<PAGE> 1
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): April 12, 1996
SI TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 0-12370 95-3381440
(State or Other Jurisdiction of (Commission File Number) (IRS Employer ID. No.)
Incorporation or Organization)
</TABLE>
4611 South 134th Place
Seattle, Washington 98168
(Address of Principal Executive Offices) (Zip Code)
(206) 244-6100
(Registrant's Telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On April 12, 1996 SI Technologies, Inc. (the "Company")
acquired all of the outstanding capital stock of Evergreen
Weigh, Inc., a Lynnwood, Washington-based company engaged in
the electronic weighing device industry.
The stock was acquired for $1,000,000 from Carl R. and Ruth
Harris. The value of consideration given in exchange for the
stock was determined by reference to Evergreen Weigh's past
operating history and the Company's analysis of its potential
under new management. The Company borrowed the funds for the
acquisition from US Bank of Washington, N.A.
(b) Evergreen Weigh, Inc. is an operating company. The Company
currently intends to continue to operate Evergreen Weigh as
a separate subsidiary.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information.
(i) Unaudited Pro Forma combined condensed financial
statements of the Company and Evergreen Weigh, Inc.
for the year ended July 31, 1995 and the six months
ended January 31, 1996.
(c) Exhibits.
(i) Acquisition Agreement and Plan of Merger dated April
12, 1996 among SI Technologies, Inc., SI Acquisition
Corporation, Evergreen Weigh, Inc. Carl R. Harris and
Ruth Harris.
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.
Dated: April 25, 1996
SI TECHNOLOGIES, INC.
By /s/ Rick A. Beets
-------------------------------
Rick A. Beets, President
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SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited pro forma combined condensed financial statements
have been derived from the historical results of operations of SI Technologies,
Inc. ("SI") and Evergreen Weigh, Inc. ("Evergreen") for the year ended July 31,
1995 and the six months ended January 31, 1996 and financial position as of
January 31, 1996.
The unaudited pro forma combined condensed financial statements are presented
for informational purposes only and do not purport to be indicative of the
operating results that actually would have occurred if the acquisition had been
consummated on August 1, 1994, nor which may result from future operations. The
pro forma adjustments are based on available information and certain assumptions
that the Company believes are reasonable. The acquisition has been accounted for
using the purchase method of accounting. These pro forma financial statements
should be read in conjunction with the historical financial statements and
related notes of the Company and the acquisition document.
3
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SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
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<CAPTION>
HISTORICAL
----------
JANUARY 31, 1996
ASSETS PRO FORMA
SI EVERGREEN ADJUSTMENTS COMBINED
------------------------- ----------------------------
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Current assets:
Cash $ 2,054 $ 12,711 $ - $ 14,765
Trade accounts receivable, less allowance
for doubtful accounts of $219,543
and $7,935 respectively 2,030,463 445,008 (38,000)(1) 2,437,471
Inventories 1,422,744 548,951 (55,000)(2) 1,916,695
Deferred tax asset 400,500 - - 400,500
Other current assets 63,305 23,216 - 86,521
------------------------- ----------------------------
Total current assets 3,919,066 1,029,886 (93,000) 4,855,952
Property and equipment, less accumulated
depreciation and amortization 725,836 40,909 33,000(3) 799,745
Other assets:
Intangible assets, net 2,829,689 - 374,947(4) 3,204,636
Other 90,884 - - 90,884
------------------------- ----------------------------
TOTAL ASSETS $7,565,475 $1,070,795 $ 314,947 $8,951,217
========================= ============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ - $ 233,494 $ - $ 233,494
Current maturities of long term debt 183,876 - 120,000(6) 303,876
Put option obligation - current 325,000 - - 325,000
Trade accounts payable 899,100 91,330 - 990,430
Income taxes payable 247,191 (2,878) - 244,313
Accrued liabilities 1,025,508 26,796 37,000(5) 1,089,304
------------------------- ----------------------------
Total current liabilities 2,680,675 348,742 157,000 3,186,417
Long-term debt, less current maturities 13,041 - 880,000(6) 893,041
Put option liability, less current maturities 60,000 - - 60,000
Deferred taxes 22,200 - - 22,200
Stockholders' equity: 4,789,559 722,053 (722,053)(7) 4,789,559
------------------------- ----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$7,565,475 $1,070,795 $ 314,947 $8,951,217
========================= ============================
</TABLE>
See notes to pro forma combined condensed balance sheet.
4
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SI TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(unaudited)
(1) Valuation adjustment for doubtful accounts receivable.
(2) Valuation reserve for obsolete and slow moving inventory.
(3) Revaluation to fair value of acquired property and equipment.
(4) Increase to intangible assets (goodwill). The goodwill associated with the
Evergreen acquisition will be amortized over a period of 25 years.
(5) Adjustments to record accrued vacation and accrued expenses associated with
the acquisition.
(6) Increase to long term debt associated with the acquisition financing of
Evergreen.
(7) Elimination of Evergreen stockholders' equity.
5
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SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
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HISTORICAL
----------
FOR THE TWELVE MONTHS ENDED
JULY 31, 1995
PRO FORMA
SI EVERGREEN ADJUSTMENTS COMBINED
-------------------------- ----------------------------
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Net sales $9,816,011 $2,104,608 $ - $11,920,619
Cost of sales 5,072,823 1,202,956 3,500(1) 6,279,279
-------------------------- ----------------------------
Gross profit 4,743,188 901,652 (3,500) 5,641,340
Operating expenses:
Selling, service, general and
administrative 3,114,778 616,011 (51,765)(2) 3,679,024
Research, development and engineering 700,600 157,488 - 858,088
Amortization of intangibles 130,443 - 15,000(3) 145,443
-------------------------- ----------------------------
Total operating expenses 3,945,821 773,499 (36,765) 4,682,555
-------------------------- ----------------------------
Earnings from operations 797,367 128,153 33,265 958,785
Interest expense (118,754) (24,450) (81,000)(4) (224,204)
Other income, net 19,343 3,929 - 23,272
-------------------------- ----------------------------
Net earnings before income taxes 697,956 107,632 (47,735) 757,853
Income tax (expense) benefit (187,491) (33,244) 16,230(5) (204,505)
-------------------------- ----------------------------
Net earnings (loss) $ 510,465 $ 74,388 $(31,505) $ 553,348
========================== ============================
Net earnings per common and
common equivalent share $ .21 $ .23
========== ===========
Weighted average common and common
equivalent shares outstanding 2,431,069 2,431,069
</TABLE>
See notes to pro forma combined condensed statements of earnings.
6
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SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------
FOR THE SIX MONTHS ENDED
JANUARY 31, 1996
PRO FORMA
SI EVERGREEN ADJUSTMENTS COMBINED
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Net sales $5,826,036 $1,075,981 $ - $6,902,017
Cost of sales 3,068,632 648,618 1,750(1) 3,719,000
-------------------------- ---------------------------
Gross profit 2,757,404 427,363 (1,750) 3,183,017
Operating expenses:
Selling, service, general and
administrative 1,626,901 336,686 (38,228)(2) 1,925,359
Research, development and engineering 441,607 75,068 - 516,675
Amortization of intangibles 45,192 - 7,500(3) 52,692
-------------------------- ---------------------------
Total operating expenses 2,113,700 411,754 (30,728) 2,494,726
-------------------------- ---------------------------
Earnings from operations 643,704 15,609 28,978 688,291
Interest expense (36,205) (13,863) (41,500)(4) (91,568)
Other income, net 36,507 6,945 - 43,452
-------------------------- ---------------------------
Net earnings before income taxes 644,006 8,691 (12,522) 640,175
Income tax (expense) benefit (243,700) (2,955) 4,257(5) (242,398)
-------------------------- ---------------------------
Net earnings (loss) $ 400,306 $ 5,736 $ (8,265) $ 397,777
========================== ===========================
Net earnings per common and
common equivalent share $ .16 $ .16
========== ==========
Weighted average common and common
equivalent shares outstanding 2,432,725 2,432,725
</TABLE>
See notes to pro forma combined condensed statements of earnings.
7
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SI TECHNOLOGIES, INC.
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
(1) Adjustment to increase depreciation expense resulting from the revaluation
of acquired property and equipment. The acquired assets will be depreciated
over service lives from two years to seven years.
(2) a.) Adjustment to remove compensation expense associated with former
executive officers of Evergreen who were not employed by the Company after
the acquisition on April 12, 1996; b.) Adjustment to increase general and
administrative expenses for consulting and non-compete agreement with
former executive officers of Evergreen; c.) Adjustment to increase
depreciation expense resulting from the revaluation of acquired property
and equipment. The acquired assets will be depreciated over service lives
from two years to seven years.
(3) Amortization of amounts assigned to intangible assets acquired in the
acquisition of Evergreen. The full adjustment amount to intangible assets
is assigned to goodwill and will be amortized over a period of 25 years.
(4) Adjustment to reflect the increased interest expense associated with the
debt financing of the Evergreen acquisition.
(5) Tax effects of pro forma adjustments.
8
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
2.1 Acquisition Agreement and Plan of Merger
dated April 12, 1996 among
SI Technologies, Inc., SI Acquisition
Corporation, Evergreen Weigh, Inc.
Carl R. Harris and Ruth Harris.
-9-
<PAGE> 1
EXHIBIT 2.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
AMONG
SI TECHNOLOGIES, INC.,
SI ACQUISITION CORP.,
EVERGREEN WEIGH, INC.
AND
CARL R. HARRIS AND RUTH HARRIS
April 12, 1996
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1 THE MERGER........................................................................................... 1
1.1 Effective Time of the Merger and Closing..................................................... 1
1.2 Effects of the Merger........................................................................ 2
1.3 Board of Directors........................................................................... 2
1.4 Officers..................................................................................... 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES........................................... 2
2.1 Effect on Capital Stock...................................................................... 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES....................................................................... 3
3.1 Representations and Warranties of the Company................................................ 3
3.2 Representations and Warranties of SI and Acqcorp............................................. 13
ARTICLE 4 COVENANTS............................................................................................ 15
4.1 Covenants of the Company Relating to Conduct of Business..................................... 15
4.2 Access to Information........................................................................ 17
4.3 Expenses..................................................................................... 17
4.4 Additional Agreements........................................................................ 18
4.5 No Solicitation.............................................................................. 18
4.6 Current Information___the Company............................................................ 18
4.7 Failure to Fulfill Conditions................................................................ 18
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING...................................................................... 19
5.1 Conditions to Each Party's Obligations to Effect the Merger.................................. 19
5.2 Conditions of Obligations of SI and Acqcorp.................................................. 19
5.3 Conditions of Obligations of the Company..................................................... 20
ARTICLE 6 TERMINATION, AMENDMENT AND WAIVER.................................................................... 21
6.1 Termination.................................................................................. 21
6.2 Effect of Termination........................................................................ 22
6.3 Amendment.................................................................................... 22
6.4 Extension; Waiver............................................................................ 22
</TABLE>
i
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<TABLE>
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ARTICLE 7 LIMITATION OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION.................................................................. 23
7.1 Survival of Representations, Warranties and Covenants........................................ 23
7.2 Indemnification by the Shareholders.......................................................... 23
7.3 Offset....................................................................................... 23
7.4 Indemnification by SI or Acqcorp............................................................. 24
ARTICLE 8 GENERAL PROVISIONS................................................................................... 24
8.1 Attorneys' Fees.............................................................................. 24
8.2 Notices...................................................................................... 24
8.3 Interpretation............................................................................... 25
8.4 Counterparts................................................................................. 25
8.5 Entire Agreement; No Third-Party Beneficiaries............................................... 25
8.6 Governing Law................................................................................ 25
8.7 Publicity.................................................................................... 25
8.8 Assignment................................................................................... 25
</TABLE>
ii
<PAGE> 4
LIST OF EXHIBITS
Exhibit Agreement Section
1. Plan of Merger 1.1
2. Board of Directors of Surviving Corporation 1.3
3. Officers of Surviving Corporation 1.4
4. Consulting and Non-Competition Agreement 5.2(d)
5. Form of Opinion of Counsel for the Company 5.2(e)
6. Form of Opinion of Counsel for SI 5.3(d)
iii
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LIST OF SCHEDULES
Schedule
3.1(a) Articles and Bylaws
3.1(e) Defaults
3.1(k) Material Agreements
3.1(l)(1) Customer List
3.1(l)(2) Suppliers
3.1(m) Title to Personal Property
3.1(p) Intellectual Property
3.1(q) Employees Agreements and Benefit Plans
3.1(r) Employees
3.1(s) Permits and Licenses
3.1(t) Bank Accounts and Safe Deposit Boxes
3.1(u) Loan Agreements
3.1(y) Taxes
3.1(ab) Affiliate Transactions
3.1(ac) Environmental Compliance
iv
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AGREEMENT
ACQUISITION AGREEMENT AND PLAN OF MERGER, dated as of April 12, 1996,
among SI TECHNOLOGIES, INC., a Delaware Corporation ("SI"), SI ACQUISITION
CORPORATION, a Washington corporation and a wholly owned subsidiary of SI
("Acqcorp"), EVERGREEN WEIGH, INC., a Washington corporation (the "Company"),
and CARL R. HARRIS and RUTH HARRIS ("Shareholders").
RECITALS
A. SI is engaged in the electronic weighing device and on-board
computers industry throughout the world;
B. The Company is engaged in the electronic weighing device industry
and the Shareholders are the owners of all of the outstanding capital stock of
the Company;
C. SI and Acqcorp desire to acquire from Shareholders, and Shareholders
desire to sell to SI and Acqcorp, all of the capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger and Closing. Subject to the provisions
hereof, articles of merger containing a plan of merger in substantially the form
of Exhibit 1 attached hereto, and any other required documents, in such form as
required by, and executed in accordance with, the relevant provisions of the
Washington Business Corporation Act (the "Washington Law") (together, the
"Merger Documents") shall be duly delivered to the Secretary of State of the
State of Washington for filing, as provided in the Washington Law, as soon as
practicable after satisfaction of the latest to occur of the conditions set
forth in Article 5. The Merger shall become effective upon the filing of the
Merger Documents by the Secretary of State of the State of Washington. The term
"Effective Time of the Merger" shall mean the date and time when the Merger
becomes effective. A closing (the "Closing") shall take place on April 12, 1996
at the offices of Graham & James/Riddell Williams or at such other place, at
such other time, or on such other date as SI, Acqcorp and the Company may
mutually agree upon for the Closing to take place. At the Closing there shall be
delivered to SI, Acqcorp and the Company
1
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the opinions, certificates and other documents and instruments required to be
delivered under Article 5 hereof.
1.2 Effects of the Merger. At the Effective Time of the Merger, (i) the
separate existence of Acqcorp shall cease and Acqcorp shall be merged with and
into the Company (Acqcorp and the Company are sometimes referred to herein as
the "Constituent Corporations" and the Company is sometimes referred to herein
as the "Surviving Corporation"), pursuant to the Plan of Merger, and (ii) the
Articles of Incorporation and the Bylaws of Acqcorp as in effect immediately
prior to the Effective Time of the Merger shall be the Articles of Incorporation
and the Bylaws of the Surviving Corporation until thereafter amended as provided
by law.
1.3 Board of Directors. Upon the effectiveness of the Merger, the
members of the Board of Directors of the Surviving Corporation shall be as set
forth in Exhibit 2.
1.4 Officers. Upon the effectiveness of the Merger, the officers of the
Surviving Corporation shall be set forth on Exhibit 3.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any further action on the part of the holder of
any shares of common stock of the Company:
(a) Capital Stock of Acqcorp. Each issued and outstanding
share of the capital stock of Acqcorp shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation
(the "Surviving Corporation Common Stock"). From and after the Effective Time of
the Merger, each outstanding certificate theretofore representing shares of
capital stock of Acqcorp shall be deemed for all purposes to evidence ownership
of and to represent the number of shares of Surviving Corporation Common Stock
into which such shares of capital stock of Acqcorp shall have been converted.
Promptly after the Effective Time of the Merger, the Surviving Corporation shall
issue, on a share for share basis, to the shareholder of Acqcorp a stock
certificate or certificates representing shares of Surviving Corporation Common
Stock in exchange for the certificate or certificates which formerly represented
shares of capital stock of Acqcorp, which shall be canceled.
(b) Right of Holders of Shares to Receive Cash and Stock. All
of the issued and outstanding shares of common stock of the Company (the
"Shares") as
2
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a class shall be converted into the right to receive an aggregate of One Million
Dollars ($1,000,000) in cash. Each holder of Shares shall be entitled to receive
such share- holder's pro rata portion of such consideration.
(c) No Further Ownership Rights in the Shares. All
consideration paid upon the surrender of shares of the Shares in accordance with
the terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to such shares of the Shares, and after the Effective Time of
the Merger there shall be no registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of the Shares which were
outstanding immediately prior to the Effective Time of the Merger. If, after the
Effective Time of the Merger, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled as provided in this Article
2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company and the
Shareholders jointly and severally represent and warrant to SI and Acqcorp,
except as otherwise disclosed on a schedule hereto, as follows:
(a) Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties or assets makes such licensing or
qualification necessary, except where failure to be so licensed or qualified
would not have a material adverse effect on the Company. Complete and correct
copies of the Articles of Incorporation and Bylaws of the Company as amended to
the date hereof are attached hereto as Schedule 3.1(a).
(b) Capital Structure. The authorized capital stock of the
Company consists of 5,000 shares of common stock, without par value per share,
of which on the date hereof 1907 2/3 shares of common stock are issued and
outstanding. All outstanding shares of the Company's capital stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. All of the outstanding shares of common stock of the Company
are owned by the Shareholders, free and clear of all liens, claims and
encumbrances, and subject to no options, warrants, contracts, purchase rights or
agreements of any kind, except for this Agreement, and the Shareholders have the
absolute right to enter into this Agreement and to effect the Merger. There are
no options, warrants, calls, rights, commitments or agreements of any character
to which the Company or any Shareholder is a party
3
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or by which it is bound obligating the Company or any Shareholder to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company or any Shareholder to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to the Company, nor
is the Company under any obligation to issue any such rights. There are no
voting trusts or other agreements or understandings to which the Company or any
Shareholder is a party with respect to the voting of the capital stock of the
Company.
(c) Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company Each of the Shareholders has the power to enter into
this Agreement and the Consulting and Noncompetition Agreement in the form
attached hereto as Exhibit 4, and to carry out his or her obligations hereunder
and under all other agreements entered into by such Shareholder in connection
herewith. The execution, delivery and performance of this Agreement by the
Shareholders, and each of the other agreements referred to herein to which such
Shareholders are party, and the performance by the Shareholders of their
obligations hereunder and thereunder have been duly authorized by all necessary
action on the part of each Shareholder. The execution and performance of this
Agreement and the other agreements contemplated hereunder by the Shareholder do
not violate, or result in a breach of, or constitute any default under, any
judgment, order or decree to which any Shareholder may be subject. Such
execution or performance does not constitute a violation of or conflict with any
duty to which any Shareholder is subject.
(d) Binding Obligation. This Agreement has been duly executed
and delivered by the Company and each Shareholder and constitutes a valid and
binding obligation of the Company and each Shareholder enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' right generally,
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
(e) No Default. Except as set forth on Schedule 3.1(e)
hereto, the execution and delivery of this Agreement by the Company and the
Shareholders do not, and the consummation by the Company and the Shareholders of
the transactions contemplated hereby and compliance by the Company and the
Shareholders with the provisions hereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation under, or result in the creation of any
4
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lien, security interest, charge or other encumbrance upon any of the respective
properties or assets of the Company under any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of the Company or any loan
or credit agreement, note, bond, mortgage, indenture, lease, conditional sale or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule, regulation, code, writ or
injunction applicable to the Company or the Shareholders, or its or their
properties or assets, other than such conflicts, violations, defaults,
terminations, cancellations or accelerations which individually or in the
aggregate do not have a material adverse effect on the financial condition of
the Company or the ability of the Shareholders to consummate the transactions
contemplated herein.
(f) Consents. No exemption, consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality domestic or foreign (a "Governmental Entity"), the shareholders
of the Company or any other third party is required by, or with respect to, the
Company, in connection with the execution and delivery of this Agreement by the
Company or the Shareholders or the consummation by the Company or the
Shareholders of the transactions contemplated hereby, except for (i) the filing
of the Merger Documents with the Secretary of State of the State of Washington
and appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business.
(g) Financial Statements and Reports. The Company has
furnished SI with true copies of balance sheets of the Company as of June
30,1995 and the related statements of income for the year then ended and an
interim balance sheet as of February 29, 1996, together with the related
statement of income for the seven month period then ended. (Such balance sheets
and related statements of income are sometimes referred to together as the
"Company Financial Statements.") Except to the extent stated therein, the
Company Financial Statements have been prepared in accordance with generally
accepted accounting principles (except for the omission of notes to interim
statements and year-end adjustments to interim results), applied on a consistent
basis with all prior periods and fairly presented the financial position of the
Company as of the dates indicated and the results of operations and changes in
financial position for the periods indicated, subject, in the case of interim
financial statements, to normal year-end adjustments. The Company does not have
any liability or obligation which is not accrued or reserved against in the
Company Financial Statements and is required to be so accrued or reserved,
except those incurred in the ordinary course of business after the date thereof
and which in the aggregate are not material to the financial condition of the
Company.
(h) Liabilities. To the best knowledge of the Company or the
Shareholders, the Company has no liabilities or obligations of any nature or of
any amount whatsoever, whether accrued, absolute, liquidated or unliquidated,
contingent
5
<PAGE> 11
or otherwise, and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
the Company which might give rise to obligations or liabilities of the Company,
except:
(i) to the extent reflected in the Company
Financial Statements and not already paid or discharged;
(ii) to the extent disclosed in this Agreement
and the schedules hereto;
(iii) those that have been or will be incurred in
or as a result of the normal and ordinary course of business consistent with
past custom and practice since the date of the Company Financial Statements; and
(iv) those expressly approved in writing by SI.
(i) Compliance with Applicable Laws. The Company holds, and
at all times relevant hereto has held, all material licenses, franchises,
permits and authorizations necessary for the lawful conduct of its business
under and pursuant to all, and has complied with and is not in default in any
respect under any applicable law, ordinance, regulation, statute, order, rule,
policy, or guideline of any Governmental Entity, except for possible violations
which individually or in the aggregate do not have a material adverse effect on
the financial condition of the Company. No investigation or review by any
Governmental Entity of the Company is pending or, to the knowledge of the
Company, threatened, nor has any Governmental Entity indicated to the Company an
intention to conduct the same.
(j) Litigation. Neither the Shareholders nor the Company is a
party to any, and there are no pending or, to the best of the Shareholders' and
the Company's knowledge, threatened, material legal, administrative, arbitral or
other proceedings, claims, actions or governmental investigations of any nature
against the Company or any Shareholder or challenging the validity or propriety
of the transactions contemplated by this Agreement and, to the best of the
Company's and the Shareholders' knowledge, there is no reasonable basis for any
other material proceeding, claim, action or governmental investigation against
the Company. The Company is not a party to any order, judgment or decree which
will, or might reasonably be expected to, materially adversely affect the
business, operations, properties, assets or financial condition of the Company.
(k) Certain Agreements. Except as set forth on Schedule
3.1(k) hereto, the Company is not a party to:
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(i) Any agreement (or group of related agreements)
for the lease of personal property to or from any person providing for lease
payments in excess of $10,000 per year;
(ii) Any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies, products or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of time of more than one year,
result in a material loss to the Company, or involve the payment of
consideration in excess of $10,000 during the term of such agreement;
(iii) Any agreement concerning a partnership or
joint venture;
(iv) Any agreement (or group of related agreements)
under which the Company has created, incurred, assumed or guaranteed any
indebtedness for borrowed money, or any lease obligation, in excess of $10,000
or under which it has imposed or granted a security interest on any of its
assets, tangible or intangible;
(v) Any agreement concerning confidentiality or
noncompetition;
(vi) Any agreement with any of the Shareholders;
(vii) Any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers or
employees;
(viii) Any collective bargaining agreement;
(ix) Any agreement for the employment of any
individual on a full-time, part-time, consulting or other basis providing annual
compensation in excess of $10,000, or providing severance benefits, or which
requires more than thirty (30) days notice of termination;
(x) Any agreement under which it has advanced or
loaned any amount to any of its directors, officers and employees;
(xi) Any agreement under which the consequences of
the default or termination could have a material adverse affect on the business,
financial condition, operations, results of operations or future prospects of
the Company; or
(xii) Any other agreement (or group of related
agreements), the performance of which involves consideration in excess of
$10,000.
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The Company has delivered to SI a correct and complete copy of each
written agreement listed in Schedule 3.1(k), and a written summary setting forth
the terms and conditions of each oral agreement referred to in Schedule 3.1(k).
With respect to each such agreement: (i) with respect to the Company, the
agreement is legal, valid, binding, enforceable and in full force and effect,
and to the Company's and the Shareholders' knowledge, the agreement is legal,
valid, binding, enforceable and in full force and effect with respect to each
other party to the agreement; (ii) the agreement will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the consummation of the transactions contemplated in this agreement;
(iii) the Company is not in breach or default under any such agreement, and to
the Company's and the Shareholders' knowledge, no other party is in breach or
default under such agreement and no events or circumstances have occurred which
could reasonably be anticipated to create a default under any such agreement;
and (iv) to the Company's and the Shareholders' knowledge, no party has
repudiated any provision of the agreement.
(l) Customers and Suppliers. Schedule 3.1(l)(1) contains a
true and complete list of all customers to which the Company provided goods or
services invoiced at $10,000 or more in the aggregate in the one-year period
ended February 29, 1996 and thereafter through the date of this Agreement.
Schedule 3.1(l)(2) contains a true and complete list of all persons who provided
goods or services to the Company in the one-year period ended February 29, 1996
and thereafter through the date of this Agreement, to which the Company paid or
is committed to pay $10,000 (or any lesser amount paid other than in the
ordinary course of business) or more in the aggregate since the beginning of
said period. The Company's relations with the foregoing customers and suppliers
are good and except as described in Schedules 3.1(l)(1) or 3.1(l)(2), there are
no disputes between the Company and any of such customers and suppliers
outstanding, or to the Company's or Shareholders' knowledge, pending or
threatened. The Company's business with such customers and suppliers is current
and to the Company's or the Shareholders' knowledge, expected to continue. True
and complete copies of all contracts with the foregoing customers and suppliers
have been delivered to SI and are in full force and effect in accordance with
their terms and there are no defaults or assertions of default thereunder.
(m) Title to Personal Property. Except as disclosed on
Schedule 3.1(m), the Company has good and marketable title to all personal
property and assets of every type and description used by it in its business,
free and clear of any and all mortgages, liens, pledges, privileges, charges or
encumbrances of every kind, nature and description; all properties and assets of
the Company are in its possession or custody or under its control; and all of
its operating assets are in good operating condition and repair, ordinary wear
and tear excepted. Except as disclosed on Schedule 3.1(m), the Company owns all
of the personal property and other assets necessary for the operation of its
business as it is currently being conducted.
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(n) Accounts Receivable. All the accounts receivable of the
Company reflected in the Company Financial Statements have been collected or are
good and collectable in the aggregate recorded amounts thereof (less a
reasonable amount for doubtful accounts as reflected in the Financial
Statements), can reasonably be anticipated to be paid in full after good faith
collection efforts, and are subject to no setoffs or counterclaims.
(o) Inventory. All of the inventory of the Company reflected
in the Company Financial Statements was in existence at the date thereof. All
such inventory and all inventory items acquired since February 29, 1996 are of
good and merchantable quality and are usable in the ordinary course of the
Company's business except for damage or deterioration adequately covered by
insurance or by claims against financially responsible third parties, and
subject to the reserve for obsolescence set forth in the Company Financial
Statements. Such inventories were valued at the lower of cost or net realizable
value and were determined in accordance with generally accepted accounting
principles consistently applied.
(p) Intellectual Properties. Neither the Shareholders or the
Company has any reason to believe the Company does not own or have the right to
use pursuant to license, sublicense, agreement or permission all patents, patent
rights, licenses, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights and similar rights necessary for
and material to the operation of its business as currently conducted. The
Company has taken all reasonably necessary action to maintain and protect each
item of intellectual property that it owns or uses. Schedule 3.1(p) identifies
all material patents, patent rights, licenses, trademarks, trademark rights,
trade names, trade name rights, service marks, service mark rights, copyrights
and similar rights used by the Company in its business. The Company has
delivered to SI true, correct and complete copies of all registrations,
applications, licenses, agreements and permission for the intellectual property
rights described in Schedule 3.1(p). To the knowledge of the Company and the
Shareholders, the Company is not infringing or otherwise acting adversely to the
right of any other person under or in respect to, any patent, license,
trademark, trade name service mark, copyright or similar intangible right such
that it has a material adverse effect on the business operations of the Company,
except as disclosed in Schedule 3.1(p).
(q) Employees and Benefits. Schedule 3.1(q) lists all
employee benefit plans covering the Company's employees and all collective
bargaining or union agreements to which the Company is a party. The Company is
not a party to any multiemployer pension or other employee benefit plan subject
to the Employment Retirement Security Act of 1974, as amended. Except as
identified on Schedule 3.1(q), neither the Company nor either of the
Shareholders has any material written or oral agreements with any of its
employees. The Company has timely paid
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all withholding, FICA and other taxes required to be paid by it on behalf of its
employees.
(r) Labor Matters. Schedule 3.1(r) lists all employees of the
Company, their current compensation level and all accrued vacation and sick pay.
The Company is in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, the failure to comply with which would have a
material adverse effect on the financial condition of the Company; there is no
unfair labor practice complaint served against the Company; no grievance or
arbitration proceeding is pending against the Company; to the knowledge of the
Company and the Shareholders no representation petition has been filed with the
National Labor Relations Board and no organizational activity, is occurring
respecting the employees of the Company; and the Company has not experienced any
work stoppage.
(s) Conduct of Business, Licenses, Etc. Schedule 3.1(s)
describes all permits, licenses, approvals and other authorizations from and
registrations with federal, territorial, state, local and other governmental
agencies necessary for the Company to conduct its business, all of which have
been secured, are valid and in full force and effect and are renewable in the
ordinary course of business. None of such permits, licenses, approvals or other
authorizations and registrations shall be invalidated or become voidable as a
result of the consummation of the transactions contemplated hereby. No consent,
approval or notice is necessary in connection with the consummation of the
transactions contemplated hereby in order to maintain in full force and effect
all of said permits, licenses, approvals, authorizations and registrations. The
operation of the Company in the past ten years has not violated or infringed in
any material respect any of said permits, licenses, approvals, authorizations,
and registrations, and the Company has not been subject to any investigation,
proceeding or action by any federal, territorial, state, local or other
governmental agency resulting in any penalty, fine or other adverse ruling,
order or report. The products sold by the Company comply with all applicable
regulatory approvals, all of which are currently in full force and effect.
Schedule 3.1(s) lists all states in which the Company has qualified to do
business as a foreign corporation.
(t) Bank Accounts. Schedule 3.1(t) hereto sets forth a
complete and correct list of all bank accounts and safe deposit boxes of the
Company. Except as set forth on such schedule, the Company has no other bank
accounts, safe deposit boxes or other time or demand deposits, investment
accounts or other liquid assets. Such schedule shows the name of each such bank,
financial institution or other depository, the address of same, and the account
number and names of all persons authorized to draw thereon or who have access
thereto.
(u) Bank Loans. Schedule 3.1(u) lists each of the loans and
other agreements between the Company and Seattle First National Bank, N.A. (the
"Bank
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Loans"). With respect to each such agreement: (i) with respect to the Company,
the agreement is legal, valid, binding, enforceable and in full force and
effect, and to the Company's and the Shareholders' knowledge, the agreement is
legal, valid, binding, enforceable and in full force and effect with respect to
Seafirst; (ii) the agreement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated in this agreement and Seafirst has
consented to such continuation; (iii) the Company is not in breach or default
under any such agreement; and (iv) to the Company's and the Shareholders'
knowledge, Seafirst has not repudiated any provision of the agreement. The
Company has no outstanding loans or agreements with any other bank.
(v) Condition of Buildings and Equipment. All of the
buildings and equipment of the Company are in reasonable good working condition
and repair, ordinary wear and tear excepted, and to the Company's and the
Shareholders' knowledge are in conformity with all applicable ordinances and
regulations and building, zoning, and other laws. The Company shall, until the
Effective Time of the Merger, continue to maintain all of its material assets in
conformity with its present practices and cause it to continue to carry its
existing insurance on such assets.
(w) Absence of Certain Changes or Events. Except as
contemplated by this Agreement, since February 29, 1996, the Company, has
conducted its business only in the ordinary course, and there has not been (i)
any material adverse change with respect to the business, operations, prospects,
properties, assets or financial condition or results of operations of the
Company, (ii) any damage, destruction or loss, whether covered by insurance or
not, which has or will have a material adverse effect on the financial condition
of the Company, or (iii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of the Company's capital stock or any redemption or other acquisition by
the Company of capital stock or any agreement entered into with respect thereto.
(x) Insurance. The Company has furnished SI with a complete
list and brief description of all insurance policies carried by the Company as
of the date hereof, which policies are maintained in full force and effect and
provide for coverages which are usual and customary in the business of the
Company as to amount and scope and as to which no notice of cancellation has
been received.
(y) Taxes. The Company has filed all tax returns and reports
as required by law and has paid all taxes and other assessments, including
withholding, Social Security taxes, unemployment insurance, and workers'
compensation premiums, by their respective due dates (including extensions
thereof), except where any failure to file or pay, taken individually or in the
aggregate, would not have a material adverse effect on the financial condition
of the Company. Each such return is true and correct in all material respects
and the Company does not have any
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<PAGE> 17
additional material liability for taxes with respect to any return heretofore
filed. The provision for taxes of the Company as shown in the Company Financial
Statements sheet is adequate for taxes due or accrued in accordance with
generally accepted accounting principles and there is no audit exam, notice of
deficiency, refund litigation, tax claim, or notice of assessment or proposed
assessment pending or which the Company has received which is not included in
such provision. Except as set forth on Schedule 3(y), the Company has not been
audited by the Internal Revenue Service or any agency of the State of
Washington. The Company has not granted or been requested to grant waivers of
any statute of limitations applicable to any claim for taxes.
(z) Brokers. Neither the Shareholders nor the Company, nor
any of its officers or directors has retained, hired or employed any broker,
investment banker or other firm or person in connection with the transactions
contemplated hereby and no such agent, broker, banker, firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement.
(aa) Minute Books. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions held
or taken, since its formation, of its shareholders and Board of Directors
(including committees of the Board of Directors). True and complete copies of
such minute books have been furnished to SI.
(ab) Affiliate Transactions. Except as specifically
contemplated by this Agreement, or as reflected on Schedule 3.1(ab), since June
30, 1995, the Company has not engaged in, or agreed to engage in (whether in
writing or orally), any transaction with any director or officer of the Company
or any "affiliate" or "associate" (as such terms are defined in Rule 405
promulgated under the Securities Act) involving aggregate payments by or to the
Company of $10,000 or more during any consecutive 12-month period.
(ac) Environmental Compliance. The Company's operations do
not violate any applicable federal, state or local law, regulation, rule or
order relating to air, water, or noise pollution, employee health or safety, or
the production, storage, labeling, transportation or disposition of waste or
hazardous toxic substances (collectively, "Environmental Law"). Except as set
forth on Schedule 3.1(ac), no licenses or permits are required to be filed by
the Company under any applicable Environmental Law with respect to the Company's
operations. The Company has not, and none of the Company or the Shareholders has
any knowledge that any other person has, stored any chemical or hazardous
substances, including any "Hazardous Substances," "Pollutants" or "Contaminants"
(as such terms are defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA")), asbestos,
petroleum products, or polychlorinated biphenyls
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(collectively referred to herein as "Hazardous Substances") on, beneath or about
any of the owned or leased properties of the Company or on, beneath or about any
other property previously owned or leased by the Company. None of the Company
nor the Shareholders knows of any condition relating to or resulting from a
release or discharge which has resulted or could result in any damage, loss,
cost expense, claim, demand, order or liability to or against the Company or SI
or Acqcorp by any governmental authority or other third party relating to or
resulting from the Company's operations. The Company has not received any notice
from any governmental authority or private or public entity advising the Company
that it is potentially responsible for response costs with respect to a release
or threatened release of any Hazardous Substances. The Company has not, and
neither the Company or either of the Shareholders has any knowledge that any
other person has, buried, dumped or otherwise disposed of any Hazardous
Substances on, beneath or about any of the owned or leased properties of the
Company or on, beneath or about any other property previously owned or leased by
the Company. The Company has not received notice of any violation of any
Environmental Law or zoning or land use ordinance, law or regulation relating to
the Company's operations including, but not limited to, CERCLA, the Toxic
Substances Control Act of 1976, as amended, the Resource Conservation Recovery
Act of 1976, as amended, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, or the Occupational Safety and health Act of
1970, as amended, nor is the Company or any Shareholder aware of any such
violation.
(ad) Disclosure. None of the statements or information made
or contained in any of the representations or warranties of the Company set
forth or to be set forth in this Agreement or in any of the schedules, exhibits,
lists, certificates or other documents specifically referred to herein and
delivered by or on behalf of the Company to SI pursuant to this Agreement or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated herein or therein or necessary to make the
statements or information contained herein or therein in light of the
circumstances under which they are made, not misleading in any material respect.
3.2 Representations and Warranties of SI and Acqcorp. SI and Acqcorp
jointly and severally represent and warrant to the Company, as follows:
(a) Organization, Standing and Power. Each of SI and Acqcorp
is a corporation duly authorized, validly existing and in good standing under
Delaware and Washington law, respectively. SI has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties or assets makes
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such licensing or qualification necessary, except where failure to be so
licensed or qualified would not have a material adverse effect on SI.
(b) Authority. SI has and Acqcorp each all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by SI and Acqcorp and the consummation by SI and Acqcorp of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of SI and Acqcorp. This Agreement has been duly
executed and delivered by SI and Acqcorp and constitutes a valid and binding
obligation of SI and Acqcorp enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and the compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation under,
any provisions of the Articles of Incorporation or By-Laws of SI or Acqcorp. No
exemption, consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other third party is
required by, or with respect to, SI or Acqcorp, in connection with the execution
and delivery of this Agreement by SI or Acqcorp, or the consummation by SI or
Acqcorp of the transactions contemplated hereby, except for filing of the Merger
Documents with the Secretary of State of Washington.
(c) Brokers. Neither SI nor any of its officers or directors
has retained, hired or employed any broker, investment banker or other firm or
person in connection with the transactions contemplated hereby and no such
agent, broker, banker, firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
(d) Information Supplied. None of the information supplied or
to be supplied in writing by SI or Acqcorp to the Company in connection with the
transactions contemplated hereby will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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ARTICLE 4
COVENANTS
4.1 Covenants of the Company Relating to Conduct of Business. During
the period from the date of this Agreement and continuing until the Effective
Time of the Merger (except as SI shall consent in writing, which consent shall
not be unreasonably withheld), the Company and the Shareholders agree that
(a) Ordinary Course. Except as provided in paragraph (b) of
this Section 4.1, the Company shall carry on its respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business and except
as provided in paragraph (b) of this Section 4.1, use its best efforts to
preserve intact its present business organizations, keep available the services
of its present employees and preserve its relationships with customers,
depositors, suppliers and others having business dealings with it to the end
that its goodwill and ongoing businesses shall be unimpaired at the Effective
Time of the Merger. The Company will not enter into any merger, consolidation or
other business combination, or agreement therefor, with any entity, nor make
available to any person not affiliated with it any information about its
business or organization that is not routinely made available to the public
generally, except as may be required by law or regulation or pursuant to this
Agreement.
(b) Dividends; Changes in Stock. The Company shall not (i)
declare, set aside or pay any dividends on, or make other distributions in
respect of, any of its capital stock, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock of the Company, or (iii) repurchase, redeem or otherwise acquire, any
shares of its capital stock or any of its other outstanding securities.
(c) Issuance or Sale of Securities. The Company will not
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class, or any securities convertible
into, or any rights, warrants or options to acquire, any such shares or
convertible securities, or enter into any agreement obligating the Company to
issue, deliver or sell any such shares, rights, warrants, options or securities,
and the Shareholders shall not enter any agreement with respect to the sale of
the Shares or any warrants, options or other rights to purchase any securities
of the Company.
(d) Charter Documents. The Company shall not amend or propose
to amend its Articles of Incorporation or Bylaws.
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(e) No Acquisitions. The Company shall not organize, acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Company other than in the
ordinary course of business.
(f) No Dispositions. The Company shall not sell, lease,
encumber, pledge, grant a security interest in, or otherwise dispose of, or
agree to sell, lease or otherwise dispose of, any of its assets (including any
interest therein) which are material, individually or in the aggregate, to the
Company, other than in the ordinary course of business consistent with past
practices and policies.
(g) Compensation and Benefits. The Company shall not grant
any officer, employee or director any increase in compensation or in severance
or termination pay, or enter into or amend or make any commitment to enter into
or amend any employment, consulting, severance or salary continuation agreement
with any officer, employee or director or any bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, group insurance or
other benefit plan, or any policies or past practices with respect to vacation,
termination, severance, and leave pay and benefits, except as may be required
under employment or termination agreements in effect on the date of this
Agreement or pursuant to this Agreement and except in accordance with the
Company's established policies with respect to timing and amounts of such
increases or the payment of bonuses; or to negotiate or otherwise make any
commitment or incur any liability or obligation, to any labor organization not
binding and enforceable against the Company and its subsidiaries on the date of
this Agreement.
(h) Capital Expenditures. The Company shall not make any
capital expenditures in excess of (i) $5,000 per project or related series of
projects, or (ii) $20,000 in the aggregate, other than pursuant to binding
commitments existing on the date hereof and other than expenditures necessary to
maintain existing assets in good repair.
(i) Debt. The Company shall not incur debt other than in the
ordinary course of business.
(j) Good Repair. The Company shall not fail to maintain all
of its properties in good repair, order and condition; or fail to maintain
insurance upon all of its properties and with respect to the conduct of its
business in amount and kind as now in existence if available at rates
substantially similar to those now in effect and, if not available at such
rates, in such amount and kind as would be appropriate in the exercise of good
business judgment.
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(k) Commitments. The Company shall not, except as otherwise
contemplated hereby, enter into any other agreements, commitments or contracts
which, individually or in the aggregate, are material to the Company except
agreements, commitments or contracts entered into in the ordinary course of
business.
(l) Real Estate. The Company shall not make any investment or
commitment to invest in real estate.
(m) Other Actions. Neither the Company nor the Shareholders
shall take any action that would result in any of the representations and
warranties of the Company set forth in this Agreement becoming untrue in any
material respect or in any of the conditions set forth in Article V not being
satisfied in any material respect, except as otherwise contemplated or required
by this Agreement.
4.2 Access to Information.
(a) The Company and the Shareholders shall afford to SI and
to SI's accountants, counsel and other representatives access during normal
business hours during the period prior to the Effective Time of the Merger,
subject to reasonable notice, to all its properties, books, contracts,
commitments, records, reports and other information, including the work papers
of the Company's accountants, any reviews, examinations, or reports by such
accountants, for the purpose of conducting an investigation of the Company on an
ongoing basis until the Effective Time of the Merger; provided, however, that
such investigation shall be conducted in a manner that does not unreasonably
interfere with the normal operations and employee relations of the Company. SI
and Acqcorp on the one hand, and Company and the Shareholders on the other, will
hold nonpublic information received from the other ("Confidential Information")
in confidence until such time as such information otherwise becomes publicly
available. In the event of termination of this Agreement for any reason each
shall promptly return all documents containing Confidential Information obtained
from the other and any copies made of such documents. This covenant of
confidentiality shall survive any termination of this Agreement, any other
provision notwithstanding provided, however, that the obligation to keep such
Confidential Information confidential shall not apply to (i) any information
which (A) a party can establish by convincing evidence was already in its
possession prior to the disclosure thereof by the other; (B) was then generally
known to the public; (C) became known to the public other than as a result of
actions by the other; or (D) was disclosed by a third party not bound by an
obligation of confidentiality; or (ii) disclosures in accordance with the
federal securities laws or pursuant to an order of a court of competent
jurisdiction.
4.3 Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, all costs and expenses incurred in connection
with this
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Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
4.4 Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time of the Merger any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
the proper officers and directors of each corporation that is a party to this
Agreement shall take all such necessary action.
4.5 No Solicitation. Neither the Shareholders nor the Company shall,
directly or indirectly, encourage or solicit or, subject to the fiduciary duties
of the Board of Directors of the Company, hold discussions or negotiations with,
or provide any information to, any person, entity or group (other than SI)
concerning any merger, sale of substantial assets not in the ordinary course of
business, sale of shares of capital stock or similar transactions involving the
Company or securities of the Company held by the Shareholders. The Shareholders
and the Company will use their best efforts to cause its officers, directors,
employees, representatives, agents, or other persons controlled by the Company
to abide by the foregoing restrictions. The Shareholders and the Company will
promptly communicate to SI the terms of any proposal which it may receive in
respect of any such transaction.
4.6 Current Information--the Company. During the period from the date
of this Agreement to the Effective Time of the Merger, the Company will cause
one or more of its designated representatives to confer on a regular basis with
representatives of SI to report the general status of the ongoing operations of
the Company. The Company will promptly notify SI of any material change in the
normal course of business or in the operation of the properties of the Company
and of any governmental complaints, investigations or hearings (or
communications indicating that the same be contemplated), or the institution or
the threat of significant litigation involving the Company and will keep SI
fully informed of such events.
4.7 Failure to Fulfill Conditions. If any of SI or Acqcorp, the
Shareholders, or the Company determines that it will be unable to fulfill on or
prior to the date set forth in Section 6.1(b) any of the material obligations
required to be fulfilled as a condition to any other party's obligation to
consummate the transactions contemplated hereby, such party will promptly notify
the other parties.
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ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction prior to the Effective Time of the Merger of the following
conditions:
(a) Shareholder Approval. This Agreement and the Merger and
the transaction contemplated hereby, to the extent required, shall have been
approved and adopted by the affirmative vote of the shareholders of the Company
as required by the Washington Law.
(b) Approvals. All authorizations, consents, orders or
approvals of, or declaration or filings with, or expirations of waiting periods
imposed by, any Governmental Entity (the "Governmental Approvals") necessary for
the consummation of the transactions contemplated by this Agreement shall have
been filed, occurred or been obtained, as the case may be, and no action, suit
or proceeding by any Governmental Entity shall have been commenced for the
purpose of postponing or preventing consummation of the Merger or the
transactions contemplated hereby.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction shall be in effect, and no statute, rule, regulation or
order of any Governmental Entity shall have been enacted, promulgated or issued
preventing consummation of the Merger or the transactions contemplated hereby.
5.2 Conditions of Obligations of SI and Acqcorp. The obligations of SI
and Acqcorp to effect the Merger and the transactions contemplated hereby are
also subject to the satisfaction or waiver prior to the Effective Time of the
Merger of the following conditions:
(a) The representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct in all
material respects as of and at the Effective Time of the Merger and shall have
been true in all material respects at the date hereof, except for any changes
approved by SI in writing;
(b) The Company and the Shareholders shall have performed and
complied in all material respects with all covenants, agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by it on or before the Effective Time of the Merger;
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(c) The Chief Executive Officer of the Company shall have
delivered to SI at the Closing a certificate certifying that the conditions
specified in paragraphs (a) and (b) of this Section 5.2 have been fulfilled;
(d) Each of the Shareholders shall execute and deliver to SI
the Consulting and Noncompetition Agreement attached in the form of Exhibit 4;
(e) SI shall have received from counsel for the Company, an
opinion dated as of the Effective Time of the Merger as to the matters set forth
in Exhibit 5 in form and substance reasonably satisfactory to SI;
(f) All corporate proceedings in connection with the Merger
and the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to SI and its counsel and
they shall have received all such counterpart original and certified or other
copies of such documents as they may reasonably request;
(g) Any consents, waivers, clearances, approvals and
authorizations of regulatory or governmental bodies which are necessary in
connection with the consummation of the transactions contemplated hereby shall
have been obtained, and none of such consents, waivers, clearances, approvals or
authorizations shall contain or impose any term, cost or condition which would,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets or financial condition of the Company
or SI and its subsidiaries taken as a whole.
(h) In addition to the approvals of any Governmental Entity
described Section 5.1(b), SI or the Company shall have obtained all necessary
third-party consents or approvals reasonably required by the SI in connection
with or to consummate the Merger and the transactions contemplated hereby, and
to retain the benefits and rights held by the Company, including without
limitation any consents or assignments reasonably necessary in connection with
any contract, agreement, or lease; except for any such consents or approvals the
failure to obtain which, individually or in the aggregate, would not have a
materially adverse effect on the operations or financial condition of the
Company.
5.3 Conditions of Obligations of the Company. The obligations of the
Company and Shareholders to effect the transactions contemplated hereby are also
subject to the satisfaction or waiver prior to the Closing of the following
conditions:
(a) The representations and warranties of SI and Acqcorp
contained in this Agreement shall be true and correct in all material respects
as of and at the Effective Time of the Merger and shall have been true in all
respects at the date hereof, except for any changes approved by the Shareholders
in writing;
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(b) SI and Acqcorp shall have performed and complied in all
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by them on or before the Effective Time of the Merger;
(c) Duly authorized officers of SI and Acqcorp shall have
delivered to the Company at the Closing a certificate certifying that the
conditions specified in paragraphs (a) and (b) of this Section 5.3 have been
fulfilled; and
(d) The shareholders shall have received from counsel to SI,
an opinion dated as of the Effective Time of the Merger as to the matters set
forth in Exhibit 6 in form and substance reasonably satisfactory to the
Shareholders; and
(e) Any consents, waivers, clearances, approvals and
authorizations of regulatory or governmental bodies which are necessary in
connection with the consummation of the transactions contemplated hereby shall
have been obtained, and none of such consents, waivers, clearances, approvals or
authorizations shall contain or impose any term, cost or condition which would,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets or financial condition of SI and its
subsidiaries, taken as a whole.
(f) In addition to the approvals of any Governmental Entity
described Section 5.1(b), SI or the Company shall have obtained all necessary
third-party consents or approvals reasonably required in connection with or to
consummate the transactions contemplated hereby, and to retain the benefits and
rights held by the Company, including without limitation any consents or
assignments reasonably necessary in connection with any contract, agreement, or
lease; except for any such consents or approvals the failure to obtain which,
individually or in the aggregate, would not have a materially adverse effect on
the operations or financial condition of SI and its subsidiaries, including the
Surviving Corporation, taken as a whole.
ARTICLE 6
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time of the Merger:
(a) By mutual consent of SI, Acqcorp, and the Company and the
Shareholders;
(b) By any party if the Closing shall not have occurred on or
prior to April 30, 1996, unless the failure of such occurrence shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe its agreements and
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conditions set forth herein to be performed or observed by such party on or
before the Effective Time of the Merger;
(c) by SI (i) if at the time of such termination there shall
be a material adverse change in the financial condition of the Company from that
existing on the date of this Agreement, except for any changes permitted by this
Agreement, it being understood that any of the matters disclosed herein are not
deemed to be a material adverse change for the purposes of this paragraph (c);
or (ii) if there shall have been any material breach of any obligation of the
Company or the Shareholders hereunder and such breach shall have not been
remedied within 30 days after receipt by the Company of notice in writing from
SI specifying the nature of such breach and requesting that it be remedied; and
(d) by the Company or, if there shall have been any material
breach of any obligation of SI or Acqcorp hereunder and such breach shall not
have been remedied within 30 days after receipt by SI of notice in writing from
the Company or such Shareholder specifying the nature of such breach and
requesting that it be remedied.
6.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 6.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of SI, or the Company
or their respective officers or director, or the shareholders, except as set
forth in Sections 4.2 and 4.3 and except to the extent that such termination
results from the wilful breach by a party hereto of any of its representations.
warranties, covenants or agreements set forth in this Agreement.
6.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties hereto may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE 7
LIMITATION OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained in this Agreement shall
survive the Effective Time of the Merger for a period of two (2) years, except
for: (i) the representations and warranties of the Shareholders set forth in
Section 3.1(y) which shall survive the Effective Time of the Merger for so long
as claims may be made by any taxing authority with respect to any taxes
referenced therein, and (ii) the representations and warranties of the
Shareholders set forth in Section 3.1(b) (Capital Structure), (p) (Intellectual
Properties), and (ac) (Environmental Compliance), which shall survive the
Effective Time of the Merger without limitation as to time.
7.2 Indemnification by the Shareholders. Each Shareholder hereby
agrees jointly and severally to indemnify SI and Acqcorp promptly against, and
to hold them harmless from any and all liability, loss, damage or injury
together with all reasonable costs and expenses relating thereto, including all
reasonable legal and accounting fees and expenses, incurred or sustained by them
arising from any failure by the Company or the Shareholders to fulfill, or other
breach of, any representation or warranty, or failure to perform or to fulfill
or other breach or violation of, any covenant, agreement or other term
obligating the Company or the Shareholders set forth in this Agreement,
irrespective of any investigation that may be or may have been made by or for SI
or Acqcorp prior to the Effective Time of the Merger, provided, however, the
obligations of the Shareholders under this Section 7.2 shall be limited in the
aggregate to the amount of the consideration received pursuant to Section 2.2
and there shall be no liability on the part of the Shareholders under this
Section 7.2 with respect to claims which may be made for damages until the
aggregate amount of damages exceeds $50,000 (the "Basket"). Notwithstanding any
other provision hereof, no claim can be made or lawsuit instituted under the
provisions of Section 7.2 or 7.4 (except for Reserved Claims) more than two
years following the Effective Time of the Merger. "Reserved Claims" shall mean
any claims or potential claims of which a party entitled to indemnification
hereunder has given written notice, prior to two years following the Closing, to
the party which may be required to provide indemnification hereunder.
7.3 Offset. In addition to any other remedies which SI or Acqcorp may
have against the Shareholders, SI or Acqcorp may offset any damages due and
owing SI or Acqcorp pursuant to Section 7.2 and not paid to SI or Acqcorp within
thirty (30) days of demand therefor against any payments required to be made by
SI or Acqcorp to any of the Shareholders under the Consulting and Noncompetition
Agreement attached as Exhibit 4.
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7.4 Indemnification by SI or Acqcorp. SI and Acqcorp hereby agree to
indemnify the Company and the Shareholders promptly against, and to hold them
harmless from any and all liability, loss, damage or injury together with all
reasonable costs and expenses relating thereto, including all reasonable legal
and accounting fees and expenses, incurred or sustained by them arising from any
failure by SI or Acqcorp to fulfill or other breach of any representation or
warranty, or failure to perform or to fulfill or other breach or violation of,
any covenant, agreement or other term obligating SI or Acqcorp set forth in this
Agreement, irrespective of any investigation that may be or may have been made
by or for the Company or said shareholders prior to the Effective Time of the
Merger.
ARTICLE 8
GENERAL PROVISIONS
8.1 Attorneys' Fees. In the event it is necessary for any party to
engage an attorney to enforce the terms of this Agreement, the prevailing party
shall, in addition to any other relief, be entitled to recover from the party in
default attorneys' fees and costs, including any on appeal.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to SI or Acqcorp, to
SI Technologies, Inc.
4611 South 134th Place
Seattle, Washington 98166
Attention: President
With copy to:
Benjamin F. Stephens
Graham & James LLP/Riddell Williams P.S.
1001 4th Avenue Plaza, Suite 4500
Seattle, Washington 98154-1065
(b) if to a former shareholder of the Company, to the
address at which payments to such Shareholder, under
the Noncompetition Agreement provided for in Section
5.2(d) hereof, are to be or were last made.
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With copy to:
Charles W. Dent
Foster Pepper & Shefelman
777 108th Ave NE, 15th Floor
Bellevue, Washington 98004
8.3 Interpretation. When a reference is made in this Agreement to
Sections, Schedules or Exhibits, such reference shall be to a Section, Schedule
or Exhibit to this Agreement unless otherwise indicated. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," and "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
8.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington.
8.7 Publicity. So long as this Agreement is in effect, no party to
this Agreement shall, or shall permit any of its officers, directors or
representatives to, issue or cause the publication of any press release, public
announcement or other public statement with respect to the transactions
contemplated by this Agreement without the prior consent of the other parties to
this Agreement, which consent shall not be unreasonably withheld; provided, that
without limiting the obligations of the parties to use their best efforts to
consult with each other prior to any public announcement nothing contained
herein shall restrict the ability of any party to issue any such announcement
which such party believes in good faith to be required by law.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior
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written consent of the other parties, except that Acqcorp may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to SI or to any direct or indirect wholly owned subsidiary of SI. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
IN WITNESS WHEREOF, SI and the Company have caused this Agreement to
be signed by their respective officers hereunto duly authorized and Shareholders
have signed all as of the date first written above.
SI TECHNOLOGIES, INC., a Delaware
corporation
By /s/ Rick A. Beets
------------------------------------------
Its President
SI ACQUISITION CORPORATION, a
Washington corporation
By /s/ Rick A. Beets
------------------------------------------
Its President
EVERGREEN WEIGH, INC., a Washington
corporation
By /s/ Carl R. Harris
------------------------------------------
Its President
/s/ Carl R. Harris
------------------------------------------
Carl R. Harris
/s/ Ruth Harris
------------------------------------------
Ruth Harris
26
