<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): February 13, 1998
SI TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-12370 95-3381440
(State or Other Jurisdiction of (Commission (IRS Employer ID. No.)
Incorporation or Organization) File Number)
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 February 13, 1998 SI Technologies, Inc. (the "Company")
merged, in a pooling of interest merger, with NV Technology,
Inc., a Las Vegas, Nevada corporation engaged in the force
measurement device industry.
The effect of the merger was an exchange of all the
outstanding capital stock of NV Technology for 200,000 shares
of SI Technologies, Inc. common stock. The value of the
consideration was determined by reference to NV Technology's
past operating history and the Company's analysis of its
future potential.
(b) NV Technology, Inc. is an operating company. The Company
currently intends to continue to operate NV Technology 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 NV Technology, Inc. for
the years ended July, 31, 1996 and July 31, 1997 and
the three months ended October 31, 1997.
(c) Exhibits.
(i) Acquisition Agreement and Plan of Merger dated
February 12th, 1998 among SI Technologies, Inc., NV
Technology, Inc.(a Washington corporation), NV
Technology, Inc. (a Nevada corporation), Marvin Moist
and Ted Dawson.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Dated: February 27, 1998
SI TECHNOLOGIES, INC.
By /s/ Rick A. Beets
-------------------------------
Rick A. Beets, President
2
<PAGE> 3
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 NV Technology, Inc. ("NV") for the years ended July 31, 1996 and
July 31, 1997 and the three months ended October 31, 1997 and financial position
as of October 31, 1997.
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, 1995, 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 pooling of interest method of accounting. An adjustment has been made
to the SI Technology, Inc. common shares to reflect the consideration of 200,000
shares of SI common stock exchanged for the outstanding stock of NV Technology,
Inc. 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
<PAGE> 4
SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
Historical
October 31, 1997
-----------------------------
NV Pro Forma
Assets SI Technology Combined
----------- ----------- -----------
<S> <C> <C> <C>
Current assets:
Cash $ 78,196 $ 30,637 $ 108,833
Trade accounts receivable, less allowance for doubtful
accounts of $115,688 and $33,714 respectively 3,168,365 279,944 3,448,309
Inventory 3,228,382 464,205 3,692,587
Deferred tax asset 250,945 -- 250,945
Refundable income taxes 382,701 -- 382,701
Other current assets 166,552 58,151 224,703
----------- ----------- -----------
Total current assets 7,275,141 832,937 8,108,078
----------- ----------- -----------
Property and equipment, less accumulated depreciation
and amortization 1,103,618 313,407 1,417,025
Other assets:
Intangible assets, net 7,442,586 191,106 7,633,692
Other 586,140 12,215 598,355
$16,407,485 $ 1,349,665 $17,757,150
=========== =========== ===========
Liabilities and stockholders' equity
Current liabilities:
Notes payable to bank $ 3,000,000 $ 50,000 $ 3,050,000
Current maturities of long-term debt 392,800 157,752 550,552
Put obligations 325,000 -- 325,000
Trade accounts payable 1,468,838 119,213 1,588,051
Accrued liabilities 696,743 182,148 878,891
----------- ----------- -----------
Total current liabilities 5,883,381 509,113 6,392,494
----------- ----------- -----------
Long term debt 4,534,543 382,674 4,917,217
Deferred taxes 178,300 -- 178,300
Total stockholders' equity 5,811,261 457,878 6,269,139
$16,407,485 $ 1,349,665 $17,757,150
=========== =========== ===========
</TABLE>
4
<PAGE> 5
SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Historical
For the Twelve Months Ended
July 31, 1996
--------------------------------
NV Pro Forma
SI Technology Combined
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 11,087,537 $ 1,298,240 $ 12,385,777
Cost of sales 5,771,310 995,565 6,766,875
------------ ------------ ------------
Gross profit 5,316,227 302,675 5,618,902
Operating expenses:
Selling and general and administrative 3,061,989 131,855 3,193,844
Research, development and engineering 1,171,792 28,620 1,200,412
Amortization of intangibles 96,774 14,970 111,744
------------ ------------ ------------
4,330,555 175,445 4,506,000
------------ ------------ ------------
Earnings from operations 985,672 127,230 1,112,902
Interest expense (112,355) (28,409) (140,764)
Other income, net 57,288 (13,456) 43,832
------------ ------------ ------------
Net earnings before income taxes 930,605 85,365 1,015,970
Income tax expense (349,416) -- (349,416)
------------ ------------ ------------
Net earnings $ 581,189 $ 85,365 $ 666,554
============ ============ ============
Net earnings per common
and common equivalent share $ 0.24 $ 0.25
============ ============
Weighted average shares outstanding 2,426,088 200,000 2,626,088
============ ============ ============
</TABLE>
5
<PAGE> 6
SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Historical
For the Twelve Months Ended
July 31, 1997
--------------------------------
NV Pro Forma
SI Technology Combined
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 12,894,711 $ 1,228,532 $ 14,123,243
Cost of sales 7,149,675 1,006,076 8,155,751
------------ ------------ ------------
Gross profit 5,745,036 222,456 5,967,492
Operating expenses:
Selling and general and administrative 3,586,262 252,325 3,838,587
Research, development and engineering 802,427 23,123 825,550
Amortization of intangibles 125,598 21,528 147,126
------------ ------------ ------------
4,514,287 296,976 4,811,263
------------ ------------ ------------
Earnings from operations 1,230,749 (74,520) 1,156,229
Interest expense (291,108) (30,199) (321,307)
Other income, net (5,956) 21,310 15,354
------------ ------------ ------------
Net earnings (loss) before income taxes 933,685 (83,409) 850,276
Income tax expense (351,000) -- (351,000)
------------ ------------ ------------
Net earnings (loss) $ 582,685 $ (83,409) $ 499,276
============ ============ ============
Net earnings (loss) per common
and common equivalent share $ 0.24 $ 0.19
============ ============
Weighted average shares outstanding 2,456,047 200,000 2,656,047
============ ============ ============
</TABLE>
6
<PAGE> 7
SI TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Historical
For the Three Months Ended
October 31, 1997
------------------------------
NV Pro Forma
SI Technology Combined
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 4,895,050 $ 450,590 $ 5,345,640
Cost of sales 2,716,585 285,096 3,001,681
----------- ----------- -----------
Gross profit 2,178,465 165,494 2,343,959
Operating expenses:
Selling and general and administrative 1,230,128 101,438 1,331,566
Research, development and engineering 258,410 6,708 265,118
Amortization of intangibles 71,378 5,283 76,661
----------- ----------- -----------
1,559,916 113,429 1,673,345
----------- ----------- -----------
Earnings from operations 618,549 52,065 670,614
Interest expense (284,503) (9,579) (294,082)
Other income, net 3,087 -- 3,087
----------- ----------- -----------
Net earnings before income taxes 337,133 42,486 379,619
Income tax expense (139,000) -- (139,000)
----------- ----------- -----------
Net earnings $ 198,133 $ 42,486 $ 240,619
=========== =========== ===========
Net earnings per common
and common equivalent share $ 0.08 $ 0.09
=========== ===========
Weighted average shares outstanding 2,543,564 200,000 2,743,564
=========== =========== ===========
</TABLE>
7
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
<S> <C> <C>
2.1 Acquisition Agreement and Plan of Merger dated February 12th
1998 among SI Technologies, Inc., NV Technology, Inc.(a
Washington corporation), NV Technology, Inc. (a Nevada
corporation), Marvin Moist and Ted Dawson.
</TABLE>
8
<PAGE> 1
EX - 2.1
Acquisition Agreement and Plan of Merger
9
<PAGE> 2
EXHIBIT 2.1
ACQUISITION AGREEMENT AND PLAN OF MERGER
AMONG
SI TECHNOLOGIES, INC.,
NV TECHNOLOGY, INC. (a Washington corporation),
NV TECHNOLOGY, INC. (a Nevada corporation),
AND
Marvin Moist AND Ted Dawson
February 12, 1998
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1 THE MERGER................................................................. 1
1.1 Effective Time of the Merger............................................... 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 Acquiror and Acqcorp..................... 14
ARTICLE 4 COVENANTS.................................................................. 16
4.1 Covenants of the Company Relating to Conduct of Business................... 16
4.2 Access to Information...................................................... 18
4.3 Expenses................................................................... 19
4.4 Additional Agreements...................................................... 19
4.5 No Solicitation............................................................ 19
4.6 Shares Fully Paid and Nonassessable........................................ 20
4.7 Current Information___the Company.......................................... 20
4.8 Failure to Fulfill Conditions.............................................. 20
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING............................................ 20
5.1 Conditions to Each Party's Obligations to Effect the Merger................ 20
5.2 Conditions of Obligations of Acquiror and Acqcorp.......................... 21
5.3 Conditions of Obligations of the Company................................... 22
ARTICLE 6 TERMINATION, AMENDMENT AND WAIVER.......................................... 23
6.1 Termination................................................................ 23
6.2 Effect of Termination...................................................... 24
6.3 Amendment.................................................................. 24
6.4 Extension; Waiver.......................................................... 24
ARTICLE 7 GENERAL PROVISIONS......................................................... 25
7.1 Limited Survival of Representations, Warranties and Agreements............. 25
7.2 Indemnification by the Company and the Shareholders........................ 25
7.3 Offset..................................................................... 25
7.4 Indemnification by Acquiror or Acqcorp..................................... 25
7.5 Attorneys' Fees............................................................ 26
7.6 Notices.................................................................... 26
7.7 Interpretation............................................................. 26
7.8 Counterparts............................................................... 27
7.9 Entire Agreement; No Third-Party Beneficiaries............................. 27
7.10 Governing Law.............................................................. 27
7.11 Publicity.................................................................. 27
7.12 Assignment................................................................. 27
</TABLE>
i
<PAGE> 4
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Agreement Section
<S> <C>
1. Plan of Merger 1.1
2. Directors of Surviving Corporation 1.3
3. Officers of Surviving Corporation 1.4
4. Articles of Incorporation of NV Technology, Inc. 3.1(a)
5. Bylaws of NV Technology, Inc. 3.1(a)
6. Employment Agreement 3.1(c)
</TABLE>
ii
<PAGE> 5
LIST OF SCHEDULES
<TABLE>
<CAPTION>
Schedule Agreement Section
- -------- -----------------
<S> <C> <C>
SCHEDULE 3.1 (b) SHAREHOLDER LIST 3.1 (b)
SCHEDULE 3.1 (e) NO DEFAULT 3.1 (e)
SCHEDULE 3.1 (k) CERTAIN AGREEMENTS 3.1 (k)
SCHEDULE 3.1 (l) CUSTOMERS AND SUPPLIERS 3.1 (l)
SCHEDULE 3.1 (m) TITLE TO PERSONAL PROPERTY 3.1 (m)
SCHEDULE 3.1 (p) INTELLECTUAL PROPERTY 3.1 (p)
SCHEDULE 3.1 (q) EMPLOYEES AND BENEFITS 3.1 (q)
SCHEDULE 3.1 (r) LABOR MATTERS 3.1 (r)
SCHEDULE 3.1 (s) CONDUCT OF BUSINESS, LICENSES 3.1 (s)
SCHEDULE 3.1 (t) BANK ACCOUNTS 3.1 (t)
SCHEDULE 3.1 (u) BANK LOANS 3.1 (u)
SCHEDULE 3.1 (ab) AFFILIATE TRANSACTIONS 3.1 (ab)
SCHEDULE 3.1 (ac) ENVIRONMENTAL COMPLIANCE 3.1 (ac)
</TABLE>
iii
<PAGE> 6
ACQUISITION AGREEMENT AND PLAN OF MERGER
ACQUISITION AGREEMENT AND PLAN OF MERGER, dated as of February 12,
1998, among SI TECHNOLOGIES, INC., a Delaware Corporation ("Acquiror"), NV
TECHNOLOGY, INC., a Washington corporation and a wholly owned subsidiary of
Acquiror ("Acqcorp"), NV TECHNOLOGY, INC., a Nevada corporation (the "Company"),
and Marvin Moist and Ted Dawson ("Shareholders").
RECITALS
A. Acquiror 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. Acquiror and Acqcorp desire to acquire from Shareholders, and
Shareholders desire to sell to Acquiror 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:
1
<PAGE> 7
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger. 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") and the General
Corporation Law of Nevada (the "Nevada Law") (together, the "Merger Documents")
shall be duly delivered to the Secretary of State of the State of Washington and
the Secretary of State of the State of Nevada for filing, as provided in the
Washington Law and Nevada 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 and the Secretary of State of the State of
Nevada. 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
February 12, 1998 at the offices of Graham & James/Riddell Williams or at such
other place, at such other time, or on such other date as Acquiror, Acqcorp and
the Company may mutually agree upon for the Closing to take place. At the
Closing there shall be delivered to Acquiror, Acqcorp and the Company 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 stockholder 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 Stock. All of the
issued and outstanding shares of common stock of the Company (the "Shares") as a
class shall be converted into the right to receive 200,000 shares of common
stock of the Acquiror. All rights to acquire shares shall expire, to the extent
not exercised, immediately prior to the Effective Time of the Merger.
Each holder of Shares shall be entitled to receive such shareholder's
pro rata portion of the consideration specified above.
(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
2
<PAGE> 8
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 and exchanged as provided in
this Article 2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company and
Shareholders jointly and severally represent and warrant to Acquiror 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 Nevada. 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 Exhibit 4 and Exhibit 5 respectively.
(b) Capital Structure. The authorized capital stock of the
Company consists of 25,000 shares of common stock, no par value per share, of
which on the date hereof 24,750 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 individuals set forth on Schedule 3.1(b), 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. There are
no options, warrants, calls, rights, commitments or agreements of any character
to which the Company is a party or by which it is bound obligating the Company
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 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 Employment Agreement in the form attached hereto as
Exhibit 6, and to carry out his 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 constitutes a valid and binding obligation of
the Company 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 do not, and the
consummation by the Company of the transactions contemplated hereby and
compliance by the Company 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 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
3
<PAGE> 9
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 its 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.
(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 consummation by the Company of the transactions contemplated
hereby, except for the filing of the Merger Documents with the Secretary of
State of the State of Washington and the Secretary of State of the State of
Nevada 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
Acquiror with true copies of balance sheets of the Company as of December 1994,
1995 and 1996, and the related statements of income, changes in stockholders'
equity, and changes in financial position for each of the years then ended, in
each case as compiled by Bradford & Bradford P.C., certified public accountants,
and a preliminary balance sheet as of December 1997, together with the related
statement of income for the December period then ended. The Company has also
furnished an interim balance sheet as of January 31, 1998, together with the
related statement of income for the period then ended, and a closing balance
sheet as of the Effective Time of the Merger. (Such balance sheets and related
statements of income, changes in stockholders' equity (for the year-end
statements only), and changes in financial position (for the year-end statements
only), including the closing balance sheet, 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. The Company has no liabilities or obligations
of any nature or of any amount whatsoever, whether accrued, absolute, liquidated
or unliquidated, contingent 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 Acquiror and
Acqcorp.
(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
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<PAGE> 10
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:
(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.
The Company has delivered to Acquiror 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) contains a true and
complete list of all customers to which the Company provided goods or services
in the one-year period ended January 28, 1997 and thereafter through the date of
this Agreement. Schedule 3.1(l) contains a true and complete list of all persons
who provided goods or services to the Company in the
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<PAGE> 11
one-year period ended January 28, 1997 and thereafter through the date of this
Agreement. The Company's relations with the foregoing customers and suppliers
are good and except as described in Schedule 3.1(l), 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
Acquiror 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.
(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 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. The Company owns or has 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. Each item of intellectual property owned or used by the Company
immediately prior to the Effective Time of the Merger will be owned or available
for use by the Company on identical terms and conditions immediately following
the Effective Time of the Merger. 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 Acquiror true, correct and complete
copies of all registrations, applications, licenses, agreements and permission
for the intellectual property rights described in Schedule 3.1(p). 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), the Company has no written or oral employment agreements with
any of its employees. The Company has timely paid 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; no representation
petition has been filed with the National Labor Relations Board and no
organizational activity, to the knowledge of the Company and the Shareholders,
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
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<PAGE> 12
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 Citibank (Nevada), NA (the "Bank
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
binding, enforceable and in full force and effect with respect to Citibank
(Nevada), NA; (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 Citibank
(Nevada), NA 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, Citibank (Nevada), NA 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 reasonably 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 December 31, 1997, the Company has conducted its
business only ln 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 Acquiror 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 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. The Company has not been audited by the
Internal Revenue Service or any agency of the State of Nevada. The Company has
not granted or been requested to grant waivers of any statute of limitations
applicable to any claim for taxes.
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(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 Acquiror.
(bb) Affiliate Transactions. Except as specifically contemplated
by this Agreement, or as reflected on Schedule 3.1(ab), the Company is not
engaged in, or has not 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 of 1933, as amended (the "Securities Act")) involving aggregate
payments by or to the Company of $10,000 or more during any consecutive 12-month
period.
(cc) 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 (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 Acquiror 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.
(dd) Investment Representation. Shareholders understand that the
shares of Acquiror's common stock issued pursuant to Section 2.1 ("Acquiror
Shares") have not been, and will not be, registered under the Securities Act or
under any state securities laws, and are being issued to the Shareholders in
reliance upon federal and state exemptions for transactions not involving any
public offering. Shareholders are acquiring the Acquiror Shares solely for their
own account for investment purposes, and not with a view to the distribution
thereof, and are, or are owned and controlled by, sophisticated investors with
knowledge and experience in business and financial matters, have received
sufficient information from Acquiror concerning Acquiror and have had the
opportunity to obtain additional information desired in order to evaluate the
merits and risks inherent in holding the Acquiror Shares, are able to bear the
economic risk and lack of liquidity inherent in holding the Acquiror Shares, and
are accredited investors as defined in Rule 501 of Regulation D under the
Securities Act. Shareholders acknowledge that the Acquiror Shares will bear a
legend substantially in the following form and any other legend required by
applicable state laws:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
state securities laws, and may not be offered, sold,
transferred, encumbered, or otherwise disposed of except upon
satisfaction of certain conditions. Information concerning these
restrictions may be obtained from the corporation or its legal
counsel. Any offer or disposition of these securities without
satisfaction of said conditions will be wrongful and will not
entitle the transferee to register ownership of the securities
with the corporation.
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(ee) 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 the Acquiror 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 Acquiror and Acqcorp. Acquiror and
Acqcorp jointly and severally represent and warrant to the Company, except as
otherwise disclosed on a schedule hereto, as follows:
(a) Organization, Standing and Power. Each of Acquiror and
Acqcorp (collectively sometimes herein referred to as the "SI Group") is a
corporation duly authorized, validly existing and in good standing under
Delaware and Washington law, respectively. Each 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 such licensing or
qualification necessary, except where failure to be so licensed or qualified
would not have a material adverse effect on SI. Acquiror has delivered to the
Company complete and correct copies of the Articles of Incorporation and Bylaws
of each company in the SI Group as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Acquiror
consists of 10,000,000 shares of common stock, $.01 par value per share, of
which on the date hereof 2,347,240 shares are issued and outstanding and
2,000,000 shares of Preferred Stock, none of which are outstanding. The
authorized capital stock of Acqcorp consists of 1,000 shares of common stock,
$.01 par value per share, of which on the date hereof 1,000 shares are issued
and outstanding. All such outstanding shares of Acquiror's and Acqcorp's capital
stock are duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
(c) Authority. Acquiror and Acqcorp each 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 Acquiror and Acqcorp and the consummation by Acquiror and
Acqcorp of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Acquiror and Acqcorp. This Agreement
has been duly executed and delivered by Acquiror and Acqcorp and constitutes a
valid and binding obligation of Acquiror 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 Bylaws
of Acquiror and 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, Acquiror or Acqcorp in
connection with the execution and delivery of this Agreement by Acquiror and
Acqcorp or the consummation by Acquiror and Acqcorp of the transactions
contemplated hereby, except for the filing of the Merger Documents with the
Secretary of State of the State of Washington and the Secretary of State of the
State of Nevada.
(d) Reports. Acquiror has furnished the Company and each of the
Shareholders with true copies of the Acquiror's Form 10-K for the year ended
July 31, 1997, Proxy Statement for the 1998 Annual Shareholders Meeting, and
Form 10-Qs for the quarter ended October 31, 1997.
(e) Brokers. Neither Acquiror 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.
(f) Information Supplied. None of the information supplied or to
be supplied in writing by Acquiror or Acqcorp to the Company in connection with
the transactions contemplated hereby will contain any untrue statement of a
material
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<PAGE> 15
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.
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 Acquiror 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.
(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.
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(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.
(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 to the Merger set forth in Article
5 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 Acquiror
and to Acquiror'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
related to the Merger 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. Acquiror 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 Merger is consummated, all costs and
expenses incurred in connection with this 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 Acquiror
and Acqcorp) 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,
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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 Acquiror the terms of any proposal which it may receive
in respect of any such transaction.
4.6 Shares Fully Paid and Nonassessable. The shares of common stock of
Acquiror to be issued to the holders of Shares pursuant to Section 2.1 hereof
will, when so issued, be duly and validly authorized and issued, fully paid and
nonassessable.
4.7 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 Acquiror to report the general status of the ongoing
operations of the Company. The Company will promptly notify Acquiror 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 Acquiror fully informed of such events.
4.8 Failure to Fulfill Conditions. If any of Acquiror, 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.
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 Nevada Law.
(b) Other 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 Acquiror and Acqcorp. The obligations
of Acquiror 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 Acquiror 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;
(c) The Chief Executive Officer of the Company shall have
delivered to Acquiror at the Effective Time of the Merger a certificate
certifying that the conditions specified in paragraphs (a) and (b) of this
Section 5.2 have been fulfilled;
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(d) Each of the Shareholders shall execute and deliver to
Acqcorp the Employment Agreement attached in the form of Exhibit 4;
(e) Acquiror shall have received from counsel for the Company,
an opinion dated as of the Effective Time of the Merger in form and substance
reasonably satisfactory to Acquiror;
(f) All corporate proceedings in connection with the Merger and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Acquiror 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 Acquiror and its subsidiaries taken as a whole.
(h) In addition to the approvals of any Governmental Entity
described Section 5.1(b), Acquiror or the Company shall have obtained all
necessary third-party consents or approvals reasonably required by the Acquiror
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.
(i) The balance sheet of the Company, dated as of the Effective
Time of the Merger, shall reflect not less than $1.15 million in assets, of
which not less than $600,000 are current assets, and no more than $690,000 in
liabilities, of which no more than $330,000 are current liabilities, and a
minimum of $500,000 in equity.
5.3 Conditions of Obligations of the Company. The obligations of the
Company and Shareholders to effect the Merger 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 Acquiror 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 Company in
writing;
(b) Acquiror 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 Acquiror and Acqcorp shall have
delivered to the Company at the Effective Time of the Merger a certificate
certifying that the conditions specified in paragraphs (a) and (b) of this
Section 5.3 have been fulfilled; and
(d) 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 Acquiror and
its subsidiaries, including the Surviving Corporation, taken as a whole.
(e) In addition to the approvals of any Governmental Entity
described Section 5.1(b), Acquiror or the Company shall have obtained all
necessary third-party consents or approvals reasonably required 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 Acquiror
and its subsidiaries, including the Surviving Corporation, taken as a whole.
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(f) Each of Mr. Marvin Moist and Mr. Ted Dawson shall have
entered into an employment agreement and a noncompetition agreement in
substantially the form attached as Exhibit 4.
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, whether before or after approval of matters
presented in connection with the Merger by the shareholders of the Company:
(a) By mutual consent of Acquiror, Acqcorp and the Company;
(b) By any party if the Effective Time of the Merger shall not
have occurred on or prior to February 20, 1998, 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 conditions set forth herein
to be performed or observed by such party on or before the Effective Time if the
Merger;
(c) by Acquiror (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 Acquiror specifying the nature of such breach and
requesting that it be remedied; and
(d) by the Company, (i) if at the time of such termination there
shall be a material adverse change in the consolidated financial condition of
Acquiror 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 purposes of
this paragraph (d); or (ii) if there shall have been any material breach of any
obligation of Acquiror or Acqcorp hereunder and such breach shall not have been
remedied within 30 days after receipt by Acquiror of notice in writing from the
Company 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 Acquiror, Acqcorp, or the
Company or their respective officers or director except as set forth in Section
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 be amended by mutual consent of the
parties hereto at any time before or after the approval of the Merger by the
shareholders of the Company but, after any such approval, no amendment shall be
made which reduces the amount or changes the form of consideration to be paid to
the shareholders without further approval by such shareholders. 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.
ARTICLE 7
GENERAL PROVISIONS
7.1 Limited Survival of Representations, Warranties and Agreements.
Representations, warranties, covenants and agreements in this Agreement and in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time of the Merger.
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7.2 Indemnification by the Company and the Shareholders. The Company and
each Shareholder hereby agrees to indemnify Acquiror 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 Acquiror or Acqcorp prior to the Effective Time of the Merger;
provided, however, no claim may be made except for amounts of damage which in
the aggregate exceed a "deductible amount" of $50,000.
7.3 Offset. Acquiror or Acqcorp may offset any damages due and owing
Acquiror or Acqcorp pursuant to Section 7.2 and not paid to Acquiror or Acqcorp
within thirty (30) days of demand therefor against any payments required to be
made by Acquiror or Acqcorp to any of the Shareholders under the Employment
Agreement attached as Exhibit 4.
7.4 Indemnification by Acquiror or Acqcorp. Acquiror and Acqcorp hereby
agree to indemnify the Company and the shareholders of the Company 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 Acquiror 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 Acquiror 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.
7.5 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.
7.6 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 Acquiror 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
(b) If to the Company, to
NV Technology, Inc.
3220 West Post Road
Las Vegas, Nevada 89118
Attention: President
With copy to:
-------------------------------
-------------------------------
-------------------------------
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7.7 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."
7.8 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.
7.9 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.
7.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
7.11 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.
7.12 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 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 Acquiror or to any direct or indirect wholly owned subsidiary of
Acquiror. 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.
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IN WITNESS WHEREOF, Acquiror, Acqcorp, 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.
"ACQUIROR": SI TECHNOLOGIES, INC., a Delaware corporation
By /s/ Rick A. Beets
---------------------------------------
Its President & CEO
---------------------------------------
"ACQCORP": NV TECHNOLOGY, INC., a Washington corporation
By /s/ Rick A. Beets
---------------------------------------
Its President & CEO
---------------------------------------
"COMPANY": NV TECHNOLOGY, INC., a Nevada corporation
By /s/ Marvin Moist
---------------------------------------
Its President
---------------------------------------
"SHAREHOLDERS":
/s/ Marvin Moist
---------------------------------------
Marvin Moist
/s/ Ted Dawson
---------------------------------------
Ted Dawson
17
