<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1995
PCT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-26088 87-0431483
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization
434 Olds Station Road, Wenatchee, WA 98801
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number,
including area code: (509) 664-8000
None
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition of Assets
- -----------------------------
On December 1, 1995 (the "Effective Date"), PCT Holdings, Inc., a
Nevada corporation (the "Company"), effected a merger (the "Merger")
between a subsidiary of the Company that was formed for such purpose and
Morel Industries, Inc., a Washington corporation ("Morel"). The Merger was
effected pursuant to the terms of an Agreement and Plan of Merger (the
"Merger Agreement") between and among the Company, Morel, Stephen L. Morel
and Mark Morel (together, the "Shareholders"), and Morel Acquisition
Corporation, a Washington corporation and wholly-owned subsidiary of the
Company. As a result of the Merger, the Company acquired a significant
amount of assets otherwise than in the ordinary course of business.
As consideration for the Company's acquisition by merger of Morel,
the Company tendered to the Shareholders 900,000 shares of the Company's
authorized but previously unissued common stock (the "Shares") upon
surrender and cancellation of all of the issued and outstanding stock of
Morel. As a result of the Merger, the Shareholders own an aggregate of
12.5% of the 7,199,309 shares of the Company's common stock issued and
outstanding as of the Effective Date, and the Company owns all of the
outstanding capital stock of Morel. The parties to the Merger Agreement
valued the Shares at $4.75 per share, the closing bid price for the common
stock of the Company as quoted on the NASDAQ SmallCap Market on the
Effective Date. The purchase price was determined pursuant to arms-length
negotiations between the Company and the Shareholders.
In connection with the Merger, the Company entered into a
registration rights agreement with the Shareholders, pursuant to which the
Company granted to the Shareholders the right to have up to 50% of the
Shares registered, at the Company's expense, on an equal basis with other
shareholders of the Company, if the Company proposes, within two years
after the date of closing, to register any of its common stock under the
Securities Act of 1933, as amended (except for registrations (i) under
compensation plans on Form S-8 or any successor form or (ii) in connection
with the acquisition by merger, tender offer or otherwise of another public
company).
Prior to the Merger, no material relationship existed between
Morel and the Company or any of its affiliates, directors, officers, or
their associates, except that Morel and certain subsidiaries of the Company
transacted business from time to time in the ordinary course of business.
Morel's purchase of its Entiat, Washington, facility was financed
by the Chelan County Development Corporation (the "Lender"). The Company
has guaranteed repayment of that financing in exchange for the Lender's
consent to the Merger. Prior to the Merger, Morel owned or leased the
equipment used in its business. After the Merger, Morel intends to continue
to use the same equipment (whether owned or leased) for the same business
purposes for which they were employed by Morel prior to the Merger.
<PAGE>
Morel was incorporated in 1946, and its primary business has been
the operation of a foundry that designs and manufactures precision cast
metal parts for the aerospace and automotive industries. After the Merger,
Morel has continued, and presently intends to continue, the business
operations described above. Morel owns and occupies its facility located at
14351 Shamel Street, Entiat, WA 98822. The principal executive office of
Morel will be at the Company's headquarters in Wenatchee, Washington.
Item 5. Other Events
- --------------------
A. Purchase of Substantially All of the Assets of Seismic Safety
Products, Inc., a Florida Corporation
-------------------------------------------------------------
On November 30, 1995, Seismic Safety Products, Inc., a Washington
corporation and second-tier subsidiary of the Company ("SSP"), purchased
substantially all of the assets of Seismic Safety Products, Inc., a Florida
corporation (the "Seller") for a total purchase price of $70,000 in cash
plus 128,750 shares of the Company's common stock (the "Payment Shares"),
pursuant to an Asset Purchase Agreement between the Company, SSP, PCT
Holdings, Inc., a Washington corporation and the parent of SSP, Seller, and
certain affiliates of Seller.
In connection with the purchase, the Company entered into a
registration rights agreement at closing with Seller and certain
shareholders of Seller (the "Eligible Shareholders") pursuant to which the
Company granted to Seller, and to Eligible Shareholders who acquire Payment
Shares from Seller, the right to have such Payment Shares registered, at
the Company's expense, on an equal basis with other shareholders of the
Company, if the Company proposes, within two years after the date of
closing, to register any of its common stock under the Securities Act of
1933, as amended (except for registrations (i) under compensation plans on
Form S-8 or any successor form or (ii) in connection with the acquisition
by merger, tender offer or otherwise of another public company).
Seller, based in Largo, Florida, manufactured and sold automatic
earthquake gas shut-off valves and other earthquake safety products.
Manufacture of the valves has been transferred to the Company's facilities
in Wenatchee, Washington. The acquisition described above will
allow the Company to produce a line of seismic safety automatic gas
shut-off valves to be used in a variety of residential and commercial
applications.
B. Purchase of Certain Technology Rights
-------------------------------------
In separate transactions also closing on November 30, 1995, SSP
purchased from James C. McGill and Antonio F. Fernandez certain patents and
related intellectual property rights (the "Technology") for $400,000,
pursuant to a patent purchase agreement dated October 24, 1995. Seller
previously had licensed a portion of the Technology from Messrs. McGill and
Fernandez for use in its manufacturing operations. SSP also purchased other
patents and intellectual
<PAGE>
property rights from Mr. McGill for $120,000 pursuant to a patent purchase
agreement dated October 27, 1995.
Item 7. Financial Statements and Exhibits
- -----------------------------------------
A. Financial Statements
--------------------
It is impracticable at this time for the Company to file the
statements of Morel as required by Item 7(a), or the pro forma financial
information relating to Morel, as required by Item 7(b). The Company is
currently in the process of obtaining audited financial statements for
Morel in accordance with Item 310 of Regulation S-B and is preparing
appropriate pro forma financial information. In accordance with Items
7(a)(4) and 7(b)(2), the Company undertakes to file the required financial
statements and pro forma financial information for Morel under cover of
Form 8-K/A as soon as practicable, but by no later than February 14, 1996.
B. Exhibits
--------
The following are filed as exhibits to this Current Report:
2. Agreement and Plan of Merger among PCT Holdings,
Inc., a Nevada corporation, Morel Acquisition
Corporation, a Washington corporation, Morel Industries,
Inc., a Washington corporation, Stephen L. Morel, and
Mark Morel
4.1 Registration Rights Agreement by and between PCT
Holdings, Inc., a Nevada corporation, and Stephen L.
Morel and Mark Morel, as shareholders of Morel Industries,
Inc., a Washington corporation
4.2 Registration Rights Agreement by and between PCT Holdings,
Inc., a Nevada corporation, Seismic Safety Products, Inc., a
Florida corporation ("Seller"), and various shareholders of
Seller
99.1 Press Release issued by the Company on December 13, 1995,
announcing the merger with Morel Industries, Inc.
99.2 Press Release issued by the Company on December 11, 1995,
announcing the acquisition of the assets of Seismic Safety
Products, Inc.
<PAGE>
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 hereunto duly authorized.
PCT HOLDINGS, INC.
By: /s/ DONALD A. WRIGHT
------------------------------------------------
Donald A. Wright
President and Chief Executive Officer
Dated: December 16, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description Page
2 Agreement and Plan of Merger among 10
PCT Holdings, Inc., a Nevada corporation,
Morel Acquisition Corporation, a
Washington corporation, Morel Industries,
Inc., a Washington corporation, Stephen
L. Morel, and Mark Morel*
EXHIBITS:
Exhibit A - Articles of Merger
Exhibit B - Bylaws of Surviving Corporation
Exhibit C - Registration Rights Agreement
Exhibit D - Lena Morel Promissory Note
Exhibit E - Stephen L. Morel Employment
Agreement
Exhibit F - Mark Morel Employment Agreement
SCHEDULES:
Schedule 2.1.2 Capitalization
Schedule 2.1.5(b) Absence of Undisclosed Liabilities
Schedule 2.1.5(c) Accounts Receivable
Schedule 2.1.6 Litigation
Schedule 2.1.7 Absence of Changes
Schedule 2.1.8 Taxes
Schedule 2.1.9 Compliance With Laws
Schedule 2.1.10 Contracts
Schedule 2.1.12 Insurance Policies
Schedule 2.1.13 Environmental Matters
Schedule 2.1.14 Labor Matters
Schedule 2.1.15 Employee Benefit Matters
Schedule 2.1.17(a) Real Property
Schedule 2.1.17(b) Tangible Personal Property
Schedule 2.1.18 Permits & Licenses
Schedule 2.1.19 Certain Interests
Schedule 2.1.21 Consents and Approvals
Schedule 2.1.22 Records
Schedule 2.1.23 Product Warranties, Recall and
Liabilities
*In accordance with Item 601(b)(2), the attachments to Exhibit 2 have
been omitted from this filing.
<PAGE>
Schedule 2.1.25 Customers and Suppliers
Schedule 2.2.2 Capital Stock of PCTH
Schedule 2.2.7 Absence of Changes (PCTH)
Schedule 2.2.8 Consents and Approvals (PCTH)
Schedule 5.1 Partial Use of Proceeds from PCTH
Capital Contribution
Schedule 5.3 Shareholder's Personal Property
4.1 Registration Rights Agreement by and 48
between PCT Holdings, Inc., a Nevada
corporation, and Stephen L. Morel and
Mark Morel, as shareholders of Morel
Industries, Inc., a Washington
corporation
4.2 Registration Rights Agreement by and 55
between PCT Holdings, Inc., a Nevada
corporation, Seismic Safety Products, Inc.,
a Florida corporation ("Seller"), and
various shareholders of Seller
99.1 Press Release issued by the Company on 66
December 13, 1995, announcing the merger
with Morel Industries, Inc.
99.2 Press Release issued by the Company on 67
December 11, 1995, announcing the acquisition
of the assets of Seismic Safety Products, Inc.
<PAGE>
AGREEMENT AND PLAN OF MERGER
among
PCT Holdings, Inc., a Nevada corporation,
Morel Acquisition Corporation, a Washington corporation,
Morel Industries, Inc., a Washington corporation,
Stephen L. Morel
and
Mark Morel
Dated as of November 30, 1995
<PAGE>ii
TABLE OF CONTENTS
ARTICLE 1. THE MERGER. . . . . . . . . . . . . . . . . . 1
1.1 Effective Date . . . . . . . . . . . . . . . . . . 1
1.2 Conversion of Acquisition Stock. . . . . . . . . . 1
1.3 Conversion of Morel Common Stock . . . . . . . . . 2
1.4 Surrender of Morel Common Stock Certificates . . . 2
1.5 Effect of Merger . . . . . . . . . . . . . . . . . 2
1.5.1 Rights and Interests . . . . . . . . . . 2
1.5.2 Liabilities and Obligations. . . . . . . 2
1.6 Corporate Matters. . . . . . . . . . . . . . . . . 2
1.6.1 Articles of Incorporation. . . . . . . . 2
1.6.2 Bylaws . . . . . . . . . . . . . . . . . 2
1.6.3 Directors. . . . . . . . . . . . . . . . 3
1.6.4 Officers . . . . . . . . . . . . . . . . 3
1.6.5 Principal Offices. . . . . . . . . . . . 3
1.7 Closing. . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES. . . . . . . . 3
2.1 Representations and Warranties of Morel and the
Shareholders . . . . . . . . . . . . . . . . . . . 3
2.1.1 Incorporation; Qualification; Articles
and Bylaws . . . . . . . . . . . . . . . . 3
2.1.2 Capitalization and Title to
Outstanding Capital Stock. . . . . . . . . 3
2.1.3 No Subsidiaries. . . . . . . . . . . . . . 4
2.1.4 Authority; Authorization . . . . . . . . . 4
2.1.5 Financial Matters. . . . . . . . . . . . . 4
2.1.6 Litigation . . . . . . . . . . . . . . . . 5
2.1.7 Absence of Changes . . . . . . . . . . . . 6
2.1.8 Taxes. . . . . . . . . . . . . . . . . . . 7
2.1.9 Compliance with Laws . . . . . . . . . . . 8
2.1.10 Contracts. . . . . . . . . . . . . . . . . 8
2.1.11 Intellectual Property. . . . . . . . . . . 9
2.1.12 Insurance. . . . . . . . . . . . . . . . . 9
2.1.13 Environmental Matters. . . . . . . . . . . 9
2.1.14 Labor Matters. . . . . . . . . . . . . . . 10
2.1.15 Employee Benefit Matters . . . . . . . . . 11
2.1.16 Other Employee Matters . . . . . . . . . . 12
2.1.17 Title to and Condition of Property . . . . 12
2.1.18 Permits and Licenses . . . . . . . . . . . 13
2.1.19 Certain Interests. . . . . . . . . . . . . 13
2.1.20 Certain Payments . . . . . . . . . . . . . 13
2.1.21 Consents and Approvals . . . . . . . . . . 13
2.1.22 Records. . . . . . . . . . . . . . . . . . 13
<PAGE>iii
2.1.23 Product Warranties, Recalls and
Liabilities . . . . . . . . . . . . . . . 13
2.1.24 Brokers and Finders. . . . . . . . . . . . 14
2.1.25 Customers and Suppliers. . . . . . . . . . 14
2.1.26 Restrictive Covenants. . . . . . . . . . . 14
2.1.27 Reliance . . . . . . . . . . . . . . . . . 14
2.2 Representations and Warranties of PCTH and
Acquisition. . . . . . . . . . . . . . . . . . . . 14
2.2.1 Incorporation; Qualification; Articles
and Bylaws . . . . . . . . . . . . . . . . 14
2.2.2 Capitalization and Title to
Outstanding Capital Stock. . . . . . . . . 14
2.2.3 Title to Shares. . . . . . . . . . . . . . 15
2.2.4 Authority; Authorization . . . . . . . . . 15
2.2.5 Financial Matters. . . . . . . . . . . . . 15
2.2.6 Litigation . . . . . . . . . . . . . . . . 16
2.2.7 Absence of Changes . . . . . . . . . . . . 16
2.2.8 Consents and Approvals . . . . . . . . . . 16
2.2.9 Brokers and Finders. . . . . . . . . . . . 17
2.2.10 Accuracy of Federal and State
Securities Filings . . . . . . . . . . . . 17
ARTICLE 3. PRE-CLOSING CONDUCT AND AGREEMENTS. . . . . . 17
3.1 Representations and Warranties . . . . . . . . . . 17
3.2 Properties and Records . . . . . . . . . . . . . . 17
3.2.1 Access . . . . . . . . . . . . . . . . . . 17
3.2.2 Confidentiality. . . . . . . . . . . . . . 17
3.3 Corporate Issues . . . . . . . . . . . . . . . . . 18
3.3.1 Governing Documents. . . . . . . . . . . . 18
3.3.2 Capital Stock. . . . . . . . . . . . . . . 18
3.4 Conduct of Morel's Business. . . . . . . . . . . . 18
3.4.1 Properties and Assets. . . . . . . . . . . 18
3.4.2 Compensation . . . . . . . . . . . . . . . 18
3.4.3 Indebtedness . . . . . . . . . . . . . . . 19
3.4.4 Leases . . . . . . . . . . . . . . . . . . 19
3.4.5 Payments . . . . . . . . . . . . . . . . . 19
3.4.6 Contracts and Agreements . . . . . . . . . 19
3.4.7 Shipments. . . . . . . . . . . . . . . . . 19
3.4.8 Insurance. . . . . . . . . . . . . . . . . 19
3.5 Public Announcements . . . . . . . . . . . . . . . 19
3.6 Notice of Breach . . . . . . . . . . . . . . . . . 19
3.6.1 By Morel and the Shareholders. . . . . . . 19
3.6.2 By PCTH and Acquisition. . . . . . . . . . 19
<PAGE>iv
ARTICLE 4. CONDITIONS TO CLOSING . . . . . . . . . . . . 20
4.1 Conditions to the Obligations of PCTH and
Acquisition. . . . . . . . . . . . . . . . . . . . 20
4.1.1 Authority. . . . . . . . . . . . . . . . . 20
4.1.2 Representations and Warranties . . . . . . 20
4.1.3 Morel's and Shareholders' Performance. . . 20
4.1.4 No Material Adverse Change . . . . . . . . 20
4.1.5 Approvals; Consents. . . . . . . . . . . . 20
4.1.6 Certificate. . . . . . . . . . . . . . . . 20
4.1.7 Capital Stock. . . . . . . . . . . . . . . 20
4.1.8 Lena Morel Debt. . . . . . . . . . . . . . 20
4.1.9 Shareholders' Accounts Receivable. . . . . 20
4.1.10 Shareholders Agreement . . . . . . . . . . 21
4.1.11 Employment Agreements. . . . . . . . . . . 21
4.1.12 Further Documents. . . . . . . . . . . . . 21
4.2 Conditions to the Obligations of Morel and the
Shareholders . . . . . . . . . . . . . . . . . . . 21
4.2.1 Authority. . . . . . . . . . . . . . . . . 21
4.2.2 Securities Filings . . . . . . . . . . . . 21
4.2.3 Representations and Warranties True at
the Effective Date . . . . . . . . . . . . 21
4.2.4 PCTH's and Acquisition's Performance . . . 21
4.2.5 President's Certificate. . . . . . . . . . 21
4.2.6 Delivery of Shares . . . . . . . . . . . . 21
4.2.7 Registration Rights Agreement. . . . . . . 21
4.2.8 Employment Agreements. . . . . . . . . . . 22
4.2.9 Further Documents. . . . . . . . . . . . . 22
ARTICLE 5. POST-CLOSING CONDUCT AND AGREEMENTS . . . . . 22
5.1 PCTH Contribution. . . . . . . . . . . . . . . . . 22
5.1.1 Specific Debts . . . . . . . . . . . . . . 22
5.1.2 Working Capital. . . . . . . . . . . . . . 22
5.1.3 Characterization . . . . . . . . . . . . . 22
5.2 Boards of Directors. . . . . . . . . . . . . . . . 22
5.3 Personal Property. . . . . . . . . . . . . . . . . 22
5.4 Insurance. . . . . . . . . . . . . . . . . . . . . 22
5.5 Employee Plans . . . . . . . . . . . . . . . . . . 22
5.6 Attorneys' Fees. . . . . . . . . . . . . . . . . . 23
5.7 Further Actions. . . . . . . . . . . . . . . . . . 23
ARTICLE 6. INDEMNIFICATION . . . . . . . . . . . . . . . 23
6.1 Indemnification by the Shareholders. . . . . . . . 23
6.1.1 General Indemnification. . . . . . . . . . 23
6.1.2 Specific Indemnification . . . . . . . . . 23
<PAGE>v
6.2 Indemnification by PCTH. . . . . . . . . . . . . . 23
6.3 Limits on Indemnification. . . . . . . . . . . . . 24
6.3.1 Limits on Liability of the
Shareholders . . . . . . . . . . . . . . . 24
6.3.2 Limits on Liability of PCTH. . . . . . . . 24
6.4 Indemnification Procedure. . . . . . . . . . . . . 25
6.4.1 Third Party Claims . . . . . . . . . . . . 25
6.4.2 Non-Third Party Claims . . . . . . . . . . 25
6.5 Rights Not Exclusive . . . . . . . . . . . . . . . 26
ARTICLE 7. TERMINATION . . . . . . . . . . . . . . . . . 26
7.1 Right to Terminate . . . . . . . . . . . . . . . . 26
7.1.1 Mutual Consent . . . . . . . . . . . . . . 26
7.1.2 Delay. . . . . . . . . . . . . . . . . . . 26
7.1.3 Breach by PCTH or Acquisition. . . . . . . 26
7.1.4 Breach by Morel or the Shareholders. . . . 26
7.2 Certain Obligations to Cease . . . . . . . . . . . 26
ARTICLE 8. MISCELLANEOUS PROVISIONS. . . . . . . . . . . 26
8.1 Exhibits; Schedules. . . . . . . . . . . . . . . . 26
8.2 Governing Law. . . . . . . . . . . . . . . . . . . 27
8.3 Notices. . . . . . . . . . . . . . . . . . . . . . 27
8.4 No Assignment. . . . . . . . . . . . . . . . . . . 28
8.5 Titles and Captions. . . . . . . . . . . . . . . . 28
8.6 Waiver . . . . . . . . . . . . . . . . . . . . . . 28
8.7 Amendment. . . . . . . . . . . . . . . . . . . . . 28
8.8 Severability . . . . . . . . . . . . . . . . . . . 28
8.9 Rights and Remedies. . . . . . . . . . . . . . . . 29
8.10 Attorneys' Fees. . . . . . . . . . . . . . . . . . 29
8.11 Counterparts . . . . . . . . . . . . . . . . . . . 29
8.12 Entire Agreement . . . . . . . . . . . . . . . . . 29
EXHIBITS:
Exhibit A - Articles of Merger
Exhibit B - Bylaws of Surviving Corporation
Exhibit C - Registration Rights Agreement
Exhibit D - Lena Morel Promissory Note
Exhibit E - Stephen L. Morel Employment Agreement
Exhibit F - Mark Morel Employment Agreement
<PAGE>vi
SCHEDULES:
Schedule 2.1.2 Capitalization
Schedule 2.1.5(b) Absence of Undisclosed Liabilities
Schedule 2.1.5(c) Accounts Receivable
Schedule 2.1.6 Litigation
Schedule 2.1.7 Absence of Changes
Schedule 2.1.8 Taxes
Schedule 2.1.9 Compliance With Laws
Schedule 2.1.10 Contracts
Schedule 2.1.12 Insurance Policies
Schedule 2.1.13 Environmental Matters
Schedule 2.1.14 Labor Matters
Schedule 2.1.15 Employee Benefit Matters
Schedule 2.1.17(a) Real Property
Schedule 2.1.17(b) Tangible Personal Property
Schedule 2.1.18 Permits & Licenses
Schedule 2.1.19 Certain Interests
Schedule 2.1.21 Consents and Approvals
Schedule 2.1.22 Records
Schedule 2.1.23 Product Warranties, Recall and Liabilities
Schedule 2.1.25 Customers and Suppliers
Schedule 2.2.2 Capital Stock of PCTH
Schedule 2.2.7 Absence of Changes (PCTH)
Schedule 2.2.8 Consents and Approvals (PCTH)
Schedule 5.1 Partial Use of Proceeds from PCTH
Capital Contribution
Schedule 5.3 Shareholder's Personal Property
<PAGE>1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and
entered into as of November 30, 1995, by and among PCT HOLDINGS, INC., a
Nevada corporation ("PCTH"), MOREL ACQUISITION CORPORATION, a Washington
corporation and wholly owned subsidiary of PCTH ("Acquisition"), MOREL
INDUSTRIES, INC., a Washington corporation ("Morel"), and STEPHEN L. MOREL
and MARK MOREL (together, the "Shareholders"). Acquisition and Morel are
sometimes referred to in this Agreement as the "Merging Corporations."
RECITALS
--------
A. Morel is the owner and operator of an aluminum casting
foundry located in Entiat, Washington.
B. The Boards of Directors of Morel, Acquisition and PCTH have
determined that it is advisable and in the best interests of the respective
corporations for Acquisition to merge with and into Morel, with Morel being
the survivor and becoming a wholly-owned subsidiary of PCTH, in
consideration for which all 416 issued and outstanding shares of Morel's
voting common stock (the "Morel Common Stock") would be converted into
common stock, $.001 par value, of PCTH (the "PCTH Common Stock"), as
described in this Agreement (the "Merger"), in a statutory merger pursuant
to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and in accordance with the applicable merger provisions of
the Washington Business Corporation Act (the "Washington Act").
C. The Shareholders are the holders of all of the Morel Common Stock,
and, under Morel's Articles of Incorporation and Washington law, are the
only shareholders of Morel entitled to vote upon the Merger.
AGREEMENT
---------
For valuable consideration, the receipt and sufficiency of which the
parties acknowledge, the parties agree as follows:
ARTICLE 1.
THE MERGER
1.1 Effective Date. The Merger shall be effective on the date on which
Articles of Merger and a Plan of Merger, in substantially the form attached
as Exhibit A (together, the "Articles of Merger") are filed with the office
of the Secretary of State of the State of Washington (the "Effective
Date"). On the Effective Date, Acquisition shall be merged with and into
Morel, the separate existence of Acquisition shall cease, and the Merging
Corporations shall become a single corporation named "Morel Industries,
Inc.," which shall be referred to in this Agreement as the "Surviving
Corporation."
1.2 Conversion of Acquisition Stock. Upon effectiveness
of the Merger, each share of the common stock of Acquisition
issued and outstanding immediately prior to the effectiveness of
the Merger shall, by virtue of the Merger and without any action
on the part
<PAGE>2
of the holder thereof, be converted into one share of Morel Common Stock.
All such shares of Morel Common Stock shall be fully paid and nonassessable
and shall be held by PCTH as of the effectiveness of the Merger.
1.3 Conversion of Morel Common Stock. As consideration to the
Shareholders for the Merger, each share of Morel Common Stock issued and
outstanding immediately prior to the effectiveness of the Merger shall, by
virtue of the Merger and without any action on the part of the
Shareholders, be converted into and exchanged for 2,163.461 shares of PCTH
Common Stock, for an aggregate of 900,000 shares of PCTH Common Stock (the
"Shares").
1.4 Surrender of Morel Common Stock Certificates. At the Closing (as
defined in Section 1.7), the Shareholders shall surrender for cancellation
their certificates representing all of the Morel Common Stock to PCTH or to
its agent designated for such purpose, and the Shareholders shall be
entitled to receive certificates representing the Shares.
1.5 Effect of Merger.
1.5.1 Rights and Interests. As of the Effective Date, (a)
Surviving Corporation shall possess all of the rights, privileges, powers
and franchises of each of the Merging Corporations, of a public as well as
a private nature, (b) Surviving Corporation shall become subject to all of
the restrictions, disabilities and duties of each of the Merging
Corporations, (c) all the singular rights, privileges, powers and
franchises of each of the Merging Corporations and all property, real,
personal and mixed, and all debts due to each of the Merging Corporations,
on whatever account, as well as all other things in action or belonging to
each of the Merging Corporations shall be vested in Surviving Corporation,
and (d) all property, assets, rights, privileges, powers, franchises,
immunities, and all and every other interest of the respective Merging
Corporations, shall become the property of Surviving Corporation. The title
to any real estate vested by deed or otherwise, in either of the Merging
Corporations, shall not revert or be in any way impaired by reason of the
Merger.
1.5.2 Liabilities and Obligations. As of the Effective Date, all
debts, liabilities and duties of the Merging Corporations shall attach to
Surviving Corporation and may be enforced against it to the same extent as
if said debts, liabilities, obligations, and duties had been incurred or
contracted by Surviving Corporation. All rights of creditors and all liens
upon any property of either of the Merging Corporations shall be preserved
unimpaired after the Merger.
1.6 Corporate Matters.
1.6.1 Articles of Incorporation. On the Effective Date, the
Articles of Incorporation of Surviving Corporation shall be repealed in
their entirety, and the Articles of Incorporation attached to the Articles
of Merger shall be adopted as the Articles of Incorporation of the
Surviving Corporation.
1.6.2 Bylaws. On or immediately after the Effective Date, the
Bylaws of the Surviving Corporation shall be repealed in their entirety and
the Amended and Restated Bylaws, in substantially the form attached as
Exhibit B, shall be adopted as the Bylaws of Surviving Corporation.
<PAGE>3
1.6.3 Directors. On the Effective Date, the following individuals
shall be elected as the directors of Surviving Corporation and shall serve
for the term specified in the Bylaws of the Surviving Corporation:
Donald A. Wright
Herman L. "Jack" Jones
Nick A. Gerde
Stephen L. Morel
Mark Morel
1.6.4 Officers. On the Effective Date, the following individuals
shall be elected as the officers of Surviving Corporation, to serve at the
pleasure of the Board of Directors and in accordance with the Bylaws of
Surviving Corporation:
President -- Stephen L. Morel
Executive V.P. -- Donald A. Wright
V.P. Sales -- Mark Morel
V.P. Finance and
Secretary -- Nick A. Gerde
1.6.5 Principal Offices. The principal office of
Surviving Corporation shall be the principal offices of PCTH,
located at 434 Olds Station Road, Wenatchee, Washington.
1.7 Closing. The closing of the transaction contemplated in this
Agreement (the "Closing") shall take place at the office of Stoel Rives,
3600 One Union Square, 600 University Street, Seattle, Washington, at 11:00
a.m. on December 1, 1995, or at such other place and time as the parties
shall agree (the "Closing Date").
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Morel and the Shareholders.
Morel and each of the Shareholders represent and warrant, jointly and
severally, to PCTH and Acquisition, that:
2.1.1 Incorporation; Qualification; Articles and Bylaws. Morel is
a corporation duly organized and validly existing under the laws of the
State of Washington and has all requisite corporate power and authority to
own, operate, and lease its assets and properties and to carry on its
business as it is now being conducted and as proposed to be conducted.
Morel is not qualified as a foreign corporation in any jurisdiction. Morel
has not received any written or oral notice within the last three years
from any governmental official of any jurisdiction to the effect that Morel
is required to be qualified or authorized to do business therein. The
failure to qualify to do business in any jurisdiction has not had, and will
not have, a material adverse effect on the business or financial condition
of Morel. Morel has delivered to PCTH complete and accurate copies of
Morel's Articles of Incorporation and Bylaws, each as amended to the date
of this Agreement.
2.1.2 Capitalization and Title to Outstanding Capital
Stock. Morel has authorized capital stock consisting of 2,500
shares of common stock, $100 par value ("Morel Common Stock") and
2,500 shares of non-voting common stock, $2,000 par value ("Non-
<PAGE>4
voting Stock"). The Non-voting Stock evidences only the right to receive
repayment of a debt to the holder thereof. On the date of this Agreement,
416 shares of Morel Common Stock and 87.5 shares of Non-voting Stock are
outstanding. All of the Nonvoting Stock will have been retired before
Closing. All of the outstanding shares of capital stock of Morel have been
duly authorized and are validly issued, fully paid and nonassessable. No
shares of capital stock of Morel have been issued in violation of or are
subject to any preemptive or similar rights granted to any former or
existing shareholder pursuant to law, Morel's Articles of Incorporation,
Bylaws or otherwise. Other than pursuant to this Agreement or as described
in Schedule 2.1.2, (a) there is no subscription, option, warrant, call,
right, agreement or commitment granted or issued by or binding upon Morel
or any shareholder of Morel (i) relating to the issuance, sale, delivery,
voting, transfer, ownership or other rights to or affecting any shares of
Morel's capital stock or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for shares of
Morel's capital stock, or (ii) relating to the payment of amounts measured
by changes in the value or price of any capital stock of Morel, and (b)
Morel has no obligation of any kind to issue any additional securities.
Except as described on Schedule 2.1.2, with respect to the Nonvoting Stock,
Morel has no outstanding obligations to repurchase, redeem or otherwise
acquire any of its outstanding shares of capital stock. Schedule 2.1.2 sets
forth a complete and accurate list of the shareholders of Morel as of the
date hereof, indicating the number of shares of Morel Common Stock and
Nonvoting Stock held by each. Except as set forth on Schedule 2.1.2, all of
the outstanding shares of capital stock of Morel are owned beneficially and
of record as set forth on the Schedule 2.1.2, free and clear of all
pledges, security interests, liens, charges, encumbrances, equities,
claims, options or limitations.
2.1.3 No Subsidiaries. Morel does not own and has never owned,
directly or indirectly, any outstanding capital stock or other ownership
interest (or securities, rights or other interests convertible into capital
stock or other ownership interest) in any other entity.
2.1.4 Authority; Authorization. Morel has full corporate power
and corporate authority, and each Shareholder has full power and authority,
to execute and deliver this Agreement, to consummate the transactions
contemplated in this Agreement, and to carry out its obligations under this
Agreement. This Agreement has been duly and validly authorized by the Board
of Directors and shareholders of Morel, has been duly and validly executed
and delivered by Morel and the Shareholders, and constitutes the valid and
binding obligation of Morel and each of the Shareholders, enforceable in
accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
laws of general application affecting the enforcement of creditors' rights,
and except that the availability of the equitable remedies of specific
performance and injunctive relief may be subject to the discretion of the
court before which any proceeding may be brought. To the best knowledge of
Morel and the Shareholders, other than the Articles of Merger, no
declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of, any governmental or regulatory body or authority
is necessary for the execution and delivery of this Agreement by Morel or
the consummation by Morel of the transactions contemplated in this
Agreement.
2.1.5 Financial Matters.
a. Financial Statements. Morel has provided to
PCTH true and correct copies of the its (a) reviewed balance
sheets, statements of income and statements of cash flow for the
fiscal years ended June 30, 1994, 1993 and 1992, and its audited
balance
<PAGE>5
sheet, statement and income and statement of cash flow for the fiscal year
ended June 30, 1995, including the related notes (collectively, the
"Historical Financial Statements"), and (b) balance sheet as of September
30, 1995 (the "Current Balance Sheet") and the related statement of income
and statement of cash flows for the period then ended (collectively, the
"Current Financial Statements"). The Historical Financial Statements and
the Current Financial Statements are collectively referred to as the "Morel
Financial Statements." The Morel Financial Statements are, to the best
knowledge of the Morel and the Shareholders after discussions with Morel's
auditors, complete and accurate and, as of their respective dates, present
fairly the financial position, results of operations, and changes in
financial position of Morel as of the dates and for the periods indicated
therein in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated,
except as otherwise indicated therein or in the notes thereto, subject, in
the case of the Current Financial Statements, to year-end audit adjustments
and any other adjustments described therein.
b. Absence of Undisclosed Liabilities. Except as set forth
on Schedule 2.1.5(b), and except for current liabilities incurred after
September 30, 1995, in the ordinary course of business and of a type and in
an amount consistent with past practices, Morel does not have any liability
or obligation (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that is not accrued, reserved against, or
disclosed in the Morel Financial Statements.
c. Accounts Receivable. Schedule 2.1.5(c) contains a
complete and accurate list of all of the receivables of Morel (including
accounts receivable, notes receivable and advances) that are reflected in
the Current Balance Sheet or that have been billed since the date of the
Current Balance Sheet (collectively, the "Receivables"). Except as set
forth on Schedule 2.1.5(c), all of the Receivables reflect actual bona fide
transactions and arose in the ordinary course of business. Each of the
Receivables can be fully collected when due and in any event within 120
days after Closing, without resort to litigation and without offset,
deduction or counterclaim, except to the extent of the normal allowance for
doubtful accounts with respect to accounts receivable, consistent with
Morel's prior practices, as reflected in the Current Balance Sheet.
d. Inventories. The inventories of Morel, whether finished
goods, work in process or raw materials, shown on the Current Balance Sheet
or thereafter acquired, are all items of a quality usable or saleable in
the ordinary and usual course of business, except for inventory items that
have been written down to an amount not in excess of realizable market
value or for which adequate reserves or allowances have been provided. The
present quantities of all inventories of Morel are reasonable and warranted
in the present circumstances of its business, in accordance with the past
practices of Morel.
2.1.6 Litigation. Except as set forth on Schedule 2.1.6, there is
no material claim, litigation, proceeding or investigation of any kind
pending by Morel or against Morel or the officers or directors of Morel in
their capacities as such, or against the properties or business of Morel,
and, to the best knowledge of Morel and the Shareholders, no such claim,
litigation, proceeding or investigation has been threatened, and there is
no basis for any such claim, litigation, proceeding or investigation. There
are no actions, proceedings, suits, investigations, or inquiries pending,
or to the best knowledge of Morel and the Shareholders, threatened, that
question the validity of this Agreement or any actions taken or to be taken
<PAGE>6
pursuant hereto. For purposes of this Section 2.1.6, "material claim" means
any claim exceeding $10,000, exclusive of interest and attorney fees.
2.1.7 Absence of Changes. Except as set forth on
Schedule 2.1.7, since June 30, 1995, Morel has not:
a. Adverse Changes. Suffered or been threatened
with any adverse change in its business, results of operations,
financial condition, properties, assets or prospects;
b. Damage. Suffered any damage, destruction,
requisition, taking or casualty loss, whether or not covered by
insurance, of or to any of its assets or properties;
c. Dividends. Declared, set aside or paid any
dividend or other distribution (whether in cash, stock, property
or any combination thereof) in respect of its capital stock, or
directly or indirectly repurchased, redeemed or otherwise
acquired any shares of its capital stock, or made any other
payment to or for the account of its shareholders;
d. Compensation. Increased the rate or terms of compensation
payable or to become payable to any director, officer or key employee;
changed the rate or terms of any bonus, insurance, pension or other
employee benefit plan, payment, severance or arrangement made to, for or
with any employee; paid any special bonus or remuneration; executed or
amended any written employment contract; or made any change in personnel
policies;
e. Expenditures. Entered into any agreement, commitment or
transaction (including without limitation any borrowing, capital
expenditure or capital financing; any purchase, acquisition, sale or other
disposition of assets; any lease or sublease; any guaranty, assumption or
endorsement of payment or performance of any loan or obligation of another;
or any amendment, modification or termination of any existing agreement,
commitment or transaction), except agreements, commitments or transactions
in the ordinary course of business or as contemplated in this Agreement
that will be performed in less than one year and do not involve the payment
of, or obligation to pay, an amount greater than $10,000 in respect of any
such agreement, commitment or transaction;
f. Accounting Changes. Made any change in
accounting methods, principles or practices;
g. Sales of Stock. Issued or sold any capital stock or
issued or granted any option, warrant or right to purchase any capital
stock or any security exercisable for the purchase of or convertible into
capital stock or relating to the payment of amounts measured by changes in
the value or price of any capital stock, or made any commitment to do any
of the foregoing;
h. Articles and Bylaws. Amended its Articles
of Incorporation or Bylaws;
i. Business Not in the Ordinary Course.
Conducted any business which is outside the ordinary course of
business or not substantially in the manner that it previously
conducted its businesses;
<PAGE>7
j. Liabilities. Except as set forth on Schedules 2.1.5(b)
and 2.1.6, incurred any material liability which, either individually or in
the aggregate, is material to its business, results of operations,
financial condition, properties, assets or prospects. For purposes of this
Section 2.1.7(j), "material liability" means any liability exceeding
$10,000, exclusive of interest and attorney fees.
k. Encumbrances. Encumbered or consented to the
encumbrance of any of its property or assets, except in the
ordinary course of business;
l. Labor. Experienced pending or threatened
labor disputes, organizational activities or disturbances
affecting in an adverse manner its business, results of
operations, financial condition, properties, assets or prospects;
m. Customers. Received any indication from any
customer that such customer intends to, is desirous of, or is
actively considering terminating or reducing its purchases from
Morel in any material amount for any reason other than normal
business activity; or
n. Further Adverse Changes. Experienced or been threatened
with any change in its assets, liabilities, licenses, permits or
franchises, or in any agreement to which it is a party or is bound, which,
either individually or in the aggregate, has had or reasonably could be
expected to have an adverse effect on its business, results of operations,
financial condition, properties, assets or prospects.
2.1.8 Taxes. Except as set forth on Schedule 2.1.8,
with respect to Taxes (as defined below):
a. Returns. Morel has filed, within the time and in the
manner prescribed by law, all returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed under
federal, state, local or any foreign laws by Morel, and all such Returns
are true, correct and complete in all material respects. There are not now
any extensions of time in effect with respect to the dates on which any
Returns were or are due to be filed.
b. Payment. Morel has, within the time and in
the manner prescribed by law, paid (and until Closing will pay,
within the time and in the manner prescribed by law) all Taxes
that are due and payable by Morel.
c. Tax Liens. There are no liens for Taxes upon
the assets of Morel, except liens for Taxes not yet due.
d. Statute of Limitations; Deficiencies. Either the statute
of limitations for the assessment of federal income tax has expired for all
federal income tax returns of Morel or such returns have been examined by
the Internal Revenue Service, for all periods through June 30, 1992. Morel
has not given any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or
Returns. No deficiency for any Taxes has been proposed, asserted or
assessed against Morel which has not been resolved and paid in full. No
issue has been raised through the date of this representation which
reasonably could be expected to result in a deficiency.
<PAGE>8
e. Withholding. Morel has complied (and until Closing will
comply) in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and has, within the time
and in the manner prescribed by law, withheld from wages and other amounts
paid or owing to any employee, creditor, independent contractor or any
third party, and paid over to the proper government authorities, all
amounts required to be so withheld and paid over under all applicable laws.
f. Copies of Returns. Morel has delivered to
PCTH true and complete copies of all federal, state and foreign
tax returns filed by Morel for taxable years ending subsequent
to 1991.
g. Definition. For purposes of this Agreement, "Taxes" shall
mean all taxes, charges, fees, levies or other assessments of whatever
kind, or including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupancy or property taxes, customs duties, fees, assessments or charges
(together with any interest and any penalties) imposed by any taxing
authority (domestic or foreign) upon or payable by Morel.
2.1.9 Compliance with Laws. Except as set forth on Schedule
2.1.9, Morel has at all relevant times conducted its business in compliance
with the provisions of its Articles of Incorporation, Bylaws, and all
applicable laws and regulations. Morel is not in violation of any
applicable laws or regulations. Morel is not subject to any outstanding
judgment, order, writ, injunction or decree and has not been charged with,
or threatened with a charge of, a violation of any provision of any
applicable law or regulation.
2.1.10 Contracts.
a. Contracts and Commitments. Schedule 2.1.10 contains a
list of all of the contracts or agreements to which Morel is a party or by
which it or any of its property is subject or bound in the following
categories: (i) notes, mortgages, deeds of trust, loan agreements, security
agreements, guaranties, debentures, indentures, credit agreements and other
evidences of indebtedness with respect to any indebtedness the principal
amount of which exceeds $20,000; (ii) contracts or agreements with any
director, officer or shareholder of Morel; (iii) leases of real property
and leases of equipment or other personal property under which Morel is the
lessee and under which rental payments exceed $10,000 annually; (iv)
letters of intent, commitments, option agreements, earnest money
agreements, or other similar agreements pertaining to the lease, purchase
or sale of any real property; (v) licenses and sublicenses material to
Morel; (vi) contracts or agreements providing for payments to or by Morel
in excess of $10,000 on an annual basis or any contract with a term
exceeding one year; and (vii) any contract or agreement not falling within
any of the foregoing categories but nevertheless material to Morel
(collectively, the "Contracts").
b. Validity; Absence of Defaults. To the best knowledge of
Morel and the Shareholders, all of the Contracts are valid, binding and
enforceable in accordance with their terms. To the best knowledge of Morel
and the Shareholders, Morel is not in default under or in violation of any
provision of any Contract. No third party has asserted any claim, dispute
or controversy with Morel or withheld payments from or performance to Morel
with respect to any Contract that has not been resolved. Morel has received
no notice or warning of alleged nonperformance or other noncompliance with
respect to its obligations under any
<PAGE>9
Contract or any notice that any such Contract may be totally or partially
terminated or suspended by the other party or parties thereto. Provided
that Morel shall have obtained and delivered to PCTH any consents and
approvals to the transactions contemplated in this Agreement, as specified
in Schedule 2.1.21 and required under the Contracts, neither the execution
and delivery of this Agreement by Morel nor the consummation by it of the
transactions contemplated hereby will conflict with, violate, result in a
breach of, or constitute a default under any of the Contracts or result in
the creation of any lien or encumbrance upon the assets of Morel.
2.1.11 Intellectual Property. Morel owns no patents. Except for
the patterns, forms and tooling that belong to customers and are used in
the ordinary course of business, Morel owns, or has a valid and binding
license or licenses (as to which there are no defaults by any of the
parties thereto) to use, all trademarks, service marks, trade names,
copyrights, trade secrets, technology, know-how and other intellectual
property (the "Intellectual Property") necessary to or used in the conduct
of Morel's business as now conducted and as proposed to be conducted.
There are no licenses or other agreements under which Morel has sold or
granted a right to use any Intellectual Property. All Intellectual Property
owned by Morel is owned by it free and clear of all liens, claims,
encumbrances or adverse claims of any third party. The conduct of the
business of Morel does not conflict with or infringe upon any Intellectual
Property rights of any other person, and no claims of conflict or
infringement are pending or threatened against Morel.
2.1.12 Insurance. Schedule 2.1.12 contains a complete and
accurate list of all insurance policies maintained by Morel covering any
property or asset of, or otherwise insuring, Morel. All such policies are
in full force and effect, all premiums covering all periods up to and
including the date as of which this representation is being made have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such insurance policies are valid and currently
in force. Such insurance policies are sufficient for compliance with all
requirements of law and agreements to which Morel is a party and provide
insurance coverage comparable to that of companies similarly situated.
Morel has not been refused any insurance with respect to its assets or
operations or had its coverage limited by any insurance carrier during the
past three-year period. Complete and accurate copies of all policies and
endorsements thereto have been delivered to PCTH.
2.1.13 Environmental Matters.
a. Definitions. "Environmental Law" means any federal, state
or local statute, regulation or ordinance pertaining to the protection of
human health or the environment and any applicable orders, judgments,
decrees, permits, licenses or other authorizations or mandates under such
laws. "Hazardous Substance" means any hazardous, toxic, radioactive or
infectious substance, material or waste as defined, listed or regulated
under any Environmental Law, and includes without limitation petroleum oil
and its fractions. "Asbestos-Containing Material" means any material
containing more than one percent by weight of asbestos. "Prior Property"
means any real property previously owned, leased, controlled, operated or
occupied by Morel.
b. Hazardous Substances. Except as specifically
described in Schedule 2.1.13, no Hazardous Substance has been
disposed of, spilled, leaked or otherwise released in, on, under
or from the Real Property (as defined in Section 2.1.17(a) below)
or the Prior Property. Except as described in Schedule 2.1.13,
no Hazardous Substance (i) is or has
<PAGE>10
been used, treated, stored, generated, manufactured or otherwise handled on
the Real Property or the Prior Property, or (ii) has otherwise come to be
located in, on or under the Real Property or the Prior Property. To the
best knowledge of Morel and the Shareholders, no Hazardous Substance has
been disposed of, spilled, leaked or otherwise released in, on, under or
from property adjacent to or in the immediate vicinity of the Real Property
or the Prior Property.
c. Asbestos; PCBs; Underground Storage Tanks. None of the
buildings, structures, fixtures or equipment on the Real Property contains
any Asbestos-Containing Material, urea formaldehyde foam insulation,
polycholorinated biphenyls in concentrations greater than 50 parts per
million (including in any electrical equipment located on the Real
Property), or any other Hazardous Substance which is prohibited or
regulated when present in buildings, structures, fixtures or equipment.
Except as set forth on Schedule 2.1.13, there are no underground storage
tanks (whether or not excluded from regulation under any Environmental Law)
on the Real Property, including any underground storage tanks in use, out
of service, closed or decommissioned in place. Except as set forth on
Schedule 2.1.13, all underground storage tanks previously on the Real
Property or previously owned or operated by Morel have been properly
decommissioned in compliance with all applicable Environmental Laws.
d. Waste Disposal. All wastes generated by the business of
Morel are and have been properly transported off site and disposed of in
compliance with all applicable Environmental Laws. Except as described on
Schedule 2.1.13, Morel has not arranged for the disposal or treatment of
Hazardous Substances at, and has not transported or arranged for
transportation on behalf of itself or any third party any Hazardous
Substances to, any facility listed or proposed for listing on the National
Priority List ("NPL") or the Comprehensive Environmental Response,
Compensation, Liability Information System list ("CERCLIS") compiled by the
Environmental Protection Agency or any similar or comparable list compiled
or maintained by any state or local governmental authority.
e. Site Lists. No portion of the Real Property or the Prior
Property is listed or proposed for listing on the CERCLIS or the NPL, or
any similar or comparable list compiled or maintained by any state or local
governmental authority. Except as described on Schedule 2.1.13, neither
Morel nor the Shareholders have received notice, or have knowledge, of any
claim that Morel is a potentially responsible party under Section 107 of
the Comprehensive Environmental Response, Compensation and Liability Act or
any similar or comparable state or local Environmental Law.
f. Environmental Reports. Morel has disclosed and made
available to PCTH true, complete and correct copies or results of any
reports, studies, analyses, tests or monitoring in the possession of or
initiated by Morel pertaining to the existence of Hazardous Substances and
any other environmental concerns relating to any of the Real Property, the
Prior Property or the business of Morel.
2.1.14 Labor Matters. Schedule 2.1.14 describes the status of
Morel's only collective bargaining agreement with any labor union. Since
January 1, 1992, there has not been any strike, slowdown, picketing or work
stoppage by employees of Morel and no unfair labor practice charge,
complaint or proceeding has been brought against Morel. Morel has complied
in all material respects with all material laws relating to the employment
of labor, including, without limitation, any provisions thereof relating to
wages, hours, collective
<PAGE>11
bargaining, employment termination, occupational safety, equal opportunity
and discrimination, plant closures and layoffs and notice thereof, hiring
of non-U.S. citizens and the payment of social security and similar taxes,
and no person has asserted, and to the knowledge of Morel and the
Shareholders there is no basis for any person to assert, that Morel is
liable in any material amount for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing. For purposes of
this Section 2.1.14, "material amount" means an amount exceeding $10,000,
exclusive of interest and attorney fees.
2.1.15 Employee Benefit Matters. With respect to the
employees of Morel:
a. Plans. Schedule 2.1.15 contains a true and complete list
of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefit,
profit-sharing, savings, pension, or retirement plan, program, agreement or
arrangement (collectively, the "Plans"), sponsored, maintained or
contributed to or required to be contributed to by Morel for the benefit of
any employee or former employee;
b. Information Regarding Plans. With respect to each of the
Plans, Morel has heretofore delivered to PCTH true and complete copies of
each of the following documents: (i) a copy of such Plan (including all
amendments thereto); (ii) a copy of the annual report, if required under
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
with respect to such Plan for the last two years; (iii) a copy of the
actuarial report, if required under ERISA with respect to such Plan for the
last two years; (iv) a copy of the most recent Summary Plan Description,
together with each Summary of Material Modifications, if required under
ERISA, with respect to such Plan, and all material employee communications
relating to such Plan; (v) if such Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof; (vi) all contracts relating to such Plan, including without
limitation service provider agreements, insurance contracts, investment
management agreements, subscription and participation agreements and record
keeping agreements; and (vii) the most recent determination letter received
from the IRS with respect to such Plan if it is intended to be qualified
under Section 401 of the Code.
c. New Plans; Modifications. Morel has no plan or
commitment, whether legally binding or not, to create any additional
employee welfare benefit plan (as defined in Section 3(1) of ERISA) or
employee pension benefit plan (as defined in Section 3(2) of ERISA), and
has no plan or commitment to modify or change any existing pension plan or
welfare benefit plan, other than changes to comply with applicable law,
that would affect any employee of Morel;
d. Continuing Benefits. Except for governmental plans and
obligations, including but not limited to COBRA, no Plan provides death,
medical or health benefits (whether or not insured) with respect to current
or former employees of Morel after any such employee's retirement or other
termination of service (other than (i) benefit coverage mandated by
applicable law, including, without limitation, coverage provided pursuant
to section 4980B of the Code, (ii) death benefits or retirement benefits
under any pension plan, (iii) deferred compensation benefits accrued as
liabilities on the books of Morel, or (iv) benefits the full cost of which
is borne by the current or former employee (or the employee's beneficiary).
"COBRA" means the continuation coverage requirements of Section 4980B of
the Internal Revenue Code and Part 6 of Title I of ERISA.
<PAGE>12
e. Determinations. Each Plan that is intended
to be "qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified, and there
is no fact or circumstance that would materially and adversely
affect such qualification; and
f. Compliance. Each of the Plans has been and is maintained,
operated and administered in all material respects in compliance with its
terms and any related documents or agreements and in accordance with all
applicable laws, including but not limited to applicable provisions of
ERISA and the Code. Neither Morel nor the Shareholders are aware of any
pending or threatened assessment, complaint, proceeding or investigation
with respect to any Plan.
2.1.16 Other Employee Matters. Morel is not bound by or subject
to (and none of its properties is bound by or subject to) any material
written or oral, express or implied, employment contract, commitment or
arrangement with any employee, including, without limitation any "golden
parachute" agreement, and all employees of Morel are employees at will.
Morel has provided PCTH with copies of and all relevant information
regarding (i) vacation, holiday or sick leave policies or arrangements with
employees, and (ii) compensation arrangements with employees and
consultants, including compensation in the form of benefits, allowances,
perquisites or otherwise.
2.1.17 Title to and Condition of Property.
a. Title to and Condition of Real Property. Schedule
2.1.17(a) contains a list of all real property owned or leased by Morel
(the "Real Property"), including the dates of and parties to all leases and
any amendments thereof. Except as described on Schedule 2.1.17(a), Morel
has good and marketable fee simple title to any Real Property listed as
owned by it on Schedule 2.1.17(a), free and clear of all liens, mortgages,
pledges, covenants, easements, restrictions, leases, charges, and other
claims and encumbrances of any nature, except covenants, easements and
restrictions of record. All Real Property (including improvements thereon)
is in satisfactory condition and repair consistent with its present use,
and is available for immediate use in the conduct of the business of the
Surviving Corporation. To the best knowledge of Morel and the Shareholders,
neither the operations of Morel on any Real Property nor any improvements
on the Real Property violate any applicable building or zoning code or
regulation of any governmental authority having jurisdiction.
b. Title to and Condition of Tangible Personal Property.
Schedule 2.1.17(b) contains a complete and accurate list of all tangible
personal property with a value in excess of $10,000 owned or leased by
Morel (the "Tangible Personal Property"), including the dates of and
parties to all leases and any amendments thereof. Morel has good and
marketable title to all of the Tangible Personal Property listed as owned
by it on Schedule 2.1.17(b), free and clear of all liens, mortgages,
pledges, leases, restrictions and other claims and encumbrances of any
nature, except as set forth on Schedule 2.1.17(b). Except as set forth on
Schedule 2.1.17(b), the Tangible Personal Property is in good operating
condition and repair (ordinary wear and tear excepted), is performing
satisfactorily, and is adequate for the conduct of the business of the
Surviving Corporation. To the best knowledge of the Shareholders, all
Tangible Personal Property and the state of maintenance thereof are in
compliance with all applicable laws and regulations.
<PAGE>13
2.1.18 Permits and Licenses. Schedule 2.1.18 contains a complete
and accurate list of all governmental licenses, permits and authorizations
(collectively, "Permits") held by Morel. Except as set forth on Schedule
2.1.18, Morel holds all Permits necessary for the lawful conduct of its
business pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental bodies, agencies and other authorities
having jurisdiction over it or any part of its operations. Morel is in
compliance with each of the terms of each of the Permits, and there are no
claims of violation by Morel of any Permit. Complete and accurate copies of
all Permits held by Morel have been delivered to PCTH.
2.1.19 Certain Interests. Except as set forth on Schedule 2.1.19,
no current or former shareholder of Morel and no entity owned or controlled
by any of them (a) has any material interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of
Morel, (b) is indebted to Morel, or (c) has any financial interest, direct
or indirect, in any supplier or customer of, or other outside business
which has any transactions with, Morel. Except as set forth on Schedule
2.1.19, Morel is not indebted to any shareholder, director or officer of
Morel (or any entity owned or controlled by one or more of such parties),
except for amounts due under normal salary arrangements and for
reimbursement of ordinary business expenses. The consummation of the
transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any act or event, or with the lapse of time, or both)
result in any payment (severance or other) becoming due from Morel to any
shareholder, officer, director or employee of Morel (or any entity owned or
controlled by one or more of such parties).
2.1.20 Certain Payments. Neither Morel nor any shareholder,
officer or director of Morel, nor any other person or entity has, directly
or indirectly, on behalf of or with respect to Morel or the business or
operations of Morel (a) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with similar
duties of any entity to which Morel sells or from which Morel buys products
for the purpose of influencing such agent or person to buy products from or
sell products to Morel; (b) otherwise made or received any payment that was
not legal to make or receive under any applicable law or regulation of the
United States or any other country or territory; or (c) engaged in any
transaction, maintained any bank account, or used any corporate funds or
assets except for transactions, bank accounts, funds, and assets which have
been and are reflected in the normally maintained books and records of
Morel.
2.1.21 Consents and Approvals. Except as set forth on Schedule
2.1.21 (which includes a list of all consents, approvals, authorizations or
filings to be obtained or made), no consent, approval, or authorization of
any entity or person not a party to this Agreement is required for the
consummation of the transactions described in this Agreement by Morel or
the Shareholders.
2.1.22 Records. Except as described on Schedule 2.1.22, the books
of account of Morel are complete and accurate in all material respects.
Except as described on Schedule 2.1.22, to the best knowledge of Morel and
the Shareholders, complete and accurate copies of the books and records of
Morel have been made available for PCTH's review.
2.1.23 Product Warranties, Recalls and Liabilities. Schedule
2.1.23 contains any standard forms of product warranties provided by Morel.
Morel has not undertaken any performance obligations or made any warranties
or guarantees with respect to its products other than those disclosed on
Schedule 2.1.23.
<PAGE>14
2.1.24 Brokers and Finders. Neither Morel nor any shareholder,
officer, director or employee of Morel has employed any broker, finder or
investment banker, or incurred any liability for any brokerage or
investment banking fees, commissions or finder's fees, in connection with
the transactions contemplated in this Agreement.
2.1.25 Customers and Suppliers. Schedule 2.1.25 sets forth (a) a
true and correct list of the ten largest customers of Morel, in terms of
sales, during the fiscal year ended June 30, 1995, and during the three
months ended September 30, 1995, showing the approximate total sales to
each such customer during such time periods; and (b) a true and correct
list of the ten largest suppliers of Morel, in terms of purchases, during
the fiscal year ended June 30, 1995, and during the three months ended
September 30, 1995, showing the approximate total purchases from each such
supplier during such time periods. There has not been any material adverse
change in the business relationship of Morel with any customer or supplier
named on Schedule 2.1.25. Except as set forth on Schedules 2.1.7 and
2.1.25, neither Morel nor the Shareholders have any reason to believe that
any such customer or supplier intends to materially reduce the amount of
business it conducts with Morel. However, neither Morel nor the
Shareholders have received any assurance from any customer or supplier
causing any such customer or supplier to be contractually obligated to any
level of commitment to Morel.
2.1.26 Restrictive Covenants. Morel is not a party
to any agreement, contract or covenant limiting the freedom of
Morel to compete in any line of business or with any person or
other entity in any geographic area.
2.1.27 Reliance. Morel and the Shareholders recognize and agree
that, notwithstanding any investigation by PCTH, PCTH is relying upon the
representations and warranties made by Morel and the Shareholders in this
Agreement.
2.2 Representations and Warranties of PCTH and Acquisition.
PCTH and Acquisition represent and warrant to Morel and the
Shareholders that:
2.2.1 Incorporation; Qualification; Articles and Bylaws. PCTH is
a corporation duly organized and validly existing under the laws of the
State of Nevada. Acquisition is a corporation duly organized and validly
existing under the laws of the State of Washington. PCTH has all requisite
corporate power and authority to own, operate, and lease its assets and
properties and to carry on its business as it is now being conducted and as
proposed to be conducted. Acquisition was formed for the purpose of
consummating the Merger, conducts no business, and has no liabilities or
assets (other than the initial capital contribution of its sole
shareholder).
2.2.2 Capitalization and Title to Outstanding Capital Stock. PCTH
has authorized capital stock consisting of 100,000,000 shares of common
stock, $.001 par value ("PCTH Common Stock"). On the date of this
Agreement, 6,308,059 shares of PCTH Common Stock are outstanding. There are
no other classes of stock of PCTH. Acquisition has authorized capital stock
consisting of 1,000,000 shares of Common Stock, no par value ("Acquisition
Common Stock"). On the date of this Agreement, 100,000 shares of
Acquisition Common Stock are outstanding and held by PCTH. All of the
outstanding shares of capital stock of PCTH and Acquisition have been duly
authorized and are validly issued, fully paid and nonassessable. No shares
of capital stock of PCTH or Acquisition have been issued in
<PAGE>15
violation of or are subject to any preemptive or similar rights granted to
any former or existing shareholder pursuant to law, their Articles of
Incorporation, Bylaws or otherwise. Other than pursuant to this Agreement
or as described on Schedule 2.2.2, (a) there is no subscription, option,
warrant, call, right, agreement or commitment granted or issued by or
binding upon PCTH or Acquisition (i) relating to the issuance, sale,
delivery, voting, transfer, ownership or other rights to or affecting any
shares of PCTH's, Acquisition's or Surviving Corporation's capital stock or
any other securities convertible into, exchangeable for, or evidencing the
right to subscribe for shares of PCTH's, Acquisition's or Surviving
Corporation's capital stock, or (ii) relating to the payment of amounts
measured by changes in the value or price of any capital stock of PCTH, and
(b) PCTH has no obligation of any kind to issue any additional securities.
2.2.3 Title to Shares. Upon effectiveness of the Merger, the
Shareholders will acquire good title to the Shares issued pursuant to the
Merger, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims, options or limitations of any nature. The
Shares issued to the Shareholders pursuant to the Merger will not be
registered under the Securities Act of 1933, as amended, or pursuant to the
blue sky laws of any state, and, except as provided in the Registration
Rights Agreement set forth as Exhibit C to this Agreement, which provides
certain piggy-back registration rights with respect to up to one-half of
the Shares of each Shareholder, PCTH shall have no obligation to register
the Shares.
2.2.4 Authority; Authorization. PCTH and Acquisition have full
corporate power and corporate authority to execute and deliver this
Agreement, to consummate the transactions contemplated in this Agreement,
and to carry out their obligations under this Agreement. This Agreement has
been duly and validly authorized by the Boards of Directors of PCTH and
Acquisition, has been duly and validly executed and delivered by PCTH and
Acquisition, and constitutes the valid and binding obligation of PCTH and
Acquisition, enforceable in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application affecting
the enforcement of creditors' rights, and except that the availability of
the equitable remedies of specific performance and injunctive relief may be
subject to the discretion of the court before which any proceeding may be
brought. To the best knowledge of PCTH and Acquisition, other than
reporting obligations of PCTH under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and filings that may be required to obtain
exemptions from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), or from the blue sky laws of any state,
and other than the filing of the Articles of Merger, no declaration,
filing, or registration with, or notice to, or authorization, consent, or
approval of, any governmental or regulatory body or authority is necessary
for the execution and delivery of this Agreement by PCTH or Acquisition or
the consummation by PCTH or Acquisition of the transactions contemplated in
this Agreement.
2.2.5 Financial Matters.
a. Financial Statements. PCTH's annual report
on Form 10-KSB for the fiscal year ended May 31, 1995, contains
true and correct copies of PCTH's (a) audited balance sheets,
statements of income and statements of cash flow for the fiscal
years ended May 31, 1995 and 1994, including the related notes,
each consolidated with respect to PCTH's subsidiaries, and PCTH's
quarterly report on Form 10-QSB for the quarter ended August 31,
1995 (the "Form 10-QSB") contains true and correct copies of
PCTH's balance sheet as of August 31, 1995, and its statement of
income for the three months then ended (collectively, the "PCTH
Financial Statements"). The PCTH Financial Statements are, to
the knowledge of
<PAGE>16
PCTH, complete and accurate and, as of their respective dates, present
fairly the consolidated financial position, results of operations, and
changes in financial position of PCTH and its subsidiaries as of the dates
and for the periods indicated therein in accordance with GAAP applied on a
consistent basis throughout the periods indicated, except as otherwise
indicated therein or in the notes thereto, subject, in the case of the
interim financial statements, to year-end audit adjustments and any other
adjustments described therein.
2.2.6 Litigation. Except as described in the Form 10-QSB, there
is no material claim, litigation, proceeding or investigation pending by
PCTH or against PCTH or the officers or directors of PCTH in their
capacities as such, or against the properties or business of PCTH, and, to
the best knowledge of PCTH, no such claim, litigation, proceeding or
investigation has been threatened and there is no basis for any such claim,
litigation, proceeding or investigation. There are no actions, proceedings,
suits, investigations, or inquiries pending, or to the best knowledge of
PCTH, threatened, that question the validity of this Agreement or any
actions taken or to be taken pursuant hereto.
2.2.7 Absence of Changes. Except as set forth on
Schedule 2.2.7, since August 31, 1995, PCTH has not:
a. Adverse Changes. Suffered or been threatened
with any adverse change in its business, results of operations,
financial condition, properties or assets;
b. Damage. Suffered any damage, destruction,
requisition, taking or casualty loss, whether or not covered by
insurance, of or to any of its assets or properties;
c. Dividends. Declared, set aside or paid any
dividend or other distribution (whether in cash, stock, property
or any combination thereof) in respect of its capital stock, or
directly or indirectly repurchased, redeemed or otherwise
acquired any shares of its capital stock, or made any other
payment to or for the account of its shareholders;
d. Sales of Stock. Issued or sold any capital stock or
issued or granted any option, warrant or right to purchase any capital
stock or any security exercisable for the purchase of or convertible into
capital stock or relating to the payment of amounts measured by changes in
the value or price of any capital stock, or made any commitment to do any
of the foregoing;
e. Articles and Bylaws. Amended its Articles
of Incorporation or Bylaws; or
f. Business Not in the Ordinary Course.
Conducted any business which is outside the ordinary course of
business or not substantially in the manner that it previously
conducted its businesses.
2.2.8 Consents and Approvals. Except as set forth on Schedule
2.2.8 (which includes a list of all consents, approvals, authorizations or
filings to be obtained or made), no consent, approval, or authorization of
any entity or person not a party to this Agreement is required for the
consummation of the transactions described in this Agreement by PCTH or
Acquisition.
<PAGE>17
2.2.9 Brokers and Finders. Neither PCTH nor Acquisition, nor any
shareholder, officer, director or employee of PCTH or Acquisition, has
employed any broker, finder or investment banker, or incurred any liability
for any brokerage or investment banking fees, commissions or finder's fees,
in connection with the transactions contemplated by this Agreement.
2.2.10 Accuracy of Federal and State Securities Filings. To its
best knowledge, no filing submitted by PCTH to any federal or state agency
under the 1934 Act, the 1933 Act or similar state acts contains any false
or misleading statement with respect to any material fact, or omits to
state any material fact necessary in order to make the statements in this
Agreement not false or misleading, in each case at the time such filing
became effective.
ARTICLE 3.
PRE-CLOSING CONDUCT AND AGREEMENTS
From the date of this Agreement until the Effective Date, except
to the extent expressly permitted by this Agreement or otherwise consented
to by an instrument in writing signed by PCTH and Morel, the parties agree
that:
3.1 Representations and Warranties. PCTH, Acquisition, Morel and the
Shareholders each agree not to take any action which would, as of the
Effective Date, cause any warranties or representations contained in this
Agreement and applicable to them to be false or misleading in any material
respect. PCTH, Acquisition, Morel and the Shareholders agree to use their
best efforts to (a) take all actions necessary to render accurate as of the
Effective Date their respective representations and warranties contained in
this Agreement, and (b) perform or cause to be satisfied each covenant or
condition to be performed or satisfied by them prior to the Effective Date.
3.2 Properties and Records.
3.2.1 Access. PCTH and Morel shall each afford to the officers,
employees, attorneys, accountants and other authorized representatives of
the other, free and full access to all of their assets, properties, books
and records, in order to afford as full an opportunity of review,
examination and investigation as they shall desire to make of the affairs
of the other, and each shall be permitted to make extracts from, or take
copies of, such books, records (including the stock record and minute
books) or other documentation or to obtain temporary possession of any
thereof as may be reasonably necessary; and each shall furnish or cause to
be furnished to the other such reasonable financial and operating data and
other information about its business, properties and assets which any of
their respective officers, employees, attorneys, accountants or other
authorized representatives may request.
3.2.2 Confidentiality. Until the Merger has been consummated (and
if the Merger is not consummated, at all times hereafter), PCTH,
Acquisition, Morel and the Shareholders each agree not to disclose or use
any information obtained in the course of their respective investigations.
If the proposed Merger is not consummated, PCTH and Acquisition will return
all returnable data and copies thereof to Morel and the Shareholders, and
Morel and the Shareholders will return all returnable data to PCTH and
Acquisition. Such obligation of confidentiality shall not extend to any
information which is (a) shown to have been previously known by PCTH,
Acquisition, Morel, or the Shareholders, as the case may be, (b) generally
<PAGE>18
known to the public, (c) or made known to PCTH, Acquisition, Morel, the
Shareholders, or the public by a third party.
3.3 Corporate Issues.
3.3.1 Governing Documents. Neither PCTH, Acquisition,
nor Morel will make any change in their respective Articles of
Incorporation or Bylaws.
3.3.2 Capital Stock. Neither PCTH nor Morel will (a) issue or
cause to be issued any additional shares of their capital stock, except
shares of PCTH Common Stock which may be issued as described in Schedule
2.2.2, (b) effect any subdivision of their outstanding capital stock,
purchase or redeem any capital stock, (c) declare, make or pay any
dividend, distribution or payment in respect of their capital stock, or (d)
grant or issue any options, warrants or other rights to acquire any capital
stock or other of their equity securities, whether by conversion or
otherwise, or make any commitment to do any of the above. Notwithstanding
the foregoing, Morel shall modify the terms of its debt to Lena Morel by
executing a promissory note in the amount of $200,000, in substantially the
form attached as Exhibit D and canceling the Non-voting Stock certificates
that previously represented such debt.
3.4 Conduct of Morel's Business. Morel and the Shareholders shall keep
Morel's business intact and shall not take or permit to be taken or do or
suffer to be done anything other than in the ordinary course of its
business as the same is presently being conducted, and shall use their best
efforts to keep available the services of Morel's directors, officers,
employees and agents and to maintain the goodwill and reputation associated
with its business. The parties understand and agree that (a) PCTH must be
consulted on every material issue and matter which may affect the business
or operations of Morel after the date of this Agreement, and (b) no such
issue or matter shall be acted on without consent of PCTH. Subject to the
foregoing, Morel and the Shareholders agree as follows (except to the
extent that PCTH gives its prior written consent otherwise):
3.4.1 Properties and Assets.
a. Maintenance. Morel shall exercise its best
efforts to maintain all of its properties and assets, tangible
or intangible, in good operating condition and repair, and take
all steps necessary to keep its operations functioning properly.
b. Liens and Encumbrances. Morel shall not
further encumber or permit to be further encumbered any of its
properties or assets.
c. Disposition. Morel shall not purchase, sell, lease or
dispose of or make any contract for the purchase, sale, lease or
disposition of or subject to lien or security interest any properties or
assets other than in the ordinary and usual course of its business
consistent with the representations and warranties contained in this
Agreement and not in breach of any of the provisions of this Agreement.
3.4.2 Compensation. Morel shall not grant any salary increase to,
or increase the draw of, any of its officers, directors, or employees, or
enter into any new, or amend or alter any existing, bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension,
stock option, group insurance, death benefit or other fringe benefit plan,
<PAGE>19
trust agreement or other similar or dissimilar arrangement, or
any employment or consulting agreement.
3.4.3 Indebtedness. Morel shall not incur any bank indebtedness
or make any borrowings, except for a $600,000 loan from the City of Entiat
and the Washington Department of Community, Trade and Economic Development.
3.4.4 Leases. Morel shall not enter into any leases.
3.4.5 Payments. Except as otherwise specified in this Agreement,
Morel shall not pay any obligation or liability (fixed or contingent) or
discharge or satisfy any lien or encumbrance, or settle any claim,
liability or suit pending or threatened against it or any of its
properties, except for liabilities on the Current Financial Statements or
current liabilities incurred between September 30, 1995, and the Effective
Date in the ordinary and usual course of business consistent with Morel's
representations and warranties contained in this Agreement and not in
breach of any of the provisions of this Agreement.
3.4.6 Contracts and Agreements. Morel shall not enter into any
contract, agreement or commitment not in the ordinary course of business,
including without limiting the generality of the foregoing, any contract,
agreement or commitment for the purchase of any materials or supplies.
3.4.7 Shipments. Morel shall not, other than in the ordinary
course of business, curtail purchases or accelerate shipments beyond
customer requirements, nor shall it modify, amend, cancel or terminate any
existing contracts or agreements.
3.4.8 Insurance. Morel shall maintain in full force
and effect its policies of insurance.
3.5 Public Announcements. Promptly after the execution of this
Agreement, PCTH shall issue a press release in a form reasonably
satisfactory to Morel. Thereafter, PCTH and Morel will consult with each
other with respect to any announcement to the public or any statement to
their employees generally concerning or relating to the Merger. No party
will make any announcement to the public without the prior written consent
of the others, except for announcements which a party believes on the
advice of such party's counsel to be required by applicable securities
laws.
3.6 Notice of Breach.
3.6.1 By Morel and the Shareholders. Morel and the Shareholders
will immediately give written notice to PCTH and Acquisition of the
occurrence of any event or the failure of any event to occur that results
in a breach of any representation or warranty by Morel or the Shareholders,
or a failure by Morel or the Shareholders to comply with any covenant,
condition or agreement contained in this Agreement.
3.6.2 By PCTH and Acquisition. PCTH and Acquisition will
immediately give written notice to Morel and the Shareholders of the
occurrence of any event or the failure of any event to occur that results
in a breach of any representation or warranty by PCTH and Acquisition or a
failure by PCTH or Acquisition or to comply with any covenant, condition or
agreement contained in this Agreement.
<PAGE>20
ARTICLE 4.
CONDITIONS TO CLOSING
4.1 Conditions to the Obligations of PCTH and Acquisition. All
obligations of PCTH and Acquisition under this Agreement are subject to the
fulfillment and satisfaction, prior to or at Closing, of each of the
following conditions, any one or more of which may be waived by PCTH in
writing:
4.1.1 Authority. All corporate actions required to be taken by,
or on the part of, Morel or the Shareholders to authorize the execution,
delivery and performance of this Agreement by Morel and the Shareholders,
and the consummation of the transactions contemplated in this Agreement,
shall have been duly and validly taken by the Board of Directors and the
Shareholders.
4.1.2 Representations and Warranties. The representations and
warranties of Morel and the Shareholders contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date,
with the same effect as though such representations and warranties had been
made at and as of the Closing Date.
4.1.3 Morel's and Shareholders' Performance. Each of
the obligations of Morel and the Shareholders to be performed on
or before the Effective Date pursuant to the terms of this
Agreement shall have been duly performed.
4.1.4 No Material Adverse Change. There shall have
been, between the date of this Agreement and the Closing, no
material adverse change in the condition, financial or otherwise,
of Morel.
4.1.5 Approvals; Consents. All required approvals, consents and
waivers with regard to the transactions contemplated by this Agreement
shall have been obtained or waived, and PCTH and Acquisition shall have
received copies of such consents and waivers in a form acceptable to PCTH
and Acquisition.
4.1.6 Certificate. Morel and the Shareholders shall have
delivered to PCTH and Acquisition a certificate to the effect of Sections
4.1.1 through 4.1.5, signed by the President of Morel and by the
Shareholders.
4.1.7 Capital Stock. The Shareholders shall have
delivered to PCTH the certificates evidencing the Morel Common
Stock, for cancellation and issuance of stock certificates
representing the Shares.
4.1.8 Lena Morel Debt. PCTH and Acquisition shall have received
evidence satisfactory to them that the debt represented by the Non-voting
Stock has been modified by execution of the promissory note referred to in
Section 3.3.2 and cancellation of the Non-voting Stock certificates that
previously represented the debt.
4.1.9 Shareholders' Accounts Receivable. The
outstanding accounts of the Shareholders with Morel, as set forth
on Schedule 2.1.19, shall have been converted into compensation
by Morel's Board of Directors and paid, and there shall be no
other accounts
<PAGE>21
receivable from or payable to the Shareholders by the Company other than
for compensation coming due in the ordinary course of business.
4.1.10 Shareholders Agreement. PCTH and Acquisition shall have
received evidence satisfactory to them that the Shareholders Agreement
between each of the Shareholders and Morel dated February 1, 1992, has been
terminated.
4.1.11 Employment Agreements. The Shareholders shall
have executed and delivered Employment Agreements in
substantially the forms attached as Exhibits E and F.
4.1.12 Further Documents. Morel and the Shareholders shall have
executed and delivered all such other documents and performances as are, in
the opinion of PCTH and its counsel, consistent with the terms of, and
required to consummate the transactions contemplated by, this Agreement.
4.2 Conditions to the Obligations of Morel and the Shareholders. All
obligations of Morel and the Shareholders under this Agreement are subject
to the fulfillment and satisfaction, prior to or at Closing, of each of the
following conditions, any one or more of which may be waived by Morel or
the Shareholders in writing:
4.2.1 Authority. All actions required to be taken by, or on the
part of, PCTH and Acquisition to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement shall have been duly and validly taken.
4.2.2 Securities Filings. PCTH shall be current in the filing of
any reports required to be filed by it pursuant to the 1934 Act. No stop
order or similar restraining order shall have been threatened or entered by
the SEC or any state securities administrator.
4.2.3 Representations and Warranties True at the Effective Date.
At the Effective Date, the representations and warranties of PCTH and
Acquisition contained in this Agreement will be true and correct in all
material respects at and as of such time, except to the extent affected by
the transactions contemplated by this Agreement.
4.2.4 PCTH's and Acquisition's Performance. Each of the
obligations of PCTH and Acquisition to be performed by it on or before the
Effective Date pursuant to the terms of this Agreement shall have been duly
performed at the Effective Date.
4.2.5 President's Certificate. PCTH and Acquisition shall have
each delivered to Morel and the Shareholders a certificate to the effect of
Sections 4.2.1 through 4.2.4, signed by the Presidents of PCTH and
Acquisition.
4.2.6 Delivery of Shares. PCTH shall have made arrangements
satisfactory to the Shareholders with its transfer agent for delivery to
the Shareholders of certificates representing the Shares.
4.2.7 Registration Rights Agreement. PCTH shall have
executed and delivered the Registration Rights Agreement, in
substantially the form attached as Exhibit C.
<PAGE>22
4.2.8 Employment Agreements. The Surviving
Corporation shall have executed and delivered the Employment
Agreements in substantially the forms attached as Exhibits E
and F.
4.2.9 Further Documents. PCTH and Acquisition shall have executed
and delivered all such other documents and performances as are consistent
with the terms of, and required to consummate the transactions contemplated
by, this Agreement.
ARTICLE 5.
POST-CLOSING CONDUCT AND AGREEMENTS
5.1 PCTH Contribution. After the Effective Date, PCTH shall contribute
a total of $2,000,000, as and when needed, to Surviving Corporation (the
"Capital Contribution"), as follows:
5.1.1 Specific Debts. PCTH shall pay in full each of
the obligations of Morel set forth on the attached Schedule 5.1
from the Capital Contribution, in the order and at such times as
determined by PCTH in its sole discretion;
5.1.2 Working Capital. PCTH shall contribute the balance, as and
when needed, of the Capital Contribution to Surviving Corporation in cash
or cash equivalent to supplement Surviving Corporation's working capital,
which funds shall be subject to expenditure only upon the approval of
management of PCTH; and
5.1.3 Characterization. Surviving Corporation shall reflect the
amounts of each such payment and cash contribution on its books of account,
at the time each such payment or cash contribution is made, as a capital
contribution by PCTH.
5.2 Boards of Directors. After the Effective Date, PCTH shall use its
best efforts to encourage the Board of Directors of PCT Holdings, Inc., a
Washington corporation and wholly-owned subsidiary of PCTH ("PCTH-WA"), to
nominate each of the Shareholders to the Board of Directors of one of
PCTH-WA's subsidiaries.
5.3 Personal Property. Schedule 5.3 lists the personal property
located on the Morel premises that is not owned by Morel, but that is the
personal property of the Shareholders. At any time after Closing, the
Shareholders may remove such personal property from Morel's premises.
5.4 Insurance. After the Closing Date, the Shareholders shall be
entitled to coverage under such director's liability insurance policies as
are generally available to the directors of the corporations affiliated
with PCTH upon whose Boards of Directors the Shareholders sit, under the
same terms and conditions as the policies covering the other directors of
such corporations.
5.5 Employee Plans. Unless and until otherwise determined by or with
the authorization of the Board of Directors of the Surviving Corporation,
all pension and retirement plans of Morel and all other plans, agreements,
or arrangements of Morel relating to its employees or any of them, in force
on the Effective Date of the Merger, shall continue in
<PAGE>23
effect and shall be applicable to the persons who would have been covered
thereby as if the Merger in this Agreement had not been effected.
5.6 Attorneys' Fees. PCTH shall pay up to $14,000 of the attorneys'
fees incurred by Morel and the Shareholders in connection with the
transactions contemplated by this Agreement subject to PCTH's approval of
the invoices for such fees. The Shareholders shall be personally
responsible for all attorneys' fees exceeding such amount.
5.7 Further Actions. The parties and the Surviving Corporation shall
each execute all such other documents and shall take all such other actions
as may be necessary or advisable to make this Agreement and the Merger
effective, and to carry out the intent of this Agreement.
ARTICLE 6.
INDEMNIFICATION
6.1 Indemnification by the Shareholders.
6.1.1 General Indemnification. Notwithstanding any investigation
by PCTH and subject to Section 6.3.1, from and after the Closing, the
Shareholders, jointly and severally, shall indemnify, hold harmless and
defend PCTH and its subsidiaries (including without limitation the
Surviving Corporation), shareholders, affiliates, officers, directors,
employees, agents, successors and assigns (the "PCTH Indemnified Persons")
from and against, and reimburse each of them with respect to, any and all
losses, damages, liabilities, costs, and expenses, including without
limitation interest, penalties and reasonable attorneys' fees
(collectively, "Damages") incurred by any of them based on or arising out
of: (a) any material breach or inaccuracy of any representation or warranty
of Morel or the Shareholders made in this Agreement or any exhibit,
schedule, certificate or agreement delivered in accordance with this
Agreement (collectively the "Related Documents"), or (b) any material
failure by Morel or the Shareholders to perform any covenant required to be
performed by them pursuant to this Agreement or Related Documents.
6.1.2 Specific Indemnification. The Shareholders
agree to defend, indemnify and hold the PCTH Indemnified Persons
harmless from (a) any interest in or claim that Paul Morel or A.
O. Powell, Jr. may have against any of Morel's capital stock,
including without limitation Morel Stock Certificate No. 13, and
(b) any right to repayment or other claim that Paul Morel may
have against Morel, including, without limitation, any claim of
a right to repayment under Bond No. 3 between Morel and Paul
Morel dated July 1, 1980. This indemnification obligation shall
not be subject to the limitations set forth in Section 6.3.1.
6.2 Indemnification by PCTH. Notwithstanding any investigation by
Morel or the Shareholders, and subject to Section 6.3.2, from and after the
Closing, PCTH shall indemnify, hold harmless and defend the Shareholders
and their agents, successors, heirs and assigns from and against, and
reimburse each of them with respect to, any and all Damages incurred by any
of them based on or arising out of: (a) any material breach or inaccuracy
of any representation or warranty of PCTH or Acquisition made in this
Agreement or any Related Document; or (b) any material failure by PCTH or
Acquisition to perform any covenant required to be performed by it pursuant
to this Agreement or any Related Document.
<PAGE>24
6.3 Limits on Indemnification.
6.3.1 Limits on Liability of the Shareholders. Notwithstanding
the foregoing, the liability of the Shareholders under Section 6.1.1, but
not under Section 6.1.2, shall be subject to the following limitations:
a. Indemnification Period. Except as otherwise specified
herein, no claim for indemnity will be effective if not made within three
years after the Closing Date (the "Indemnification Period"). Claims based
upon the assertion that either of the Shareholders had actual knowledge
that a representation or warranty made by Morel or the Shareholders was
materially false when made or was made with the intent to deceive, and
claims based on Section 6.1.2, may be made at any time up to the applicable
statute of limitations.
b. Amount of Indemnification. The maximum aggregate amount
of each Shareholder's liability for claims made during the Indemnification
Period shall be limited to an amount of cash equal to the Fair Market Value
of a percentage of the Shares received by him pursuant to this Agreement,
on the schedule set forth below:
If claim is made within: % of Shares
----------------------- -----------
0 through 12 Months after Closing 40%
13 through 24 Months after Closing 30%
25 through 36 Months after Closing 20%
37 months after Closing and beyond 0%
The "Fair Market Value" of the Shares shall be deemed to be the closing bid
price of the PCTH Common Stock on the NASDAQ SmallCap Market on the Closing
Date. The Shareholders may pay their liability for any such claims in cash
or by delivering to PCTH Shares having a value equal to the amount of the
claim, based on the Fair Market Value of the Shares. Notwithstanding the
above, there shall be no limit on each Shareholders' liability for claims
based upon the assertion that either of the Shareholders had actual
knowledge that a representation or warranty made by Morel or the
Shareholders was materially false when made or was made with the intent to
deceive, or claims based on Section 6.1.2.
6.3.2 Limits on Liability of PCTH. The liability of
PCTH pursuant to Section 6.2 is limited as follows:
a. Indemnification Period. No claim for indemnity will be
effective if not made within three years after the Closing Date, other than
claims based upon the assertion that PCTH had actual knowledge that a
representation or warranty made by PCTH or Acquisition was materially false
when made or was made with the intent to deceive, which claims may be made
at any time up to the applicable statute of limitations.
b. Amount of Indemnification. The maximum
aggregate amount of PCTH's liability at any given time is limited
to the Fair Market Value of the percentage of the Shares set
forth on the schedule in Section 6.3.1(b).
<PAGE>25
6.4 Indemnification Procedure.
6.4.1 Third Party Claims.
a. Each indemnified party will, promptly after obtaining
knowledge of a claim, provide the indemnifying party with written notice of
all third party actions, suits, proceedings, claims, demands or assessments
that may be subject to the indemnification provisions of this Article 6
(collectively, "Third Party Claims"), including, in reasonable detail, the
basis for the claim, the nature of Damages and a good faith estimate of the
amount of Damages.
b. The indemnifying party shall have 15 days after its
receipt of the claim notice to notify the indemnified party in writing
whether the indemnifying party agrees that the claim is subject to this
indemnification under this Article 6 and, if so, whether the indemnifying
party elects to undertake, conduct and control, through counsel of its
choosing (subject to the consent of the indemnified party, such consent not
to be withheld unreasonably), and at its sole risk and expense, the good
faith settlement or defense of the Third Party Claim.
c. If within 15 days after its receipt of the claim notice
the indemnifying party notifies the indemnified party that it elects to
undertake the good faith settlement or defense of a Third Party Claim, the
indemnified party shall reasonably cooperate with the indemnifying party,
including, without limitation, by making available to the indemnifying
party all relevant information material to the defense of the Third Party
Claim. The indemnified party shall be entitled to participate in the
settlement or defense of the Third Party Claim through counsel chosen by
the indemnified party, at its expense, and to approve any proposed
settlement that would impose any obligation or duty on the indemnified
party, which approval may, in the sole discretion of the indemnified party,
be withheld. So long as the indemnifying party is contesting the Third
Party Claim in good faith and with reasonable diligence, the indemnified
party shall not pay or settle the Third Party Claim. Notwithstanding the
foregoing, the indemnified party shall have the right to pay or settle any
Third Party Claim at any time, if it waives any right to indemnification
therefor by the indemnifying party.
d. If the indemnifying party does not provide notice that it
elects to undertake the good faith settlement or defense of a Third Party
Claim, or if the indemnifying party fails to contest the Third Party Claim
or undertake or approve settlement, in good faith and with reasonable
diligence, the indemnified party shall thereafter have the right to
contest, settle or compromise the Third Party Claim at its exclusive
discretion, at the risk and expense of the indemnifying party.
6.4.2 Non-Third Party Claims.
a. Each indemnified party will, with reasonable promptness,
deliver to the indemnifying party written notice of all claims for
indemnification under this Article 6, other than Third Party Claims,
including, in reasonable detail, the basis for the claim, the nature of
Damages and a good faith estimate of the amount of Damages.
b. The indemnifying party shall have 30 days after its
receipt of the claim notice to notify the indemnified party in writing
whether the indemnifying party accepts liability for all or any part of the
Damages described in the claim notice. If the indemnifying
<PAGE>26
party does not so notify the indemnified party, the indemnifying party
shall be deemed to accept liability for all the Damages described in
the claim notice.
6.5 Rights Not Exclusive. An indemnified party's rights to
indemnification under this Article 6 are in addition to, and not in lieu
of, any other rights to which the indemnified party may be entitled at law
or in equity. A party's failure to give timely notice of a claim will not
constitute a defense (in part or in whole) to any claim for indemnification
by such party, except if, and only to the extent that, such failure results
in any material prejudice to the indemnifying party.
ARTICLE 7.
TERMINATION
7.1 Right to Terminate. Notwithstanding anything to the contrary in
this Agreement, this Agreement may be terminated and the transactions
contemplated herein abandoned at any time prior to the Closing:
7.1.1 Mutual Consent. By mutual consent of PCTH and
Morel.
7.1.2 Delay. By either PCTH or Morel, if the Closing shall not
have occurred by December 31, 1995; provided, however, that the right to
terminate this Agreement under this Section 7.1.2 shall not be available to
any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on
or before such date.
7.1.3 Breach by PCTH or Acquisition. By Morel, if PCTH or
Acquisition breach any of their representations and warranties in any
material respect or fail to comply in any material respect with any of
their agreements contained here.
7.1.4 Breach by Morel or the Shareholders. By PCTH, if Morel or
either of the Shareholders breach any of their representations and
warranties in any material respect or fail to comply in any material
respect with any of their agreements contained herein.
7.2 Certain Obligations to Cease. If this Agreement is terminated
pursuant to Section 7.1, all obligations of the parties to this Agreement
shall terminate and there shall be no liability of any party hereto to any
other party, except: (a) for breaches of Section 3.2; (b) that nothing
herein will relieve any party from liability for any willful breach of this
Agreement; and (c) PCTH shall pay all expenses of Morel for the audit of
its financial statements for the most recent two fiscal years.
Notwithstanding the above, if this Agreement is terminated by PCTH under
Section 7.1.2 due to Morel's or the Shareholder's failure to close despite
PCTH's willingness to close, subject to the fulfillment or waiver of the
conditions contained in Section 4.2, PCTH shall only pay one-half of such
auditing expenses.
<PAGE>27
ARTICLE 8.
MISCELLANEOUS PROVISIONS
8.1 Exhibits; Schedules. Each Exhibit to this Agreement
and each Schedule delivered pursuant to the terms of this
Agreement is incorporated into this Agreement by reference.
8.2 Governing Law. This Agreement and the Merger shall be
governed by and construed in accordance with the internal laws
of the State of Washington.
8.3 Notices. Any notice or other communications required or permitted
under this Agreement shall be sufficiently given if in writing and shall be
deemed given or made when delivered personally, by facsimile, or by courier
(with signed receipt), or three days after sent by certified or registered
mail, return receipt requested, to the following addresses or to such other
address as a party may designate in writing to the others:
If to Morel (prior to the Effective Date):
Morel Industries, Inc.
14351 Shamel Street
P.O. Box 678
Entiat, WA 98822
Attn: Stephen L. Morel
Fax No.: (509) 784-1201
with a copy to:
Jerome D. Carpenter, Esq.
Inslee, Best, Doezie & Ryder
777 108th Avenue N.E., Suite 1800
Bellevue, WA 98104
Fax No.: (206) 635-7720
If to the Shareholders:
Stephen L. Morel
224 Stoneybrook Lane
Wenatchee, WA 98801
Fax No.: (509) 784-1201
Mark Morel
2014 Broadway N.
Wenatchee, WA 98801
Fax No.: (509) 784-1201
<PAGE>28
with a copy to:
Jerome D. Carpenter, Esq.
Inslee, Best, Doezie & Ryder
777 108th Avenue N.E., Suite 1800
Bellevue, WA 98104
Fax No.: (206) 635-7720
If to PCTH or to Acquisition:
PCT Holdings, Inc.
434 Olds Station Road
Wenatchee, Washington 98801
Attn: Donald A. Wright, President
Fax No.: (509) 664-6868
with a copy to:
Sheryl A. Symonds
Stoel Rives
3600 One Union Square
600 University Street
Seattle, WA 98101
Fax No.: (206)386-7500
8.4 No Assignment. This Agreement may not be assigned by
operation of law or otherwise.
8.5 Titles and Captions. The section titles, captions and headings in
this Agreement are for convenience only and shall not be deemed part of
this Agreement or in any way intended to define, limit, extend or define
the scope or intent of any provisions of this Agreement.
8.6 Waiver. No failure by any party hereto to insist upon the strict
performance of any covenant, duty, agreement, or condition of this
Agreement or to exercise any right or remedy consequent upon a breach
thereof shall constitute a waiver of any such breach or of such or any
other covenant, agreement, term or condition. Any party by notice pursuant
to this Agreement may, but shall be under no obligation to, waive any of
its rights or any conditions to its obligations under this Agreement, or
any duty, obligation or covenant of any other party. No waiver shall affect
or alter the remainder of this Agreement but each and every other covenant,
agreement, term and condition of this Agreement shall continue in full
force and effect with respect to any other then existing or subsequently
occurring breach.
8.7 Amendment. This Agreement may be amended with respect to any
provision contained herein by a written instrument duly executed on behalf
of each party hereto.
8.8 Severability. If any condition, covenant or other provision in
this Agreement is held to be invalid, void or unenforceable by a court of
competent jurisdiction, the same shall be deemed severable from the
remainder of this Agreement and shall in no way affect any other covenant,
condition or provision of this Agreement. If such condition, covenant or
other
<PAGE>29
provision shall be deemed invalid due to its scope or breadth, such
provision shall be deemed reformed and valid to the extent of the scope or
breadth permitted by law.
8.9 Rights and Remedies. The rights and remedies of the parties under
this Agreement shall not be mutually exclusive and the exercise of one or
more of the provisions of this Agreement shall not preclude the exercise of
any other provision.
8.10 Attorneys' Fees. In the event of any legal action arising from or
relating to this Agreement, the non-prevailing party shall reimburse the
prevailing party for all of the prevailing party's costs and expenses,
including reasonable attorneys' fees, incurred in legal action.
8.11 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and
the same agreement.
8.12 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements or understandings
between parties, written or oral, as to the subject matter of this
Agreement.
Executed as of the date first written above.
MOREL:
MOREL INDUSTRIES, INC.
By /s/ STEPHEN L. MOREL
-----------------------------
Stephen L. Morel
Its President
SHAREHOLDERS:
/s/ STEPHEN L. MOREL
-------------------------------
STEPHEN L. MOREL
/s/ MARK MOREL
-------------------------------
MARK MOREL
<PAGE>30
PCTH:
PCT HOLDINGS, INC., a Nevada
corporation
By /s/ DONALD A. WRIGHT
-----------------------------
Donald A. Wright
Its President
ACQUISITION:
MOREL ACQUISITION CORPORATION
By /s/ DONALD A. WRIGHT
-----------------------------
Donald A. Wright
Its President
<PAGE>31
SPOUSAL CONSENTS
The undersigned hereby consent to the execution of this Agreement
by their respective spouses, individually and on behalf of their respective
marital communities.
/s/ KATHRYN M. MOREL
- -----------------------------------
Kathryn M. Morel
/s/ MARISA MOREL
- -----------------------------------
Marisa Morel
<PAGE>1
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS AGREEMENT is entered into as of December 1, 1995, by and
between PCT HOLDINGS, INC., a Nevada corporation ("PCTH"), and the persons
whose names are listed on the signature page of this Agreement, both of whom
are shareholders of MOREL INDUSTRIES, INC., a Washington corporation ("Morel")
as of the date of this Agreement (the "Shareholders").
RECITALS
A. PCTH, Morel Acquisition Corporation, a wholly-owned subsidiary of
PCTH ("Acquisition"), Morel, and the Shareholders have entered into a
Agreement and Plan of Merger dated as of November 30, 1995 (the "Merger
Agreement"), pursuant to which Acquisition is merging with Morel, with Morel
to be the surviving corporation and a wholly-owned subsidiary of PCTH (the
"Merger");
B. All of the consideration for the Merger is common stock, $.001 par
value, of PCTH (the "PCTH Common Stock"); and
C. The Merger Agreement provides for the execution of a registration
rights agreement on the terms set forth herein, providing certain rights to
the Shareholders with respect to up to one-half of the shares of PCTH Common
Stock acquired by each of them as a result of the merger (the "Registrable
Shares").
AGREEMENT
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agree as
follows:
1. Notice of Registration. If, at any time within two years
after the Closing (as defined in the Merger Agreement), PCTH proposes to
register any PCTH Common Stock under the Securities Act of 1933, as amended
(the "1933 Act"), but only if other PCTH shareholders may offer to sell PCTH
Common Stock to the general public under such registration (a "Registered
Offering"), PCTH will:
(a) promptly give written notice of the proposed
Registered Offering to each of the Shareholders who, at the time such notice
is sent, holds of record any of the Registrable Shares (which notice shall
include a list of the jurisdictions in which PCTH intends to attempt to
qualify such securities under the applicable state laws regulating the offer
and sale of securities (the "State Acts")); and
(b) at the written request of any Shareholder who holds
Registrable Shares, which notice must be provided to PCTH within 15 days after
receipt of the notice referred to in Section 1(a), include in the Registered
Offering (and any related qualification under applicable State Acts) and in
any related underwriting, the Registrable Shares of any such Shareholder on
an equal basis with other shareholders of PCTH, with expenses of such
registration to be paid as provided in Section 4 below.
2. Registration. In the event that PCTH receives a timely
request for registration pursuant to Section 1(b), PCTH will use its best
efforts to include in the
<PAGE>2
Registered Offering the portion of the Registrable Shares that any Shareholder
requests to have included therein and to file post-effective amendments, apply
for appropriate qualification under applicable State Acts and undertake
appropriate compliance with applicable regulations issued under the 1933 Act.
Notwithstanding the foregoing, PCTH shall not be obligated to effect, or to
take any action to effect, any such Registered Offering.
3. Underwriting. If the Registered Offering of which PCTH
gives notice involves an underwriting, PCTH shall so advise the Shareholders
as part of the written notice given pursuant to Section 1(a). In such event,
the Shareholders' rights to registration pursuant to Section 2 shall be
conditioned upon their participation in such underwriting. The Shareholders
and PCTH (and any other shareholders proposing to distribute their shares of
PCTH Common Stock through such underwriting) shall enter into an underwriting
agreement in customary form with the representatives of the underwriter or
underwriters selected for such underwriting by PCTH. Notwithstanding any
other provisions of this Agreement, if the representatives of the underwriter
or underwriters determine that marketing factors make it advisable to impose
a limitation on the number of shares to be underwritten, the number of shares
that may be included in the Registered Offering on behalf of the Shareholders,
or any other shareholders proposing to distribute their shares of PCTH Common
Stock through such underwriting shall be allocated in proportion, as nearly
as practicable, to the respective amounts of securities that they had
requested to be included. If any Shareholder disapproves of the terms of any
such underwriting, such Shareholder may elect to withdraw therefrom by written
notice to PCTH and the representatives of the underwriter or underwriters.
4. Expenses of Registration. PCTH shall bear all reasonable
registration expenses incurred in connection with any registration,
qualification and compliance by PCTH pursuant to Section 2. All underwriting
discounts or commissions shall be borne by the holders of the securities so
registered, pro rata on the basis of the number of their shares so registered.
5. Registration Procedures. In the case of a registration
effected by PCTH pursuant to Section 2, PCTH will keep the Shareholders
advised in writing as to the initiation of the registration and as to the
completion thereof. In connection therewith, PCTH will:
(a) to the extent allowed by the 1933 Act and the rules
and regulations of the Securities and Exchange Commission, keep such
registration effective for a period of 60 days or until the Shareholders have
completed their distribution as described in the registration statement,
whichever first occurs;
(b) furnish at its expense such number of prospectuses and
other documents incident thereto as the participating Shareholders from time
to time may reasonably request; and
(c) use its best efforts to register or qualify the
Registrable Shares under the State Acts of such jurisdictions as the
participating Shareholders may reasonably request; provided however, that PCTH
shall not be obligated to register or qualify Registrable Shares in any
jurisdiction in which PCTH would be required to execute a general consent to
service of process in order to effect such registration, qualification or
compliance, unless PCTH is already subject to service in such jurisdiction and
except as may be required by the 1933 Act or applicable rules or regulations
thereunder.
<PAGE>3
6. Indemnification.
(a) Indemnification by PCTH. PCTH, with respect to each
registration or qualification effected pursuant to Section 2, will defend,
indemnify and hold harmless the Shareholders and each underwriter, if any, and
each party controlling any such underwriter, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular
or other material document incident to any such registration, qualification
or compliance, (ii) any omission (or alleged omission) of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) any violation by PCTH of the 1933 Act or any State Act
or any rule or regulation thereunder applicable to PCTH and relating to an
action or inaction required of PCTH in connection with any such registration,
qualification or compliance. PCTH will reimburse the Shareholders,
underwriters or control persons for any legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that PCTH will not be liable
in any case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based upon information furnished to PCTH by the
Shareholders or such underwriter or control person, as the case may be.
(b) Indemnification by Shareholders. If Shares held by
a Shareholder are included in the securities as to which a registration,
qualification or compliance is being effected, such Shareholder will defend,
indemnify and hold harmless PCTH, each of PCTH's officers and directors, each
party controlling PCTH, each legal counsel and independent accountant of PCTH,
each underwriter, if any, and each party controlling any such underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact made by such Shareholder and contained
in any registration statement, prospectus, offering circular or other material
document incident to any such registration, qualification or compliance, (ii)
any omission (or alleged omission) of a material fact by such Shareholder
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) any violation by such Shareholder of the 1933 Act or any
State Act or any rule or regulation thereunder applicable to him, her or it
and relating to an action or inaction required in connection with any such
registration, qualification or compliance. Any such Shareholder will
reimburse PCTH, such officers, directors, underwriters, control persons or
others for any legal and other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case only to the extent that any such claim, loss, damage, liability
or expense arises out of or is based upon information furnished to PCTH or its
representatives by or on behalf of such Shareholder.
(c) Notice of Claims. Each party entitled to
indemnification under this Section 6 (the "Indemnified Party") shall give
notice to the party that allegedly is obligated hereunder to indemnify the
Indemnified Party (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claims as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such
claim or any litigation resulting therefrom; provided, however, that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefore, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or potential
differing
<PAGE>4
interests or defenses exist or may exist between the Indemnifying Party
and the Indemnified Party, in which case such expense shall by paid by
the Indemnifying Party); and provided further that the failure of any
Indemnified Party to give notice as provided in this Agreement shall not
relieve the Indemnifying Party of its obligations under this Section 6. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation.
7. Information from and Obligations of the Shareholders. Each
Shareholder whose Registrable Shares are included in himself Registered
Offering will furnish in writing to PCTH all information regarding himself and
the distribution proposed to be made by him as PCTH may request in writing and
as may be required in connection with the registration, qualification or
compliance contemplated in this Agreement. Each of the Shareholders shall
have the burden of proving that Shares of PCTH Common Stock held by him are
Registrable Shares. For purposes of this Agreement, any shares of PCTH Common
Stock held in escrow pursuant to the terms of the Merger Agreement on the date
that notice is provided under Section 1(a), above, shall not be deemed to be
Registrable Shares.
8. Stand-Off Agreement. No person who participates in a
Registered Offering in accordance with this Agreement, if so requested by PCTH
or an underwriter of securities of PCTH, will sell or otherwise transfer or
dispose of any other securities of PCTH held by such person during the 180-
day period following the effective date of a registration statement for such
Registered Offering. PCTH may impose stop transfer instructions with respect
to the securities subject to the restriction in this section until the end
of the 180-day period.
9. Miscellaneous.
(a) Waiver or Modification of Agreement. No modification
or waiver of any provision of this Agreement, nor any consent to any departure
by either party herefrom, shall in any event be effective unless the same
shall be in writing and signed by the party against which enforcement of such
modification or waiver is sought, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) Amendment of Agreement. This Agreement may be amended
with respect to any provision contained herein by a written instrument duly
executed on behalf of each party hereto.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered, or three days after deposited in the United States mail,
first-class, postage prepaid, or upon confirmed facsimile transmission,
addressed to the respective parties hereto as follows:
<PAGE>5
If to PCTH:
----------
PCT Holdings, Inc.
434 Olds Station Road
Wenatchee, Washington 98801
Attn.: Donald A. Wright
Telephone: (509) 664-8000
Facsimile: (509) 664-6868
with a copy to:
Sheryl A. Symonds, Esq.
Stoel Rives
36th Floor, One Union Square
600 University Street
Seattle, Washington 98101-3197
Telephone: (206) 386-7611
Facsimile: (206) 386-7500
If to any of the Shareholders, to the address or number shown next to their
name on the signature pages of this Agreement; or to such other address as any
party hereto may designate by like notice to the other parties hereto, with
a copy to;
Jerome Carpenter, Esq.
Inslee, Best, Doezie & Ryder
777 108th Avenue, NE, Suite 1900,
Bellevue, Washington 98009-9016
Telephone: (206) 450-4235
Facsimile: (206) 635-7720
(d) No Assignment. No Shareholder may transfer any rights
granted pursuant to this Agreement to any third party.
(e) Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of
which counterparts collectively shall constitute one instrument, and in making
proof of this Agreement, it shall never be necessary to produce or account for
more than one such counterpart.
(f) Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of PCTH, the Shareholders, and their
representatives, successors, and permitted assigns, in accordance with the
terms hereof.
(g) Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to registration
rights and supersedes all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether
oral or written, express or implied, with respect to the subject matter
hereof.
<PAGE>6
(h) Governing Law. This Agreement and its validity,
construction, enforcement, and interpretation shall be governed by the
substantive laws of the State of Washington.
(i) Waiver. No failure or delay on the part of any party
in exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a
waiver of such right, power, or privilege, nor shall any single or partial
exercise of any such right, power, or privilege preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege.
(j) Headings. The descriptive section headings are for
convenience of reference only and shall not control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
duly executed as of the date and year first above written.
PCTH:
PCT HOLDINGS, INC., a Nevada corporation
By /s/ DONALD A. WRIGHT
-------------------------------------
Donald A. Wright
Its: President
SHAREHOLDERS:
/s/ STEPHEN L. MOREL
---------------------------------------
Stephen L. Morel
Address: 224 Stoneybrook Lane
Wenatchee, WA 98801
Facsimile: (509) 784-1201
/s/ MARK MOREL
---------------------------------------
Mark Morel
Address: 2014 Broadway N.
Wenatchee, WA 98801
Facsimile: (509) 784-1201
<PAGE>1
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is entered into as of November 30, 1995,
by and between PCT HOLDINGS, INC., a Nevada corporation ("PCTH"),
SEISMIC SAFETY PRODUCTS, INC., a Florida corporation ("Seller"),
and the persons whose names are listed on the signature page of
this Agreement, all of whom are shareholders of Seller as of the
date of this Agreement (the "Shareholders").
RECITALS
--------
A. PCTH, certain subsidiaries of PCTH, Seller, and certain
affiliates of Seller have entered into an Asset Purchase
Agreement dated as of October 27, 1995 (the "Purchase
Agreement"), pursuant to which a subsidiary of PCTH is acquiring
substantially all of the assets of Seller (the "Assets");
B. A portion of the purchase price for the Assets is
common stock, $.001 par value, of PCTH (the "PCTH Common Stock");
and
C. The Purchase Agreement provides for the execution of
a registration rights agreement on the terms set forth herein,
providing certain rights to Seller and the Shareholders.
NOW, THEREFORE, for valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the undersigned
agree as follows:
AGREEMENT
---------
1. Notice of Registration. If, at any time (but only
once) within two years after the Closing (as defined in the
Purchase Agreement), PCTH proposes to register any PCTH Common
Stock under the Securities Act of 1933, as amended (the "1933
Act"), except for registration on Form S-8 or any successor form
with respect to compensation plans and except for registrations
in connection with the acquisition by merger or otherwise of
another public company (subject to the foregoing exceptions, a
"Registered Offering"), PCTH will:
(a) promptly give written notice of the proposed
Registered Offering to Seller (if Seller has not previously been
dissolved) and to each of the Shareholders who, at the time such
notice is sent, holds of record any of the shares ("Registrable
Shares") of PCTH Common Stock that were issued to Seller as part
of the purchase price for the Assets (which notice shall include
a list of the jurisdictions in which PCTH intends to attempt to
qualify such securities under the applicable state laws
regulating the offer and sale of securities (the "State Acts"));
and
(b) at the written request of Seller (if it holds
of record any Registrable Shares) or any Shareholder who holds
Registrable Shares, which notice must be provided to PCTH within
15 days after receipt of the notice referred to in Section 1(a),
include in the Registered Offering (and any related qualification
under applicable State Acts) and in any related underwriting, the
Registrable Shares of Seller and any such Shareholder on an equal
basis with other shareholders of PCTH, with expenses of such
registration to be paid as provided in Section 4 below.
<PAGE>2
2. Registration. In the event that PCTH receives a
timely request for registration pursuant to Section 1(b), PCTH
will use its best efforts to include in the Registered Offering
the portion of the Registrable Shares that Seller and any
Shareholders request to have included therein and to file post-
effective amendments, apply for appropriate qualification under
applicable State Acts and undertake appropriate compliance with
applicable regulations issued under the 1933 Act.
Notwithstanding the foregoing, PCTH shall not be obligated to
effect, or to take any action to effect, any such Registered
Offering.
3. Underwriting. If the Registered Offering of which
PCTH gives notice involves an underwriting, PCTH shall so advise
Seller and the Shareholders as part of the written notice given
pursuant to Section 1(a). In such event, Seller's and the
Shareholders' rights to registration pursuant to Section 2 shall
be conditioned upon their participation in such underwriting.
Seller, the Shareholders, and PCTH (and any other shareholders
proposing to distribute their shares of PCTH Common Stock through
such underwriting) shall enter into an underwriting agreement in
customary form with the representatives of the underwriter or
underwriters selected for such underwriting by PCTH.
Notwithstanding any other provisions of this Agreement, if the
representatives of the underwriter or underwriters determine that
marketing factors make it advisable to impose a limitation on the
number of shares to be underwritten, the number of shares that
may be included in the Registered Offering on behalf of Seller,
the Shareholders, or any other shareholders proposing to
distribute their shares of PCTH Common Stock through such
underwriting shall be allocated in proportion, as nearly as
practicable, to the respective amounts of securities that they
had requested to be included. If Seller or any Shareholder
disapproves of the terms of any such underwriting, he, she or it
may elect to withdraw therefrom by written notice to PCTH and the
representatives of the underwriter or underwriters.
4. Expenses of Registration. PCTH shall bear all
reasonable registration expenses incurred in connection with any
registration, qualification and compliance by PCTH pursuant to
Section 2. All underwriting discounts or commissions shall be
borne by the holders of the securities so registered, pro rata
on the basis of the number of their shares so registered.
5. Registration Procedures. In the case of a
registration effected by PCTH pursuant to Section 2, PCTH will
keep Seller and the Shareholders advised in writing as to the
initiation of the registration and as to the completion thereof.
In connection therewith, PCTH will:
(a) to the extent allowed by the 1933 Act and the
rules and regulations of the Securities and Exchange Commission,
keep such registration effective for a period of 60 days or until
Seller and the Shareholders have completed their distribution as
described in the registration statement, whichever first occurs;
(b) furnish at its expense such number of
prospectuses and other documents incident thereto as Seller and
the participating Shareholders from time to time may reasonably
request; and
(c) use its best efforts to register or qualify
the Registrable Shares under the State Acts of such jurisdictions
as the participating Shareholders may reasonably request;
provided however, that PCTH shall not be obligated to register
or qualify Registrable Shares in any jurisdiction in which PCTH
would be required to execute a general consent to service of
process in order to effect such registration, qualification or
compliance,
<PAGE>3
unless PCTH is already subject to service in such jurisdiction and except
as may be required by the 1933 Act or applicable rules or regulations
thereunder.
6. Indemnification.
(a) Indemnification by PCTH. PCTH, with respect
to each registration or qualification effected pursuant to
Section 2, will defend, indemnify and hold harmless Seller and
the Shareholders and each underwriter, if any, and each party
controlling any such underwriter, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising
out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any registration
statement, prospectus, offering circular or other material
document incident to any such registration, qualification or
compliance, (ii) any omission (or alleged omission) of a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) any violation by
PCTH of the 1933 Act or any State Act or any rule or regulation
thereunder applicable to PCTH and relating to an action or
inaction required of PCTH in connection with any such
registration, qualification or compliance. PCTH will reimburse
Seller, the Shareholders, underwriters or control persons for any
legal and other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action; provided, however, that PCTH will not be
liable in any case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based upon
information furnished to PCTH by Seller, the Shareholders or such
underwriter or control person, as the case may be.
(b) Indemnification by Shareholders. If Shares
held by Seller or a Shareholder are included in the securities
as to which a registration, qualification or compliance is being
effected, Seller and such Shareholder will defend, indemnify and
hold harmless PCTH, each of PCTH's officers and directors, each
party controlling PCTH, each legal counsel and independent
accountant of PCTH, each underwriter, if any, and each party
controlling any such underwriter, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising
out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact made by Seller or such Shareholder
and contained in any registration statement, prospectus, offering
circular or other material document incident to any such
registration, qualification or compliance, (ii) any omission (or
alleged omission) of a material fact by Seller or such
Shareholder required to be stated therein or necessary to make
the statements therein not misleading, and (iii) any violation
by Seller or such Shareholder of the 1933 Act or any State Act
or any rule or regulation thereunder applicable to him, her or
it and relating to an action or inaction required in connection
with any such registration, qualification or compliance. Seller
and any such Shareholder will reimburse PCTH, such officers,
directors, underwriters, control persons or others for any legal
and other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, in each case only to the extent that any
such claim, loss, damage, liability or expense arises out of or
is based upon information furnished to PCTH or its
representatives by Seller or such Shareholder.
(c) Notice of Claims. Each party entitled to
indemnification under this Section 6 (the "Indemnified Party")
shall give notice to the party that allegedly is obligated
hereunder to indemnify the Indemnified Party (the "Indemnifying
Party") promptly after such Indemnified Party has actual
knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided,
however, that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefore, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld),
<PAGE>4
and the Indemnified Party may participate in such defense at such
party's expense (unless the Indemnified Party shall have been advised
by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified
Party, in which case such expense shall by paid by the
Indemnifying Party); and provided further that the failure of any
Indemnified Party to give notice as provided in this Agreement
shall not relieve the Indemnifying Party of its obligations under
this Section 6. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation.
7. Information from and Obligations of Seller and the
Shareholders. Seller and each Shareholder whose Registrable
Shares are included in a Registered Offering will furnish in
writing to PCTH all information regarding themselves and the
distribution proposed to be made by them as PCTH may request in
writing and as may be required in connection with the
registration, qualification or compliance contemplated in this
Agreement. Without limiting the foregoing, Seller shall notify
PCTH immediately upon distribution of any Registrable Shares to
any of the Shareholders, which notice will include the number of
Registrable Shares so distributed. Seller and each of the
Shareholders shall have the burden of proving that Shares of PCTH
Common Stock held by them are Registrable Shares.
8. Stand-Off Agreement. No person who participates
in a Registered Offering in accordance with this Agreement, if
so requested by PCTH or an underwriter of securities of PCTH,
will sell or otherwise transfer or dispose of any other
securities of PCTH held by such person during the 180-day period
following the effective date of a registration statement for such
Registered Offering. PCTH may impose stop transfer instructions
with respect to the securities subject to the restriction in this
section until the end of the 180-day period.
9. Dissolution of Seller. In the event that Seller
is dissolved or its corporate existence is terminated under
applicable law, or if for any reason Seller no longer holds any
Registrable Shares, any obligations of PCTH with respect to
Seller described in this Agreement shall be automatically
terminated, without requiring any action on the part of PCTH, on
the effective date of such dissolution or termination or on the
first date on which Seller ceases to hold Registrable Shares.
10. Miscellaneous.
(a) Waiver or Modification of Agreement. No
modification or waiver of any provision of this Agreement, nor
any consent to any departure by either party herefrom, shall in
any event be effective unless the same shall be in writing and
signed by the party against which enforcement of such
modification or waiver is sought, and then such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given.
(b) Amendment of Agreement. This Agreement may
be amended with respect to any provision contained herein by a
written instrument duly executed on behalf of each party hereto.
(c) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly given when personally delivered, or
<PAGE>5
three days after deposited in the United States mail, first-class,
postage prepaid, or upon confirmed facsimile transmission, addressed
to the respective parties hereto as follows:
If to PCTH:
----------
PCT Holdings, Inc.
434 Olds Station Road
Wenatchee, Washington 98801
Attn.: Donald A. Wright
Telephone: (509) 664-8000
Facsimile: (509) 664-6868
with a copy to:
Sheryl A. Symonds, Esq.
Stoel Rives
36th Floor, One Union Square
600 University Street
Seattle, Washington 98101-3197
Telephone: (206) 386-7611
Facsimile: (206) 386-7500
If to Seller:
------------
c/o Bob McGill
2174 Kent Ave. W.
Clearwater, Florida 34624
Telephone: (813) 539-1468
If to any of the Shareholders, to the address or number shown
next to their name on the signature pages of this Agreement; or
to such other address as any party hereto may designate by like
notice to the other parties hereto.
(d) No Assignment. Neither Seller nor any
Shareholder may transfer any rights granted pursuant to this
Agreement to any third party.
(e) Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed an
original but all of which counterparts collectively shall
constitute one instrument, and in making proof of this Agreement,
it shall never be necessary to produce or account for more than
one such counterpart.
(f) Binding Effect; Assignment. This Agreement
shall be binding upon and inure to the benefit of PCTH, Seller,
the Shareholders, and their representatives, successors, and
permitted assigns, in accordance with the terms hereof.
(g) Entire Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect to
registration rights and supersedes all prior agreements,
representations, warranties, statements, promises, information,
<PAGE>6
arrangements and understandings, whether oral or written, express
or implied, with respect to the subject matter hereof.
(h) Governing Law. This Agreement and its
validity, construction, enforcement, and interpretation shall be
governed by the substantive laws of the State of Washington.
(i) Waiver. No failure or delay on the part of
any party in exercising any right, power, or privilege hereunder
or under any of the documents delivered in connection with this
Agreement shall operate as a waiver of such right, power, or
privilege, nor shall any single or partial exercise of any such
right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
(j) Headings. The descriptive section headings
are for convenience of reference only and shall not control or
affect the meaning or construction of any provision of this
Agreement.
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be duly executed as of the date and year first above
written.
PCTH:
PCT HOLDINGS, INC., a Nevada corporation
By /s/ DONALD A. WRIGHT
------------------------------------
Its President
SELLER:
SEISMIC SAFETY PRODUCTS, INC., a
Florida corporation
By /s/ ROBERT L. MCGILL
------------------------------------
Its President
SHAREHOLDERS:
/s/ ELENA F. MCGILL
---------------------------------------
Elena F. McGill
520 Ivy Street
Glendale, California 91204
---------------------------------------
Leopoldo V. Abis
88 H. Viola Street
sQuezon City, Phillipines
/s/ ADOLPINO B. AGUAYON
---------------------------------------
Adolpino B. Aguayon
3252 Terzilla Place
Los Angeles, CA 90065
<PAGE>7
/s/ OPHELIA AQUINO
---------------------------------------
Ophelia Aquino
1827 Apex Avenue
Los Angeles, CA 90026
/s/ RICARDO P. AQUINO
---------------------------------------
Ricardo P. Aquino
1827 Apex Avenue
Los Angeles, CA 90026
/s/ GEORGE H. BALDWIN
---------------------------------------
George H. Baldwin
Box 30
Bridgeport, IL 62417
---------------------------------------
Joseph L. Besnard
3063 Autumn Drive
Palm Harbor, FL 34683
/s/ BANDIPHAN BHANDHUKRAUI
---------------------------------------
Bandiphan Bhandhukraui
8306 Wilshire Blvd., #184
Beverly Hills, CA 90211
/s/ VORAPAT CHARUSORN
---------------------------------------
Vorapat Charusorn
16 Harcourt St., 9I
Boston, MA 02006
/s/ RALPH HAGUE
---------------------------------------
Ralph Hague
633 Alhambra Rd. #901-02
Venice, FL 34285
/s/ BETTY MCGILL HENDRIX (ELIZABETH)
---------------------------------------
Betty McGill Hendrix
2617 Cove Cay, #504
Clearwater, FL 34620
/s/ JAMES V. KENNEDY
---------------------------------------
James V. Kennedy
112 Belle Glen Drive
Nashville, TN 37221
<PAGE>8
/s/ WADE L. KOHN
---------------------------------------
Wade L. Kohn
2059 Arbor Drive
Clearwater, FL 34620
/s/ JERRY J. LEWIS
---------------------------------------
Jerry J. Lewis
606 Hendrie Blvd.
Royal Oak, MI 48067
/s/ JAMES W. MALLEIS
---------------------------------------
James W. Malleis, CPA
30345 Woodgate Lane
Southfield, MI 48076
/s/ JAMES C. MCGILL
---------------------------------------
James C. McGill
c/o Elena McGill
520 Ivy Street
Glendale, CA 91024
/s/ JOE MCGILL
---------------------------------------
Joe McGill
7837 Skyview Blvd.
Navarre, FL 32566
/s/ BARBARA MCGILL
---------------------------------------
Barbara McGill
7837 Skyview Blvd.
Navarre, FL 32566
/s/ ROBERT L. MCGILL
---------------------------------------
Robert L. McGill
2174 Kent Ave. West
Clearwater, FL 34624
/s/ WILLIAM MCGILL, SR.
---------------------------------------
William McGill, Sr.
4444 West Cap Road
Whites Creek, TN 37189
<PAGE>9
/s/ ADELENA MCGILL
---------------------------------------
Adelena McGill, Sr.
4444 West Cap Road
Whites Creek, TN 37189
---------------------------------------
Elizabeth S. McNamara
603 L. Longview Road
Knoxville, TN 37919
/s/ JOHN P. MCNAMARA
---------------------------------------
John P. McNamara
Route 1, Box 173-34 McCormick
Brewster, WA 98812
/s/ ALBERTO S. MORILLO, JR.
---------------------------------------
Alberto S. Morillo, Jr.
36 M. Viola, Area 3, U.P.Campus
Quezon City, Phillipines
/s/ FURMAN G. O'NEAL
---------------------------------------
Furman G. O'Neal
4780 Lickton Pike
Whites Creek, TN 37189
/s/ RONALD N.S. ROCZ
---------------------------------------
Ronald N.S. Rocz
32400 Evergreen
Birmingham, MI 48025
/s/ LES SAFFIL
---------------------------------------
Les Saffil
1505 Purdue Ave., Ste. 303
Los Angeles, CA 90025
---------------------------------------
John H. Smith
1201 Davidson Street
Nashville, TN 37206
/s/ PAUL C. SMITH
---------------------------------------
Paul C. Smith
45185 Waterpointe, #202
Ashburn, VA 20011
<PAGE>10
/s/ SUTHIPONGSE THATPHITHAKKUL
---------------------------------------
Suthipongse Thatphithakkul
7514 Bellingham Ave.
North Hollywood, CA 91605
/s/ SUTIN THATPHITHAKKUL
---------------------------------------
Sutin Thatphithakkul
7514 Bellingham Ave.
North Hollywood, CA 91605
/s/ LYRA V. THOMPKIN
---------------------------------------
Lyra V. Thompkin
520 Ivy Street
Glendale, CA 91204
/s/ PERFECTO M. TOBIAS
---------------------------------------
Perfecto M. Tobias
2 Duane Street
Irvine, CA 92720
/s/ WAYNE WARD
---------------------------------------
Wayne Ward
2203 Humble Road
Missoula, MT 59801
/s/ MARY JANE WARD
---------------------------------------
Mary Jane Ward
2203 Humble Road
Missoula, MT 59801
CONTACT: Don Wright, President/CEO
Nick Gerde, Vice President/CFO
Phone: (509) 664-8000
FAX: (509) 664-6868
FOR IMMEDIATE RELEASE
- ---------------------
PCT HOLDINGS, INC. SUBSIDIARY MERGES WITH MOREL INDUSTRIES, INC.
Second Major Expansion This Quarter To Increase Manufacturing and Sales
WENATCHEE, WASH -- December 13, 1995 -- PCT Holdings, Inc. (PCTH) announced
today that one of its subsidiaries has merged with Morel Industries, Inc., a
manufacturer of precision cast aluminum components for the transportation and
aerospace industries. Morel will continue operating as a wholly-owned
subsidiary of PCTH.
"Morel's outstanding service to Washington manufacturers for nearly 85
years has enabled the company to build strong relationships with local
companies producing heavy trucks, earth-moving equipment and aerospace
products. The market for Morel's aluminum cast parts and components is
expanding as more industries use these products for a broad range of
equipment," said Don Wright, president and CEO of PCTH. "Our process is more
cost effective than raw stock manufacturing and it conforms to endurance
standards required for use in transportation equipment and well as
sophisticated aerospace products."
The merger is expected to increase production capacities and improve
operating efficiencies for Morel and PCTH's subsidiary, Cashmere
Manufacturing. Prior to the merger, PCTH was already providing precision
machining capabilities for Morel products. "The two companies were producing
products together for the same customer base," Wright explained. "The merger
allows us to continue to serve those customers with greater efficiency and
cost effectiveness -- a win-win for everybody."
"This is the second major expansion of PCTH this quarter," Wright noted.
"The addition of Morel will significantly increase sales for PCTH and its
subsidiaries."
PCTH and its subsidiaries design, manufacture, assemble and distribute
precision electronic components for the aerospace, automotive, electronic,
energy and medical equipment industries. PCTH owns over 25 patents and
employs a number of proprietary manufacturing technologies. The Company is
publicly traded on the NASDAQ SmallCap Market(SM) under the trading symbol
"PCTH."
CONTACT: Don Wright, President/CEO
NICK GERDE, Vice President/CFO
Phone: (509) 664-8000
FAX: (509) 664-6868
FOR IMMEDIATE RELEASE
- ---------------------
PCT HOLDINGS, INC. SUBSIDIARY ACQUIRES ASSETS OF SEISMIC
SAFETY PRODUCTS
Proprietary Technology Activates Gas Safety Valves During Earthquakes
WENATCHEE, WASH -- December 10, 1995 -- PCT Holdings, Inc. (PCTH), a Nevada
corporation based in Wenatchee, Wash., announced today that one of its
subsidiaries, Seismic Safety Products, Inc., a Washington corporation (Seismic
Safety) purchased the assets of Seismic Safety Products, Inc., a Florida
corporation. The purchase price was not disclosed but included a combination
of cash and unregistered common stock of PCTH.
"We believe there is a significant market for Seismic Safety's valves
which stop the flow of gas during seismic activity," said Don Wright,
president and CEO of PCTH. "We also believe that our technology can save both
lives and property, and we intend to market aggressively in earthquake-prone
areas including California, Japan and Washington state." To spearhead this
initiative, the company has appointed John McNamara as Vice President of Sales
and Marketing of Seismic Safety. McNamara has over 25 years of experience
marketing technology products in the United States and Asia.
"The acquisition of Seismic Safety compliments our current line of
patented products by utilizing existing manufacturing facilities. It also
provides an opportunity to become a market leader in earthquake safety
applications for commercial, residential and gas utility companies," Wright
explained.
PCTH and its subsidiaries design, manufacture, assemble and distribute
precision electronic components for the aerospace, automotive, electronic,
energy and medical equipment industries. The company is publicly traded on
the NASDAQ SmallCap Market(SM) under the trading symbol "PCTH."
