FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest
event reported): September 28, 1995
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PCT HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 0-26088 87-0431483
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or No.)
organization)
434 Olds Station Road, Wenatchee, WA 98801
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number,
including area code: (509) 664-8000
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None
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(Former name or former address, if changed since last report)
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Item 5. Acquisition or Disposition of Assets.
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As of September 28, 1995, PCT Holdings, Inc., a Nevada
corporation (the "Company"), entered into a letter of intent (the "Letter
of Intent") with Morel Industries, Inc., a Washington corporation
("Morel"), to acquire Morel. The proposed acquisition is subject to the
negotiation and execution of a definitive agreement by both parties, the
approval of both Boards of Directors and the approval of the shareholders
of Morel. Except for certain provisions, the Letter of Intent is not
binding on either the Company or Morel.
As proposed by the Letter of Intent, the Company would form a
wholly-owned subsidiary under the laws of the State of Washington (the
"Acquisition Corporation"). Acquisition Corporation would merge with and
into Morel, with Morel being the surviving corporation (the "Merger"). The
transaction is intended to be treated as a statutory merger pursuant to
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, and
applicable regulations.
In consideration for the shares of Morel to be surrendered in the
Merger, the shareholders of Morel would receive an aggregate of 937,931
unregistered, nonassessable shares of common stock, $.001 par value per
share, of the Company (the "Company Common Stock"), provided that on the
date on which the definitive agreement is executed (the "Signing Date") the
closing bid price of the Company Common Stock as traded on the NASDAQ
SmallCap Market is not lower than $6.25 nor higher than $8.25 per share. In
the event that the closing bid price of the Company Common Stock is lower
than $6.25 or higher than $8.25 per share on the Signing Date, the number
of shares of the Company Common Stock to be received by the shareholders of
Morel would be increased or decreased, as the case may be, calculated by
dividing $6.8 million by the closing bid price of the Company Common Stock
on the Signing Date.
The Letter of Intent also provides that if the Company proposes
to register any Company Common Stock under the Securities Act of 1933, as
amended, so that any of its shareholders may offer to sell Company Common
Stock to the general public, the former shareholders of Morel may request
that up to 50% of the shares of the Company that are received by them in
the Merger, and that are not at the time of such registration eligible for
resale under Rule 144, be included in such registration.
Morel was founded in 1909 in Seattle, Washington, and recently
moved its operations to Entiat, which is approximately 15 miles from the
Company's headquarters in Wenatchee, Washington. Morel manufactures
precision cast aluminum parts and components mainly for the heavy truck and
aerospace industries. Morel's principal place of business is 14351 Shamel
Street, Entiat, Washington.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
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1.(a) Financial Statements of Business Acquired. It is
impractical for the Company to provide the required financial statements of
Morel at this time. The Company undertakes that it will file the required
financial statements no later than 60 days after this Current Report must
be filed.
(b) Pro Forma Financial Statement. It is impractical for the
Company to provide required pro forma financial information relative to the
combined operations of
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the Company and Morel and the Company's other subsidiaries at this time.
The Company undertakes that it will file the required pro forma financial
information no later than 60 days after this Current Report must be filed.
2. Exhibits. The following are filed as exhibits to this Current
Report:
(a) Letter of Intent, dated as of September 28, 1995, by and
between PCT Holdings, Inc. and Morel Industries, Inc.
(b) Press Release issued by the Company on October 3, 1995.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PCT HOLDINGS, INC.
By: DONALD A. WRIGHT
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Donald A. Wright
President and Chief Executive Officer
Dated: October 11, 1995
Exhibit A
PCT HOLDINGS, INC.
September 28, 1995
Messrs. Stephen and Mark Morel
Morel Industries, Inc.
14351 Shamel Street
P.O. Box 678
Entiat, WA 98822
RE: ACQUISITION OF MOREL INDUSTRIES, INC. BY PCT
HOLDINGS, INC.
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Dear Steve and Mark:
The purpose of this letter is to outline the manner in which PCT
Holdings, Inc., a Nevada corporation ("PCTH"), proposes to acquire Morel
Industries, Inc., a Washington corporation ("Morel").
The parties recognize that the transaction will require further
documentation and approvals, including the preparation and approval of a
formal agreement setting forth the terms and conditions of the proposed
transaction (the "Transaction Agreement"); nevertheless, they execute this
letter to evidence their intention to proceed in mutual good faith to
complete work required and to negotiate terms of a Transaction Agreement
that are consistent with this letter.
The proposed terms and conditions include, but are not limited
to, the following:
1. ACQUISITION.
(a) PCTH would form a wholly-owned subsidiary of PCTH under the
laws of the State of Washington (the "Acquisition Corporation").
Acquisition Corporation would merge with and into Morel, with Morel being
the surviving corporation (the "Merger"). All parties shall use their best
efforts to ensure that the transaction is treated as a statutory merger
pursuant to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, and applicable regulations.
(b) In consideration for the shares of Morel to be surrendered in
the Merger, Stephen Morel and Mark Morel, as the shareholders of Morel (the
"Shareholders"), would receive an aggregate of 937,931 unregistered,
nonassessable shares of common stock, $.001 par value per share, of PCTH
(the "PCTH Common Stock"), provided that on the date on which the
Transaction Agreement is executed (the
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"Signing Date"), the closing bid price of PCTH Common Stock as traded on
the NASDAQ SmallCap Market is not lower than $6.25 nor higher than $8.25
per share. In the event that the closing bid price of the Common Stock is
lower than $6.25 or higher than $8.25 per share on the Signing Date, the
number of shares of PCTH Common Stock to be received by the Shareholders
would be increased or decreased, as the case may be, calculated by dividing
$6.8 million by the closing bid price of the PCTH Common Stock on the
Signing Date.
2. ACCESS.
(a) To permit PCTH to conduct its due diligence investigation, as
long as this letter remains in effect, Morel will permit PCTH and its
agents to have reasonable access to the premises in which Morel conducts
its business and to all of its books, records, and personnel files, and
Morel will furnish to PCTH and its agents such financial data, operating
data, and other information as PCTH and its agents shall reasonably
request.
(b) To permit Morel to conduct its due diligence investigation,
as long as this letter remains in effect, PCTH will permit Morel and its
agents to have reasonable access to the premises in which PCTH and its
subsidiaries conduct their business and to all of the books, records, and
personnel files of PCTH and its subsidiaries and will furnish to Morel and
its agents such financial data, operating data, and other information as
Morel and its agents shall reasonably request.
(c) PCTH, Morel and the Shareholders agree to treat all
information obtained pursuant to this paragraph 2 as confidential and not
to voluntarily disclose the same to any person or entity, except to their
authorized representatives, as contemplated in subparagraphs 2(a) and 2(b)
above. Upon the termination of this letter for any reason other than the
closing of the proposed transaction, each shall return promptly to the
other all printed information received by it in connection with the
proposed transaction.
3. CONDITIONS TO CLOSING. The closing of the transaction would be
subject to certain conditions, including without limitation the following:
(a) PCTH, Acquisition Corporation, Morel, and the Shareholders
must have prepared and executed a definitive Transaction Agreement with
terms satisfactory to all parties, containing provisions not inconsistent
with the basic understanding set forth in this letter. The Transaction
Agreement shall also contain representations, warranties, covenants,
conditions, and indemnification provisions customary in transactions of
this size and type.
(b) BDO Seidman shall have completed the audit of Morel's
financial statements for the most recent two fiscal years or such other
periods as prescribed by the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the regulations thereunder applicable PCTH as a
reporting company under the 1934 Act.
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(c) The transaction shall have been approved by the Boards of
Directors of PCTH and Morel and by the Shareholders.
(d) Any required filings, approvals, consents and authorizations
of state and federal regulatory authorities shall have been received.
(e) Any required consents of third parties shall have been
received.
(f) PCTH and Morel shall have completed their respective due
diligence review of the assets and business of the other satisfactory to
each of them in its sole discretion.
4. NEWS RELEASE; CONFIDENTIALITY. Neither PCTH, Morel, nor the
Shareholders, will issue or approve a news release or other announcement
concerning the transaction without the prior approval of the others as to
the contents of the announcement and its release, except as required by
law. This letter will be confidential and may not be disclosed, except as
required by law or as agreed by the parties.
5. NEGOTIATIONS WITH OTHERS. Until such time as this letter has
been terminated, neither the Shareholders nor Morel will offer the stock or
assets of Morel to, entertain offers for them from, negotiate for their
sale to, or make information about them available (for purposes of sale)
to, any third party.
6. CONDUCT OF BUSINESS; INTERIM OPERATIONS. As long as this
letter remains in effect, the Shareholders will cause Morel to use its best
efforts to conduct its business in a reasonable and prudent manner in
accordance with past practices, to preserve its existing business
organizations and relationships with its employees, customers, suppliers,
and others with whom it has a business relationship, to preserve and
protect its properties, and to conduct its business in compliance with all
applicable laws and regulations.
7. COVENANT NOT TO COMPETE; EMPLOYMENT. In the Transaction
Agreement, the Shareholders would agree that they will not, directly or
indirectly, through a subsidiary or otherwise, compete with Morel, PCTH or
PCTH's subsidiaries for a period as agreed to by the parties. PCTH and the
Shareholders would negotiate and execute agreements for PCTH or Acquisition
Corporation to employ each of the Shareholders for such a period and under
such terms as may be agreed to by the parties.
8. REGISTRATION RIGHTS. In the Transaction Agreement, PCTH would
agree that if PCTH proposes to register any of its Common Stock under the
Securities Act of 1933, as amended, so that any of its shareholders may
offer to sell Common Stock to the general public, the Shareholders may
request that up to 50% of the shares of PCTH that are received by the
Shareholders in the Merger, and that are not at the time of such
registration eligible for resale under Rule 144, be included in such
registration.
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9. EQUITY INVESTMENT. Upon the closing of the transaction set
forth in the Transaction Agreement, PCTH would invest $2.0 million in
unrestricted equity in Morel for purposes of restructuring Morel's balance
sheet and reducing short-term debt.
10. AUDIT EXPENSES. PCTH will bear the cost of audit of Morel's
financial statements as described in Section 3(b) above; provided that, in
the event that PCTH is prepared to consummate the Merger, subject to the
fulfillment or waiver of any conditions contained in the Transaction
Agreement, but Morel or the Shareholders are not willing to do so, PCTH and
Morel will share equally the cost of such audit.
11. SIGNING DATE; CLOSING DATE. The Signing Date of the
Transaction Agreement is anticipated to be on or about November 30, 1995.
Subject to execution of a Transaction Agreement, the closing date under the
Transaction Agreement will be on a date mutually agreed by PCTH,
Acquisition Corporation, Morel, and the Shareholders, upon satisfaction or
waiver of each condition to closing set forth in the Transaction Agreement.
12. BROKERS' FEES. Neither Morel, the Shareholders nor PCTH has
entered into arrangements with any broker, finder, or investment banker
that will result in payment of a fee in connection with this transaction.
13. EFFECT OF THIS LETTER. This letter sets forth the intent of
the parties only, is not binding on the parties, and may not be relied on
as the basis for a contract by estoppel or be the basis for a claim based
on detrimental reliance or any other theory; provided that paragraphs 4, 5
and 10, the confidentiality and document return provisions of paragraph 2
and this paragraph 13 will be enforceable in accordance with their terms.
With the exception of paragraphs 4, 5 and 10, the confidentiality and
document return provisions of paragraph 2 and this paragraph 13, the
parties understand that no party shall be bound until the Transaction
Agreement has been negotiated, executed, delivered and approved by the
Boards of Directors of PCTH and Morel and by the Shareholders.
14. TERMINATION OF NEGOTIATIONS. This letter may be terminated at
any time by either party giving written notice to the other and will
terminate automatically (i) upon execution of a Transaction Agreement, or
(ii) at 5:00 p.m. on December 29, 1995, if no Transaction Agreement has
been executed by the parties prior to that time. Thereafter, the parties
shall be bound only by paragraphs 4, 10 and 13, and the confidentiality and
document return provisions of paragraph 2. Any termination of this letter
pursuant to this paragraph 14 shall not be deemed to violate any obligation
that the parties may have to deal with each other in good faith.
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If this letter sets forth your intent to proceed in good faith
substantially in the manner outlined in this letter, please sign a copy of
this letter and return it to PCTH. This letter of intent shall be of no
further force and effect if it is not signed and returned to PCTH by the
close of business on September 30, 1995.
Very truly yours,
PCT HOLDINGS, INC.
By: Donald A. Wright
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Donald A. Wright, President
Accepted and agreed to:
STEPHEN MOREL Date: 9/30/95
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Stephen Morel
MARK MOREL Date: 9/30/95
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Mark Morel
MOREL INDUSTRIES, INC. Date: 9/30/95
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By: STEPHEN MOREL
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Its President
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Exhibit B
FOR RELEASE: October 3, 1995
CONTACT: Don A. Wright, President/CEO or
Nick Gerde, V.P./CFO
PCT Holdings, Inc. PCT Holdings, Inc.
(509) 664-8000 (509) 664-8000
PCT HOLDINGS, INC. TO ACQUIRE MOREL INDUSTRIES
Wenatchee, Washington - - - PCT Holdings, Inc. (PCTH), a Nevada
corporation headquartered in Wenatchee, Washington, announced today that it
has signed a letter of intent to acquire Morel Industries of Entiat,
Washington. The proposed acquisition is subject to the negotiation and
signing of a definitive agreement by both parties and the approval of both
Boards of Directors.
Morel was founded in 1909 in Seattle, Washington and recently moved
its operations to Entiat, which is approximately 15 miles from the PCT
Holdings, Inc. headquarters in Wenatchee, Washington. The Company
manufactures precision cast aluminum parts and components mainly for the
heavy truck and aerospace industries. The Company is currently a customer
of Cashmere Manufacturing Co., Inc., another subsidiary of PCT Holdings,
Inc. and management anticipates that the shared customer base and synergy
between the two operations will result in increased operating margins at
both companies.
Donald A. Wright, President and CEO of PCT Holdings, Inc. said "We
look forward to adding a company with Morel's history, quality and
manufacturing capabilities to the PCT Holdings, Inc. family." Sales for
both companies if consolidated for the fiscal year ending May 31, 1995
would have been approximately $21.7 million.
PCT Holdings, Inc. is an acquisition-oriented, high technology
manufacturing company specializing in the manufacture of patented
ceramic-based hermetic connectors, feed-throughs, electronic packaging,
ceramic filters and precision machined components. The company's stock
trades on the NASDAQ Small Cap market under the "PCTH" symbol.
