a Colorado corporation ("PTS"), and Portfolio
Management Consultants, Inc., a Colorado corporation ("PMC" and each of PIS,
PTS and PMC, a "Guarantor"), and Dundee Bancorp Inc., an Ontario corporation
("Lender").
RECITALS
A. PMC International, Inc., a Colorado corporation (the
"Company"), and the Lender have entered into a Loan Agreement, dated as of
July __, 1998 (as the same may be modified, supplemented or restated from
time to time, the "Loan Agreement"), pursuant to which the Lender has agreed
to extend to the Company a loan in the amount of $1.5 million, subject to the
terms and conditions set forth in the Loan Agreement.
B. The Company owns, beneficially and of record, all of the issued
and outstanding capital stock of each of the Guarantors.
C. The obligation of the Lender to extend the loan to the Company
pursuant to the Loan Agreement is conditioned upon the execution and delivery
by each of the Guarantors of a Guarantee Agreement to guarantee the
performance by the Company of its obligations under the Loan Agreement.
D. In order to induce Lender to enter into the Loan Agreement and
to extend to the Company the loan provided for thereunder, each Guarantor is
willing to enter into this Guarantee Agreement, providing for the guarantee
by such Guarantor, jointly and severally with each other Guarantor, of the
Company's obligations under the Loan Agreement, the Note, the Borrower
Security Agreement and the Pledge Agreement (collectively, the "Principal
Documents").
E. Capitalized terms used in this Guarantee Agreement without
definition have the meanings given to them in the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the Guarantors hereby agree
with the Lender as follows:
Section 1. Guarantee. Each Guarantor hereby
unconditionally and irrevocably guarantees, jointly and severally with each
other Guarantor, to Lender (a) the due, prompt and complete payment by the
Company of the principal of and the premium,
<PAGE>
if any, and interest on,
and any other amount becoming due under, each Principal Document, when and as
the same shall become due and payable (whether at stated maturity or by
required or optional prepayment or by declaration or otherwise) in accordance
with the terms of the Principal Documents, and (b) the due, prompt and
faithful performance of, and compliance with, all obligations, covenants,
terms, conditions and undertakings of the Company contained in the Principal
Documents and in any other agreement or document executed by the Company
pursuant to the Principal Documents (such Principal Documents and other
agreements and documents being sometimes collectively hereinafter referred to
as the "Operative Documents", and the amounts payable by the Company under
any of the Operative Documents, and all other obligations of the Company
thereunder, being sometimes collectively hereinafter referred to as the
"Guaranteed Obligations"). This guarantee is a guarantee of payment,
performance and compliance and not of collectibility and is in no way
conditioned or contingent upon any attempt to collect from or enforce
performance or compliance by the Company or upon any other event, contingency
or circumstance whatsoever. If for any reason whatsoever the Company shall
fail or be unable duly, punctually and fully to pay such amounts as and when
the same shall become due and payable or to perform or comply with any
Guaranteed Obligation, whether or not such failure or inability shall
constitute an "Event of Default" under the Loan Agreement, each Guarantor,
jointly and severally, without demand, presentment, protest or notice of any
kind, will forthwith pay or cause to be paid such amounts to Lender, in
lawful money of the United States, at the place specified in the applicable
Operative Document, or perform or comply with such Guaranteed Obligations or
cause such Guaranteed Obligations to be performed or complied with, together
with interest (in the amounts and to the extent required of the Company under
such Operative Document) on any amount due and owing from the Company. Each
Guarantor, jointly and severally, promptly after demand, will pay to Lender
the reasonable costs and expenses of collecting such amounts or otherwise
enforcing this Guarantee Agreement, including, without limitation, the
reasonable fees and expenses of counsel.
Section 2. Guarantor's
Obligations Unconditional. The obligations of each Guarantor under this
Guarantee Agreement are primary, absolute and unconditional obligations of
such Guarantor, shall not be subject to any counterclaim, set-off, deduction,
diminution, abatement, recoupment, suspension, deferment, reduction or
defense based upon any claim the Guarantor or any other Person may have
against the Company, the Lender or any other Person, and shall remain in full
force and effect without regard to, and shall not be released, discharged or
in any way affected by, any circumstance or condition whatsoever (whether or
not such Guarantor or the Company shall have any knowledge or notice
thereof), including, without limitation:
<PAGE>
(a) any termination, waiver, amendment or modification of or
deletion from or addition or supplement to or other change in any of the
Operative Documents;
(b) any furnishing, acceptance or release of, or any defect in
any security for, any of the Guaranteed Obligations, or the failure of
any Person (including the Lender) to perfect any security interest;
(c) any failure, omission or delay on the part of the Company to
conform or comply with any term of any of the Operative Documents,
including, without limitation, failure to give notice to the Guarantor
of the occurrence of a default or an Event of Default;
(d) any waiver of the payment, performance or observance of any of
the obligations, conditions, covenants or agreements contained in any
Operative Document, or any other waiver, consent, extension, indulgence,
compromise, settlement, release or other action or inaction under or in
respect of any of the Operative Documents or any obligation or liability
of the Company, or any exercise or non-exercise of any right, remedy,
power or privilege under or in respect of any such instrument or
agreement or any such obligation or liability;
(e) any failure, omission or delay on the part of the Lender to
enforce, assert or exercise any right, power or remedy conferred on it
in this Guarantee Agreement or in any Operative Document;
(f) any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the benefit of
creditors, composition, receivership, conservatorship, custodianship,
liquidation, marshalling of assets and liabilities or similar
proceedings with respect to the Company, any Guarantor or any other
Person or any of their respective properties or creditors, or any action
taken by any trustee or receiver or by any court in any such proceeding;
(g) any limitation on the liability or obligations of the Company
or any other Person under any of the Operative Documents, or any
discharge, termination, cancellation, frustration, irregularity,
invalidity or unenforceability, in whole or in part, of any of the
Operative Documents or any term of this Guarantee Agreement;
<PAGE>
(h) any merger or consolidation of the Company or any Guarantor
into or with any other Person, or any sale, lease or transfer of any of
the assets of the Company or any Guarantor to any other Person;
(i) any change in the ownership of any shares of capital stock of
the Company or any Guarantor, or any change in the relationship between
the Company and any Guarantor, or any termination of such relationship;
or
(j) any other occurrence, circumstance, happening or event
whatsoever, whether similar or dissimilar to the foregoing, whether
foreseen or unforeseen, and any other circumstance that might otherwise
constitute a legal or equitable defense or discharge of the liabilities
of a guarantor or surety or might otherwise limit recourse against any
Guarantor.
Section 3. Full Recourse Obligations;
Maximum Liability. (a) The obligations of each Guarantor set forth herein
constitute the full recourse obligations of such Guarantor enforceable
against such Guarantor to the full extent of all of such Guarantor's assets
and properties.
(b) Notwithstanding any other provision hereof, the liability of
no Guarantor hereunder shall exceed the greater of (x) 95% of the Adjusted
Net Worth (as defined below) of such Guarantor as of the date hereof and (y)
95% of the Adjusted Net Worth of such Guarantor on the date on which payment
under this Guarantee Agreement is sought. As used herein, the term "Adjusted
Net Worth" of a Guarantor means the excess of (i) the amount of the fair
saleable value of the assets of such Guarantor determined in accordance with
applicable federal and state laws governing determinations of solvency over
(ii) the amount of all liabilities of such Guarantor, including contingent
liabilities (but excluding contingent liabilities of such Guarantor as
Guarantor hereunder), determined in accordance with such laws.
Section 4. Waiver. Each Guarantor unconditionally waives,
to the extent permitted by applicable law, (a) notice of any of the matters
referred to in Section 2, (b) notice to such Guarantor of the incurrence of
any of the Guaranteed Obligations, notice to such Guarantor or the Company of
any breach or default by the Company with respect to any of the Guaranteed
Obligations or any other notice that may be required, by statute, rule of law
or otherwise, to preserve any rights of Lender against such Guarantor,
(c) presentment to or demand of payment from the Company or any Guarantor with
respect to any Operative Document or protest for nonpayment or dishonor,
(d) any right to the enforcement, assertion or exercise by the Lender of any
right, power, privilege or
<PAGE>
remedy conferred in any Operative Document
or otherwise, (e) any requirement of diligence on the part of Lender, (f) any
requirement to exhaust any remedies or to mitigate the damages resulting from
any default under any Operative Document, (g) any notice of any sale,
transfer or other disposition of any right, title to or interest in any
Operative Document, (h) any release of any Guarantor from such Guarantor's
obligations hereunder resulting from any loss by such Guarantor of such
Guarantor's rights of subrogation hereunder or otherwise and (i) any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety or might otherwise
limit recourse against such Guarantor.
Section 5. Subrogation. Upon the payment in full of
all principal of and premium, if any, and interest on the Loan and any other
amounts payable by the Company under the Operative Documents, and the
performance in full of all obligations to be performed or observed by the
Company under or pursuant to the Operative Documents, each Guarantor shall be
subrogated to the rights of Lender in respect of any payment or other
obligation with respect to which an amount has been paid by such Guarantor
hereunder. No Guarantor shall seek to exercise any rights of subrogation,
reimbursement or indemnity arising from payments made by such Guarantor
pursuant to the provisions of this Guarantee Agreement until the full and
complete payment or performance and discharge of the Guaranteed Obligations.
Section 6. Effect of
Bankruptcy Proceedings, etc. This Guarantee Agreement shall continue to be
effective or shall be automatically reinstated, as the case may be, if at any
time payment, in whole or in part, of any of the sums due Lender pursuant to
the terms of any Operative Document is rescinded or must otherwise be
restored or returned by Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or any other Person, or upon or
as a result of the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to the Company or other Person or
any substantial part of its property, or otherwise, all as though such
payment had not been made. If an event permitting the acceleration of the
maturity of any principal amount of the Loan shall at any time have occurred
and be continuing, and such acceleration shall at such time be prevented by
reason of the pendency against the Company or any other Person of a case or
proceeding under a bankruptcy or insolvency law, each Guarantor agrees that,
for purposes of this Guarantee Agreement and such Guarantor's obligations
hereunder, the maturity of the principal amount of the Loan shall be deemed
to have been accelerated with the same effect as if Lender had accelerated
the same in accordance with the terms of the Loan Agreement, and such
Guarantor shall forthwith, jointly and severally with the other
<PAGE>
Guarantor, pay such principal amounts, any interest thereon and any other
amounts guaranteed hereunder without further notice or demand.
Section 7. Subordination. (a) Each Guarantor hereby
agrees that until such time as all of the Guaranteed Obligations shall be
paid and performed in full, any Subordinated Indebtedness (as hereinafter
defined) is and shall be expressly subordinated, to the extent and in the
manner hereinafter set forth, in right of payment to the prior payment of the
Guaranteed Obligations.
(b) The term "Subordinated Indebtedness" shall mean, at any time,
the then outstanding aggregate principal amount of all indebtedness of the
Company to any Guarantor in respect of borrowed money, fees, royalties or
other advance or arrangement, all accrued and unpaid interest and premium, if
any, thereon and all expenses incurred by and all indemnities payable to any
Guarantor pursuant to any agreement between the Company and such Guarantor in
respect of any such indebtedness or otherwise.
(c) Upon the occurrence of an "Event of Default" under the Loan
Agreement, or an event which but for the lapse of time or the giving of
notice or both would be such an Event of Default, unless and until such Event
of Default or event shall have been remedied or waived, no direct or indirect
payment (in cash, property or securities or by set-off or otherwise) shall be
made or agreed to be made on account of the Subordinated Indebtedness and no
Guarantor shall demand, collect or receive any payment on account of any
Subordinated Indebtedness.
(d) In the event of any bankruptcy, receivership, liquidation,
reorganization or other similar proceedings relating to the Company, or in
the event of any proceedings for the voluntary or involuntary liquidation,
dissolution or other winding-up of the Company, whether or not involving
insolvency or bankruptcy proceedings, all of the Guaranteed Obligations
(including any interest accruing at the legal rate after the commencement of
any such proceedings and any additional interest that would have accrued but
for the commencement of such proceedings) shall first be paid in full before
any payment or distribution, whether in cash, securities or other property,
shall be made to any Guarantor on account of any Subordinated Indebtedness.
Any payment or distribution, whether in cash, securities or other property,
which would otherwise (but for these subordination provisions) be payable or
deliverable in respect of any Subordinated Indebtedness shall be paid or
delivered directly to the Lender (or to a banking institution selected by the
court or designated by the Lender) and to the holders of any other senior
indebtedness of the Company that may then be outstanding, in accordance with
the priorities
<PAGE>
then existing among such holders until all of the
Guaranteed Obligations shall have been paid in full.
(e) If any payment or distribution of any character, whether in
cash, property or otherwise, shall be received by any Guarantor in
contravention of any of the terms of the provisions of this Section 7, such
payment or distribution shall be paid over to Lender and to the holders of
any other senior indebtedness of the Company that may then be outstanding, in
accordance with the priorities then existing among such holders. Upon
payment in full of all of the Guaranteed Obligations, each Guarantor shall be
subrogated to the rights of Lender and any holders of any other senior
indebtedness of the Company to receive payments or distributions of assets
made with respect to the Guaranteed Obligations to the extent of amounts
payable to such Guarantor which, pursuant to the provisions of this Section
7, were paid to Lender or such holders and, for the purposes of such
subrogation, no payments to Lender or such holders of any character to which
such Guarantor would be entitled except for the provisions hereof shall, as
between the Company and its creditors other than the Lender or such holders,
on the one hand, and such Guarantor, on the other, be deemed to be a payment
or distribution by the Company to or on account of the Guaranteed Obligations.
Section 8. Term of Agreement. This Guarantee
Agreement and all guarantees, covenants and agreements of each Guarantor
contained herein shall continue in full force and effect and shall not be
discharged until such time as all of the Guaranteed Obligations shall be paid
and performed in full and all of the agreements of each Guarantor hereunder
shall be duly paid and performed in full.
Section 9. Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be given
to such party at the address or facsimile number set forth on Schedule I to
this Guarantee Agreement, or such other address or facsimile number as such
party may hereafter specify for the purpose by notice to the other party.
Each such notice, request or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (ii) if given by
any other means, when delivered at the address specified in this Schedule I
to this Guarantee Agreement.
Section 10. Further Assurances. Each Guarantor
hereby agrees to execute and deliver all such instruments and take all such
action as Lender may from time to time reasonably request in order to
effectuate fully the purposes of this Guarantee Agreement and to establish and
perfect the rights and remedies intended to be created in favor of the
<PAGE>
Lender hereunder or under any of the Operative Documents. Each Guarantor
shall cooperate with Lender to procure due performance by the Company of the
provisions of the Operative Documents.
Section 11. WAIVER OF JURY TRIAL. EACH OF THE
GUARANTORS AND LENDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS GUARANTEE AGREEMENT OR THE OTHER "LOAN DOCUMENTS" OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR THE RELATIONSHIP ESTABLISHED
HEREUNDER OR THEREUNDER.
Section 12. GOVERNING LAW; VENUE AND JURISDICTION
THE VALIDITY OF THIS GUARANTEE AGREEMENT, THE
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT HEREOF AND THE RIGHTS OF THE
PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH GUARANTOR
AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND EACH OTHER "LOAN DOCUMENT" SHALL BE TRIED AND LITIGATED IN
FEDERAL OR, IN THE ABSENCE OF FEDERAL SUBJECT MATTER JURISDICTION, STATE
COURTS LOCATED IN THE STATE OF NEW YORK UNLESS SUCH ACTIONS OR PROCEEDINGS
ARE REQUIRED TO BE BROUGHT IN ANOTHER COURT TO OBTAIN SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE GUARANTORS AND THE
COLLATERAL AGENT WAIVES, TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE IN ANY
PROCEEDING BROUGHT IN ACCORDANCE WITH THE IMMEDIATELY PRECEDING SENTENCE.
SERVICE OF PROCESS, SUFFICIENT FOR PERSONAL JURISDICTION IN ANY ACTION AGAINST
ANY GUARANTOR, MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ITS ADDRESS INDICATED IN SECTION 9.
Section 13. Amendments, Etc. No amendment, modification,
supplement, termination, consent or waiver of this Guarantee Agreement or any
term or provision of this Guarantee Agreement shall be effective and binding
unless in writing
<PAGE>
and signed by the Lender. Any such waiver will be
effective only in the specific instance and for the specific purpose for
which it is given.
Section 14. Successors and Assigns. This Guarantee Agreement is
for the benefit of the Lender and its successors, assigns and participants,
and in the event of an assignment of or the granting of a participation in
all or any of the Guaranteed Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned or participated out, may be
transferred with such indebtedness.
Section 15. Severability. Any provision of this Guarantee
Agreement which is illegal, invalid, prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such illegality, invalidity, prohibition or unenforceability without
invalidating or impairing the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other jurisdiction. To
the extent permitted by applicable law, each Guarantor hereby waives any
provision of law that renders any provisions hereof prohibited or
unenforceable in any respect.
Section 16. Counterparts; Section Headings. This Agreement may be
executed in any number of counterparts, each of which is an original, but all
of which together constitute but one instrument. Except as otherwise
indicated, references herein to any "Section" means a "Section" of this
Agreement, and the section headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof.
<PAGE>
IN WITNESS WHEREOF, each Guarantor and Lender has caused this
Guarantee Agreement to be duly executed as of the day and year first above
written.
GUARANTORS:
PMC INVESTMENT SERVICES, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
PORTFOLIO TECHNOLOGY SERVICES, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
PORTFOLIO MANAGEMENT
CONSULTANTS, INC.
By /s/ Kenneth S. Phillips
Name:
Title:
LENDER:
DUNDEE BANCORP INC.
By /s/ Ray Benzinger
Name:
Title:
<PAGE>
Schedule I
to the
Guarantee Agreement
Notices
Guarantors:
If to PMC Investment Services, Inc.:
PMC Investment Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
<PAGE>
If to Portfolio Technology Services, Inc.
Portfolio Technology Services, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
If to Portfolio Management Consultants, Inc.
Portfolio Management Consultants, Inc.
555 17th Street, 14th Floor
Denver, Colorado 80202
Attention: Kenneth S. Phillips
Scott A. McKillop
Tel: (303) 292-1177
Fax: (303) 293-2152
In the case of each Guarantor, with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln Street
Denver, Colorado 80203
Attention: Linda K. Wackwitz
Tel: (303) 861-7000
Fax: (303) 866-0200
<PAGE>
If to Dundee Bancorp Inc.:
Dundee Bancorp Inc.
40 King Street West
Scotia Plaza - 55th Floor
Toronto, Canada M5H 4A9
Attention: Ray Benzinger
Tel: (416) 365-5113
Fax: (416) 363-4536
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Steven Ostner
Tel: (212) 909-6000
Fax: (212) 909-6836
<PAGE>
EXHIBIT 10.10
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 9, 1998, between PMC
International, Inc., a Colorado corporation (the "Pledgor"), and Dundee
Bancorp Inc., an Ontario corporation, as pledgee (the "Pledgee").
RECITALS
1. The Pledgor is the legal and beneficial owner of all of the
issued and outstanding shares of capital stock of (i) PMC Investment
Services, Inc., a Delaware corporation ("PIS"), (ii) Portfolio Technology
Services, Inc., a Colorado corporation ("PTS"), (iii) Portfolio Management
Consultants, Inc., a Colorado corporation ("PMC"), and (iv) Portfolio
Brokerage Services Inc., a Colorado corporation ("PBS" and together with PIS,
PTS and PMC, the "Pledged Subsidiaries").
2. Pursuant to the Loan Agreement, dated as of July __, 1998 (as
the same may be modified, supplemented or restated from time to time, the
"Loan Agreement"), between the Pledgor, as borrower, and Dundee Bancorp Inc.,
as lender (in such capacity, the "Lender"), the Lender has agreed to extend
to the Pledgor a loan in the amount of $1.5 million (the "Loan"), subject to
the terms and conditions set forth in the Loan Agreement.
3. In order to induce the Lender to enter into the Loan Agreement
and to extend the Loan, the Pledgor has agreed to pledge to the Pledgee all
of the shares of capital stock of each Pledged Subsidiary as security for the
performance of its obligations under the Loan Agreement.
4. Capitalized terms used in this Agreement without definition
have the meanings given to them in the Loan Agreement, except that the term
"UCC" shall have the meaning given to it in the Borrower Security Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Pledgor hereby agrees
with the Pledgee as follows:
Section 1. Security for Obligations. This Agreement is entered
into to secure (a) the payment of the principal of and premium and interest
on the Loan (including, without limitation, interest accruing after the date
of any filing by Pledgor of any petition in bankruptcy or the commencement of
any bankruptcy, insolvency or similar proceeding with respect to Pledgor) as
and when the same becomes due and <PAGE>
payable in accordance with the terms of
the Loan Agreement, whether at maturity or by prepayment, acceleration,
declaration of default or otherwise, (b) the payment of all other
indebtedness and other amounts payable by the Pledgor under the Loan
Agreement, the Note, this Agreement and the other Loan Documents, (c) the due
and punctual performance by Pledgor of and compliance by the Pledgor with all
its obligations under the Loan Agreement, the Note, this Agreement and all
other Loan Documents, and (d) all extensions and renewals of any of the
foregoing (all of the payment and performance obligations referred to in this
Section 1 being referred to collectively as the "Secured Obligations").
Section 2. Pledge of Shares, Etc. As security for the prompt
payment and performance of the Secured Obligations when due (whether at
stated maturity, by acceleration or otherwise), the Pledgor hereby pledges to
the Pledgee and grants, transfers and sets over to the Pledgee a continuing
security interest in all the following property, whether now owned or
hereafter acquired and whether now or in the future existing (collectively,
the "Collateral"):
(a) all of the issued and outstanding shares of capital stock of
each Pledged Subsidiary;
(b) all additional shares of capital stock and other equity
securities of any class of the Pledged Subsidiaries from time to time
acquired by Pledgor in any way (the property described in clause (a)
above and this clause (b) being referred to collectively as "Pledged
Stock");
(c) all subscriptions, warrants, rights or options of Pledgor to
acquire any shares of capital stock or other equity securities of any
Pledged Subsidiary or any interest therein;
(d) all dividends, instruments, cash and other property or rights
of any kind at any time received, receivable or otherwise distributed or
distributable with respect to any of the property described in clauses
(a) through (c) above;
(e) all certificates or other writings representing or evidencing
any of the property described in clauses (a) through (d) above;
(f) all proceeds of any of the property described in clauses (a)
through (e) above; and
<PAGE>
(g) all books, correspondence, credit files, electronic data,
records, invoices and other papers and documents relating to any of the
foregoing.
Section 3. Representations and Warranties. The Pledgor represents
and warrants to the Pledgee as follows:
(a) The issued and outstanding shares of capital stock of PIS
consists solely of 920 shares of common stock; the issued and
outstanding capital stock of PTS consists solely of 100 shares of
common stock; the issued and outstanding capital stock of PMC consists
solely of 23,492.67 shares of Class A common stock and 18,907.33 shares
of Class B common stock; and the issued and outstanding capital stock of
PBS consists solely of 1,000 shares of common stock (all of the shares
described in this clause (a) being referred to collectively as the
"Shares").
(b) The Pledgor is the record and beneficial owner of the Shares,
free and clear of any Lien except for the Lien created by this Agreement.
(c) All of the Shares have been duly and validly issued and are
fully paid and non-assessable. There are no preemptive, conversion or
similar rights on the part of any Person with respect to the capital
stock of any Pledged Subsidiary. There are no subscriptions, options,
warrants or other agreements or arrangements of any kind, contingent or
otherwise, obligating the Pledgor or any Pledged Subsidiary to sell or
issue, or cause to be sold or issued, any equity interest in any Pledged
Subsidiary, and no authorization therefor has been given. There are no
securities convertible into or exchangeable for any equity interests of
any Pledged Subsidiary, and no authorization therefor has been given.
No Person has any contractual or other right or obligation to purchase
or otherwise acquire any shares or other equity interests in any Pledged
Subsidiary.
(d) Upon delivery to the Pledgee of the certificates evidencing
the Shares, the security interest granted pursuant to this Agreement
will constitute a valid perfected first priority security interest in
the Shares, enforceable as such against all creditors of the Pledgor
and any Persons purporting to purchase any Shares from Pledgor.
Section 4. Voting Rights, Dividends and Other Distributions, Etc.
4.1 Prior to Event of Default. So long as no Event of Default
has occurred and is continuing, the Pledgor will remain entitled to exercise
any and all voting and other consensual rights pertaining to the Pledged
Stock and to receive and use cash dividends as and to the extent permitted by
the Loan Agreement, in either case for any purpose not inconsistent with the
terms of this Agreement or any other Loan Document.
<PAGE>
4.2 After Event of Default. For so long as an Event of Default
is continuing, (i) the Pledgor may not exercise any voting or other
consensual rights with respect to any Pledged Stock without the prior written
consent of the Pledgee, (ii) the right, if any, of Pledgor to receive cash
dividends in respect of the Pledged Stock will cease and all such dividends
must be paid directly to the Pledgee (or if received by Pledgor will be
deemed held in trust by Pledgor for the benefit of, and must be turned over
immediately by Pledgor to, the Pledgee) and thereafter will be held and
disposed of by the Pledgee as part of the Collateral, and (iii) if the Pledgee
has notified the Pledgor that it elects to exercise the Pledgee's right to
exercise voting and other consensual rights hereunder, all rights of Pledgor
to exercise the voting and other consensual rights which Pledgor would
otherwise be entitled to exercise pursuant to Section 4.1 will cease, all
such rights will thereupon become vested in the Pledgee, who during the
continuance of such Event of Default will have (directly or through its
nominee) the sole right to exercise such voting and other consensual rights,
including, without limitation, (A) all voting, corporate and other rights
pertaining to any of the Pledged Stock, (B) all rights to give consents,
waivers and ratifications in respect thereof and (C) any and all rights of
conversion, exchange, subscription and any other rights, privileges or
options pertaining to any of the Pledged Stock as if it were the absolute
owner thereof, and in connection therewith, the right to deposit and deliver
any and all of the Pledged Stock with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property
actually received by it (the Pledgor hereby irrevocably constituting and
appointing the Trustee the proxy and attorney-in-fact of the Pledgor, with
full power of substitution, to do or take any of the above actions for as
long as the Event of Default is continuing). The Pledgee will have no duty
to Pledgor to exercise any such right and will not be responsible for any
failure to do so or delay in so doing. In order to permit the Pledgee to
exercise the voting and other consensual rights which it may be entitled to
exercise pursuant to this Section 4.2, and to receive all dividends and
distributions which it may be entitled to receive under this Section 4.2, the
Pledgor will, upon written notice from the Pledgee, from time to time execute
and deliver to the Pledgee appropriate proxies, dividend payment orders and
other instruments as the Pledgee may reasonably request.
Section 5. Covenants of Pledgor.
5.1 Sale of Collateral, Etc. Pledgor will not (i) sell, assign,
transfer, convey, or otherwise dispose of, or grant any option with respect
to, any of the Collateral, or (ii) create or permit to exist any Lien upon or
with respect to any of the Collateral, except for the Lien created by this
Agreement.
<PAGE>
5.2 Delivery of Stock Certificates, Etc. Pledgor will
immediately deliver to the Pledgee all certificates or other writings
representing or evidencing any of the Shares and any other "securities" or
"instruments" (as such terms are defined in the UCC) included in the
Collateral at any time acquired or received by Pledgor, directly or
indirectly, either in suitable form for transfer by delivery, or issued in
the name of Pledgor and accompanied by stock powers or other appropriate
instruments of transfer or assignment, duly executed by Pledgor in blank and
undated, and in either case having attached thereto all requisite federal or
state stock transfer tax stamps, all in form and substance satisfactory to
the Pledgee.
5.3 Other Distributions. Except for cash dividends permitted to
be paid to Pledgor pursuant to Section 4.1, Pledgor will cause all dividends
and distributions of any kind on the Pledged Stock (including any sums paid
upon or in respect of the Pledged Stock upon the liquidation or dissolution
of the issuer thereof or upon the recapitalization or reclassification of the
capital of the issuer thereof or upon the reorganization of the issuer
thereof) to be paid directly to the Pledgee (and if any such dividends or
distributions are received by Pledgor, Pledgor will hold them in trust for
the benefit of, and will immediately turn them over to, the Pledgee) and the
Pledgee will hold and dispose of all such dividends and distributions as part
of the Collateral.
5.4 Additional Capital Stock of any Pledged Subsidiary. Pledgor
will not permit or suffer any Pledged Subsidiary to issue any shares of
capital stock or any subscriptions, warrants, options or rights to acquire
the same or any securities convertible into or granting the right to purchase
or exchange for any shares of capital stock of any Pledged Subsidiary except
to Pledgor, and then only unless such capital stock, subscriptions, warrants,
options or rights are duly and validly pledged to the Pledgee as additional
Collateral under this Agreement.
5.5 Records; Location of Records; Inspection. Pledgor will keep
full and accurate books and records relating to the Collateral, and stamp or
otherwise mark such books and records in such manner as is necessary or
desirable in order to reflect the pledge and security interest granted
pursuant to this Agreement. Pledgor will permit representatives of the
Pledgee at any time upon reasonable advance notice to inspect and make
abstracts from its books and records pertaining to the Collateral and to
discuss matters relating to the Collateral with officers of Pledgor.
<PAGE>
5.6 Costs, Expenses and Certain Taxes. Pledgor will pay to the
Pledgee from time to time on demand any and all costs and expenses, including
attorneys' fees and expenses, paid or incurred by or on behalf of the Pledgee
in connection with the administration or enforcement of this Agreement or the
collection of any amount payable by Pledgor under this Agreement, whether or
not any legal proceeding is commenced hereunder or thereunder and whether or
not any Default or Event of Default has occurred and is continuing. The
Pledgor will indemnify the Pledgee on demand against any loss, liability or
expense incurred by the Pledgee arising out of or in connection with the
acceptance or administration of this trust, or any action or omission of the
Pledgee hereunder, including the costs and expenses of defending itself
against any claim or liability (including any claim by Pledgor) in connection
with the exercise or performance of any of its powers or duties hereunder;
provided that the Pledgee shall not have the right to be indemnified
hereunder for its own gross negligence or willful misconduct as determined by
a court of competent jurisdiction. All amounts payable to the Pledgee under
this Section 5.6 accrue interest until paid in full at the default interest
rate in the Loan Agreement from the date of demand therefor. All such
amounts shall constitute additional indebtedness of the Pledgor secured
hereunder and shall be payable on demand. Pledgor will also pay, and will
hold the Pledgee harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamps, excise, sales or
other taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
5.7 Priority of Security Interest; Further Assurances. (a)
Pledgor will at all times cause the security interest granted pursuant to
this Agreement to constitute a valid perfected first priority security
interest in the Collateral, enforceable as such against all creditors of
Pledgor and any Persons purporting to purchase any Collateral from Pledgor.
(b) Pledgor will at any time and from time to time, at its own
expense, promptly execute and deliver all further instruments and documents,
and take all further actions, as may be necessary or desirable, or that the
Pledgee may reasonably request, in order to (i) grant more effectively a
security interest in favor of the Pledgee in all or any portion of the
Collateral, (ii) maintain, preserve, or perfect the Lien created or purported
to be created by this Agreement and the first priority status of such lien,
(iii) preserve and defend against any Person Pledgor's rights in and title to
the Collateral and the rights purported to be granted therein by this
Agreement, (iv) enable the Pledgee to exercise and enforce its rights and
remedies hereunder, or (v) carry out more effectively the purposes of this
Agreement.
Section 6. Rights of the Pledgee.
<PAGE>
6.1 No Obligations or Liability to Pledgor. The rights and
powers of the Pledgee hereunder are not contingent upon the pursuit by the
Pledgee of any right or remedy against Pledgor or against any other Person
which may be or become liable in respect of any of the Secured Obligations or
against any other collateral security or guarantee therefor or right of
offset with respect thereto, but are solely to protect its interest in the
Collateral. The Pledgee will not be liable for any failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so, nor is the Pledgee under any obligation to sell or otherwise
dispose of any Collateral upon the request of Pledgor or any other Person or
to take any other action whatsoever with regard to the Collateral or any part
thereof. No action or inaction on the part of the Pledgee hereunder or under
any other Loan Document will release Pledgor from any of its obligations
hereunder or under any other Loan Document, or constitute an assumption of any
such obligations on the part of the Pledgee, or cause the Pledgee to become
subject to any obligation or liability to Pledgor. The Pledgee has no
obligation to perform any of the obligations or duties of Pledgor as a
shareholder of the Pledged Subsidiaries.
6.2 Right of Pledgee to Perform Pledgor's Covenants, Etc. If
Pledgor fails to make any payment or to perform any agreement required to be
made or performed hereunder, the Pledgee may (but need not) at any time
thereafter make such payment or perform such act, or otherwise cause such
payment or performance. No such action will create any liability to Pledgor
on the part of the Pledgee. All amounts so paid by the Pledgee and all costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) incurred by the Pledgee in any such performance shall accrue
interest from the date paid or disbursed until reimbursed to the Pledgee in
full by or on behalf of Pledgor at the rate established in Section 5.6. All
such amounts shall constitute additional indebtedness of the Pledgor secured
hereunder and shall be payable on demand.
6.3 Registration of Securities in Name of Pledgee. In addition
to its rights under the last sentence of Section 4.2, if the Pledgee
determines that registration of any of the Pledged Stock in the name of the
Pledgee or its nominee is necessary or desirable to protect the interests of
the Pledgee, then the Pledgee may without notice to or consent of Pledgor
cause any or all of the Pledged Stock to be so registered, and the Pledgor
will take all reasonable actions to accomplish such registration.
Notwithstanding any such registration, the Pledgee and any such nominee will
continue to hold such Pledged Stock on the terms and conditions set forth
herein.
6.4 Additional Security. Without notice to or consent of Pledgor
and without impairment of the security interest and rights granted pursuant
to this Agreement, the Pledgee may accept from any other Person or Persons,
additional security for the Secured Obligations. Neither the giving of this
Agreement nor the acceptance of any such additional security will prevent the
Pledgee from resorting, first to such additional security, or, first to the
security created by this Agreement, in either case without affecting the
Pledgee's security interest and rights granted pursuant to this Agreement.
<PAGE>
6.5 Release of the Pledge and Security Interest Created Hereby.
Upon payment in full of the outstanding principal amount of, and all premium,
if any, and accrued interest on the Loan in accordance with the Loan
Agreement and payment or satisfaction of all other Secured Obligations, the
Pledgee will, upon the written request of Pledgor, promptly return to the
Pledgor all Collateral held by the Pledgee.
Section 7. Remedies and Enforcement.
7.1 Remedies in Case of an Event of Default. If an Event of
Default has occurred and is continuing, then in addition to the actions
referred to in Section 4.2 the Pledgee may take any or all of the following
actions, without demand of performance or other demand, advertisement or
notice of any kind to or upon Pledgor or any other Person (except as
specified in Section 7.1(b)) all and each of which are hereby expressly
waived by Pledgor:
(a) The Pledgee may, in its own name or at its sole option in the
name of Pledgor, exercise any or all of the rights, powers and
privileges of, and pursue any or all of the remedies accorded to,
Pledgor under the Collateral and may exclude Pledgor and all Persons
claiming by, through or under Pledgor wholly or partly therefrom,
including in such rights, privileges and remedies, but without
limitation, all rights of Pledgor to demand, receive, sue for,
compromise and settle all payments in respect of the Collateral, and in
connection therewith to exercise all rights and remedies thereunder
which Pledgor could enforce if this Agreement had not been made.
(b) The Pledgee may forthwith collect, recover, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or
may forthwith sell, assign, give an option or options to purchase,
contract to sell or otherwise dispose of and deliver the Collateral, or
any part thereof, in one or more parcels at public or private sale or
sales, at such place and on such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The
Pledgee need not make any sale of Collateral even if notice thereof has
been given, may reject any and all bids that in its commercially
reasonable discretion it shall deem inadequate, and may adjourn any
public or private sale. Without limiting the foregoing, Pledgor agrees
that the Pledgee need not give more than ten days notice of the time
and place of any public sale or of the time after which a private sale
or other intended disposition is to take place and that such notice is
reasonable notification of such matters, and waives all other demands or
notices of any kind.
<PAGE>
(c) The Pledgee may, as a matter of right and without notice to
Pledgor or any Person claiming by, through or under Pledgor, cause the
appointment of a receiver for all or any part of the Collateral.
(d) In addition to all other rights and remedies granted to it in
this Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Secured Obligations, the Pledgee
will have and may exercise with respect to any or all of the Collateral
all of the rights and remedies of a secured party under the UCC.
Pledgor consents to and ratifies any action which the Pledgee may
take to enforce its rights under this Section 7.1. Pledgor waives to the
full extent permitted by law the benefit of all appraisement, valuation,
stay, extension, moratorium and redemption laws now or hereafter in force and
all rights of marshalling in the event of the sale of the Collateral or any
part thereof or any interest therein. Pledgor will execute and deliver such
documents as the Pledgee deems advisable or necessary in order that any such
sale or disposition be made in compliance with applicable law.
Any sale or other disposition of the Collateral or any part thereof
or interest therein in the exercise of any remedy hereunder will constitute a
perpetual bar against Pledgor and any Persons claiming by, through or under
Pledgor. Upon any such sale or other disposition, the receipt of the officer
making the sale or other disposition or of the Pledgee is a sufficient
discharge to the purchaser for the purchase money, and such purchaser will
have no duty to see to the application thereof.
7.2 Application of Proceeds Following an Event of Default. All
amounts held or collected by the Pledgee as part of the Collateral
(including, without limitation, all amounts realized as a result of the
exercise of any rights and remedies hereunder) following the occurrence of any
Event of Default will be applied forthwith by the Pledgee as provided in
Section 10 of the Borrower Security Agreement.
7.3 Purchase of Collateral by Pledgee. The Pledgee may be a
purchaser of the Collateral or any part thereof or any interest therein at
any sale or other disposition hereunder and may apply against the purchase
price the indebtedness secured hereby owing to such purchaser.
<PAGE>
7.4 Purchaser to Acquire Good Title. Any purchaser of the
Collateral at any sale or other disposition thereof pursuant to this Section
7 will, upon any such purchase, acquire good title to the Collateral so
purchased free of the Lien created by this Agreement and free of all rights of
equity or redemption in Pledgor, which rights Pledgor hereby expressly waives
and releases to the full extent permitted by law, and Pledgor will warrant
and defend the title of such purchaser against all claims arising by, through
or under the Pledgor. Nevertheless, if so requested by the Pledgee or any
such purchaser, Pledgor will ratify and confirm any exercise of remedies by
the Pledgee hereunder by executing and delivering to the Pledgee or such
purchaser all bills of sale, assignments, releases and other proper
instruments to effect such ratification and confirmation as may be designated
in any such request. In addition, Pledgor will do or cause to be done all
such other acts and things as may be reasonably necessary to make such
exercise of remedies valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards
of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such exercise, all at
Pledgor's expense.
7.5 Sale of Pledged Stock Without Registration. Pledgor
recognizes that (i) the Pledgee may be unable to effect a public sale of any
or all of the Pledged Stock by reason of the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state or foreign securities
laws or otherwise, but may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof and
who otherwise satisfy the requirements of any such applicable law, and
(ii) any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale. No such sale will be
deemed to have been made in a commercially unreasonable manner for the reason
that it was made as a private sale rather than a public sale, and the Pledgee
will be under no obligation to delay a sale of any of the Pledged Stock for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, or otherwise comply with applicable law,
even if the issuer would agree to do so and would be able to do so.
<PAGE>
7.6 Appointment as Attorney-in-Fact. Pledgor hereby irrevocably
constitutes and appoints the Pledgee, with full power of substitution, as
Pledgor's attorney-in-fact, with full irrevocable power and authority in the
place and stead of Pledgor and in the name of Pledgor or otherwise, from time
to time in the Pledgee's discretion, to execute and deliver any and all bills
of sale, assignments or other instruments which the Pledgee may deem
necessary or advisable in its exercise of any of the remedies hereunder, and
to take any other action to accomplish the purposes of this Agreement,
including, without limitation, to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipt for moneys due and to
become due under or in connection with the Collateral, to receive, endorse,
and collect any drafts or other instruments, documents and chattel paper in
connection therewith, and to file any claims or take any action or institute
any proceedings which the Pledgee may deem to be necessary or desirable for
the collection thereof, Pledgor hereby ratifying and confirming all that such
attorney or any substitute may lawfully do by virtue hereof. This power of
attorney is a power coupled with an interest and is irrevocable.
7.7 No Waiver; Cumulative Remedies. No action or inaction of the
Pledgee will be deemed to waive any of the rights, powers or remedies of the
Pledgee hereunder except pursuant to a writing, signed by the Pledgee, and
then only to the extent expressly set forth therein. A waiver by the Pledgee
of any right, power or remedy on any one occasion will not bar the exercise
of any right, power or remedy hereunder on any future occasion. No failure
of the Pledgee to exercise nor delay of the Pledgee in exercising any right,
power or remedy will preclude the exercise of any other right, power or
remedy. If the Pledgee accepts payment of any amount secured hereby after
its due date, it will not thereby be deemed to have waived its right to
require prompt payment when due of all other amounts payable hereunder. Each
right, power and remedy of the Pledgee provided for in this Agreement or now
or hereafter existing at law or equity or by statute or otherwise is
cumulative and concurrent and is in addition to every other such right, power
or remedy of the Pledgee, and the exercise of any one or more of any such
rights, powers or remedies with respect to any of the Collateral will not
preclude the simultaneous or later exercise by the Pledgee of any other
right, power or remedy with respect to any other Collateral.
7.8 Restoration of Rights and Remedies. If the Pledgee has
instituted any proceeding to enforce any right, power or remedy under this
Agreement and such proceeding has been discontinued or abandoned for any
reason, with or without notice to Pledgor, or has been determined adversely
to the Pledgee, then and in every such case Pledgor and the Pledgee will be
restored to their former positions hereunder, and thereafter all rights,
powers and remedies of the Pledgee will continue as though no such proceeding
had been instituted.
Section 8. Miscellaneous.
8.1 Amendments, Etc. No amendment, modification, supplement,
termination, consent or waiver of this Agreement or any term or provision of
this Agreement shall be effective and binding unless in writing and signed by
the Pledgee. Any such waiver will be effective only in the specific instance
and for the specific purpose for which it is given.
<PAGE>
8.2 Successors and Assigns. This Agreement and the Lien in the
Collateral created hereunder are for the benefit of the Pledgee and the
Lender and their successors, assigns and participants, and in the event of an
assignment of or the granting of a participation in all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned or participated out, may be transferred with such
indebtedness. This Agreement shall be binding on the Pledgor and its
successors and assigns.
8.3 Severability. Any provision of this Agreement which is
illegal, invalid, prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such illegality,
invalidity, prohibition or unenforceability without invalidating or impairing
the remaining provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
8.4 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL OR
EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER "LOAN DOCUMENTS" OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
<PAGE>
8.5 GOVERNING LAW; VENUE AND JURISDICTION. THE VALIDITY OF THIS
AGREEMENT, THE CONSTRUCTION, INTERPRETATION AND ENFORCEMENT HEREOF AND THE
RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE
PLEDGOR AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND EACH OTHER "LOAN DOCUMENT" SHALL BE TRIED AND LITIGATED IN
FEDERAL OR, IN THE ABSENCE OF FEDERAL SUBJECT MATTER JURISDICTION, STATE
COURTS LOCATED IN THE STATE OF NEW YORK UNLESS SUCH ACTIONS OR PROCEEDINGS
ARE REQUIRED TO BE BROUGHT IN ANOTHER COURT TO OBTAIN SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF THE PARTIES WAIVES, TO
THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO
ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE IN ANY PROCEEDING BROUGHT IN ACCORDANCE WITH
THE IMMEDIATELY PRECEDING SENTENCE. SERVICE OF PROCESS, SUFFICIENT FOR
PERSONAL JURISDICTION IN ANY ACTION AGAINST THE BORROWER, MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS
INDICATED IN SECTION 8.7.
8.6 Agreement May Constitute Financing Statement. Pledgor
consents to the filing of this Agreement or a photocopy thereof as a
financing statement under the UCC as in effect in any jurisdiction in which
the Pledgee may determine such filing to be necessary or desirable.
8.7 Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given to such party at
the following address or facsimile number, or such other address or facsimile
number as such party may hereafter specify for the purpose by notice to the
other party. (a) if to the Pledgee, Dundee Bancorp Inc., 40 King Street West,
Scotia Plaza, 55th Floor, Toronto, Canada M5H 4A9, attention: Ray Benzinger,
tel: (416) 365-5113, fax: (416) 363-4536; with a copy to Debevoise &
Plimpton, 875 Third Avenue, New York, New York 10022, attention: Steven
Ostner, tel: (212) 909-6000, fax: (212) 909-6836; and (b) if to the
Borrower, PMC International Inc., 555 17th Street, 14th Floor, Denver,
Colorado 80202, attention: Kenneth S. Phillips and Scott A. McKillop, tel:
(303) 292-1177, fax: (303) 293-2152; with a copy to Holme Roberts & Owen
LLP, 1700 Lincoln Street, Denver, Colorado 80203, attention: Linda K.
Wackwitz, tel: (303) 861-7000, fax: (303) 866-0200. Each such notice, request
or other communication shall be effective (i) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (ii) if given by any other means, when
delivered at the address specified in this Section 8.7.
8.8 Counterparts; Section Headings. This Agreement may be
executed in any number of counterparts, each of which is an original, but all
of which together constitute but one instrument. Except as otherwise
indicated, references herein to any "Section" means a "Section" of this
Agreement, and the section headings in this Agreement are for purposes of
reference only and shall not limit or define the meaning hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
PMC INTERNATIONAL, INC.,
as Pledgor
By /s/ Kenneth S. Phillips
Title:
DUNDEE BANCORP INC.,
as Pledgee
By /s/ Ray Benzinger
Title:
<PAGE>
EXHIBIT 10.11
PMC INTERNATIONAL, INC.
SECURED NOTE
$1,500,000 New York, New York
July 10 , 1998
FOR VALUE RECEIVED, PMC INTERNATIONAL, INC., a Colorado
corporation (the "Borrower"), hereby promises to pay to the order
of DUNDEE BANCORP INC., an Ontario corporation (the "Lender"),
the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000) on December 31, 1998, unless previously paid in
full, and to pay interest on such unpaid principal amount on the
dates and at the rates specified in the Loan Agreement referred
to below. Payments of principal and interest are to be made to
the Lender at the place specified pursuant to the Loan Agreement,
in the lawful money of the United States of America.
This Note evidences the Loan made under, and is
entitled to the benefits of, the Loan Agreement, dated as of
July 7, 1998 (said agreement, as the same may from time to time
be amended, modified or supplemented, the "Loan Agreement"),
between the Borrower and the Lender. Terms defined in such Loan
Agreement are used herein with the same meanings. Reference is
made to such Loan Agreement, as so amended, for provisions
relating to the prepayment, both optional and mandatory, and the
acceleration of maturity hereof.
The Borrower hereby waives presentment, demand, notice
of dishonor, protest and notice of protest.
This Note is entitled to the benefits of the Security
Agreements and the Pledge Agreement, which contain provisions for
the securing of this Note and the Loan evidenced hereby upon the
terms and conditions specified therein.
<PAGE>
This Note shall be construed in accordance with and
governed by the laws of the State of New York.
PMC INTERNATIONAL, INC.
By: /s/ Kenneth S. Phillips
Name:
Title:
ENDORSEMENT
This Note is entitled to the benefit of the Guarantee
of the undersigned pursuant to the Guarantee Agreement.
PMC INVESTMENT SERVICES, INC.
By: /s/ Kenneth S. Phillips
PORTFOLIO TECHNOLOGY SERVICES, INC.
By: /s/ Kenneth S. Phillips
PORTFOLIO MANAGEMENT CONSULTANTS,
INC.
By: /s/ Kenneth S. Phillips
<PAGE>
EXHIBIT 10.12
SEPARATION AGREEMENT
This agreement is between PMC International, Inc. ("PMC,"
which definition unless otherwise noted shall include all
subsidiaries of PMC) and Kenneth S. Phillips ("Phillips"), and
shall be effective the 24th day of August, 1998 (the "Effective
Date"), which date represents the date Phillips executed this
agreement.
Recitals
A. Phillips has been employed by PMC in the capacity of
Chief Executive Officer and President pursuant to an Employment
Agreement, by and between PMC and Phillips, dated as of July 26,
1995 (as subsequently amended by an Amendment dated April 15,
1998, the "Employment Agreement"). A dispute has arisen
concerning the circumstances of Phillips's employment with PMC
(the "Dispute").
B. PMC and Phillips now desire to terminate the employment
relationship and employment agreement, to terminate certain other
contractual relationships and fully and completely to resolve all
differences between them.
Agreement
In consideration of the conditions, covenants and agreements
set forth below, the parties agree as follows:
1. Resignation. Concurrent with the execution of this Agreement,
Phillips shall resign, effective as of the Effective Date,
as a director, an executive officer and an employee of PMC
and all PMC subsidiaries and affiliates.
2. Termination of Employment Agreement. Concurrent with the
execution hereof, the Employment Agreement shall terminate
and for all purposes shall be of no further force and
effect. In satisfaction of all responsibilities thereunder,
the parties agree that:
a. Accrued salary in the gross amount of $5769.01, subject to
reduction by an amount equal to all taxes and usual and
customary payroll deductions, will be paid to Phillips
on the Effective Date.
b. Phillips is entitled to payment of $ 11,538.02 representing
two weeks unused vacation, subject to reduction by an
amount equal to all taxes and usual and customary
payroll deductions, which amount shall be paid to
Phillips on the eighth day after the Effective Date (or
the next following business day if such eighth day is a
Saturday, Sunday or a banking holiday).
<PAGE>
c. All documented, authorized and as yet unreimbursed business
expenses incurred by Phillips on or before the close of
business August 18, 1998 (the "Allowed Expenses"), as
are itemized in an expense reimbursement request and
timely presented to PMC, will be paid to Phillips.
d. The outstanding advance to Phillips from PMC in the amount
of $12,977.07 (the "Advance") shall be subtracted from
the last payment or payments to be made to Phillips
pursuant to paragraph 2(e), below, after all taxes and
usual and customary payroll deductions have been
deducted. Phillips shall be solely responsible for
all taxes that might result from the delayed repayment
of said advance.
e. PMC shall pay to Phillips as severance, the gross sum of
$675,000.00, payable in equal bi-monthly payments over
a period of twenty-seven months, subject to reduction
by an amount equal to all taxes and usual and customary
payroll deductions. The first payment shall be due and
payable on September 1, 1998 which payment shall be a
prorata payment for the number of days elapsed from the
Effective Date. The payments due in the twenty-seventh
month shall be accelerated and also paid on September
1, 1998. All subsequent payments shall me made on the
1st and 15th day of each month until paid in full,
subject to the terms of paragraphs 2(d), 2(h) and 10(d)
hereof. Said severance payments may be accelerated if
and when control of PMC changes, at the sole discretion
of the purchaser or entity gaining control of PMC. A
"change of control" is defined as a change in the
person or entity controlling 51% or more of PMC's
voting shares through a stock purchase or merger or
other means of change of control. Phillips shall have
no right to compel acceleration of the severance
payments upon a change of control.
f. The "Severance Period" is defined as the twenty-seven month
period during which severance payments shall be made to
Phillips, or such shorter duration of payments that
results pursuant to the terms of paragraph 2(h) or
10(d) below.
g. During the Severance Period, Phillips shall continue to be
provided the following additional benefits, subject to
the terms of paragraph 2(h) or 10(d) below:
i. During the Severance Period, or for so long as Phillips
is eligible to continue his health and dental
coverage through COBRA, or until Phillips is
eligible to participate in a health and/or dental
plan through another employer, whichever is
shorter, PMC shall pay to COBRA the premiums for
Phillips' health and dental insurance (covering
Phillips and his two minor children), less any
amounts for such insurance paid by Phillips
pursuant to PMC's then current policies and
procedures for payment of insurance premiums
(currently, $171.87 per bi-monthly period).
<PAGE>
ii. After termination of COBRA coverage, PMC shall pay
directly to Phillips the amount paid by PMC
pursuant to subparagraph 2(g)(i) above for so long
as the Severance Period continues or until
Phillips is eligible to participate in a health
and/or dental plan through another employer
whichever is shorter.
iii. PMC shall continue to pay the premiums for and maintain
the same $30,000 term life insurance policy that
it currently maintains on the life of Phillips for
so long as the Severance Period continues or until
Phillips is eligible to participate in a life
insurance plan through another employer, whichever
is shorter.
h. Any violation or breach by Phillips of any of the terms of
paragraphs 7 (Release), 9 (Protection of Trade Secrets
and Confidential Information), 10 (Noncompetition), 11
(Non-Solicitation), 12 (Inventions), 19
(Confidentiality), 20 (Covenant of Non-Disparagement),
21 (Covenant of Non-Interference) or 22 (Covenant of
Cooperation in Litigation), or of this subparagraph
2(h), shall result in immediate termination of the
Severance Period and Phillips's rights to any
remuneration, benefits, or payments on his behalf shall
terminate immediately and all sums due to PMC shall
become immediately due and payable; it being understood
and agreed (i) that during the Severance Period
Phillips shall provide to PMC, in a form reasonably
acceptable to PMC, written representation and warranty
quarterly, no later than the last day of such quarter,
that Phillips has not breached and does not intend to
breach any of said provisions or covenants, and (ii)
that, immediately but no later than five business days
after Phillips shall have accepted any offer of
employment or other arrangement to conduct business
and, in any event, at least two business days prior to
commencement of such employment, Phillips shall provide
the name of the employer and a reasonably detailed
description of the duties and responsibilities of the
position or arrangement.
3. Termination of Change of Control Severance Agreement. Concurrent
with the execution hereof, that certain Change of Control
Severance Agreement, by and between Phillips and PMC, dated
as of May 15, 1998, shall terminate and for all purposes
shall be of no further force and effect.
<PAGE>
4. Payment of Loans and Dissolution of LLC. The parties acknowledge
that PMC has provided certain financial assistance to KP3,
LLC (the "LLC"), a Colorado limited liability company
principally owned and controlled by Phillips. The LLC has
obtained certain loans in the aggregate principal amount of
$1,750,000 (the "Loans") from Citywide Bank (the "Bank"),
for which PMC has provided cash collateral in the form of
certificates of deposit on deposit with the Bank in the
aggregate amount of $1,750,000 (the "Cash Collateral")
pursuant to that certain Reimbursement and Pledge Agreement
dated January 8, 1997, as amended August 24, 1998 (the
"Pledge Agreement"), against a pledge by the LLC of shares
of PMC common stock (the "Pledged Shares"). Payment of the
Loans is subject to certain restrictions imposed by Dundee
Bancorp Inc. ("Dundee") in connection with a recent loan
from Dundee to PMC. In addition, under the Pledge
Agreement, PMC has provided funds to the LLC for the purpose
of funding interest payments on the Loans and for which the
LLC has executed promissory notes in favor of PMC in the
aggregate principal amount of $217,504.33 plus accrued
interest thereon (the "Notes"). The parties agree to take
the following actions to pay the Loans and dissolve the LLC:
a. Subject to paragraph 4(d) below, on the later of (x) the
eighth day after the Effective Date (or the next
following business day if such eighth day is a
Saturday, Sunday or a banking holiday), (y) the date of
Dundee's approval, or (z) if Dundee shall not have
granted its approval, on such date as the Loans shall
come due,
i. PMC shall instruct the Bank to apply the Cash
Collateral in payment of the principal balance of
the Loans,
ii. Phillips shall cause the LLC to apply all funds held on
its account at the Bank (in the amount of no less
than $7,670.00) towards payment of the accrued and
unpaid interest on the Loans (which funds shall
continue to accrue interest and shall not be
diminished by Phillips or the LLC prior to
application to payment of the Loans),
iii. Subject to an absolute maximum of $2,000,000 (the
"Cap"), which consists of the aggregate of all
advances and accrued interest thereon made by PMC
to LLC or Phillips for the benefit of LLC, all
payments of interest and accrued interest thereon
made by PMC to the Bank in satisfaction of the
Loans, and all principal payments made by PMC to
the Bank in satisfaction of the Loans, PMC shall
instruct the Bank to apply the interest that has
accrued to date on the Cash Collateral in payment
of the principal balance of the Loans. The
balance of all interest in excess of the Cap that
has accrued on the Cash Collateral to date
("Excess Interest"), if any, shall be paid to PMC.
iv. Phillips shall pay any remaining accrued interest in
full satisfaction of the Loans.
v. In the event that PMC is not paid the Excess Interest,
if any, on or before the eighth day after the
Effective Date, PMC shall deduct such amount from
the next severance payment due and each successive
severance payment due to Phillips, until the total
amount of the Excess Interest shall have been
recovered by PMC.
<PAGE>
b. Concurrently with the application of the Cash Collateral
pursuant to subparagraph 4(a)(i) above, Phillips shall
cause the LLC to release to PMC all of the LLC's right
title and interest in the Pledged Shares (being 410,961
shares of PMC common stock beneficially owned by the
LLC and held by PMC pursuant to the terms of the Pledge
Agreement). Upon release of the Pledged Shares and
receipt by PMC of the Excess Interest, PMC shall cancel
the Notes.
c. Immediately upon completion of the actions set forth in
paragraphs (a) and (b) above to the satisfaction of
PMC, Phillips shall cause the LLC to dissolve.
d. In the event Dundee shall not have approved prepayment of
the Loans by 5:00 p.m. Denver time September 4, 1998
PMC shall accelerate the payments due in the
twenty-sixth month and shall pay those funds to
Phillips together with the bi-monthly payment due
October 1, 1998 pursuant to paragraph 2(e) above.
5. General Termination. Concurrent with the execution hereof, and
except as expressly agreed herein, all other contracts
between Phillips and PMC, express and implied, all other
positions with PMC held by Phillips and all other
relationships of any kind between Phillips and PMC
(including without limitation Phillips's rights, direct or
indirect, under that certain Shareholders Agreement by and
among PMC, Phillips and the other parties thereto, dated as
of December 24, 1996, and under those certain Subscription
Agreements by and among PMC and the Investors named therein
in connection with PMC's December 1996 private placement of
securities) shall terminate and for all purposes shall be of
no further force and effect.
6. Return of Property; Representations; Covenants.
a. No later than the Effective Date, Phillips shall return or
shall cause to be returned to PMC all personal property
of PMC of any kind whatsoever in the possession of
Phillips or any family member, agent or assign; without
limiting the generality of the foregoing, Phillips
shall return all documents, files, client and customer
lists and information, rolodexes, cell phones,
computers, printers and other equipment, instruments,
furnishings, software, credit cards, office access card
and telephone cards; EXCEPT, that Phillips may keep one
laptop computer (all others must be returned), one
cellular phone (all others must be returned), and the
one desk and one chair currently located at his home
(all others must be returned). Phillips hereby
acknowledges that he has, among other things,
intellectual property of PMC stored on the laptop in
his possession, which Phillips agrees to return,
together with all copies thereof, to PMC no later than
the seventh day after the Effective Date.
<PAGE>
b. Phillips hereby represents and warrants that he has not
destroyed or otherwise impaired any material PMC
intellectual property, files, client information or
business records of any kind (the "Identified
Property") during the 15-day period preceding the
Effective Date. Phillips further represents and
warrants that to his knowledge, based on a thorough
search, he has no Identified Property in his possession
other than the intellectual property identified in
subparagraph 6(a) above.
c. Phillips hereby covenants that, in the event he should at
any time after the Effective Date discover that he has
any Identified Property in his possession, he promptly
shall return all such Identified Property to PMC.
7. Release.
a. Phillips, for himself, his heirs, personal representatives
and assigns, and any other person or entity that could
or might act on behalf of him (all of whom are
collectively referred to as "Releasers"), hereby fully
and forever release and discharge PMC, its present and
future affiliates and subsidiaries, and each of their
past, present and future officers, directors,
employees, shareholders, independent contractors,
attorneys, insurers and any and all other persons or
entities that are now or may become liable to any
Releaser due to any Releasee's act or omission, all of
whom are collectively referred to as "Releasees," of
and from any and all actions, causes of action, claims,
demands, costs and expenses, including attorneys' fees,
of every kind and nature whatsoever, in law or in
equity, whether now known or unknown, that Releasers,
or any person acting under any of them, may now have,
or claim at any future time to have, based in whole or
in part upon any act or omission occurring on or before
the Effective Date, without regard to present actual
knowledge of such acts or omissions, including
specifically, but not by way of limitation, matters
which may arise at common law, such as breach of
contract, express or implied, promissory estoppel,
wrongful discharge, tortious interference with
contractual rights, infliction of emotional distress,
defamation, or under federal, state or local laws, such
as the Fair Labor Standards Act, the Employee
Retirement Income Security Act, the National Labor
Relations Act, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Equal Pay Act, the
Americans with Disabilities Act, and the Colorado Civil
Rights Act; EXCEPT for the rights and obligations
created by this agreement. Phillips understands and
agrees that by signing this agreement he is giving up
his right to bring any legal claim against PMC
concerning, directly or indirectly, Phillips's
employment relationship with PMC, including his
separation from employment; provided, that no claims
arising hereunder shall be released.
<PAGE>
b. PMC, for itself and its affiliates ("PMC Releaser"), hereby
releases and discharges Phillips, his heirs,
representatives, assigns, and any and all other persons
or entities that are now liable to any PMC Releaser on
account of Phillips's employment with PMC or separation
therefrom, all of whom are collectively referred to as
"PMC Releasees," of and from any and all actions,
causes of action, claims, demands, costs and expenses,
including attorneys' fees, of every kind and nature
whatsoever, in law or in equity, now known, that PMC
Releasers, may now have, based in whole or in part upon
any act or omission occurring before the Effective
Date; EXCEPT as specifically provided otherwise in this
agreement. Notwithstanding the foregoing, this
subparagraph 7(b) shall not release Phillips or any PMC
Releasee from any actions, causes of action, claims,
demands, costs and expenses, including attorneys' fees,
of every kind and nature whatsoever, in law or in
equity, derivative or otherwise, brought by any PMC
shareholder or any other third party against Phillips
or any PMC Releasee, nor shall this subparagraph 7(b)
release any claims arising hereunder.
Upon payment in full of the Loans, release of the
Pledged Shares and dissolution of the LLC, all pursuant
to paragraph 4 hereof, PMC Releaser, shall release and
discharge LLC from any and all claims against LLC,
except claims arising hereunder, claims based on fraud
or wilful misconduct and claims which may be brought by
third parties based on the Cap having been exceeded by
any payments made pursuant to paragraph 4.
8. Unemployment Compensation. Phillip hereby expressly acknowledges
and agrees that he shall not make any application for
benefits under Colorado's Unemployment Compensation Act.
9. Protection of Trade Secrets and Confidential Information.
a. "Confidential Information" means all nonpublic information
concerning or arising from PMC's business, including
particularly but not by way of limitation trade secrets
used, developed or acquired by PMC in connection with
its business; information concerning the manner and
details of PMC's operation, organization and
management; financial information and/or documents and
nonpublic policies, procedures and other printed or
written material generated or used in connection with
PMC's business; PMC's business plans and strategies;
the identities of PMC's customers and the specific
individual customer representatives with whom PMC
works; the details of PMC's relationship with such
customers and customer representatives; the identities
of distributors, contractors and vendors utilized in
PMC's business; the details of PMC's relationship with
such distributors, contractors and vendors; the nature
of fees and charges made to PMC's customers; nonpublic
forms, contracts and other documents used in PMC's
business; the nature and content of computer software
used in PMC's business, whether proprietary to PMC or
used by PMC under license from a third party; and all
other nonpublic information concerning PMC's concepts,
prospects, customers, employees, contractors, earnings,
products, services, equipment, systems, and/or
prospective and executed contracts and other business
arrangements.
<PAGE>
b. Phillips shall not, without PMC's prior written consent, at
any time, directly or indirectly, use, disclose or
otherwise communicate any Confidential Information to
any person or entity.
c. Phillips acknowledges that during the term of his employment
with PMC, Phillips had access to Confidential
Information; that unauthorized disclosure of
Confidential Information will damage PMC's business;
that Confidential Information would be susceptible to
immediate competitive application by a competitor of
PMC's; that PMC's business is substantially dependent
on access to and the continuing secrecy of Confidential
Information; that Confidential Information is unique to
PMC and known only to Phillips, PMC and certain key
employees and contractors of PMC; that PMC shall at all
times retain ownership and control of all Confidential
Information; and that the restrictions contained in
this paragraph are reasonable and necessary for the
protection of PMC's business.
d. All documents or other records containing or reflecting
Confidential Information ("Confidential Documents")
prepared by or provided to Phillips are and shall
remain PMC's property. Except with PMC's prior written
consent, Phillips shall not copy or use any
Confidential Document for any purpose or use, disclose
or sell any Confidential Document to any party other
than PMC. This paragraph shall not bar Phillips from
complying with any subpoena or court order, provided
that Phillips shall at the earliest practicable date
provide a copy of the subpoena or court order to PMC's
President.
e. Phillips acknowledges that PMC has received from third
parties confidential or proprietary information, and
that PMC must maintain the confidentiality of such
information and use it only for proper purposes.
Phillips shall not use or disclose any such information
except as permitted in writing by PMC or the third
party to whom the information belongs.
<PAGE>
10. Noncompetition.
a. During the Severance Period or for a period of two years
from the Effective Date, whichever is longer , or until
such time as Phillips shall have exercised his option
pursuant to subparagraph 10(d) below (the
"Noncompetition Period"), Phillips shall not, directly
or indirectly, as an officer, director, employee,
consultant, owner, shareholder, adviser, joint
venturer, or otherwise, compete with PMC within the
United States of America (the "Protected Region"):
(i) in a Competitive Advisory Business (as defined
below); or (ii) in any other line of business in which
PMC was engaged at any time during Phillip's employment
with PMC; or (iii) in any other line of business into
which PMC, during the term of Phillip's employment with
PMC, developed a business plan to pursue (including,
without limitation, hedge fund products). This
covenant shall not preclude Phillips from owning less
than two percent (2%) of the securities of any
competitor of PMC if such securities are publicly
traded on a nationally recognized stock exchange or
over-the-counter market.
b. Phillips acknowledges that the foregoing geographic
restriction on competition is fair and reasonable,
given the geographic scope of PMC's business operations
and the nature of Phillips's position with PMC.
Phillips also acknowledges that while employed by PMC,
Phillips had access to information that would be
valuable or useful to PMC's competitors, and therefore
acknowledges that the foregoing restrictions on
Phillips's future employment and business activities
are fair and reasonable. Phillips acknowledges and is
prepared for the possibility that his standard of
living may be reduced during the Noncompetition Period,
and assumes and accepts any risk associated with that
possibility.
c. For the purposes of this paragraph 12, "Competitive Advisory
Business" includes, but is not limited to:
i. services, products or software in the investment
advisory, wrap-fee or privately managed account
business (whether using individual securities,
mutual funds, hedge funds, insurance products or
separate accounts) and/or services, products or
software in the investment performance reporting
business;
ii. the offering of any of the following products or
services directly or 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 terms "investment advisory", "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
portfolio and/or 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
<PAGE>
(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;
iii. turn key asset management programs; and
iv. 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, IAN, Frank Russell Company and Callan
Associates, Inc.;
provided, that "Competitive Advisory Business" shall
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, and shall not include such other
business as to which PMC shall reasonably consent.
d. The parties agree that, at any time after the one-year
anniversary of the Effective Date, Phillips may, upon
two weeks written notice to PMC, elect to terminate the
benefits of the severance and other payments made
pursuant to subparagraphs 2(e) and 2(g) above in
consideration of PMC's release of Phillips from the
obligations of this paragraph 10; provided, that PMC
shall be under no obligation to release Phillips from
this paragraph 10 unless and until all amounts owed to
PMC pursuant to subparagraph 2(d) shall have been paid
in full.
e. In the event PMC shall fail to make any payment required by
paragraph 2(e) by the close of business on the fourth
business day after the date such payment was due,
Phillips shall be released from the restrictions of
this paragraph 10.
11. Non-Solicitation. During the Severance Period or for a period of
two years after the Effective Date, whichever is longer,
Phillips shall not without PMC's prior written consent,
directly or indirectly:
<PAGE>
a. cause or attempt to cause any employee, agent or contractor
of PMC or any PMC affiliate, to terminate his or her
employment, agency or contractor relationship with PMC
or any PMC affiliate; interfere or attempt to interfere
with the relationship between PMC and any PMC employee,
contractor for products or services related to PMC's
investment advisory, brokerage, information technology
or reporting businesses, or agent of PMC; hire or
attempt to hire any employee, agent or contractor of
PMC or any PMC affiliate; or conduct business of any
kind with any PMC contractor without the express
written consent of PMC which consent shall not be
withheld unreasonably.
b. solicit business from or conduct business with any customer
or client served by PMC at any point during such
period; or interfere or attempt to interfere with any
transaction, agreement or business relationship in
which PMC or any affiliate was involved at any point
during such period.
12. Inventions.
a. Disclosure. Upon PMC's request, Phillips shall promptly
disclose to PMC, in a manner specified by PMC in its
sole discretion, all ideas, processes, trademarks and
service marks, inventions, discoveries, and
improvements to any of the foregoing, that Phillips
learned of, conceived, developed or created alone or
with others during his employment with PMC (whether or
not conceived, developed or created during regular
working hours) that directly or indirectly arises from
or relates to: (i) PMC's business; (ii) work performed
for PMC by Phillips or any other PMC employee;
(iii) the use of PMC's property or time; or (v) access
to PMC's Confidential Information and/or Confidential
Documents.
b. Assignment. Phillips shall assign to PMC, without further
consideration, Phillips's entire right to any concept,
idea or invention described in the preceding
subparagraph, which shall be the sole and exclusive
property of PMC whether or not subject to patent,
copyright, trademark or trade secret protection under
applicable law. Phillips also acknowledges that all
original works of authorship which are made by Phillips
(solely or jointly with others), within the scope of
Phillips' employment and/or this agreement, and which
are protectable by copyright, are "works made for
hire," as that term is defined in the United States
Copyright Act (17 U.S. C. section 101). To the extent that
any such works, by operation of law, cannot be "works
made for hire," Phillips hereby assigns to PMC all
right, title, and interest in and to such works and to
any related copyrights.
<PAGE>
13. References. Phillips may indicate on a resume or employment
application the fact of his employment with PMC. Phillips
may list as a reference PMC's Director of Human Resources,
who will respond to inquiries concerning Phillips by
providing only Phillips's salary and position histories, and
dates of hire and separation. Phillips may also list as
references past or present employees of PMC, solely in those
persons' individual capacities and not in a representative
capacity involving PMC. Phillips agrees that any future
claim that he may have that directly or indirectly arises
from or relates to his use of a past or present PMC Employee
as a reference, shall not be made against PMC under any
circumstances. Phillips expressly assumes all risks
associated with listing any past or present PMC Employee,
other than PMC's Director of Human Resources, as a
reference, and explicitly authorizes any past or present PMC
Employee whom he chooses to name as a reference, other than
PMC's Director of Human Resources, to respond to any
reference request openly, honestly and candidly as to both
fact and opinion.
14. [Intentionally left blank]
15. Indemnification. Notwithstanding the provisions of paragraph 7,
and subject to Phillips' performance of the covenants of
paragraph 22 (Covenant of Cooperation in Litigation) below,
to the extent that Phillips would have been entitled to
indemnification during the term of his employment with PMC,
such indemnification shall continue according to the same
terms and conditions then in effect, but only for such acts,
omissions, and otherwise, that occurred or failed to occur
during the time period during which he was employed by PMC.
Phillips is not and will not be indemnified for any acts,
omissions, and otherwise, that occurred or failed to occur
subsequent to the time period during which he was employed
by PMC or as of the Effective Date of this agreement,
whichever first occurs.
16. Denial of Liability. The parties understand and agree that this
agreement shall not be construed as an admission of
liability on the part of any person or entity, liability
being expressly denied.
17. Injunctive Relief. Phillips acknowledges that the breach or
threatened breach by him of any of the provisions of
paragraphs 7 (Release), 9 (Protection of Trade Secrets and
Confidential Information), 10 (Noncompetition), 11
(Non-Solicitation), 12 (Inventions), 19 (Confidentiality),
20 (Covenant of Non-Disparagement), 21 (Covenant of
Non-Interference) or 22 (Covenant of Cooperation in
Litigation), would cause PMC irreparable harm. Upon the
breach or threatened breach of any of such provisions PMC
will be entitled to an injunction, without bond, restraining
Phillips from committing such breach. This right will not
be construed to limit PMC's ability to obtain any other
remedies available to it for such breach or threatened
breach, including the recovery of damages.
18. Authority and Nonassignment. The parties warrant that each has
authority to enter into this agreement, and that neither has
transferred to any other person or entity any claim, action,
demand, or cause of action released by this agreement.
<PAGE>
19. Confidentiality. Phillips represents and warrants to PMC that,
prior to the Effective Date, he has not disclosed to any
person, other than to his tax advisor and counsel, the terms
of this agreement or the circumstances under which the
Dispute has been resolved. After the Effective Date,
neither Phillips, counsel for Phillips, nor any other person
under Phillips's control shall disclose any term of this
agreement or the circumstances of Phillips's separation from
PMC, except that he may disclose such information, as
required by subpoena or court order, or to an attorney or
accountant to the extent necessary to obtain professional
advice. Phillips shall not be entitled to rely upon the
foregoing exception for disclosures pursuant to subpoena or
court order unless Phillips has given PMC written notice,
within three business days following service of the subpoena
or court order. If Phillips violates any provision of this
paragraph, he shall be liable to PMC for liquidated damages,
not a penalty, in the amount of $25,000 for each breach.
20. Covenant of Non-Disparagement.
a. Phillips covenants never to disparage or speak ill of PMC or
any PMC product or service, or of any past or present
employee, officer or director of PMC, nor shall
Phillips at any time harass or behave unprofessionally
toward any past, present or future PMC employee,
officer or director. If Phillips breaches this
non-disparagement obligation, he shall be liable to PMC
for liquidated damages, not a penalty, in the amount of
$25,000 for each breach.
b. PMC covenants that no PMC officer or director shall, while
employed by or while serving on the board of directors
of PMC, disparage or speak ill of Phillips to any non
affiliated third party, nor shall any such person,
while employed by or while serving on the board of
directors of PMC, at any time harass or behave
unprofessionally toward Phillips; notwithstanding the
foregoing, the parties agree that PMC has the right
generally and specifically to discuss and describe
PMC's past and current financial and business
conditions and prospects and in so doing has the right
generally and specifically to discuss actions taken by
Phillips on behalf of PMC, whether or not such
discussion is favorable to Phillips. If any PMC
officer or director breaches this non-disparagement
obligation, PMC shall be liable to Phillips for
liquidated damages, not a penalty, in the amount of
$25,000 for each breach.
21. Covenant of Non-Interference. Phillips covenants that, at all
times on or after the Effective Date, he will not interfere
with the business or activities of PMC; without limiting the
generality of the foregoing, Phillips covenants that he will
not interfere with PMC's business relationship with any PMC
president or chief executive officer, client or customer,
contractor, vendor or any other third party having or
proposing to do business with PMC or enter into an agreement
of any kind with PMC. Phillips further covenants he will
have no communication with any PMC employee regarding or
relating to or in any way arising from PMC's business.
<PAGE>
22. Covenant of Cooperation in Litigation. Phillips acknowledges
that because of his position with PMC, he may possess
information that may be relevant to or discoverable in
litigation in which PMC is involved or may in the future be
involved. Phillips agrees that he shall testify truthfully
in connection with any such litigation, shall cooperate with
PMC in connection with such litigation, and that his duty of
cooperation shall include an obligation to meet with PMC
representatives and/or counsel concerning such litigation
for such purposes, and at such times and places, as PMC
deems necessary, in its sole discretion, and to appear for
deposition upon PMC's request and without a subpoena.
Phillips shall not be entitled to any compensation in
connection with his duty of cooperation, except that PMC may
reimburse Phillips for reasonable out-of-pocket expenses
that he incurs in honoring his obligation of cooperation.
Without limiting the generality of the foregoing, (a)
Phillips agrees to cooperate in all respects with PMC's
defense of the Daniel Shore dispute, and (b) Phillips agrees
to provide to PMC a sworn affidavit satisfactory to PMC
setting forth the facts and circumstances of such dispute
and such other related information as PMC shall reasonably
require.
23. Nonreliance. Each party understands and agrees that he or it
assumes all risk that the facts or law may be, or become,
different than the facts or law as believed by the party at
the time he or it executes this agreement. Phillips and PMC
acknowledge that their adversary relationship precludes any
affirmative obligation of disclosure, and expressly disclaim
all reliance upon information supplied or concealed by the
adverse party or its counsel in connection with the
negotiation and/or execution of this agreement.
24. Additional Warranty and Acknowledgment. The parties warrant and
represent that they have been offered no promise or
inducement except as expressly provided in this agreement,
and that this agreement is not in violation of or in
conflict with any other agreement of either party.
25. Survival of Covenants and Warranties. All covenants and
warranties contained in this agreement are contractual and
shall survive the closing of this agreement.
26. Acknowledgment of Rights Under the Older Worker's Benefits
Protection Act.
a. Phillips agrees and acknowledges that he: (i) understands
the language used in this agreement and the agreement's
legal effect; (ii) understands that by signing this
agreement he is giving up the right to sue PMC for age
discrimination; (iii) will receive compensation under
this agreement to which he would not have been entitled
without signing this agreement; (iv) has been advised
by PMC to consult with an attorney before signing this
agreement; and (v) was given no less than twenty-one
days to consider whether to sign this agreement.
b. For a period of seven days after the Effective Date,
Phillips may, in his sole discretion, rescind this
agreement, by delivering a written notice of recision
to PMC. If Phillips rescinds this agreement within
seven calendar days after the Effective Date, this
agreement shall be void, all actions taken pursuant to
this agreement shall be reversed, and neither this
agreement nor the fact of or circumstances surrounding
its execution shall be admissible for any purpose
whatsoever in any proceeding between the parties,
except in connection with a claim or defense involving
the validity or effective rescission of this
agreement. If Phillips does not rescind this agreement
within seven calendar days after the Effective Date,
this agreement shall become final and binding and shall
be irrevocable.
<PAGE>
27. Press Release. The parties acknowledge that PMC must issue a
press release to disclose the departure of Mr. Phillips from
the employ of the company and from its board of directors
and they hereby agree to work together to arrive at a text
for such press release that is reasonably satisfactory to
both parties; provided, that, if the parties are unable to
agree to acceptable text by the end of the business day next
following the Effective Date, PMC shall be entitled to issue
the press release in a form it deems reasonably necessary to
meet its disclosure obligations.
28. Miscellaneous.
a. Successors and Assigns. This agreement shall be binding in
all respects upon, and shall inure to the benefit of,
the parties' heirs, successors and assigns.
b. Governing Law. This agreement shall be governed by the
internal laws of the State of Colorado, irrespective of
the choice of law rules of any jurisdiction.
c. Severability. In the event that a court of competent
jurisdiction enters a final judgment holding invalid
any provision of this agreement other than paragraphs
7 (Release) and 19 (Confidentiality), the remainder of
this agreement shall be fully enforceable. In the
event that a court of competent jurisdiction enters a
final judgment holding invalid paragraphs 7 and/or 19,
above, then either party may, in its sole discretion,
rescind this agreement by providing written notice of
rescission to the other party, in care of that party's
counsel, not later than ten days following entry of the
judgment; in this event, all monies paid under this
agreement shall be returned within ten days of receipt
of the notice, all other rights and obligations created
under this agreement shall then become void, and
neither this agreement nor the fact of or circumstances
surrounding its execution shall be admissible into
evidence for any purpose whatsoever in any proceeding
between the parties, except in connection with a claim
or defense involving the validity, or effective
rescission, of this agreement.
d. Integration. This agreement constitutes the entire
agreement of the parties and a complete merger of prior
negotiations and agreements.
e. Modification. This agreement shall not be modified except
in a writing signed by the parties.
f. Waiver. No term or condition of this agreement shall be
deemed to have been waived, nor shall there be an
estoppel against the enforcement of any provision of
this agreement, except by a writing signed by the party
charged with the waiver or estoppel. No waiver of any
breach of this agreement shall be deemed a waiver of
any later breach of the same provision or any other
provision of this agreement.
<PAGE>
g. Headings. Headings are intended solely as a convenience and
shall not control the meaning or interpretation of any
provision of this agreement.
h. Gender and Number. Pronouns contained in this agreement
shall apply equally to the feminine, neuter and
masculine genders. The singular shall include the
plural, and the plural shall include the singular.
i. Other Agreements. Each party shall promptly execute,
acknowledge and deliver any additional document or
agreement that the other party reasonably believes is
necessary to carry out the purpose or effect of this
agreement.
j. Burden of Proof. Any party contesting the validity or
enforceability of any term of this agreement shall be
required to prove by clear and convincing evidence
fraud, concealment, failure to disclose material
information, unconscionability, misrepresentation or
mistake of fact or law.
k. Construction. The parties acknowledge that they and their
respective counsel have reviewed this agreement in its
entirety and have had a full and fair opportunity to
negotiate its terms. Each party therefore waives all
applicable rules of construction that any provision of
this agreement should be construed against its drafter,
and agrees that all provisions of the agreement shall
be construed as a whole, according to the fair meaning
of the language used.
l. Disputes. Every dispute arising from or relating to this
agreement shall be tried only in the state or federal
courts situated in the Denver, Colorado, metropolitan
area. The parties consent to venue in those courts,
and agree that those courts shall have personal
jurisdiction over them in, and subject matter
jurisdiction concerning, any such action.
m. Fees and Costs. In any action relating to or arising from
this agreement, the party substantially prevailing
shall recover from the other party all attorneys' fees
and litigation expenses.
n. Counterparts and Telecopies. This agreement may be executed
in counterparts, or by copies transmitted by
telecopier, all of which shall be given the same force
and effect as the original.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Kenneth S. Phillips:
/s/ Kenneth S. Phillips
Date: 8/24/98
PMC International, Inc.
By: /s/ Scott A. MacKillop
As its: Exec. VP / COO
Date: August 24, 1998
<PAGE>
Read and approved as to form:
Holme Roberts & Owen LLP
Linda K. Wackwitz, Esq.
/s/ Linda K. Wackwitz
Attorneys for PMC International, Inc.
Waldbaum, Corn, Koff, Berger & Cohen, P.C.
Leonard N. Waldbaum, Esq.
/s/ Leonard N. Waldbaum
Attorneys for Kenneth S. Phillips
<PAGE>
EXHIBIT 10.13
AMENDMENT TO REIMBURSEMENT AND PLEDGE AGREEMENT
This Amendment to that certain Reimbursement and Pledge Agreement (this
"Amendment"), dated August 24, 1998, by and among PMC International, Inc.,
a Colorado corporation (the "Company") and KP3, LLC, a Colorado limited
liability company (the "Pledgor") (collectively the "Parties"), amends
that certain Reimbursement and Pledge Agreement among the Parties dated as
of January 8, 1997 (the "Agreement"). Capitalized
terms used but not otherwise defined herein have the meanings ascribed to
such terms in the Agreement.
The Parties desire to amend the Agreement as set
forth below.
NOW THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
1. Section 4 of the Agreement is amended
to include the following additional language:
"4.5 If, at any time, the Bank shall apply all or any portion of the Bank
Collateral in payment of the principal and/or interest of the Loan,
the Stock shall automatically be released to the Company without prior
notice to the Pledgor, subject to compliance with notice provisions,
if any, required by law, in satisfaction (partial or full as the case
may be) of the obligations secured thereby. This paragraph is in addition
to and not in lieu of nor as a substitute for any and/or all of the
other rights and/or remedies the Company enjoys under the Agreement."
2. Except as modified by Section 1 above, the Agreement shall continue
in full force and effect as between the Parties.
3. This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, including all counterparts
received by facsimile transmission, but all of which together shall
constitute one and the same instrument.
* * * *
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
PMC INTERNATIONAL, INC.,
A Colorado corporation
/s/ Scott A. MacKillop
By Scott A. MacKillip
Title: Exec. VP / COO
KP3, LLC,
a Colorado limited liability company
/s/ Kenneth S. Phillips
By Kenneth S. Phillips
Title: Manager
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