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) MARCH 18, 2005
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EMRISE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 001-10346 77-0226211
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
9485 HAVEN AVENUE, SUITE 100, RANCHO CUCAMONGA, CALIFORNIA 91730
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (909) 987-9220
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The disclosures contained in Item 2.01 of this Form 8-K are
incorporated herein by reference.
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On March 1, 2005, Emrise Corporation ("Emrise") and XCEL Corporation
Limited, a wholly-owned subsidiary of Emrise ("XCEL"), entered into an agreement
("Purchase Agreement") relating to the acquisition of Pascall Electronic
(Holdings) Limited ("Pascall") by XCEL. The closing of the purchase occurred
on March 18, 2005. Emrise loaned to XCEL the funds that XCEL used to purchase
Pascall.
Pascall was a wholly-owned subsidiary of Intelek Properties Limited,
which itself is one of five operating subsidiaries of Intelek PLC, a London
Stock Exchange public limited company. Pascall and its subsidiary,
Pascall Electronics Limited ("PEL"), produce, design, develop, manufacture and
sell power supplies and radio frequency products for a broad range of
applications, including in-flight entertainment systems and military programs.
Under the Purchase Agreement, XCEL has purchased all of the
outstanding capital stock of Pascall. The initial purchase price was 3,100,000
British pounds sterling (approximately U.S. $5,971,840 based on the exchange
rate in effect on March 18, 2005). The purchase price was paid in cash
and is subject to upward or downward adjustment on a pound for pound basis to
the extent that the value of the net assets of PEL as of the closing date is
greater or less than 2,520,000 British pounds sterling. The calculation of
the value of the net assets of PEL is to occur within six weeks after the
closing, and Intelek Properties Limited will have 25 business days after
receipt of the calculation to accept or dispute the calculation. Any payment
relating to the increase or reduction of the purchase price based on the
value of the net assets of PEL will be due from XCEL or Intelek Properties
Limited, as the case may be, within 14 days of the acceptance of the
calculation. A default rate of interest equal to 3% above the base lending
rate of Barclays Bank plc London will apply if the adjustment payment is not
timely made. The purchase price is also subject to downward adjustments
for any payments that may be made to XCEL under indemnity, tax or warranty
provisions of the Purchase Agreement.
XCEL loaned to Pascall and PEL at the closing 1,600,000 British
pounds sterling (approximately U.S. $3,082,240 based on the exchange rate in
effect on March 18, 2005) in accordance with the terms of a Loan Agreement
entered into by those entities at the closing. The loaned funds were used
to immediately repay outstanding intercompany debt owed by Pascall and PEL
to Intelek Properties Limited.
Emrise and Intelek PLC have agreed to guarantee payment when due of all
amounts payable by XCEL and Intelek Properties Limited, respectively, under the
Purchase Agreement. Emrise and XCEL agreed to seek to replace the guaranty
that Intelek Properties Limited has given to PEL's landlord with a guaranty
by Emrise, and XCEL has agreed to indemnify Intelek Properties Limited and
its affiliates for damages they suffer as a result of any failure to obtain
the release of the guarantee of the 17-year lease that commenced in May 1999.
The leased property is a 30,000 square foot administration, engineering and
manufacturing facility located off the south coast of England.
Intelek Properties Limited has agreed to various restrictive
covenants that apply for various periods following the closing. The covenants
include non-competition with Pascall's business, non-interference with
Pascall's customers and suppliers, and non-solicitation of Pascall's employees.
In conjunction with the closing, Intelek Properties Limited,
XCEL, Intelek PLC and Emrise entered into a Supplemental Agreement dated
March 18, 2005. The Supplemental Agreement provides, among other things, that
an interest free bridge loan of 200,000 British pounds sterling (approximately
U.S. $385,400 based on the exchange rate in effect on March 17, 2005) that
was made by Intelek Properties Limited to PEL on March 17, 2005 would be
repaid by PEL by March 31, 2005. XCEL agreed to ensure that PEL has sufficient
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funds to repay the bridge loan. A default rate of interest equal to 3% above
the base lending rate of Barclays Bank plc London will apply if the loan is
not timely repaid.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
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To be filed under cover of Form 8-K/A on or before June 3, 2005.
(b) Pro Forma Financial Information.
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To be filed under cover of Form 8-K/A on or before June 3, 2005.
(c) Exhibits.
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Number Description
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2.1 Agreement dated March 1, 2005 among Intelek Properties Limited,
XCEL Corporation Limited, Intelek PLC and Emrise Corporation
relating to the sale and purchase of the outstanding capital
shares of Pascall Electronic (Holdings) Limited
2.2 Supplemental Agreement dated March 18, 2005 among Intelek
Properties Limited, XCEL Corporation Limited, Intelek PLC and
Emrise Corporation
2.3 Loan Agreement dated March 18, 2005 among XCEL Corporation
Limited, Pascall Electronics Limited and Pascall Electronic
(Holdings) Limited
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.
Date: March 24, 2005 EMRISE CORPORATION
By: /S/ RANDOLPH D. FOOTE
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Randolph D. Foote, Chief Financial Officer
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EXHIBITS FILED WITH THIS REPORT
Number Description
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2.1 Agreement dated March 1, 2005 among Intelek Properties Limited,
XCEL Corporation Limited, Intelek PLC and Emrise Corporation
relating to the sale and purchase of the outstanding capital
shares of Pascall Electronic (Holdings) Limited
2.2 Supplemental Agreement dated March 18, 2005 among Intelek
Properties Limited, XCEL Corporation Limited, Intelek PLC and
Emrise Corporation
2.3 Loan Agreement dated March 18, 2005 among XCEL Corporation
Limited, Pascall Electronics Limited and Pascall Electronic
(Holdings) Limited