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Exhibit 10.17
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT (the "Agreement") is dated as of the 8th day
of January, 1997, and is by and among KP3, LCC, a limited liability company
with offices located at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxx, Xxxxxx,
Xxxxxxxx 00000 (the "Borrower"), Norwest Bank Colorado, National Association, a
national banking association with offices located at 0000 Xxxxxxxx, Xxxxxx,
Xxxxxxxx 00000-0000 (the "Bank"), and PMC International, Inc., 000 Xxxxxxxxxxx
Xxxxxx, Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000 ("PMCI").
RECITALS:
WHEREAS, the Borrower has requested the Bank to lend it up to the sum
of One Million Seven Hundred Fifty Thousand And No/100 Dollars ($1,750,000.00)
on a term loan basis (the "Loan") for the purpose of refinancing obligations of
Xxxxxxxx & Xxxxxx, LLC and acquiring shares of PMCI, and;
WHEREAS, the Bank is willing to lend such sum to Borrower upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises herein contained, and
each intending to be legally bound hereby, the parties agree as follows:
1. Definitions
As used herein:
1.1. Agreement" shall mean this Term Loan Agreement and all
amendments and supplements hereto which may from time to time become effective
hereafter in accordance with the terms of this Agreement.
1.2. "Banking Day" shall mean a day on which banks are open
for business in Denver, Colorado.
1.3. "Base Rate" shall mean the "base" or "prime" rate of
interest as announced by the Bank as in effect from time to time.
1.4. "Borrowed Money" shall mean funds obtained by
incurring contractual indebtedness and shall not include trade accounts payable.
1.5. "Collateral" and "Collateral Documents" shall mean
the security and the security documents specified in Section 4.
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1.6. "Default" shall mean an Event of Default as referred
to in Section 8 hereof, or an event which with notice or lapse of time or both
would become an Event of Default.
1.7. "Indebtedness" shall mean, as to the Borrower, all items
of indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several.
1.8. "Note" and "Term Note" shall mean the promissory note
evidencing the Borrower's obligation to the Bank as described in this Agreement.
2. The Loan
2.1. On the effective date hereof, the Bank will lend to the
Borrower the principal sum of One Million Seven Hundred Fifty Thousand And
No/100 Dollars ($1,750,000.00) on a term basis (the "Loan").
2.2. The Bank will credit the proceeds of the Loan to the
Borrower's deposit account with the Bank.
2.3. At the time of the making of the Loan, the Borrower will
execute and deliver the Term Note to the Bank.
2.4. Interest on the Note shall be calculated at an annual
rate of three tenths of one percent (.30%) less than the Base Rate in effect
from time to time on the basis of the actual number of days elapsed in a year
of 360 days, and shall change as and when the Base Rate changes.
2.5. The principal of the Loan will be re-paid in full at
maturity, December 31, 1997.
2.6. Interest shall be payable quarterly, commencing March 31,
1997, and continuing on the same day of each succeeding quarter.
2.7. All sums payable to the Bank hereunder shall be paid
directly to the Bank in immediately available funds. The Bank shall send the
Borrower statements of all amounts due hereunder, which statements shall be
considered correct and conclusively binding on the Borrower unless the Borrower
notifies the Bank to the contrary within thirty days of its receipt of any
statement which it deems to be incorrect. Alternatively, at its sole
discretion, the Bank may charge against any deposit account of the Borrower all
or any part of any amount due hereunder.
2.8. The Borrower may, without the payment of penalty or
premium, prepay the principal of the Loan in whole or, from time to time, in
part. Moreover, Borrower agrees to reduce the principal amount of the loan in
an amount equal to any amount received by Borrower from Bedford Capital
Financial Group's exercising its option to purchase PMCI shares. The Bank
agrees promptly to release its Collateral in amount that is equal to Borrower's
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prepayment(s), so that the Collateral shall be equal to the principal
obligation of the Loan and anticipated interest. The Bank further agrees
quarterly to reduce its Collateral in the amount of $35,000, provided that
regular quarterly interest payments are made by Borrower to the Bank.
2.9. The Bank acknowledges that it has received a due
diligence fee from Borrower in the amount of $10,000. The Bank has determined
that the appropriate fee should be $8,750 and the Bank agrees to reimburse
$1,250 to the Borrower at Closing.
3. Conditions Precedent
The obligation of the Bank to make the Loan hereunder is
subject to the following conditions precedent:
3.1. The Borrower shall have delivered to the Bank, prior
to the disbursement of the Loan (the "Closing") the following:
3.1.1. The Note.
3.1.2. A security agreement/collateral pledge
agreement, duly executed by "PMCI," pledging to Bank the Collateral that is
described in Section 4, as well as a control agreement executed by Norwest
Investment Services, Inc. ("NISI").
3.1.3. Duly executed guaranty agreement of Xxxxxxx
X. Xxxxxxxx.
3.1.4. A copy of resolutions of PMCI's board of
directors and a copy of the Borrower's operating agreement authorizing the
execution, delivery and performance of the documents that they shall
respectively execute in connection with this Agreement, including the Note, the
Collateral Documents, and each other document to be delivered pursuant hereto.
3.1.5. A certificate of PMCI's corporate secretary
as to the incumbency and signatures of the officers of PMCI signing this
Agreement, and the Collateral Documents.
3.1.6. A written opinion of the PMCI's counsel,
dated the date of the Closing and addressed to the Bank, in the form that is
attached to this Agreement as Exhibit A.
3.2. At the time of the Closing:
3.2.1. No Event of Default shall have occurred and
be continuing, and no event shall have occurred and be continuing that, with
the giving of notice or passage of time or both, would be an Event of Default;
3.2.2. No material adverse change shall have
occurred in the financial condition of Borrower or PMCI since the date of this
Agreement or the Closing, as applicable; and
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3.2.3. All of the Collateral Documents shall have
remained in full force and effect.
3.3. At the time of the Closing, all legal matters
incidental thereto shall be satisfactory to the Bank's legal counsel.
4. Security
4.1. To secure the Note and the performance of its additional
obligations as set forth hereunder, prior to or simultaneous with the first
borrowing hereunder, PMCI shall execute and deliver to the Bank a security
agreement or collateral pledge agreement, and financing statement, in form and
substance satisfactory to the Bank, granting to the Bank a first security
interest in cash-equivalent investment property that is reasonably acceptable
to the Bank, that has a value of at least $1,890,000, and that is held in
PMCI's account with NISI. PMCI will also execute, together with NISI, the
Bank's control agreement by which the parties acknowledge that the Bank has
control of the Collateral until such time as the Note has been paid in full.
The amount of the Collateral ($1,890,000) is equal to the initial principal
amount of the Loan plus an interest reserve of $140,000. The Collateral will be
reduced, as specified in Section 2.8 hereof, as interest and principal are
paid, so that the Collateral will remain at all times equal to the principal
balance of the Loan plus interest calculated to be due up to the including the
date of maturity.
4.2. Subject to Section 2.8 of this Agreement, the Collateral
shall stand as one general, continuing collateral security for all indebtedness
due the Bank, and may be retained by the Bank until all such indebtedness has
been paid in full.
4.3. At any time requested by the Bank, the Borrower or PMCI
shall execute and deliver to the Bank such additional documents as the Bank may
consider to be necessary or desirable to evidence or perfect the security
interests referred to in this Section 4.
4.4. In addition, the Borrower shall cause to be executed and
delivered to Bank a guaranty agreement, in form and substance acceptable to the
Bank, whereby Xxxxxxx X. Xxxxxxxx individually, shall guaranty repayment of all
indebtedness evidenced by the Note.
4.5. The foregoing liens shall be first and prior liens.
5. Representations and Warranties
To induce the Bank to enter into this Agreement, PMCI
represents and warrants to the Bank as follows:
5.1. PMCI is a corporation duly organized, existing and in
good standing under the laws of the State of Colorado.
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5.2. PMCI has successfully completed the private equity
placement that is more fully described in that certain Confidential Private
Placement Memorandum dated November 11, 1996, as supplemented December 23,
1996.
5.3. The execution, delivery and performance of this
Agreement and the Collateral Documents are within the powers of PMCI and have
been duly authorized by PMCI's board of directors.
5.4. No consent, approval or authorization of or declaration
or filing with any governmental authority on the part of PMCI is required in
connection with the execution and delivery of the Collateral Documents.
To induce the Bank to enter into this Agreement, the Borrower
represents and warrants to the Bank as follows:
5.5. The Borrower is a limited liability company duly
organized, existing and in good standing under the laws of the State of
Colorado.
5.6. The execution, delivery and performance of this
Agreement and the issuance of the Note are within the powers of the Borrower
and have been duly authorized.
5.7. This Agreement is, and the Note when issued will be,
valid and binding in accordance with their terms.
6. Affirmative Covenants
The Borrower covenants and agrees that so long as any
indebtedness remains outstanding hereunder, unless the Bank shall otherwise
consent in writing, it will do all of the following.
6.1. Pay, when due, all taxes assessed against it or its
property except to the extent and so long as contested in good faith.
6.2. Maintain its limited liability company existence, and
comply with all laws and regulations applicable.
6.3. Furnish to the Bank:
6.3.1. Promptly after they become available, the
quarterly and annual securities reports of PMCI.
6.3.2. Annual federal tax returns for the guarantor
within 90 days after filing of said tax returns.
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6.3.3. Annual financial statements of the guarantor
within 90 days after the end of guarantor's fiscal year end.
6.3.4. Within 45 days after the end of each fiscal
quarter, account statements from NISI, with respect to the Collateral.
6.3.5. Promptly upon knowledge thereof, notice of
the Bank in writing of the occurrence of any event which has or might, after
the lapse of time or the giving of notice and the lapse of time, become an
event of default under Section 8 of this Agreement.
6.3.6. Promptly, such other information as the Bank
may reasonably request.
6.4. Maintain present ownership and management of the
Borrower.
6.5. Cause PMCI to advance funds to the Borrower, if
necessary, to allow Borrower to make interest payments to the Bank as required
by the Note.
6.6. When requested so to do, make available for inspection
by duly authorized representatives of the Bank any of its books and records,
and furnish the Bank any information regarding its business affairs and
financial condition within a reasonable time after written request therefor.
7. Negative Covenants
Without the Bank's written consent, so long as any
indebtedness remains outstanding hereunder, the Borrower will not do any of the
following.
7.1. Create, incur, assume or suffer to exist, contingently
or otherwise, other than in the ordinary course of business for conducting
their present business operation, indebtedness for Borrowed Money, except: (i)
indebtedness arising under this Agreement, (ii) indebtedness disclosed to the
Bank in writing as existing at the time of execution of this Agreement, (iii)
purchase money financing, and (iv) indebtedness for money borrowed from PMCI or
a third party to pay principal or interest on the Loan.
7.2. Permit the aggregate amount of the Borrower's
expenditures for fixed assets, including but not limited to fixed asset lease
and lease purchases, to exceed $25,000.00 annually.
7.3. Enter into any transaction of merger or consolidation,
or transfer, sell, assign, lease or otherwise dispose of all or a substantial
part of its properties or assets, or any of its notes or accounts receivable,
or any assets or properties necessary or desirable for the proper conduct of
its business, or change the nature of its business, or wind up, liquidate or
dissolve, or agree to do any of the foregoing.
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7.4. Purchase or otherwise acquire all or substantially all
of the assets of any person, firm, corporation or association unless after the
consummation of such transaction, and after giving effect thereto and to any
concurrent transactions, no event of default specified in Section 8 hereof, and
no event which with notice or lapse of time or both would become such an event
of default, would exist.
7.5. Become or remain a guarantor or surety, or pledge its
credit or become liable in any manner (except by endorsement for deposit in the
ordinary course of business) on undertakings of another.
7.6. Make any loan or advance to any member, manager, or
employee of the Borrower, except for temporary advances in the ordinary course
of business.
7.7. Make a material change in its accounting procedures,
whether for tax purposes or otherwise.
8. Events of Default
8.1. Upon the occurrence of any of the following events of
default:
8.1.1. Default in any payment of interest or of
principal on the Note when due, and continuance thereof for 5 days; or
8.1.2. Default in the observance or performance of
any agreement of the Borrower set forth in Sections 6 and 7 hereof; or
8.1.3. Default in the observance or performance of
any other agreement of the Borrower herein set forth and continuance thereof for
30 days; or
8.1.4. Default by the Borrower in the payment of
any other indebtedness for Borrowed Money or in the observance or performance of
any term, covenant or agreement of the Borrower in any agreement relating to
any indebtedness of the Borrower, the effect of which default is to permit the
holder of such indebtedness to declare the same due prior to the date fixed for
its payment under the terms thereof; or
8.1.5. Any representation or warranty made by the
Borrower or PMCI herein, or in any statement or certificate furnished by the
Borrower or PMCI hereunder, is untrue in any material respect; or
8.1.6. A judicial judgment or governmental ruling
against the Borrower or PMCI, which has a material adverse effect on the
Borrower's or PMCI's ability to continue business;
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then, or at any time thereafter, unless such event of default is remedied, the
Bank or the holder of the Note may, by notice in writing to the Borrower,
declare the Note to be due and payable, whereupon the Note shall immediately
become due and payable.
8.2. Upon the occurrence of any of the following events of
default:
The Borrower or PMCI becomes insolvent or
bankrupt, or makes an appointment for the
benefit of creditors or consents to the
appointment of a custodian, trustee or
receiver for themselves or for the greater
part of their properties; or a custodian,
trustee or receiver is appointed for the
Borrower or PMCI, or for the greater part
of their properties without their consent
and is not discharged within 60 days; or
bankruptcy, reorganization or liquidation
proceedings are instituted by or against
the Borrower or PMCI and, if instituted
against either of them, is consented to by
them or remain undismissed for 60 days;
then the Note shall automatically become immediately due and payable, without
notice.
9. Miscellaneous
9.1. The provisions of this Agreement shall be in addition to
those of any guaranty, pledge or security agreement, note or other evidence of
liability held by the Bank, all of which shall be construed as complementary to
each other. Nothing herein contained shall prevent the Bank from enforcing any
or all other notes, guaranty, pledge or security agreements in accordance with
their respective terms.
9.2. From time to time, the Borrower and PMCI will execute
and deliver to the Bank such additional documents and will provide such
additional information as the Bank may reasonably require to carry out the
terms of this Agreement and be informed of the Borrower's and PMCI's status and
affairs.
9.3. The Bank shall have the right at all times to enforce
the provisions of this Agreement and the Collateral Document, in strict
accordance with the terms hereof and thereof, notwithstanding any conduct or
custom on the part of the Bank in refraining from so doing at any time or
times. The failure of the Bank at any time or times to enforce its rights under
such provisions, strictly in accordance with the same, shall not be construed
as having created a custom in any way or manner contrary to specific provisions
of this Agreement or as having in any way or manner modified or waived the
same. All rights and remedies of the Bank are cumulative and concurrent and the
exercise of one right or remedy shall not be deemed a waiver or release of any
other right or remedy.
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9.4. The Borrower will pay all expenses, including the
reasonable fees and expenses of legal counsel for the Bank, incurred in
connection with the enforcement of this Agreement and the Collateral Documents
and the collection or attempted collection of the Note.
9.5. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered in
person or if sent by certified mail, postage prepaid, return receipt requested,
addressed as follows, or at such other address as may be provided in writing to
the parties to this Agreement.
Borrower: KP3, LLC
000 Xxxxxxxxxxx Xx.
Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Copy to: Xxxxxxx X. Xxxxxxxx, Esq.
Waldbaum, Corn, Xxxx, Xxxxxx & Xxxxx
000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
PMCI: PMC International, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Copy to: Xxxxxxx X. Xxxxxxx, Esq.
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Bank: Norwest Bank Colorado, N.A.
0000 Xxxxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxx
9.6 The substantive laws of the State of Colorado shall
govern the construction of this Agreement and the rights and remedies of the
parties hereto.
9.7 If any provision of this Agreement shall be held invalid
under any applicable laws, such invalidity shall not affect any other provision
of this Agreement that can be given effect without the invalid provision, and,
to this end, the provisions hereof are severable.
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9.8 All representations, warranties, covenants and agreements
of the Borrower and PMCI hereunder shall survive the making of the Loan.
9.9 Whenever any installment of the interest on the Note
becomes due and payable on a day which is not a Banking Day, the maturity or
due date thereof shall be extended to the next succeeding Banking Day and, in
the case of principal of the Note, interest shall be payable thereon at the
rate per annum specified in the Note during such extension.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
KP3, LLC
By:__________________________________
Xxxxxxx X. Xxxxxxxx, Manager
Norwest Bank Colorado, National Association
By:__________________________________
Xxxxxxxx X. Xxxxx, Vice President
PMC International, Inc.
By:__________________________________
Title:________________________________
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