<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)/1/
GARGOYLES, INC.
________________________________________________________________________________
(Name of Issuer)
COMMON STOCK, NO PAR VALUE
________________________________________________________________________________
(Title of Class of Securities)
366033-10-8
________________________________________________________________________________
(CUSIP Number)
CYNTHIA POPE
20121 48TH AVENUE WEST, LYNNWOOD, WA 98036
(206) 872-6100
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
JULY 6, 1998
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
(Continued on following pages)
(Page 1 of 8 Pages)
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/1/ The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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SCHEDULE 13D
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CUSIP NO. 366033-10-8 PAGE 2 OF 8 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TRILLIUM CORPORATION, 91-0913168
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
WC, OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
WASHINGTON STATE
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SOLE VOTING POWER
7
NUMBER OF 2,505,313
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY
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EACH SOLE DISPOSITIVE POWER
9
REPORTING 2,505,313
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,505,313
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
32%
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TYPE OF REPORTING PERSON*
14
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
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Item 1. Security and Issuer
-------------------
This statement relates to the Common Stock, no par value (the "Common
Stock"), of Gargoyles, Inc. (the "Issuer"). The principal executive offices of
the Issuer are 5866 S. 194th Street, Kent, WA 98032
Item 2. Identity and Background
-----------------------
2(a) This Schedule 13D relates to each of the following persons
(collectively referred to herein as "Reporting Persons"):
- Trillium Corporation ("Trillium").
- David R. Syre, as a director and as Chairman and Chief Executive
Officer, and sole shareholder of Trillium.
- Steven R. Brinn, as a director and as Vice Chairman of Trillium.
- Timothy C. Potts, as a director and as Senior Vice President of
Trillium.
- Robert G. Wolfe, as a director and as Chief Financial Officer of
Trillium.
- Kenneth D. Hertz, as a director of Trillium.
- A. Faruk Taysi, as Senior Vice President of Trillium.
- Teri Treat, as Vice President of Trillium.
- Paula Kurtz, as Vice President of Trillium.
2(b) Trillium is a corporation organized under the laws of the State of
Washington and conducts its principal business operations in Bellingham,
Washington at 4350 Cordata Parkway, Bellingham, Washington 98226. The other
Reporting Persons are residents of the State of Washington, with the same
principal business address as reported in this Item 2(b) for Trillium with the
exception of Hertz, whose business address is 112 Ohio Street, Bellingham, WA
98225.
2(c) Trillium's principal businesses are real estate development and
investment, timber tree farm operations and investments in numerous types of
business enterprises. Information regarding the occupation and employment for
the other Reporting Persons is contained in Item 2(a), above.
2(d) None of the Reporting Persons has during the last five years been
convicted in a criminal proceeding.
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2(e) None of the Reporting Persons has during the last five years been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
2(f) Each of the Reporting Persons who are individuals are U.S. citizens.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
At the date of this report, Trillium beneficially owned 1,505,994 shares of
Common Stock and had entered into an agreement to purchase from Douglas B. Hauff
and a related partnership an aggregate of 999,319 shares of Common Stock (the
latter being referred to herein as the "Hauff Shares") as more fully described
below.
In the case of the 1,505,994 shares held as of July 6, 1998, on November 7,
1997, Trillium acquired 1,490,994 shares upon distribution by Trillium Investors
II, LLC, which had acquired those shares prior to the Issuer's initial public
offering (the "Pre-IPO Shares"). The Pre-IPO Shares do not include 567,704
shares pledged by Douglas Hauff to Trillium. Trillium acquired an additional
15,000 shares in the NASDAQ market for a total price of $70,635 in the fall of
1997 (the "Open Market Shares").
In the case of the Hauff Shares, on July 6, 1998, Trillium entered into a
Stock Purchase Agreement (the "Agreement") between Trillium and Douglas B. Hauff
("Hauff"), a principal shareholder and past President/CEO of the Issuer, and
Tracy L. Hauff and The Hauff Family Partnership (Mr. Hauff, Ms. Hauff and the
Hauff Family Partnership are collectively referred to herein as the "Sellers")
wherein Trillium agreed to purchase 999,319 shares of Common Stock held by
Sellers (the "Hauff Shares"), for a purchase price of approximately
$2,250,000.00. The purchase price is to be paid by (1) the conveyance of
certain real property to the Sellers (valued at $844,000), (2) satisfaction of
debt owed by Hauff to Trillium (approximately $1,085,000.00 including interest
through July 31, 1998 of approximately $100,000), (3) cash in an amount ranging
from $150,000 to $200,000, and (4) the balance pursuant to a non-interest
bearing promissory note which is partly payable in 1999, with the remainder
payable in 2000. This is only a summary of the Agreement, which is attached
hereto and incorporated herein by this reference. Closing of the purchase of the
Hauff Shares pursuant to the Agreement is subject to satisfaction of a number of
conditions, which are not expected to occur before July 31, 1998. There can be
no assurance that closing will occur.
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The source of Trillium's consideration under the Agreement is real property
and notes receivable owned by Trillium and Trillium's working capital. Trillium
will not acquire any of the Common Stock with borrowed funds.
Steven R. Brinn received 189,514 shares upon distribution by Trillium
Investments II, LLC.
The source of funds for Kenneth D. Hertz' purchase of Common Stock was cash
from personal funds. Hertz purchased the Common Stock for approximately $20,000.
Timothy C. Potts received 97,560 shares upon distribution by Trillium
Investments II, LLC.
The source of funds for Paula Kurtz' purchase of Common Stock was cash from
personal funds. Kurtz purchased the Common Stock for approximately $10,000.
The source of funds for Teri Treat's purchase of Common Stock was cash from
personal funds. Treat purchased the Common Stock for approximately $8,000.
Item 4. Purpose of Transaction
----------------------
The Pre-IPO Shares and the Open Market Shares were acquired by Trillium for
investment purposes. The shares held by all other Reporting Persons were
acquired for investment purposes.
Trillium has entered into the Agreement to acquire the Hauff Shares in part
for the purpose of providing for satisfaction of sums owed by Mr. Hauff to
Trillium and certain other shareholders of the Issuer (the "Hauff Debt") in the
amounts of approximately $937,454 and $159,362, respectively (which sums
include accrued interest through July 31, 1998). This indebtedness had been
incurred by Mr. Hauff as of March 7, 1997 in connection with his purchase of an
aggregate of 664,209 shares of Common Stock from Trillium and certain other
shareholders of the Issuer, of which 567,704 shares had been acquired from
Trillium. The collectability of the Hauff Debt had come into question following
Mr. Hauff's resignation as an officer and director of the Issuer in January
1998. Trillium will own approximately 32% (approximately 2,505,313 shares) of
the Issuer's Common Stock following the closing of the Hauff transaction.
Trillium also has had discussions with certain minority shareholders of the
Issuer, including certain former officers and employees of the Issuer, for the
purpose of possibly acquiring additional shares of Common Stock from such
individuals. Trillium also from time to time may purchase additional shares of
Common Stock in the open market or in other privately negotiated transactions.
Trillium might seek to increase its percentage ownership of the Issuer's Common
Stock to greater than one-third of outstanding shares. Also, Trillium might
elect to sell shares of Common Stock.
In addition to providing for satisfaction of the Hauff Debt, the purchase
of the Hauff Shares and, potentially, additional shares of Common Stock is also
motivated in part by the desire of Trillium to increase its voting power in
order to gain a more
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influential position in the management of the Company and the pursuit or
selection of strategic alternatives by the Company, such as a merger, sale of
control or sale of assets. Also, by increasing its ownership of Common Stock
to greater than one-third of all outstanding voting securities of the Company,
Trillium has the ability to disapprove mergers, consolidations or sales of
substantial amounts of assets which would (if not otherwise approved by a
majority of continuing directors of the Company, as defined in the Company's
Articles of Incorporation) require a two-thirds vote.
Except as generally stated in this Item 4, Trillium and the other Reporting
Persons have no present plans or proposals that relate to or would result in:
(i) the acquisition by any person of additional securities of the issuer, or the
disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (iii) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (iv) any change in the
present Board of Directors or management of the Issuer, including any plans or
proposals to change the number or term of Directors or to fill any vacancies on
the Board; (v) any material change in the present capitalization or dividend
policy of the Issuer; (vi) any other material change in the Issuer's business or
corporate structure; (vii) changes in the Issuer's Articles of Incorporation,
Bylaws, or instruments corresponding thereto or other actions which may impede
the acquisition of control of the Issuer by any person; (viii) causing a class
of securities to be delisted from a national securities exchange or to cease to
be authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (ix) a class of equity securities of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g) (4)
of the Exchange Act; or (x) any action similar to those enumerated above.
The Reporting Persons reserve the right to determine in the future whether
to change the purpose or purposes described above, to adopt plans or proposals
of the type specified above, or to purchase or sell shares of Common Stock.
Item 5. Interest in Securities of the Issuer.
-------------------------------------
5(a) Information regarding the aggregate number and percentage of the
class of securities beneficially owned by Trillium is contained in the
cover page, items 11-13.
For the other Reporting Persons, the aggregate number of shares and
percentage of the class of securities beneficially owned, respectively, is as
follows:
David R. Syre, 2,505,313, 32%;
Steven R. Brinn, 189,514, 2.4%;
Robert G. Wolfe, 0, 0%;
Timothy C. Potts, 97,560, 1.2%;
Kenneth D. Hertz, 2,500, less than 1%;
A. Faruk Taysi, 0, 0%;
Teri Treat, 500, less than 1%; and
Paula Kurtz, approximately 600, less than 1%.
5(b) The shares shown in Item 5(a) as beneficially owned by Messrs. Brinn,
Wolfe, and Potts do not include shares held by Trillium, which each of them may
be deemed to have the power to vote or dispose of as officers of Trillium.
Otherwise, each of the Reporting Persons has sole voting and dispositive power
with regard to his, her or its shares.
5(c) On July 6, 1998, Trillium and Hauff entered into the Agreement,
whereby Trillium has the right to acquire the Hauff Shares. See Item 3 above
for the type and amount of consideration to be paid by Trillium.
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5(d) None of the other Reporting Persons has been a party to any
transaction in the Common Stock in the last 60 days. The Hauff shares are
subject to a pledge for the benefit of Trillium with respect to 567,704 shares
and the balance for the benefit of certain other persons to secure payment of
the Hauff Debt described in Item 4, above. Upon closing of the Agreement, these
pledges will be extinguished. Otherwise, the Reporting Persons know of no other
person that has the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the subject Common Stock.
5(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
-------------------------------------------------------------
Respect to Securities of the Issuer.
------------------------------------
On July 6, 1998, Trillium and Hauff entered into the Agreement, whereby
Trillium has the right to acquire the Hauff Shares. Section 10.15 of the
Agreement also provides that Seller shall (1) cooperate with Trillium prior to
the closing of the Agreement with respect to all voting rights pertaining to the
Hauff Shares, and (2) vote the Hauff Shares in accordance with the manner in
which Trillium votes its shares of the Issuer's stock with respect to any
matters of the Issuer which require a vote of the shareholders.
Item 7. Materials to be Filed as Exhibits.
---------------------------------
7.1 Stock Purchase Agreement dated July 6, 1998, between Trillium and
Douglas B. Hauff, Tracy L. Hauff and The Hauff Family Partnership.
Signature
The undersigned hereby agree that this Schedule is filed on behalf of each
of them and, after reasonable inquiry and to the best of their knowledge and
belief, hereby certify that the information set forth in this statement is true,
complete, and correct.
Dated this 16th day of July, 1998.
TRILLIUM CORPORATION
By: /s/ Timothy Potts
---------------------
Its: Senior Vice President
---------------------
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EXHIBIT 7.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of this ____ day of
July, 1998, by and between TRILLIUM CORPORATION, a Washington corporation, The
Semiahmoo Company, a Washington general partnership, Settlers Bay Development,
Inc., an Alaska corporation and/or their assigns (collectively referred to
herein as "Purchaser") and DOUGLAS B. HAUFF, TRACY __ HAUFF and THE HAUFF FAMILY
PARTNERSHIP, a Washington Limited Partnership (collectively referred to herein
as "Hauff" or "Seller").
RECITALS
A. Seller owns 999,319 shares (the "Shares") of the common stock (the "Stock")
of Gargoyles, Inc., a Washington corporation (the "Corporation"). 335,110 of the
Shares are held in one or more brokerage accounts by Smith Barney under accounts
managed by Erik Englestone (the "Smith Barney Shares"). A copy of the
certificates representing the Smith Barney Shares is attached hereto as Exhibit
A-1.
B. 664,209 of the Shares are held by Purchaser as Special Escrow Agent
pursuant to that certain Escrow Agreement dated as of March 22, 1995 (the
"Optioned Shares"). Such shares are being acquired by Hauff pursuant to notes
owed to Purchaser, and to various past or present minority shareholders of the
Corporation (the "Minority Shareholders"). The names of such Minority
Shareholders and a list of the number of pledged shares are shown on attached
Exhibit A-2 (the "Pledged Shares").
C. Subject to the terms and conditions of this Agreement, Seller desires to
sell the Shares to Purchaser, and Purchaser desires to purchase the Shares from
Seller.
D. Capitalized terms shall have the meanings given them herein.
AGREEMENT
1. Purchase and Sale of Stock. Subject to the terms and conditions of this
Agreement, on the Closing Date Seller shall sell and transfer to Purchaser, and
Purchaser shall accept and purchase from Seller all of Seller's right, title and
interest in the Shares and all stock options, stock warrants and other stock
purchase or stock appreciation rights that Seller holds in Stock of the
Corporation (the "Stock Rights").
1.1 Minority Shareholder Debt. 96,505 of the Shares are currently pledged
as collateral for notes payable by Seller to the Minority Shareholders (the
"Minority Shareholder Debt") in the total combined original amount of principal
of $159,361.56 plus accrued interest thereon of approximately $17,000.00 as of
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July 31, 1998. Purchaser is acting as Special Escrow Agent for the Minority
Shareholder Debt and related Pledged Shares. Seller will, no later than three
(3) days prior to the Closing Date but in no event later than July 24, 1998,
obtain from some or all of the Minority Shareholders binding written agreements,
where such parties agree to accept a specified payment to be paid on or before
August 15, 1998 in the form of a Cashiers check mailed to a specified address by
Certified Mail in full and complete satisfaction and extinguishment of that
party's Minority Shareholder Debt. Such agreement will be in a form approved by
Purchaser (which approval shall not be unreasonably withheld) which will
disclose the existence of this transaction and will expressly release Purchaser,
its officers, employees, directors, attorneys and agents, from all claims and
fiduciary responsibilities to such Minority Shareholder(s) under the Escrow
Agreement upon receipt by said shareholder of such amount. Further, under such
agreement, the Minority Shareholders will agree to execute all necessary
documents to assign the related Shares to Purchaser promptly after receiving the
prescribed payment. In the event that any such Minority Shareholder does not
agree to a discounted payment amount, then such Minority Shareholder shall
receive out of the sales proceeds otherwise payable to Seller, the amount of
principal and interest otherwise payable by Seller to said party. There will be
withheld from the escrowed proceeds at Closing the Note and an amount, which
when added to other funds placed into such Escrow by Seller, will represent
$1,500 plus 100% of the funds necessary to pay all such parties. To the extent
the $150,000.00 in cash delivered to escrow by Purchaser as set forth in Section
2.1 is insufficient to pay all Minority Shareholders (after taking into account
all discounts) and Seller's other closing costs and fees under this Agreement,
Purchaser shall deliver an amount of funds, not to exceed $60,000, to cover such
shortfall. For each dollar delivered by Purchaser in excess of $150,000 pursuant
to the foregoing sentence, the principal amount of the Note described in Section
2.2 shall be decreased by $1.25. Such note reduction shall first be charged
against amounts due one year from Closing. Mr. Larry Daugert (or his successor
named by Purchaser and approved by Seller) of Brett & Daugert, 300 North
Commercial, Bellingham, WA 98225 (the "Master Escrow Agent") on behalf of
Purchaser as Special Escrow Agent for the Minority Shareholders, shall promptly
after Closing pay off in full all then unsatisfied Minority Shareholder Debt out
of the retained proceeds in accordance with the amounts then owing to them and
shall then immediately disburse to Seller all remaining proceeds payable to
Seller, less $1,500 payable by Seller to the Master Escrow Agent for such
services. Purchaser shall pay any additional fees charged by the Master Escrow
Agent for such services. Purchaser shall not initiate contact with any Minority
Shareholder unless requested to do so by Seller as to matters relating to such
payoff negotiations by Seller, but Purchaser will answer truthfully and will
honor any questions or requests made of Purchaser by said parties that are
consistent with Purchaser's fiduciary obligations as Special Escrow Agent.
Purchaser hereby acknowledges that to its knowledge and belief its fiduciary
obligations as Special Escrow Agent do not require it to disclose to any
Minority
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Shareholder the economic terms of this Agreement and, accordingly, Purchaser
agrees to keep the economic terms of this Agreement confidential.
1.2 Smith Barney Shares. Upon execution of this Agreement, Seller will
immediately take all steps necessary to transfer possession of the Smith Barney
Shares to the Master Escrow Agent pursuant to the provisions of Sections 3.1.
The Master Escrow Agent shall take the steps necessary to determine that such
shares are freely assignable by Seller to Purchaser free and clear of all debts,
encumbrances, liens and restrictions and shall hold such shares or assignments
thereof in escrow pending closing.
1.3 Trillium Pledged Shares. 567,704 of the Shares are pledged to
Trillium Corporation to secure payment of the debt of Seller to Trillium
Corporation described in Section 2.4.1.
2. Purchase Price and Manner of Payment. The purchase price for the Stock
shall be the sum of the items shown below in this Section 2 (the "Purchase
Price"). The Purchase Price shall be paid as follows unless otherwise instructed
by all of Sellers. Prior to Closing, all payments, notes and deeds shall be
transferred to the applicable Escrow for purposes of Closing:
2.1 Cash at Closing. At Closing, Purchaser shall pay to the Master Escrow
Agent to the account of Seller for disbursement at or after Closing according to
this Agreement in cash or other immediately available funds the sum of One
Hundred Fifty Thousand Dollars ($150,000.00), plus such additional amount of
cash as required pursuant to Section 1.1; and
2.2 Note. At Closing, Purchaser shall pay to the Master Escrow Agent for
the account of Seller a promissory note to Seller in original principal amount
of One Hundred Seventy Thousand Dollars ($170,000) in the form of the attached
Exhibit B (the "Note"), subject to diminishment of the principal amount pursuant
to Section 1.1. The Note shall be unsecured and non interest bearing prior to
default, and shall be due and payable as follows:
$75,000 due and payable one year from the Closing Date; and
$95,000 due and payable two years from the Closing Date.
Purchaser shall reasonably cooperate and execute any necessary or appropriate
documents to facilitate an assignment of the Note by Seller for collateral
purposes or otherwise.
2.3 Transfer of Real Property. At Closing, Purchaser shall transfer to
Seller the following real property (the "Property"):
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2.3.1 Semiahmoo Lot. Residential real estate lot 33 of the Drayton
Hillside I subdivision of The Semiahmoo Company's residential resort development
located in Blaine, Washington as legally described on attached Exhibit C-1,
which is by this reference incorporated herein (the "Semiahmoo Lot"). Purchaser
shall convey the Semiahmoo Lot to Seller at Closing by Statutory Warranty Deed
free and clear of encumbrances, subject to current year's real estate taxes not
yet due and payable and subject to dues and related owner's association
assessments which are not delinquent, prorated as of the Closing Date, any
exceptions that come through Seller, and further subject to all conditions,
reservations, covenants, restrictions, easements, and other exceptions to title
to the Semiahmoo Lot which are commonly applicable to Drayton Hillside I
subdivision lots sold by the Semiahmoo Company to third party buyers of lots
(all collectively referred to as the "Permitted Exceptions"). Purchaser, at its
cost, shall provide Seller with a standard owner's policy of title insurance
issued by First American Title Insurance Company, 215 N. Commercial Street,
Bellingham, WA 98225 ("First American"), in the amount of $115,000 insuring the
condition of title to the Semiahmoo Lot subject only to the standard policy
exceptions and exclusions and to the Permitted Exceptions. The agreed value of
the Semiahmoo Lot is $115,000. The conveyance of the Semiahmoo Lot will be
closed by First American on the Closing Date. Purchaser will pay the real estate
excise tax, one half of First American's escrow and closing fees and all other
amounts not payable by Seller hereunder. Seller shall pay all real estate taxes
and owner's association assessments applicable to the Lot and prorated after the
Closing Date, one half of First American's escrow and closing fees and the costs
to record the conveyance of the Lot.
2.3.2 Getchell Parcels. Two parcels of timberland representing
approximately 168 acres of timberland located in Snohomish County, Washington
legally described and depicted on attached Exhibit C-2, referred to hereinafter
as the "Getchell Parcels". The conveyance of the Getchell Parcels shall be
closed by First American out of either its Bellingham or Everett office. The
Getchell Parcels will be conveyed by Purchaser to Seller by Statutory Warranty
Deed free and clear of all debt encumbrances except current year's real estate
taxes not yet due and payable, and any deferred real estate taxes which are
attributable to the classification of the Getchell Parcels as timberland or
forest land for real estate tax purposes. A continuance of such special use
classification shall be made at Closing and the parties will cooperate in timely
requesting the same from the Snohomish County Assessor's office. The Getchell
Parcels shall be conveyed subject to the above described real estate tax
obligations and any exceptions that come through Seller, and further subject to
all conditions, reservations, restrictions, covenants and exceptions of record
provided that such items may not unreasonably and materially restrict the
Getchell Parcels from being sold and used as rural forestry lands, eligible for
residential or forestry use in accordance with existing Snohomish County zoning
requirements for the Getchell Parcels (all the foregoing exceptions to the
condition of title to the Getchell Parcels are collectively referred to as the
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"Permitted Exceptions"). The agreed value of the Getchell Parcels is $700,000.
At Closing, Purchaser shall provide to Seller, at Purchaser's cost, a standard
owner's title insurance policy in the amount of $700,000 issued by First
American Title Insurance Company. Such policy shall be subject only to the
standard form exceptions and exclusions and to the Permitted Exceptions.
Purchaser shall pay the real estate excise tax, one half of First American's
escrow and closing fee, the Standard Owner's policy title insurance premium and
all other costs not paid by Seller. Seller shall pay the real estate taxes
prorated after the Closing Date, one half the closing agent's escrow and closing
fees and the cost to record the conveyance of the Getchell Parcels.
2.3.3 Settlers Bay Lots. Residential real estate lot #14 of Block 7,
Unit #2 subdivision of Settlers Bay Development, Inc.'s residential development
located at Mile 8, Knik Road, Wasilla, Alaska as legally described on attached
Exhibit C-3, which is by this reference incorporated herein (the "Settlers Bay
Lot"). Purchaser shall convey the Settlers Bay Lot to Seller at Closing by
Statutory Warranty Deed free and clear of encumbrances, subject to current
year's real estate taxes not yet due and payable and subject to dues and related
owner's association assessments which are not delinquent, prorated as of the
Closing Date and any exceptions that come through Seller, and further subject to
all conditions, reservations, covenants, restrictions, easements, and other
exceptions to title to the Settlers Bay Lot which are commonly applicable to
Unit #2 subdivision lots sold to third party buyers (all collectively referred
to as the "Permitted Exceptions"). Purchaser, at its cost, shall provide Seller
with a standard owner's policy of title insurance issued by Matsu Title Company,
951 East Bogard Road, Suite 100, Wasilla, Alaska 99654 ("Matsu Title"), in the
amount of $29,000 insuring the condition of title to the Settlers Bay Lot
subject only to the standard policy exceptions and exclusions and to the
Permitted Exceptions. The agreed value of the Settlers Bay Lot is $29,000. The
conveyance of the Settlers Bay Lot will be closed by Matsu Title on the Closing
Date. Purchaser will pay any real estate excise or transfer tax, one half of
Matsu Title's escrow and closing fees and all other amounts not payable by
Seller hereunder. Seller shall pay all real estate taxes and owner's association
assessments applicable to the Settlers Bay Lot and prorated after the Closing
Date, one half of Matsu Title's escrow and closing fees and the costs to record
the conveyance of the Lot.
2.4 Debt. In satisfaction of certain debts to Trillium:
2.4.1 Full satisfaction of the note dated March 7, 1997, payable by
Seller to Purchaser in the original principal amount of $937,454.36 together
with all accrued interest thereon, which note is secured by 567,704 of the
Shares held by Purchaser as collateral for said debt. Such note will be marked
paid in full at Closing and returned to Seller.
2.4.2 Full satisfaction of the unsecured note dated March 23, 1995
and all extensions and amendments thereof, payable by Seller to Purchaser in the
original principal amount of $51,000 together with all unpaid and accrued
interest thereon. Such note shall by marked paid in full at Closing and returned
to Seller.
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<PAGE>
3. Closing. Subject to satisfaction or waiver of the conditions to Closing
set forth herein, closing of the transaction contemplated by this Agreement (the
"Closing") shall take place at the offices of Trillium Corporation, 4350 Cordata
Parkway, Bellingham, WA 98226 pursuant to a Master Escrow and other ancillary
escrows described below. The closing shall occur as soon as reasonably possible,
but no later than July 31, 1998.
3.1 Master Escrow/Representation/Closing. The "Master Escrow" for closing
the subject transaction shall be at the offices of Brett and Daugert 300 N.
Commercial Street, Bellingham, Washington 98225, under the direction of Larry
Daugert, the Master Escrow Agent. Prior to Closing, a Master Escrow Agreement
will be drafted in accordance with the relevant provisions of this Agreement
(including Section 1.1) and shall be executed by all parties hereto and by the
Master Escrow Agent. Except as otherwise provided herein as to Seller's payment
of certain post closing Master Escrow fees, Purchaser shall pay all the fees of
Mr. Daugert and Brett and Daugert. Mr. Daugert and said law firm shall
represent Purchaser in the subject transaction. Seller shall select the counsel
of its choice to represent Seller in the subject transaction and Seller shall
pay all the fees of such counsel. Seller acknowledges that Seller has been
advised by Purchaser to obtain counsel for Seller. All Shares shall be
deposited in the Master Escrow on or before July 15, 1998, or, if earlier, at
least three days prior to Closing. The Master Escrow Agent shall coordinate
with First American and Matsu Title to cause the subject transactions to close
together. Prior to Closing, to allow the closing to occur on the Closing Date,
Purchaser and Seller shall deposit in the Master Escrow and with First American
and Matsu Title, as the case may be, the Shares, the Share Assignments fully
endorsed, an Assignment of the Stock Rights in a form approved by Purchaser, all
necessary funds in collected form, the executed Note, all executed deeds and
excise tax affidavits, the documents pertaining to the debts owed to Purchaser
to be extinguished at Closing, and all other documents, agreements and forms
necessary or appropriate to consummate the subject transactions in accordance
with the terms of this Agreement. Upon Closing, the conveyance deeds will be
recorded in the applicable recording offices and delivered thereafter to Seller,
the Shares and Assignment of the Stock Rights (or proper assignments thereof for
shares held in a brokerage account) will be delivered to Purchaser accompanied
by the executed Share Assignment(s), the Note and proceeds payable to Seller
will be delivered to Seller (or withheld in escrow for the benefit of Seller to
be applied to satisfy the Minority Shareholder Debt), and all other fully
executed and dated documents and agreements provided for hereunder shall be
delivered to the party entitled to receive them after closing.
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3.2 Documents and Funds to be Delivered by Seller. At Closing, Seller
shall deliver to the applicable escrow (i) a certificate or certificates
representing the Shares duly endorsed in blank or accompanied by fully executed
stock powers in a form reasonably acceptable to Purchaser, (ii) an assignment of
all other Stock Rights, if any, (iii) the consents of any third parties required
to effect transfer of the Shares or the Stock Rights, (iv) funds as necessary to
pay the closing costs and any debt payable at Closing attributable to Seller as
set forth below, if any, and (v) all other documents necessary to be provided by
the Seller to cause the transfer of the Shares and Stock Rights and the closing
of the conveyances of the Property to Seller (the "Related Documents").
3.3 Documents and Funds to be Delivered by Purchaser. At Closing,
Purchaser shall deliver or cause to be delivered to the applicable escrow (i)
the cash portion of the Purchase Price due at Closing (ii) the Note, (iii) the
Deeds of conveyance and Related Documents necessary to transfer the Property to
be conveyed to Seller, and (iv) funds to pay the closing costs attributable to
Purchaser as set forth below.
3.4 Title; Title Insurance. At or prior to Closing, Purchaser shall cause
to be delivered to Seller, binding commitments for the owner's standard polices
of title insurance described in Sections 2.3.1, 2.3.2 and 2.3.3 above, subject
only to the permitted title exceptions described in such sections.
3.5 Prorations. Real property taxes and assessments and all applicable
owners association dues shall be prorated to 11:59 p.m. on the Closing Date.
3.6 Closing Costs. At Closing, Seller and Purchaser shall pay the fees,
costs and expenses in accordance with Sections 1.1, 2 and this Section 3.
4. Representations and Warranties of Seller. Seller represents and warrants to
Purchaser that the following statements are true and correct as of the date
hereto and will be true and correct as of the Closing Date:
4.1 Authority of Hauff. Douglas B. Hauff and Tracy __ Hauff have all
requisite power and authority by their signatures to enter into this Agreement
and transfer the Shares and the Stock Rights on behalf of themselves and the
Hauff Family Partnership.
4.2 Authority of Seller. Seller (including the Hauff Family Partnership)
has all requisite power and authority to execute and deliver this Agreement and
all the documents to be delivered by Seller hereunder and to carry out and
perform its obligations under the terms of this Agreement. The execution,
delivery and performance of this Agreement and all the documents and instruments
to be delivered by Seller hereunder have been duly authorized by all requisite
action on the part of the partners of the Hauff Family Partnership. This
Agreement and each
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<PAGE>
of the documents to be delivered hereunder to which Seller is a party have been,
and at Closing will be, duly executed and delivered by Seller and will
constitute a valid and binding obligation of Seller enforceable against Seller
in accordance with their terms.
4.3 Ownership of the Shares. Seller is the legal owner of the Shares.
The Shares are validly issued and upon the Closing will be fully paid and non-
assessable. Upon delivery of the certificates representing the Shares duly
endorsed in blank or accompanied by a duly executed stock power, good and
marketable title to the Shares will be sold, assigned, conveyed, transferred and
delivered to Purchaser, free and clear of all liens, pledges and assessments,
except any amounts to be fully satisfied at Closing by proceeds held in the
Master Escrow for the account of the Seller.
4.4 No Litigation. Seller is not engaged in nor has received any written
threat of or notice of any litigation, arbitration, investigation or other
proceeding related to or affecting the transactions contemplated by this
Agreement, or the Shares, and to the best of Seller's knowledge there is no
basis for any such litigation, arbitration, investigation or other proceeding.
Seller is not subject to any outstanding and unsatisfied judgments.
4.5 Finders or Brokers Fee. Seller has retained no broker in connection
with the transactions contemplated by this Agreement and has dealt with no
broker or finder in connection with the transactions contemplated by this
Agreement which would create an entitlement by any person to a finders' or
brokers' fee.
4.6 Solvency of Seller. Each of the Sellers is solvent in the "balance
sheet" sense of the term solvency, in that the fair market value of the Sellers'
assets exceeds the amount of the Sellers' liabilities.
4.7 Shares Not Freely Tradable. The Shares are not registered and may
otherwise be subject to certain trading restrictions imposed by federal or state
securities regulations. Accordingly, the Shares are not freely tradable by
Seller.
5. Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller that the following statements are true and correct as of the
date hereof and will be true and correct as of the Closing Date:
5.1 Organization and Good Standing. Trillium Corporation is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Washington. The Semiahmoo Company is a Washington general partnership
duly organized, validly existing and in good standing under the laws of the
state of Washington. Settlers Bay Development, Inc., is an Alaska corporation
duly organized, validly existing and in good standing under the laws of the
state of Alaska. Purchaser has all requisite corporate power and authority to
own and
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<PAGE>
operate its properties and assets and to carry on its business as currently
conducted.
5.2 Authority of Purchaser. Purchaser has all requisite corporate power
and authority to execute and deliver this Agreement and to carry out and perform
its obligations under the terms of this Agreement. The execution, delivery and
performance of this Agreement and all the documents and instruments to be
delivered by or on behalf of Purchaser hereunder have been duly authorized by
all requisite action on the part of the partners, owners, officers, directors or
shareholders of Purchaser, as the case may be. This Agreement and each of the
documents to be delivered to which Purchaser is a party have been, and at
Closing will be, duly executed and delivered and will constitute, a valid and
binding obligation of Purchaser enforceable against Purchaser in accordance with
their terms.
5.3 Environmental Condition of the Property. To Purchaser's knowledge,
the Property is in compliance with all Environmental Laws and Purchaser has
received no written notice of any violation issued pursuant to any Environmental
Law with respect to any Lot or any use or condition thereon. Purchaser is not
aware of any Release or threatened Release of any Hazardous Material existing
on, beneath or from any of the Property. Purchaser is not aware of any above
ground or underground tanks on the Property used or formerly used for the
purpose of storing any Hazardous Materials. "Environmental Laws" means any
federal, state or local law or regulation relating to the use, storage,
disposal, presence, cleanup, transportation or release of Hazardous Materials.
"Hazardous Materials" means asbestos, petroleum or petroleum byproducts, PCBs
and any other waste, substance or materials defined, listed or designated as
hazardous, toxic, a pollutant, waste or otherwise harmful to human health under
any law, or regulation. "Release" shall have the meaning given that term under
CERCLA.
5.4 No Litigation. Purchaser is not engaged in nor has received any
written threat of or notice of any litigation, arbitration, investigation or
other proceeding related to or affecting the transactions contemplated by this
Agreement or the Property, and to the best of Purchaser's knowledge, there is no
basis for any such litigation, arbitration, investigation or other proceeding.
Purchaser is not subject to any outstanding and unsatisfied judgments.
5.5 Parties in Possession. There are no parties in possession or which
have a right to possession of all or any portion of the Property, and there are
no leases or licenses affecting the Property.
5.6 Documents. To Purchaser's knowledge, all materials and documents
delivered to Seller pursuant to Section 2.3.4 of this Agreement are true and
correct copies of what they purport to be, and to the extent such materials were
prepared by Purchaser, do not contain any material inaccuracies or errors.
Notwithstanding
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<PAGE>
the foregoing, Seller is responsible for its own due diligence as to the
accuracy of such materials and documents.
5.7 Finders or Brokers Fee. Purchaser has retained no broker in
connection with the transactions contemplated by this Agreement and has dealt
with no broker or finder in connection with the transactions contemplated by
this Agreement which would create an entitlement by any person to a finders' or
brokers' fee.
6. Conditions Precedent to Seller's Obligations. The obligation of
Seller to consummate the transactions contemplated by this Agreement is subject
to fulfillment of the following conditions at or prior to the Closing Date:
6.1 Representations and Performance. The representations and warranties
made by Purchaser hereunder shall be true and correct in all material respects
at and as of Closing, and Purchaser shall have, unless waived by Seller in
writing, performed and complied in all material respects with all agreements,
covenants and conditions contained in this Agreement required to be performed or
complied with by Purchaser prior to or at Closing.
6.2 Payment of Consideration. Purchaser shall have delivered to the
Master Escrow (or the applicable escrow) the cash portion of the Purchase Price,
the Note, all Conveyance and Related Documents necessary to convey the Property,
and the notes payable by Seller to Purchaser to be satisfied at Closing.
6.3 Title Insurance Commitment. Purchaser shall have obtained commitments
from the Title Companies insuring title to the Property in Seller subject only
to the items described in Sections 2.3.1, 2.3.2 and 2.3.3.
6.4 Securities Issues. Seller shall be permitted to transfer the Shares
pursuant to applicable securities laws, and all filings, notices and other
actions required of Seller under the securities laws to effect the transfer
shall have been completed by Seller at Seller's expense.
7. Conditions Precedent to Purchaser' Obligations. The obligation of
Purchaser to purchase the Shares and to consummate the transactions contemplated
by this Agreement are subject to fulfillment of the following conditions at or
prior to the Closing Date:
7.1 Representations and Performance. The representations and warranties
made by Seller hereunder shall be true and correct in all material respects at
and as of Closing, and Seller shall, unless waived by Purchaser in writing, have
performed and complied in all material respects with all agreements, covenants
and conditions contained in this Agreement required to be performed or complied
with by Seller prior to or at Closing;
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<PAGE>
7.2 No Material Securities Law Concerns. Purchaser, at Purchaser's sole
discretion shall have satisfied itself that the consummation of the subject
transactions by Purchaser will not cause Purchaser to be at any significant risk
under securities laws, and are not in violation of any fiduciary duties to the
Corporation or any other shareholders of the Corporation.
7.3 Board of Directors of Gargoyles, Inc. The Board of Directors of
Gargoyles, Inc. must be fully informed by Purchaser of the transactions
contemplated by this Agreement, and such Board must not take action to prevent
or delay these transactions from occurring.
8. Indemnities. Seller and Purchaser hereby indemnify each other as follows:
8.1 Indemnity of Seller. Seller agrees to indemnify and hold harmless
Purchaser, its officers, directors, attorneys, agents and employees, from and
against any and all liability, loss, damage or expense, including reasonable
attorneys' fees and costs, as a result of any action, suit, proceeding, lien, or
claim (i) resulting from a breach by Seller of a representation or warranty made
hereunder or a material breach by Seller of a provision of this agreement, or
(ii) affecting title to the Shares and/or affecting the Property in relation to
which the facts that give rise to such action, suit or proceeding arose or
occurred during Seller's ownership of the Shares and/or the Property.
8.2 Indemnity of Purchaser. Purchaser agrees to indemnify and hold
harmless Seller, its owners, partners, attorneys, agents and employees, from and
against any and all liability, loss, damage or expense, including reasonable
attorneys' fees and costs, as a result of any action, suit, proceeding, lien, or
claim (i) resulting from a breach by Purchaser of a representation or warranty
made hereunder or a material breach by Purchaser of a provision of this
agreement, or (ii) affecting title to the Shares and/or affecting the Property
in relation to which the facts that give rise to such action, suit or proceeding
arose or occurred during Purchaser's ownership of the Shares and/or the
Property.
8.3 Releases. Purchaser, in its capacity as a shareholder of the
Corporation, hereby releases and forever discharges Seller, its officers,
directors, partners, employees, attorneys and agents, from any and all causes of
action, claims, damages and demands of any nature whatsoever, whether known or
unknown, arising out of Seller's ownership of the Shares and management of the
Corporation; provided, however, this release shall not limit, diminish or
release the representations and warranties and indemnity obligations of Seller
under Sections 4 and 8.2, which obligations of Seller shall be joint and several
obligations of each Seller or each deemed Seller under this Agreement. Seller
hereby releases and forever discharges Purchaser, its officers, directors,
employees, attorneys and agents from any and all causes of action, claims,
damages, and demands of any nature whatsoever, including claims pertaining to
Purchaser's actual or alleged
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<PAGE>
knowledge of "insider" information pertaining to the Corporation, whether known
or unknown, arising out of Purchaser's ownership of the Shares and management of
the Corporation; provided, however, this release shall not limit, diminish or
release the representations and warranties and indemnity obligations of Seller
under Sections 5 and 8.2. The parties intend for the foregoing releases to act
as a complete release and disassociation between the parties hereto except for
the limited claims that may be asserted between the parties hereto for
violations of representations and warranties under this Agreement and the
foregoing indemnities set forth in this Section 8.
9. Termination
9.1 By Mutual Consent. At any time, this Agreement may be terminated by
the written consent of all the parties hereto without liability on the part of
any party or their respective owners, partners, directors, officers,
shareholders or employees. If this Agreement is terminated under this Section
9.1, the Agreement shall have no further force or effect as of the termination
date agreed by the parties.
9.2 Termination Upon Default or Breach. If one party to this Agreement
materially defaults in the performance of any of the covenants or Conditions
Precedent contained in this Agreement, or if there shall have been a material
breach by a party of any of such party's representations or warranties set forth
in this Agreement, the other party may: (i) terminate this Agreement without
prejudice to its rights and remedies available under law by delivering written
notice of termination to the other party to this Agreement or (ii) bring an
action for specific performance of the breaching party's obligations hereunder.
Such termination shall be effective upon the termination date specified in the
notice.
10. Miscellaneous Provisions.
10.1 Amendment and Modification. Subject to applicable law, prior to the
Closing Date this Agreement may be amended, modified and supplemented or any
provision waived only by written agreement, executed by the party who is waiving
a right.
10.2 Waiver of Compliance; Consents. Any failure of a party to comply with
any obligation, covenant, agreement or condition herein, may be waived in
writing, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing.
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<PAGE>
10.3 Expenses. Each party to this Agreement shall bear its own expenses
related to the representation of counsel, preparation of documents, due
diligence investigations, or other matters related to the transactions
contemplated by this Agreement.
10.4 Attorneys' Fees. If it shall be necessary for any party to this
Agreement to employ an attorney to enforce their rights pursuant to this
Agreement because of the default of another party(s), the defaulting party(s)
shall reimburse the non-defaulting party(s) for reasonable attorneys' fees and
expenses.
10.5 Further Assurances. From time to time both before and after the
Closing and without further consideration, the parties hereto will cooperate in
good faith to execute and deliver, or arrange for the execution and delivery of
such other instruments and take such other action or arrange for such other
actions as may reasonably be requested to more effectively complete any of the
transactions contemplated by this Agreement.
10.6 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be given by: (a)
hand delivery; (b) first-class registered or certified mail with postage
prepaid, (c) overnight receipted courier service, or (d) telephonically
confirmed facsimile transmission, which notice is addressed to the party at the
address set forth below, or such other address as may hereafter be designated in
writing by the party. Notices given in accordance with this Section shall be
effective upon receipt or when receipt is refused by the party to who such
notice is given.
If to Seller, to:
Douglas B. Hauff
The Highlands
Seattle, WA 98177
Tel: (206) 364-5898
Fax: (206) 364-5998
with a copy to:
Foster Pepper Shefelman PLLC
1111 Third Avenue, Suite 3400
Seattle, WA 98101
Attn.: Stellman Keehnel
Tel: (206) 447-8935
Fax: (206) 749-1964
If to Purchaser, to:
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Trillium Corporation
4350 Cordata Parkway
Bellingham, WA 98226
Attn: General Counsel
Tel: (360) 676-9400
Fax: (360) 676-7736
10.7 Assignment; Form of Transaction. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement or
assignment of the right to all or any portion of the Shares is freely assignable
in part or whole by Purchaser without the prior consent of Seller, provided that
Trillium Corporation shall remain fully liable to Seller for the performance
required of Purchaser and for Purchaser's representations and warranties and
other obligations hereunder.
10.8 Assignment of Property. Sellers may assign the rights to receive
title to the Property to an entity controlled by Douglas B. Hauff without the
prior written consent of Purchaser, provided that Seller shall remain fully
liable to Purchaser for the performance required of Seller hereunder and for
Seller's representations and warranties and other obligations hereunder. Any
assets transferred to such entity shall be transferred subject to all
obligations of the Seller hereunder which are not released pursuant to Section
8.3 hereof and by accepting such assets, the transferee entity shall be deemed
to have agreed to be directly liable for such obligations as if it was a Seller
under this Agreement.
10.9 Governing Law. This Agreement shall be governed by the internal law
of the state of Washington as to all matters, including but not limited to
matters of validity, construction, effect and performance.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.12 Exhibits and Schedules. The exhibits and schedules attached hereto
are incorporated herein by reference as if fully set forth herein.
10.13 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement and supersedes all prior agreements, representations,
warranties, promises, covenants, arrangements, communications and
understandings, oral or
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written, express or implied, between the parties with respect to such
transactions. There are no agreements, representations, warranties, promises,
covenants, arrangements or understandings between the parties with respect to
such transactions, other than those expressly set forth or referred to herein.
10.14 Severability. Unless otherwise provided herein, if any provision of
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.15 Voting of Shares Prior to Closing. Seller shall cooperate with
Purchaser prior to Closing with respect to all voting rights pertaining to the
Shares. Prior to Closing and prior to the termination of this Agreement
according to its terms, Seller shall vote the Shares in accordance with the
manner in which Purchaser votes its shares of the Corporation's stock, with
respect to any matters of the Corporation which require a vote of the
shareholders.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the date first above written. The Semiahmoo Company and
Settlers Bay Development, Inc. are executing this Agreement for the sole
purposes of the real estate conveyances described in Sections 2.3.1 and 2.3.3
and the related closing matters, representations and warranties described in
Sections 3 through 3.6 and Sections 5 through 5.4. Trillium Corporation shall
inure to and be liable for all other rights and obligations of the Purchaser
hereunder.
PURCHASER: SELLER:
TRILLIUM CORPORATION,
a Washington corporation
By: /s/ David R. Syre /s/ Douglas B. Hauff
----------------------------- ------------------------------
Douglas B. Hauff
Its: Chairman and CEO
-----------------------------
/s/ Tracy L. Hauff
______________________________
Tracy L. Hauff
SETTLERS BAY DEVELOPMENT, INC. HAUFF FAMILY PARTNERSHIP
an Alaska corporation
By: /s/ Teri Treat By: /s/ Douglas B. Hauff
----------------------------- -------------------------
Douglas B. Hauff
Its: President
-----------------------------
Its:
-------------------------
By: /s/ Tracy L. Hauff
-------------------------
Tracy L. Hauff
Its:
-------------------------
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<PAGE>
SEMIAHMOO COMPANY,
a Washington general partnership
By: Semiahmoo Holding Company, L.P., a
Washington limited partnership,
its managing general partner
By: SC Partnership, a Washington general
partnership, its general partner
By: Birch Point Partners, Ltd.,
a Washington limited partnership,
its managing general partner
By: Birch Point, Inc.,
a Washington corporation
its general partner
By: /s/ Steve Brinn
-----------------
Name: Steve Brinn
Its: President
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<PAGE>
EXHIBIT A-1
COPY OF STOCK CERTIFICATES
held in Smith Barney brokerage account(s) (the Smith Barney Shares)
Page 18
<PAGE>
EXHIBIT A-2
-----------
<TABLE>
<CAPTION> Shares Grand
Shares Options Post Subject to Options Post Total
Subject to Dividend Purchase Hauff Option Dividend Purchase Purchase
Investors Hauff Option (x5.45) Price ($5SP) (x5.45 Price Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trillium Corporation 20,833 113,539 $520,803.39 83,333 454,165 567,704 $416,650.97 $ 937,454.36
Gary Waterman 792 4,316 $ 19,799.33 3,167 17,260 21,576 $ 15,834.32 $ 35,633.65
Peter von Reichbauer 188 1,024 $ 4,697.09 750 4,087 5,111 $ 3,749.41 $ 8,446.50
Arthur H. Kern 313 1,705 $ 7,820.84 1,250 6,812 8,517 $ 6,249.33 $ 14,070.16
John Rudolf 271 1,476 $ 6,770.41 1,083 5,902 7,378 $ 5,414.49 $ 12,184.91
Steve Kingma 417 2,272 $ 10,421.66 1,667 9,085 11,357 $ 8,334.58 $ 18,756.24
David Jobe 417 2,272 $ 10,421.66 1,667 9,085 11,357 $ 8,334.58 $ 18,756.24
Tom Johnson 208 1,133 $ 5,197.07 833 4,539 5,672 $ 4,164.08 $ 9,361.15
Stan Walderhaug 104 566 $ 2,596.24 417 2,272 2,838 $ 2,084.33 $ 4,680.57
Gary Gigot 146 795 $ 3,646.67 583 3,177 3,972 $ 2,914.58 $ 6,561.24
Robert Manne 104 567 $ 2,599.91 417 2,272 2,839 $ 2,084.33 $ 4,684.24
Bruce Hosford 271 1,476 $ 6,770.41 1,083 5,902 7,378 $ 5,414.49 $ 12,184.91
Tim Buckley 208 1,133 $ 5,197.07 833 4,539 5,672 $ 4,164.08 $ 9,361.15
Allen Shoup 104 566 $ 2,596.24 417 2,272 2,838 $ 2,084.33 $ 4,680.57
------- ----------- ------- ------- ----------- -------------
Totals 132,840 $609,338.00 531,369 664,209 $487,477.92 $1,096,815.92
</TABLE>
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<PAGE>
EXHIBIT B
UNSECURED PROMISSORY NOTE
$170,000.00 ________, 1998
Bellingham, WA
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the order of
DOUGLAS B. HAUFF AND TRACEY ___ HAUFF, husband and wife, and the HAUFF FAMILY
PARTNERSHIP, a Washington limited partnership, or their assigns ("Holder"), the
principal sum of One Hundred Seventy Thousand Dollars ($170,000.00), all as
hereinafter provided and upon the following agreements, terms and conditions:
1. Interest. This Note shall be non-interest bearing; provided, that
in the event of any default as hereinafter defined, all sums then and thereafter
owing hereon at the option of Holder shall bear interest at a rate which shall
be equal to the lesser of twelve percent (12%) per annum or the highest rate
then permitted by applicable law ("Default Rate").
2. Payment. Except as provided below, this Note shall be due and
payable as follows:
$75,000 due and payable on ________________, 1999.
$95,000 due and payable on ________________, 2000.
Payment shall be made to Holder hereof at The Highlands, Seattle, WA. 98177 or
such other place as Holder may specify in writing from time to time.
3. Late Charge. If any payment on this Note is not paid when due
and remains unpaid for a period of ten (10) days inclusive after Holder provides
notice to Maker in accordance with the notice provisions of this Note, Maker
will pay Holder a late charge equal to five percent (5%) of the amount of the
delinquent payment.
4. Prepayment. This Note may be prepaid at any time without penalty.
5. Acceleration. In the event any payments required by this
Promissory Note are not paid when due, and remain unpaid after a date specified
by a notice to Maker, and such default remains uncured after a date specified by
a notice to Maker, then the whole sum of principal shall become due and payable
at once without further notice at the option of the Holder hereof. The date
specified shall not be less than ten (10) days (for non-payment) or thirty (30)
days (for any other default) from the date notice is given to Maker in
accordance with the notice provisions of this Note. This note will be
automatically accelerated in the event of
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insolvency or the commencement of an insolvency or bankruptcy proceeding by or
against Maker. All rights and remedies of Holder are cumulative and not
exclusive and the commencement or partial exercise of any such right or remedy
shall not preclude Holder from the exercise of any other right or remedy until
the debts evidenced by this note are paid in full.
6. Costs and Attorneys' Fees. Maker agrees to pay all costs and
expenses which Holder may incur by reason of any default, including without
limitation Holder's reasonable attorneys' fees with regard to legal services
relating to any default and to a determination of any of Holder's rights or
remedies under this Note, and reasonable attorneys' fees relating to any actions
or proceedings which Holder may institute to protect its interest under the
terms of this Note. Any judgment recovered by Holder shall bear interest at the
Default Rate, not to exceed, however, the highest rate then permitted by law,
from the date of the judgment.
7. Nonwaiver of Holder. Holder's failure to exercise its option to
accelerate this Note upon a default or to exercise any other rights to which
Holder may be entitled in the event of a default, shall not constitute a waiver
of the right to exercise such option or any other rights in the event of any
subsequent default, whether of the same or a different nature.
8. Waiver of Maker. Maker waives presentment, protest and demand,
notice of protest, demand or dishonor and nonpayment of this Note.
9. Maximum Interest. Notwithstanding any other provision of this
Note, interest, fees and charges payable by reason of the indebtedness evidenced
hereby shall not exceed the maximum, if any, permitted by applicable law and, if
by virtue of applicable law, sums in excess of such maximum would otherwise be
payable hereon, then such excess shall be treated as having been immediately
applied by Holder to principal when received.
10. Applicable Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Washington.
11. Notice. Except as otherwise provided in this Note, all notices
and consents required or permitted under this Note shall be in writing and may
be telexed, facsimilied, cabled, delivered by hand, or mailed by first class
registered or certified mail, return receipt requested, postage prepaid, and
addressed as follows:
Holder: Douglas and Tracey Hauff
The Highlands
Seattle, WA 98177
Tel.: (206) 364-5898
Maker: Trillium Corporation
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4350 Cordata Parkway
Bellingham, WA 98226
Attn: Timothy C. Potts
Tel: (360) 676-9400
Fax: (360) 738-2910
Changes in the respective addresses to which such notices may be directed may be
made from time to time by either party by notice to the other party.
Notices and consents given by mail in accordance with this Section 11 shall be
deemed to have been given three (3) days after the date of dispatch; notices and
consents given by other means shall be deemed to have been given when received.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
Maker:
TRILLIUM CORPORATION, a
Washington corporation
By: _______________________________
_______________________________
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