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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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) August 15, 1996
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Organik Technologies, Inc.
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(Exact Name of Registrant as Specified in Charter)
Washington 0 - 18935 81 - 0440517
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1919 - 70th Avenue West, Tacoma, Washington 98466
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone Number, including area code (206) 564-1400
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(Inapplicable)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
(Inapplicable)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
By Stock Purchase Agreement ("Agreement") dated August 15, 1996 between the
registrant and Emerald Apparel, Inc. ("Emerald"), registrant has agreed to
acquire all of the outstanding shares of capital stock of Emerald in exchange
for 2,000,000 shares of common stock of registrant, plus an additional 3,000,000
shares of such common stock contingent upon the registrant's earning certain
amounts of Net Income Before Taxes (as defined) in the current and two
subsequent fiscal years, as follows:
(a) Up to 1,000,000 such shares of common stock shall be issued at the
rate of 4 shares for each dollar of Net Income Before Taxes between $0 and
$250,000 earned during registrant's fiscal year ended July 31, 1997;
(b) Up to an additional 1,000,000 such shares shall be issued at the
rate of 4 shares for each dollar of Net Income Before Taxes between
$250,000 and $500,000 earned during registrant's fiscal year ended July 31,
1998; and
(c) Up to an additional 1,000,000 such shares shall be issued at the
rate of 4 shares for each dollar of Net Income Before Taxes between
$500,000 and $750,000 earned during registrant's fiscal year ended July 31,
1999.
In the Agreement, Emerald represents and warrants that it has the
ability to obtain, and shortly following the closing under the Agreement will
obtain, orders for the manufacture and delivery of approximately $3,000,000 in
fleece, knit shirts and shorts apparel items from major U. S. retailers, and
that Emerald has or will arrange for production and financing for all such
orders booked. In the Agreement, Emerald also represents and warrants that it
is newly formed, has never had any operations and has no indebtedness of any
type whatsoever, including no obligations for back wages or salaries, no fees to
professionals, and no obligations to trade creditors. Emerald does not have a
material amount of assets.
Pursuant to the Agreement, Barry Watson and A. J. Salomon, who are
principals of Emerald, have been appointed President and Chief Executive
Officer, and Secretary-Treasurer and Chief Financial Officer, respectively, of
the registrant. Also, registrant's official By-Laws have been amended to
increase the number of Directors of registrant to eight, and Messrs. Watson and
Salomon, together with Dean Sanders, have been appointed to registrant's Board
of Directors. In the Agreement, Emerald represents and warrants that, subject
to any action to the contrary by the Board of Directors or shareholders of
registrant, Messrs. Watson, Sanders and Salomon will continue to serve as
managers of registrant for at least 12 months following the Closing under the
Agreement. Registrant's former President and Chief Executive Officer, William
Bryson, Chief Financial Officer, William Gould, and Vice-Chairman of the Board
and Director, Matthew Gensler, resigned those positions in June 1996. Set forth
below is certain relevant biographical information concerning Messrs. Watson,
Saloman and Sanders.
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Barry Watson has spent the greater part of his apparel career in retail
sales as buyer, merchandiser, product development manager, designer, and store
manager. A graduate of the Wal-Mart Institute of Management, Mr. Watson
recently directed the $350 million men's apparel division of Sam's Club, and
prior to that was employed by Macy's, Emporium-Capwell, May Company, Carter-
Hawley-Hale, Wal-Mart and Gottschalk's. As a product development manager, Mr.
Watson spent twelve years designing and developing apparel lines. While at the
May Company, Mr. Watson was responsible for the development of the CHRISTOPHER
BROOKS line, and while at Carter-Hawley-Hale, he developed the NEIL-MARTIN
label. In addition to design and development, Mr. Watson is experienced in
sourcing apparel manufacturing in the Far East, Central and South America, the
United States and Canada.
A. J. Salomon, founder and president of Stafford & Company, consults in the
acquisition of public companies and has operated his own development company
engaged in construction, financing and marketing of real estate in the Western
United States. Mr. Salomon is the owner of Capay Cattle Company and for eight
years operated Sierra National Bank, a nine-branch national bank in Northern
California, for which he served as chairman of the board. Beginning as a broker
and financial consultant in the acquisition and sale of commercial real estate,
Mr. Salomon expanded his operations over the years to include construction,
property management, land acquisition and real estate marketing.
Dean Sanders has served in most departments during his over 20-year career
with Wal-Mart Stores, his most recent position being CEO and president of Sam's
Club, from which he retired in 1995. While Mr. Sanders was CEO of Sam's Club,
that company grew from 150 clubs to over 430 and developed Sam's Club Super
Centers, outlets that combine grocery store operations with retail operations in
a common center. Sam's Club currently has annual revenues of over $20 billion.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
(Inapplicable)
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) On August 16, 1996 , John R. Gilbert, Chairman of registrant's Audit
Committee, advised registrant's independent accountants, Price Waterhouse LLP,
that with the acquisition of Emerald, registrant would have a complete change in
management and that the new management plans to solicit proposals for new
auditors, thereby dismissing Price Waterhouse LLP as auditors. The decision to
change accountants has been approved by registrant's Audit Committee.
The audit reports of Price Waterhouse LLP on the financial statements of
registrant for registrant's last two fiscal years did not contain an adverse
opinion or disclaimer of opinion, nor was either opinion qualified or modified
as to uncertainty, audit scope, or accounting principles, except that their
report on the financial statements for the year ended July 31, 1994 included an
emphasis of matter paragraph regarding registrant's recurring losses and
declining cash position. During registrant's two most recent fiscal years and
the subsequent interim
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periods preceding such termination, there have been no disagreements with Price
Waterhouse LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Price Waterhouse LLP, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report. There have occurred no "reportable events" within the meaning of
Item 304(a)(1)(v) of Regulation S-K during registrant's two most recent fiscal
years and the subsequent interim periods preceding such termination.
The registrant has requested that Price Waterhouse LLP furnish it with a
letter addressed to the Commission stating whether or not it agrees with the
above statements. A copy of such letter dated August 21, 1996 is filed as
Exhibit 16 hereto.
(b) Registrant contemplates that new auditors will be engaged to audit
registrant's financial statements for the fiscal year ended July 31, 1996 as
soon as the closing of the books for that fiscal year have been completed.
ITEM 5 OTHER EVENTS.
(Inapplicable)
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
(Inapplicable)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The following Exhibits are filed with this Current Report on Form 8-K:
EXHIBIT DOCUMENT
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2.1 Stock Purchase Agreement dated August 15, 1996 with
Emerald Apparel, Inc.
4.1 Letter dated August 16, 1996 from John R. Gilbert on
behalf of registrant's Audit Committee to Rick Greaves
of Price Waterhouse LLP
4.2 Letter dated August 21, 1996 from John R. Gilbert on
behalf of registrant's Audit Committee to Richard D.
Greaves of Price Waterhouse LLP requesting that it
furnish the Commission with a letter stating whether or
not it agrees with the statements of registrant in
Item 4(a) of this Current Report on Form 8-K
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EXHIBIT DOCUMENT
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16 Letter dated August 21, 1996 from Price Waterhouse LLP.
ITEM 8. CHANGE IN FISCAL YEAR.
(Inapplicable)
SIGNATURES
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.
Organik Technologies, Inc.
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(Registrant)
Date: August 21, 1996 By: /s/ Finn E. Walstad
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(Finn E. Walstad)
Senior Vice-President
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement
("Agreement") is by and between Organik Technologies, Inc., a Washington
corporation ("Organik"), and Emerald Apparel, Inc., a Nevada corporation (the
"Company");
WITNESSETH, THAT WHEREAS:
A. Organik has been engaged in the design, manufacturing, and marketing of
casual clothing from its ORGANIK-TM- family of all natural shrink-free, 100%
cotton knit fabrics;
B. Organik has in recent months suffered a series of financial reversals
and is presently without any significant orders for its ORGANIK garment products
and without the financial resources necessary to continue its operations;
C. Organik's Chief Executive Officer, Chief Financial Officer and Vice-
Chairman of the Board have recently resigned and have ceased supplying
management services to Organik;
D. The Company has proposed to Organik that Organik acquire (the
"Acquisition") all of the outstanding shares (the "Shares") of the Company's
capital stock in exchange for shares of common stock of Organik, subject to
certain conditions, which includes the obtaining by the Company of several
million dollars of garment orders to assure at least some immediate ongoing
operations by the combined companies;
E. The stockholders of Emerald, A. J. Salomon ("Salomon") and Barry Watson
("Watson") (together, the "Stockholders"), and Dean Sanders ("Sanders") have
substantial management experience and contacts in the retail apparel industry
and upon consummation of the Acquisition would serve as the management of
Organik as well as of the Company;
F. Through his company, Tuscan, Inc. ("Tuscan"), Watson has provided
emergency management services to Organik during the month of July, 1996 in order
to give the Stockholders an opportunity to do "due diligence" on Organik on
behalf of the Company and Organik an opportunity to do "due diligence" on the
Stockholders, both of which have been accomplished, Organik having obtained an
opinion of an investment banking firm, National Securities Corporation
("National") that the terms of the proposed acquisition of the Company by
Organik are fair to all of the current Organik shareholders;
G. The parties now desire to proceed with the Acquisition on the terms and
conditions set forth herein;
NOW THEREFORE, in and for consideration of the mutual covenants contained
herein, the parties do hereby agree as follows:
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1. Subject to the terms and conditions hereof, Organik shall purchase from
the Stockholders, and the Stockholders shall sell to Organik, all of the Shares.
In consideration for the purchase of the Shares by Organik, Organik shall issue
and deliver to the Stockholders at the closing of the Acquisition (the
"Closing") certificates representing 2,000,000 shares of common stock of
Organik (the "Organik Shares") from authorized but theretofore unissued shares
of common stock of Organik, which stock certificates shall be registered in such
names as the Stockholders may designate (the "Designees"). In addition, Organik
shall reserve from authorized but theretofore unissued shares of its common
stock, which reservation shall be exclusively for issuance to such persons as
the Stockholders may then designate (the "New Designees") an additional
3,000,000 shares of Organik common stock (the "Organik Contingent Shares") which
shall be issued and delivered to the New Designees if but only if the following
conditions are met:
(a) Up to 1,000,000 Organik Contingent Shares shall be issued at the
rate of 4 shares for each dollar of net income before taxes ("Net Income
Before Taxes") between $0 and $250,000 earned during Organik's fiscal year
ended July 31, 1997;
(b) Up to an additional 1,000,000 Organik Contingent Shares shall be
issued at the rate of 4 shares for each dollar of Net Income Before Taxes
between $250,000 and $500,000 earned during Organik's fiscal year ended
July 31, 1998; and
(c) Up to an additional 1,000,000 Organik Contingent Shares shall be
issued at the rate of 4 shares for each dollar of Net Income Before Taxes
between $500,000 and $750,000 earned during Organik's fiscal year ended
July 31, 1999.
For purposes hereof, "Net Income Before Taxes" shall mean that amount
included in that line item on Organik's financial statements for the fiscal year
in question prepared in accordance with generally accepted accounting principles
and audited by Organik's accountants. These financial statements shall be the
same ones that shall appear in Organik's Annual Report on Form 10K-SB for such
year filed with the Securities Exchange Commission, or such successor report as
may then be filed by Organik. The Organik Contingent Shares issuable hereunder,
if any, shall be issued within 10 days following the receipt by Organik of the
audited financial statements indicating that the Organik Contingent Shares are
so issuable. The certificates representing the Organik Shares and the Organik
Contingent Shares shall be registered in the names of the individual Designees
and New Designees, respectively. In the event that the shares of Organik common
stock shall be split (including a reverse stock split) or there shall be issued
a stock dividend to all Organik shareholders, the number of Organik Contingent
Shares issuable hereunder thereafter shall be proportionately adjusted upwards
or downwards, as the case may be, to reflect the stock split or dividend.
2. As an inducement to Organik to make the Acquisition, the Company hereby
represents and warrants to Organik as follows, which representations and
warranties shall be true and correct at the date hereof and at the date of the
Closing:
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(a) The initial issuance of the Shares to the Stockholders by the
Company was duly authorized by all necessary corporate action, and the Shares in
the hands of the Stockholders are validly issued, fully paid and nonassessable.
(b) The original issuance of the Shares to the Stockholders, the
entering into of this Agreement and the sale of the Shares to Organik hereunder,
did and will not violate or breach any provisions of the Company's Articles of
Incorporation or By-Laws or any agreement, purchase order, or other document or
instrument, or any court or regulatory order, to which the Company or any of the
Stockholders or Sanders is a party or subject, or to which they or any of their
properties are bound.
(c) The Shares are the only shares of capital stock that the Company
presently has outstanding. The Company has no other types of capital stock
authorized to be outstanding, nor are there outstanding any options, warrants or
rights to purchase capital stock of the Company, nor any commitments therefor to
any person. The Stockholders are the sole owners of the Shares, which they own
free and clear of liens and encumbrances of any type whatsoever, and upon
assignment of the Shares to Organik in the Acquisition, Organik shall acquire
good and marketable title to the Shares free and clear of any and all liens and
encumbrances of any type whatsoever.
(e) The Company, which is newly formed and has never had any
operations, has, and shall have at the closing, no indebtedness of any type
whatsoever, including no obligations for back wages or salaries, no fees to
professionals, and no obligations to trade creditors.
(f) The Company has furnished Organik with copies of all of its
corporate books and records, including its minute books and stock records, as
well as copies of any agreements, contracts, leases or other documents or
instruments to which it is a party or to which any of its properties is subject.
Similarly, the Company acknowledges that Organik has made available to the
Company and the Stockholders, through Tuscan and otherwise, all of Organik's
books, records and personnel, to supplement the information contained in
Organik's public filings with the Securities and Exchange Commission ("SEC").
(g) The Company has the ability to obtain, and shortly following the
Closing will obtain, orders for the manufacture and delivery of approximately
$3,000,000 in fleece, knit shirts and shorts apparel items from major U. S.
retailers, and the Company has or will arrange for production and financing for
all such orders booked. These orders and the financial benefits thereunder will
be owned solely by the Company.
(h) Between the signing of this Agreement and the Closing, the Company
shall be operated in the ordinary course, and there shall not have occurred, nor
shall Organik become aware of, any event which shall result in any material
adverse change in the operations, financial condition or prospects of the
Company.
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3. As an inducement to the Stockholders and the Company to proceed with the
Acquisition, Organik represents and warrants to the Stockholders and the Company
as follows, which representations and warranties shall be true and correct at
the date hereof and at the date of the Closing:
(a) The entering into of this Agreement and the issuance of the
Organik Shares and the Organik Contingent Shares hereunder is duly authorized by
all necessary corporate action, and if and when issued pursuant to the terms
hereof, the Organik Shares and the Organik Contingent Shares in the hands of the
Designees and the New Designees, respectively, shall be validly issued, fully
paid and nonassessable.
(b) The entering into of this Agreement and the issuance of the
Organik Shares and the Organik Contingent Shares to the Designees and the New
Designees, respectively, hereunder will not violate or breach any provisions of
Organik's Articles of Incorporation or By-Laws or any agreement, purchase order,
or other document or instrument, or any court or regulatory order, to which
Organik is a party or subject, or to which it or any of its properties are
bound.
(c) The financial and other information concerning Organik contained
in Organik's public filings with the SEC, copies of which have been furnished to
the Stockholders and to the Company, are accurate and complete as of the dates
so filed. Organik has made available to the Company and the Stockholders,
through Tuscan and otherwise, all of its books, records and personnel, to
supplement the information contained in Organik's public filings with the SEC.
(d) Between the signing of this Agreement and the Closing, Organik
shall be operated in the ordinary course, and there shall not have occurred, nor
shall the Stockholders or the Company become aware of, any event which shall
result in any material adverse change in the operations, financial condition or
prospects of Organik.
(e) The Board of Directors of Organik has received and reviewed, and
the decision of Organik to proceed with the Acquisition is based upon, among
other things, an opinion from National, which is an investment banking firm
having corporate finance personnel with substantial experience in the area of
mergers and acquisitions, that the terms of the Acquisition are fair to all of
the current shareholders of Organik.
4. Organik agrees that at or prior to the Closing the official By-Laws of
Organik shall be amended so that the number of Organik's Directors shall be
increased by such number that when added to the number of vacancies then
existing shall result in there being three vacancies on the Board, and the three
vacancies thereby resulting shall be filled by Watson, Salomon and Sanders.
Organik further agrees that at or prior to the Closing the positions of
President, who shall function as Organik's Chief Executive Officer and of
Secretary-Treasurer, who shall function as Organik's Chief Financial Officer,
shall be filled by Watson and Salomon, respectively. The Company represents and
warrants that, subject to any action to the contrary by the Board of
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Directors or shareholders of Organik, Watson, Sanders and Salomon will continue
to serve as managers of Organik and the Company for at least 12 months following
the Closing hereunder.
5. It shall be a condition to Organik's proceeding with the Closing that
all of the representations and warranties of the Company hereunder shall be then
true and correct and that the Company shall not be in breach of any of its
covenants herein. Similarly, it shall be a condition to the Company's
proceeding with the Closing that all of the representations and warranties of
Organik hereunder shall be then true and correct and that Organik shall not be
in breach of any of its covenants herein. The representations, warranties and
obligations of the parties herein shall survive the Closing and continue
thereafter to bind the parties hereto.
6. At the Closing hereunder, the Company shall deliver to Organik stock
certificates representing the Shares, and assignments thereof properly signed by
the Stockholders, in form satisfactory to Organik, and Organik shall deliver to
the Stockholders certificates representing the Organik Shares registered in the
names of the respective Designees.
7. The Company represents and warrants to, and covenants with, Organik that
each of the Designees is acquiring the Organik Shares, and the New Designees
will acquire the Organik Contingent Shares, for his own account and without a
view toward distribution thereof to the public. Organik represents and warrants
to, and covenants with, the Company that it is acquiring the Shares for its own
account and without a view toward distribution thereof to the public. The
parties acknowledge that neither the Shares, the Organik Shares, nor the Organik
Contingent Shares are registered under state or federal securities laws and may
not be offered, sold or transferred for value without either registration under
such laws or the furnishing of an opinion of counsel, concurred in by counsel
for Organik, that to do so would not violate the registration provisions of such
laws. The parties also acknowledge that there exists no obligation on the part
of either Organik or the Company to register any of such shares either now or in
the future. The parties agree that an appropriate legend reflecting the above
restrictions may be placed on the stock certificates representing the Shares,
the Organik Shares and the Organik Contingent Shares and that a stop-transfer
order against transfer of the respective shares except upon a showing of
compliance with these restrictions may be placed on the official stock transfer
records of Organik and the Company, as appropriate.
8. This Agreement shall: (a) be governed by and construed in accordance
with the local laws of the State of Washington, without giving effect to
principles of conflicts or choice of laws; (b) not be amended, modified or
waived except in writing signed by the party to be bound, the waiver of any part
hereof or at any given time not constituting a waiver of any other part nor for
any other time; (c) constitute the entire agreement of the parties, and
supersede any and all prior agreements, with respect to the subject matter
hereof; (d) inure to the benefit of and be binding upon the parties hereto,
their heirs, personal representatives, successors and assigns; (e) be capable of
being signed in counterparts, (f) be severable, so that if any provision hereof
shall be
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deemed invalid or unenforceable for any reason, all other provisions shall
remain in full force and effect and binding upon the parties; and (g) be
enforceable by action in any court of competent jurisdiction in law or in
equity, the prevailing party being entitled to an award of attorneys fees and
other costs from the losing party.
IN WITNESS WHEREOF, the parties have signed this Agreement by the following
persons, each duly authorized thereto by his Board of Directors, on this 15th
day of August, 1996.
COMPANY: ORGANIK:
Emerald Apparel, Inc. Organik Technologies, Inc.
By: Barry Watson By: John Gilbert
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(Barry Watson) (John Gilbert)
President Secretary
And by: A. J. Salomon
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(A. J. Salomon)
Secretary-Treasurer
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ORGANIK TECHNOLOGIES, INC.
1919 70TH AVE. WEST
TACOMA WA 98466
August 16, 1996
Rick Greaves
Price Waterhouse, LLP
1001 Fourth Avenue Plaza
Suite 4200
Seattle WA 98154
RE: Organik Technologies
Dear Mr. Greaves:
As you were informed by Mike Liles' letter of August 6, 1996, Organik
Technologies was in the throes of the acquisition of Emerald Apparel, Inc.
Yesterday, the Board of Directors approved the transaction. As a result, the
Company will have a complete change in management. The new management plans to
solicit proposals for new auditors.
It is my understanding that Mike Liles will be preparing the necessary SEC
filing for this change in auditors. Please coordinate whatever role you play in
this filing with him.
Very truly yours,
/s/ John R. Gilbert
John R. Gilbert
Audit Committee of Organik Technologies, Inc.
cc: A J Salomon, Emerald Apparel, Inc.
Mike Liles, Jr., Karr, Tuttle, Campbell
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[Letterhead]
August 21, 1996
Rick Greaves
Price Waterhouse, LLP
1001 Fourth Avenue Plaza
Suite 4200
Seattle, WA 98154
Dear Mr. Greaves:
You have previously been furnished with a copy of the disclosures Organik
Technologies, Inc. is making in Item 4(a) of its Current Report on Form 8-K
relative to the change it is making of its auditors. These disclosures are
being made in response to Item 304(a) of Regulation S-K of the Securities and
Exchange Commission. Please furnish Organik Technologies, Inc. with a letter
addressed to the Securities and Exchange Commission stating whether Price
Waterhouse LLP agrees with the statements in Item 4(a) and, if not, stating the
respects in which Price Waterhouse LLP does not agree.
Very truly yours,
/s/ John R. Gilbert
John R. Gilbert
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[Letterhead]
August 21, 1996
Ladies and Gentlemen
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Ladies and Gentlemen:
Subject: ORGANIK TECHNOLOGIES, INC.
We have read Item 4 of Organik Technologies, Inc. Form 8-K dated August 15, 1996
and are in agreement with the statements contained in paragraph 4(a) therein.
Yours very truly,
/s/ Price Waterhouse LLP
