UNITED STATES
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): September 16, 1996
TOROTEL, INC.
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction of incorporation)
2-33256 44-0610086
(Commission File Number) (IRS Employer Identification No.)
13402 South 71 Highway, Grandview, Missouri 64030
(Address of principal executive of offices) (Zip Code)
Registrant's telephone number, including area code (816) 761-6314
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
On September 16, 1996, Torotel, Inc. (the "Company") announced that it had
entered into a letter of intent for the possible sale of 1,990,050 shares of
common stock for $2.0 million to Brockson Investment Company of Phoenix,
Arizona ("Brockson"). In connection with this sale, Brockson also would
purchase at the same per-share price, or acquire voting rights with respect
to, stock from the founder's family shareholders of the Company. As a result
of these transactions, Brockson would acquire more than 50% of the
outstanding shares of the Company.
These transactions are subject to, among other things, due diligence,
the negotiation and execution of definitive agreements, and the approval of
the Company's shareholders. The board of directors of the Company may, if
required in the exercise of its fiduciary duties, provide information and
conduct discussions in response to an unsolicited proposal from other
prospective purchasers, as well as terminate this letter of intent subject to
the payment of a $200,000 termination fee to Brockson under certain
circumstances.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
1. Press release dated September 16, 1996
2. Letter of intent dated August 23, 1996
SIGNATURE
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.
TOROTEL, INC.
By: /s/ H. James Serrone
H. James Serrone
Vice President of Finance and
Chief Financial Officer
Date: September 17,1996
EXHIBIT INDEX
Exhibit Description
1. Press release dated September 16, 1996
2. Letter of intent dated August 23, 1996
Exhibit 1
NEWS BULLLETIN
TOROTEL
TRADED: ASE:TTL
For Further Information:
AT THE COMPANY: AT THE FlNANCIAL RELATIONS BOARD
Jim Serrone Lynne Franklin (General info) 312/266-7800
Chief Financial Officer
816/761 -6314
FOR IMMEDIATE RELEASE
MONDAY, SEPEMBER 16, 1996
TOROTEL SIGNS LETTER OF INTENT
TO SELL COMMON SHARES TO
BROCKSON INVESTMENT
KANSAS CITY, MO, September 16, Torotel, Inc., (AMEX:TTL) announced today
that it has entered into a letter of intent for the possible sale of
1,99O,O5O shares of common stock for $2.0 million to Brockson Investment
Company, Phoenix, AZ. In connection with this sale, Brockson also would
purchase at the same per-share price, or acquire voting rights with respect
to, stock from the founder's family shareholders of the company. As a result
of these transactions, Brockson would acquire more than 50 percent of the
outstanding Torotel shares.
These transactions are subject to, among other things, due diligence, the
negotiation and execution of definitive agreements, and the approval of the
Torotel shareholders. The board of directors of Torotel has reserved the
right, in the exercise of its fiduciary duties, to provide information and
conduct discussions in response to an unsolicited proposal from other
prospective purchasers, as well as to terminate this letter of intent
subject to the payment of a $200,000 termination fee to Brockson under
certain circumstances.
Torotel, Inc. specializes in the design and manufacture of high-power
switching power supplies and a broad range of precision magnetic components
used in commercial and military electronics. Torotel's products are sold to
original equipment manufacturers for use in telecommunications systems,
digital control devices, and avionics equipment. The company has a base of
more than 700 customers.
For further information on Torotel by FAX, dial 1-800-PRO-INFO, ext. 155
Exhibit 2
BROCKSON
Investment Company
Value thru Vision
August 23, 1996
CONFIDENTIAL
Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attn: Board of Directors
Re: Letter of Intent to Purchase $2,000,000 of Common Stock
of Torotel, Inc. of Grandview, Missouri
Gentlemen:
This letter of intent (which is non-binding except as
described in the penultimate paragraph hereof) sets forth our
mutual understanding concerning the possible purchase by
Brockson Investment Company or an entity to be formed by
Brockson ("Brockson") of newly issued common stock of Torotel,
Inc. ("Torotel"). The proposed transaction structure is as follows:
PURCHASE OF
COMMON STOCK: Torotel will issue one million, nine hundred
ninety thousand and fifty (1,990,050) new shares
of its common stock to Brockson for Two
million dollars ($2,000,000), cash at closing
(approximately $1.005 per share). These shares,
without regard to shares acquired in related but
separate transaction(s), will represent at the time
of purchase at least forty point zero, three, two
percent (40.032%) of the then fully diluted
outstanding shares of Torotel. Brockson
represents that it does not currently own any
shares of Torotel.
CONTINGENCIES: The closing of the transactions contemplated by
this letter of intent are contingent upon the
following items:
(1) Completion and execution of mutually
acceptable agreements.
(2) Completion by Brockson of its due diligence of Torotel.
(3) Torotel receiving an acceptable opinion from an investment
banker, acceptable to Brockson, that the transaction is fair to
Torotel's shareholders.
(4) A successful vote by Torotel's shareholders approving this
transaction.
(5) The simultaneous closing of a proposed transaction,
discussed below under Required Simultaneous Transaction.
TRANSACTION
TIMETABLE: The following is the expected timetable for the
transaction:
AUGUST 23 1996: Execution of this non-binding letter of
intent documenting Brockson and Torotel's agreement to the
terms of this transaction.
SEPTEMBER 16 1996: Receipt of fairness opinion by Torotel
and execution of definitive agreements, which shall not contain
any financing or due diligence conditions.
SEPTEMBER 30 1996: Filing with SEC of Torotel proxy
statement in connection with shareholder vote on transaction.
OCTOBER 30 1996: Notice to Torotel's shareholders of vote
to be conducted at shareholder meeting.
DECEMBER 3. 1996: Torotel shareholder meeting and formal
vote on the transaction.
DECEMBER 4 1996: Formal closing of the Brockson purchase
of stock transaction.
OTHER MATTERS: The following additional terms are an integral part of this
letter of intent:
PUBLICITY: Neither Brockson nor Torotel shall make any
public statement regarding this transaction without the consent
of the other, except as in accordance with law or SEC or
AMEX requirements.
OTHER MATTERS
INVESTIGATION:Torotel shall make available to
Brockson and its advisors access during reasonable business
hours to all facilities, books, records, financial statements,
documents related to Torotel's business to conduct its due
diligence. Due diligence shall be subject to the terms of the
Confidentiality Agreement previously executed between
Brockson and Torotel.
EMPLOYMENT CONTRACTS: The definitive Investment
Agreement will provide that between the date of this letter
and closing Torotel will not enter into any contracts with
management or supervisory employees without Brockson's
consent. As part of the transaction, Brockson expects that all
management and supervisory employees of Torotel will enter
into a confidentiality agreement with Torotel that is
acceptable to Brockson.
STANDSTILL: Torotel will not solicit proposals from other
prospective purchasers of Torotel during the period
contemplated by the Transaction Timetable (above). If
Torotel receives an unsolicited proposal and its Board of
Directors determines that the exercise of their fiduciary
duties requires Torotel to provide information to or to
conduct discussions with such other prospective purchaser,
Torotel may do so and may terminate this letter of intent;
provided, however, that in the event Torotel enters into a
letter of intent or similar document or a definitive agreement
with any such other party at any time prior to six months
following the termination of this letter of intent, then Torotel
shall immediately pay to Brockson a fee of $200,000. In the
event Brockson declines to enter into a transaction on the
terms outlined in the letter of intent, but otherwise enters
directly or indirectly into the business of the manufacture and
sale of magnetic transformers, inductors, reactors, chokes,
toroidal coils or switching power supplies in competition
with Torotel, during the nine month period following the
termination of this letter of intent, Brockson will pay Torotel
a fee of $200,000.
REQUIRED
SIMULTANEOUS
TRANSACTION: As indicated above, one of the contingencies of this offer is
the simultaneous closing of a transaction between Brockson
and various members of the Sizemore Family in which
Brockson will purchase between 500,000 and 694,317 shares
of Torotel stock for $1.005 per share and acquire voting
rights for a period of two years over a number of Torotel
shares equal to the difference between 694,317 and the
number of shares purchased by Brockson from Sizemore
family members. Upon the closing of the purchase of stock
directly from Torotel and the transactions with the Sizemore
family, Brockson will own or control a total of 2,684,367
shares of Torotel which will represent 54% of the total, fully
diluted, shares outstanding at that time which will give
Brockson majority control of Torotel and it's Board of
Directors. The definitive Investment Agreement will provide
that neither Brockson nor its affiliates will enter into any
transaction with Torotel without the approval of a majority
of the directors who are not affiliates of Brockson. If at such
time all Torotel directors are affiliates of Brockson, such
transactions will require the approval of a majority of
shareholders who are not affiliates of Brockson.
We look forward to completing this transaction with Torotel. We
believe that this injection of additional capital into Torotel, coupled with an
enhanced management team, and the implementation of a new strategic plan,
which includes future acquisitions (the financing of which shall be arranged
by Brockson), should result in a significant appreciation in shareholder
value for the existing Torotel shareholders.
This Letter of Intent evidences our agreement to negotiate in good
faith to complete a transaction on the terms described herein. The paragraph
labeled "Standstill" is intended to be legally binding. No other paragraph is
intended to be legally binding. The parties will only be legally bound to
transaction terms by the execution and delivery of mutually acceptable
definitive agreements. This letter of intent supersedes and replaces our
previous letter of intent dated July 2, 1996. This letter of intent has been
authorized and approved by the Board of Directors of Torotel.
Please execute and return one copy of this Letter of Intent to evidence
your acceptance hereof and agreement herewith.
Very truly yours,
Brockson Investment Co.
By:
John F. Trotter
President
ACCEPTED AND AGREED
ON AUGUST 23, 1996.
TOROTEL, INC.
By: /s/ Dale H. Sizemore, Jr.
Dale H. Sizemore, Jr.
President and Chief Executive Officer
