STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 3, 1998 by and between The
▇▇▇▇▇▇▇ Companies, Inc., a Wisconsin corporation ("▇▇▇▇▇▇▇"), and PMC
International, Inc., a Colorado corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
the parties are entering into a $3.5 million credit facility.
WHEREAS, as a condition to ▇▇▇▇▇▇▇'▇ willingness to enter into the $3.5
million credit facility, ▇▇▇▇▇▇▇ has requested that the Company agree, and the
Company has so agreed, to grant to ▇▇▇▇▇▇▇ an option with respect to certain
shares of the Company's Common Stock, $.01 par value ("Common Stock"), on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce ▇▇▇▇▇▇▇ to enter into the $3.5 million credit
facility, and in consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants as of the date hereof
to ▇▇▇▇▇▇▇ an irrevocable option (the "Company Option") to purchase 4,500,000
shares of Common Stock, subject to adjustment as provided in Section 7 (such
shares being referred to herein as the "Company Shares"), in the manner set
forth below at a price (the "Exercise Price") per Company Share of $.60 payable
in cash. The Company Option shall expire on the later of (1) March 31, 1999, or
(2) fifteen (15) days after the date all loans (and interest) from ▇▇▇▇▇▇▇ and
its affiliates to the Company have been repaid in full and all amounts due to
▇▇▇▇▇▇▇ under the Agreement and Plan of Merger have been paid in full ("the
"Expiration Date").
2. Exercise of Option. The Company Option may be exercised by
▇▇▇▇▇▇▇, in whole or in part, at any time or from time to time until the Company
Option expires, without expense to ▇▇▇▇▇▇▇. In the event ▇▇▇▇▇▇▇ wishes to
exercise the Company Option, ▇▇▇▇▇▇▇ shall deliver to the Company a written
notice (an "Exercise Notice") specifying the total number of Company Shares it
wishes to purchase. Each closing of a purchase of Company Shares (a "Closing")
shall occur at a place, on a date and at a time designated by ▇▇▇▇▇▇▇ in an
Exercise Notice delivered at least two business days prior to the date of the
Closing. Upon the delivery by ▇▇▇▇▇▇▇ to the Company of the Exercise Notice and
the applicable aggregate Exercise Price, ▇▇▇▇▇▇▇ shall be deemed to be the
holder of record of the Company Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company may then be closed
or that certificates representing such Company Shares may not then be actually
delivered to ▇▇▇▇▇▇▇.
3. Closing. At any Closing, (a) the Company will deliver to ▇▇▇▇▇▇▇
or its designee a single certificate in definitive form representing the number
of the Company Shares designated by ▇▇▇▇▇▇▇ in its Exercise Notice, such
certificate to be registered in the name of ▇▇▇▇▇▇▇ and to bear the legend set
forth in Section 8, and (b) ▇▇▇▇▇▇▇ will deliver to the Company the aggregate
purchase price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. The Company shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates in the name of ▇▇▇▇▇▇▇ or its designee.
4. Representations and Warranties of the Company. The Company
represents and warrants to ▇▇▇▇▇▇▇ that (a) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has the corporate power and authority to enter into this Agreement,
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Company, constitutes a valid and binding obligation of the
Company and, assuming this Agreement constitutes a valid and binding obligation
of ▇▇▇▇▇▇▇, is enforceable against the Company in accordance with its terms, (d)
the Company has taken all necessary corporate action to authorize and reserve
for issuance and to permit it to issue, upon exercise of the Company Option, and
at all times from the date hereof through the expiration of the Company Option
will have reserved, authorized and unissued Company Shares equal to 4,500,000 of
the outstanding Shares of Common Stock, such amount being subject to adjustment
as provided in Section 7, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable, (e) upon delivery of the Company Shares to ▇▇▇▇▇▇▇ against
full payment thereof, ▇▇▇▇▇▇▇ will acquire the Company Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (f) the execution and delivery of this Agreement by the Company does
not, and the consummation by the Company of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under or the creation of a lien,
pledge, security interest or other encumbrance on assets of the Company or any
of its subsidiaries.
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5. Representations and Warranties of ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ represents
and warrants to the Company that (a) ▇▇▇▇▇▇▇ is a corporation duly organized,
validly existing under the laws of the State of Wisconsin and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by
▇▇▇▇▇▇▇ and the consummation by ▇▇▇▇▇▇▇ of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
▇▇▇▇▇▇▇ and no other corporate proceedings on the part of ▇▇▇▇▇▇▇ are necessary
to authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by ▇▇▇▇▇▇▇ and constitutes a
valid and binding obligation of ▇▇▇▇▇▇▇, and, assuming this Agreement
constitutes a valid and binding obligation of Company, is enforceable against
▇▇▇▇▇▇▇ in accordance with its terms.
6. Voting of Shares. ▇▇▇▇▇▇▇ shall vote any shares of capital stock
acquired by it pursuant to this Agreement, or otherwise beneficially owned
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act")) as it sees fit.
7. Adjustment Upon Changes in Capitalization. Without limitation to
any restriction on the Company contained in the Agreement and Plan of Merger,
dated October 29, 1998, among ▇▇▇▇▇▇▇, ▇▇▇▇ Corp., a Colorado corporation and
wholly owned subsidiary of ▇▇▇▇▇▇▇, and the Company, in the event of any change
in the Common Stock by reason of stock dividends, stock splits, mergers,
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Company Option, and the Exercise
Price per share provided in Section 1, shall be adjusted appropriately to
restore to ▇▇▇▇▇▇▇ its rights hereunder. Notwithstanding any other provision of
this Agreement, from the date hereof to the Expiration Date, the Company shall
not, without the prior written consent of ▇▇▇▇▇▇▇, issue or sell, or authorize
or propose the issuance or sale of any shares of Common Stock, or securities
convertible into any shares of Common Stock, or any rights, warrants or options
to acquire any shares of Common Stock.
8. Restrictive Legends. Each certificate representing shares of
Company Common Stock issued to ▇▇▇▇▇▇▇ pursuant to the Option, shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s)
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without such reference if ▇▇▇▇▇▇▇ shall have delivered to the Company a copy of
a letter from the staff of the Securities and Exchange Commission, or an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such legend is not required for purposes of the Securities Act; and
(ii) the reference to the provisions to this Agreement in the above legend shall
be removed by delivery of substitute certificate(s) without such reference if
the shares have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference. In addition, such certificates shall bear any other legend as may be
required by law.
9. Binding Effect; No Assignment; No Third Party Beneficiaries.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as
expressly provided for in this Agreement, neither this Agreement nor the rights
or the obligations of either party hereto are assignable, except by operation of
law, or with the written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective permitted assigns any rights or remedies
of any nature whatsoever by reason of this Agreement.
10. Specific Performance. The parties recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate or
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
11. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
12. Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary to consummate the transactions contemplated hereby.
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery
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of an amendment to this Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the parties hereto
with respect to such provision and the economic effects thereof. If for any
reason any such court or regulatory agency determines that ▇▇▇▇▇▇▇ is not
permitted to acquire the full number of shares of Company Common Stock provided
in Section 1 hereof (as the same may be adjusted), it is the express intention
of the Company to allow ▇▇▇▇▇▇▇ to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof to
be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including but not limited to money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the result
of such holding or order.
14. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) upon delivery if delivered personally,
or (ii) the next business day if sent by reputable overnight courier service, or
(iii) upon sending if sent by telecopy (which is confirmed), or (iv) five days
after being mailed by registered or certified mail (return receipt requested),
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
A. If to ▇▇▇▇▇▇▇, to:
The ▇▇▇▇▇▇▇ Companies, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: S. ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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B. If to the Company, to:
PMC International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
Holme ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Suite 4100, 1700 Lincoln
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
15. Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of Wisconsin
applicable to agreements made and to be performed within such State.
16. Interpretation. When a reference is made in this Agreement to a
Section such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
17. Expenses. Except as otherwise expressly provided herein, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
18. Extension of Time Periods. The time periods for exercise of
certain rights under the Agreement shall be extended to the extent necessary to
avoid any liability under Section 16(b) of the Exchange Act by reason of such
exercise.
19. Replacement of Company Option. Upon receipt by the Company of
evidence reasonably satisfactory to it on the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, the Company will execute and deliver a new
Agreement of like tenor and date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
THE ▇▇▇▇▇▇▇ COMPANIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: CFO
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PMC INTERNATIONAL, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇
-------------------------
Name: ▇.▇. ▇▇▇▇▇▇
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Title: CEO
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