Exhibit A
PCT HOLDINGS, INC.
September 28, 1995
Messrs. Xxxxxxx and Xxxx Xxxxx
Xxxxx Industries, Inc.
00000 Xxxxxx Xxxxxx
P.O. Box 678
Entiat, WA 98822
RE: ACQUISITION OF XXXXX INDUSTRIES, INC. BY PCT
HOLDINGS, INC.
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Dear Xxxxx and Xxxx:
The purpose of this letter is to outline the manner in which PCT
Holdings, Inc., a Nevada corporation ("PCTH"), proposes to acquire Xxxxx
Industries, Inc., a Washington corporation ("Xxxxx").
The parties recognize that the transaction will require further
documentation and approvals, including the preparation and approval of a
formal agreement setting forth the terms and conditions of the proposed
transaction (the "Transaction Agreement"); nevertheless, they execute this
letter to evidence their intention to proceed in mutual good faith to
complete work required and to negotiate terms of a Transaction Agreement
that are consistent with this letter.
The proposed terms and conditions include, but are not limited
to, the following:
1. ACQUISITION.
(a) PCTH would form a wholly-owned subsidiary of PCTH under the
laws of the State of Washington (the "Acquisition Corporation").
Acquisition Corporation would merge with and into Xxxxx, with Xxxxx being
the surviving corporation (the "Merger"). All parties shall use their best
efforts to ensure that the transaction is treated as a statutory merger
pursuant to Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, and applicable regulations.
(b) In consideration for the shares of Xxxxx to be surrendered in
the Merger, Xxxxxxx Xxxxx and Xxxx Xxxxx, as the shareholders of Xxxxx (the
"Shareholders"), would receive an aggregate of 937,931 unregistered,
nonassessable shares of common stock, $.001 par value per share, of PCTH
(the "PCTH Common Stock"), provided that on the date on which the
Transaction Agreement is executed (the
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"Signing Date"), the closing bid price of PCTH Common Stock as traded on
the NASDAQ SmallCap Market is not lower than $6.25 nor higher than $8.25
per share. In the event that the closing bid price of the Common Stock is
lower than $6.25 or higher than $8.25 per share on the Signing Date, the
number of shares of PCTH Common Stock to be received by the Shareholders
would be increased or decreased, as the case may be, calculated by dividing
$6.8 million by the closing bid price of the PCTH Common Stock on the
Signing Date.
2. ACCESS.
(a) To permit PCTH to conduct its due diligence investigation, as
long as this letter remains in effect, Xxxxx will permit PCTH and its
agents to have reasonable access to the premises in which Xxxxx conducts
its business and to all of its books, records, and personnel files, and
Xxxxx will furnish to PCTH and its agents such financial data, operating
data, and other information as PCTH and its agents shall reasonably
request.
(b) To permit Xxxxx to conduct its due diligence investigation,
as long as this letter remains in effect, PCTH will permit Xxxxx and its
agents to have reasonable access to the premises in which PCTH and its
subsidiaries conduct their business and to all of the books, records, and
personnel files of PCTH and its subsidiaries and will furnish to Xxxxx and
its agents such financial data, operating data, and other information as
Xxxxx and its agents shall reasonably request.
(c) PCTH, Xxxxx and the Shareholders agree to treat all
information obtained pursuant to this paragraph 2 as confidential and not
to voluntarily disclose the same to any person or entity, except to their
authorized representatives, as contemplated in subparagraphs 2(a) and 2(b)
above. Upon the termination of this letter for any reason other than the
closing of the proposed transaction, each shall return promptly to the
other all printed information received by it in connection with the
proposed transaction.
3. CONDITIONS TO CLOSING. The closing of the transaction would be
subject to certain conditions, including without limitation the following:
(a) PCTH, Acquisition Corporation, Xxxxx, and the Shareholders
must have prepared and executed a definitive Transaction Agreement with
terms satisfactory to all parties, containing provisions not inconsistent
with the basic understanding set forth in this letter. The Transaction
Agreement shall also contain representations, warranties, covenants,
conditions, and indemnification provisions customary in transactions of
this size and type.
(b) XXX Xxxxxxx shall have completed the audit of Xxxxx'x
financial statements for the most recent two fiscal years or such other
periods as prescribed by the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and the regulations thereunder applicable PCTH as a
reporting company under the 1934 Act.
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(c) The transaction shall have been approved by the Boards of
Directors of PCTH and Xxxxx and by the Shareholders.
(d) Any required filings, approvals, consents and authorizations
of state and federal regulatory authorities shall have been received.
(e) Any required consents of third parties shall have been
received.
(f) PCTH and Xxxxx shall have completed their respective due
diligence review of the assets and business of the other satisfactory to
each of them in its sole discretion.
4. NEWS RELEASE; CONFIDENTIALITY. Neither PCTH, Xxxxx, nor the
Shareholders, will issue or approve a news release or other announcement
concerning the transaction without the prior approval of the others as to
the contents of the announcement and its release, except as required by
law. This letter will be confidential and may not be disclosed, except as
required by law or as agreed by the parties.
5. NEGOTIATIONS WITH OTHERS. Until such time as this letter has
been terminated, neither the Shareholders nor Xxxxx will offer the stock or
assets of Xxxxx to, entertain offers for them from, negotiate for their
sale to, or make information about them available (for purposes of sale)
to, any third party.
6. CONDUCT OF BUSINESS; INTERIM OPERATIONS. As long as this
letter remains in effect, the Shareholders will cause Xxxxx to use its best
efforts to conduct its business in a reasonable and prudent manner in
accordance with past practices, to preserve its existing business
organizations and relationships with its employees, customers, suppliers,
and others with whom it has a business relationship, to preserve and
protect its properties, and to conduct its business in compliance with all
applicable laws and regulations.
7. COVENANT NOT TO COMPETE; EMPLOYMENT. In the Transaction
Agreement, the Shareholders would agree that they will not, directly or
indirectly, through a subsidiary or otherwise, compete with Xxxxx, PCTH or
PCTH's subsidiaries for a period as agreed to by the parties. PCTH and the
Shareholders would negotiate and execute agreements for PCTH or Acquisition
Corporation to employ each of the Shareholders for such a period and under
such terms as may be agreed to by the parties.
8. REGISTRATION RIGHTS. In the Transaction Agreement, PCTH would
agree that if PCTH proposes to register any of its Common Stock under the
Securities Act of 1933, as amended, so that any of its shareholders may
offer to sell Common Stock to the general public, the Shareholders may
request that up to 50% of the shares of PCTH that are received by the
Shareholders in the Merger, and that are not at the time of such
registration eligible for resale under Rule 144, be included in such
registration.
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9. EQUITY INVESTMENT. Upon the closing of the transaction set
forth in the Transaction Agreement, PCTH would invest $2.0 million in
unrestricted equity in Xxxxx for purposes of restructuring Xxxxx'x balance
sheet and reducing short-term debt.
10. AUDIT EXPENSES. PCTH will bear the cost of audit of Xxxxx'x
financial statements as described in Section 3(b) above; provided that, in
the event that PCTH is prepared to consummate the Merger, subject to the
fulfillment or waiver of any conditions contained in the Transaction
Agreement, but Xxxxx or the Shareholders are not willing to do so, PCTH and
Xxxxx will share equally the cost of such audit.
11. SIGNING DATE; CLOSING DATE. The Signing Date of the
Transaction Agreement is anticipated to be on or about November 30, 1995.
Subject to execution of a Transaction Agreement, the closing date under the
Transaction Agreement will be on a date mutually agreed by PCTH,
Acquisition Corporation, Xxxxx, and the Shareholders, upon satisfaction or
waiver of each condition to closing set forth in the Transaction Agreement.
12. BROKERS' FEES. Neither Xxxxx, the Shareholders nor PCTH has
entered into arrangements with any broker, finder, or investment banker
that will result in payment of a fee in connection with this transaction.
13. EFFECT OF THIS LETTER. This letter sets forth the intent of
the parties only, is not binding on the parties, and may not be relied on
as the basis for a contract by estoppel or be the basis for a claim based
on detrimental reliance or any other theory; provided that paragraphs 4, 5
and 10, the confidentiality and document return provisions of paragraph 2
and this paragraph 13 will be enforceable in accordance with their terms.
With the exception of paragraphs 4, 5 and 10, the confidentiality and
document return provisions of paragraph 2 and this paragraph 13, the
parties understand that no party shall be bound until the Transaction
Agreement has been negotiated, executed, delivered and approved by the
Boards of Directors of PCTH and Xxxxx and by the Shareholders.
14. TERMINATION OF NEGOTIATIONS. This letter may be terminated at
any time by either party giving written notice to the other and will
terminate automatically (i) upon execution of a Transaction Agreement, or
(ii) at 5:00 p.m. on December 29, 1995, if no Transaction Agreement has
been executed by the parties prior to that time. Thereafter, the parties
shall be bound only by paragraphs 4, 10 and 13, and the confidentiality and
document return provisions of paragraph 2. Any termination of this letter
pursuant to this paragraph 14 shall not be deemed to violate any obligation
that the parties may have to deal with each other in good faith.
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If this letter sets forth your intent to proceed in good faith
substantially in the manner outlined in this letter, please sign a copy of
this letter and return it to PCTH. This letter of intent shall be of no
further force and effect if it is not signed and returned to PCTH by the
close of business on September 30, 1995.
Very truly yours,
PCT HOLDINGS, INC.
By: Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, President
Accepted and agreed to:
XXXXXXX XXXXX Date: 9/30/95
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Xxxxxxx Xxxxx
XXXX XXXXX Date: 9/30/95
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Xxxx Xxxxx
XXXXX INDUSTRIES, INC. Date: 9/30/95
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By: XXXXXXX XXXXX
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Its President
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