<PAGE>
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
SEPTEMBER 30, 1997
(Date of Report)
FLOW INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-12448 91-1104842
-------- ------- ----------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Identification
incorporation) Number) Number)
23500 64th Avenue South, Kent, Washington 98032
-----------------------------------------------
(Address of principal executive offices)
(253) 850-3500
(Registrant's telephone number)
Total number of pages: 55
Page on which exhibit index appears: 9
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1997 Flow International Corporation ("Flow" or the
"Company"), a Delaware corporation, completed the sale of the assets and certain
liabilities of its Access and Services businesses to SafeWorks, L.L.C.
("SafeWorks"), a Washington limited liability company, formed by the management
group of the Access and Services businesses, together with a group of local
investors. The Access business manufactures, sells, services and rents powered
scaffolding systems and has previously conducted business through the Company's
wholly-owned subsidiaries, Spider Staging Corporation and Power Climber, Inc.
and affiliated companies. The Services business provides as a service the
removal of concrete using ultrahigh-pressure ("UHP") water as either a general
contractor or subcontractor and the removal of paint and rubber from both
commercial and military airport runways using UHP water. Services has
previously conducted business through the Company's wholly-owned subsidiary
Rampart Waterblast, Inc., as well as the Flow Services division.
With new advancements and the increasing acceptance of UHP technology as
the machine tool of choice, as well as recent developments which utilize core
UHP technology in liquid food processing and surface preparation, management
determined that refocusing Flow solely back to UHP manufacturing and sales was
in the best interest of the Company and as a result divested itself of its
non-core businesses. As a result of disposing of the Access and Services
businesses, management expects the Company to benefit in several areas, such as
increased focus on the remaining business, including both current operations and
future strategic direction, increased funding of research and development and
decreased corporate expenses.
The divestiture was completed pursuant to the terms of an Asset Purchase
and Sale Agreement dated as of August 25, 1997 (the "Purchase and Sale
Agreement"). Under the terms of the Purchase and Sale Agreement, Flow sold the
assets and SafeWorks assumed approximately $4.7 million of the liabilities of
the Access and Services businesses for cash consideration of $31.7 million.
Additionally, SafeWorks agreed to purchase approximately $4.5 million of Access
inventory currently held by Flow. Flow has agreed to manufacture Access and
Services products for SafeWorks for a period not to exceed two years and will
utilize this inventory in connection therewith. Flow also agreed to indemnify
SafeWorks with respect to collection of certain accounts receivable, certain
Flow Services contracts and for any loss or liability arising out of a breech of
any representation or warranty until April 30, 1999. No portion of the purchase
price is being held in escrow.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
INDEX TO FINANCIAL INFORMATION
PAGE
----
Pro Forma Consolidated Financial Information
Pro Forma Consolidated Balance Sheet as of July 31, 1997 ....... 5
Pro Forma Consolidated Statement of Operations for the
Three Months Ended July 31, 1997 .......................... 6
Pro Forma Consolidated Statement of Income for the
Year Ended April 30, 1997 ................................. 7
Notes to Pro Forma Consolidated Financial Information ......... 8
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PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information set forth on the
following pages, reflects the disposition by Flow International Corporation
("Flow" or the "Company") of its Access and Services businesses. These
businesses have been conducted by the wholly owned subsidiaries, Spider Staging
Corporation, Power Climber, Inc. and affiliated companies, Rampart Waterblast,
Inc. and the Flow Services division. Flow's core ultrahigh-pressure ("UHP")
waterjet technology and automation business remains. The pro forma consolidated
financial information is presented for information purposes only, does not take
into account corporate savings expected to be realized from the sale of these
businesses and is not indicative of the actual consolidated financial position
or results of operations in the future.
The following unaudited pro forma consolidated balance sheet presents the
UHP manufacturing and sales operations as of July 31, 1997, assuming that the
disposition occurred as of that date. The unaudited pro forma statements of
operations reflect the results of the UHP manufacturing and sales business for
the three months ended July 31, 1997, and the year ended April 30, 1997,
assuming that the disposition had occurred as of May 1, 1996. The pro forma
financial statements are based upon historical balance sheets and statements of
operations of both the UHP and Access and Services businesses, giving effect to
the pro forma adjustments described in the notes to the pro forma financial
information.
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FLOW INTERNATIONAL CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
July 31, 1997
(unaudited, in thousands)
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Access & Adjust- Consoli-
ASSETS Consolidated Services (1) ments dated
------------ ------------ ----- -----
<S> <C> <C> <C> <C>
Current assets:
Cash and short-term investments $ 7,824 $ - $ - $ 7,824
Trade accounts receivable, net of allowance 42,940 16,310 26,630
Inventories 41,882 6,186 35,696
Deferred income taxes 4,758 4,758
Other current assets 4,338 801 3,537
--------- -------- -------- --------
Total current assets 101,742 23,297 78,445
Property and equipment, net 27,774 16,100 11,674
Intangible assets, net 14,033 14,033
Deferred income taxes 515 515
Other assets 3,091 71 - 3,020
--------- -------- -------- --------
$ 147,155 $ 39,468 $ - $107,687
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Notes payable to banks $ 1,843 $ - $ - $ 1,843
Current portion of long-term obligations 2,985 2,985
Inter-co payable 32,806 32,806 (2)
Accounts payable 12,027 3,366 8,661
Accrued payroll and other liabilities 4,324 799 3,525
Other accrued taxes 985 429 556
Other accrued liabilities 9,307 3,150 6,157
--------- -------- -------- --------
Total current liabilities 31,471 40,550 32,806 23,727
Long-term obligations 61,640 (31,724)(2) 29,916
Minority interest 518 518
Stockholders' equity:
Common stock 151 151
Capital in excess of par 39,012 39,012
Retained earnings 18,317 (1,082)(3) 17,235
Treasury common stock of 380,817
shares at cost (1,429) (1,429)
Cumulative translation adjustment (2,184) (1,082) (1,102)
Unrealized loss on equity securities
available for sale (341) (341)
--------- -------- -------- --------
Total stockholders' equity 53,526 (1,082) (1,082) 53,526
--------- -------- -------- --------
$ 147,155 $39,468 $ - $107,687
</TABLE>
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended July 31, 1997
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Access & Adjust- Consoli-
Consolidated Services (1) ments dated
------------ ------------ ----- -----
<S> <C> <C> <C> <C>
Revenue:
Sales $ 37,446 $ 6,782 $ - $ 30,664
Services 6,423 6,423
Rentals 3,645 3,645 - -
--------- -------- -------- --------
Total revenues 47,514 16,850 30,664
Cost of sales:
Sales 22,468 4,617 17,851
Services 5,887 5,887
Rentals 1,099 1,099 - -
--------- -------- -------- --------
Total cost of sales 29,454 11,603 - 17,851
--------- -------- -------- --------
Gross profit 18,060 5,247 - 12,813
Expenses:
Marketing 6,895 2,020 4,875
Research and engineering 2,500 263 2,237
General and administrative 4,160 1,234 2,926
Restructuring 4,910 - (4,910)(4) -
--------- -------- -------- --------
18,465 3,517 (4,910) 10,038
Operating income (loss) (405) 1,730 4,910 2,775
Interest and other expense, net (1,055) (377) 388 (5) (290)
--------- -------- -------- --------
Income (loss) before provision
for income taxes (1,460) 1,353 5,298 2,485
Provision (benefit) for income taxes (511) 473 1,854 (6) 870
--------- -------- -------- --------
Net income (loss) $ (949) $ 880 $ 3,444 $ 1,615
Earnings (loss) per share $ (.06) $ .11
Weighted average shares outstanding 14,690 15,198
</TABLE>
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
Year Ended April 30, 1997
(unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Access & Adjust- Consoli-
Consolidated Services (1) ments dated
------------ ------------ ----- -----
<S> <C> <C> <C> <C>
Revenue:
Sales $135,087 $ 22,655 $ - $112,432
Services 20,336 20,336
Rentals 12,770 12,770 - -
--------- -------- -------- --------
Total revenues 168,193 55,761 112,432
Cost of sales:
Sales 80,151 14,354 65,797
Services 15,241 15,241
Rentals 6,650 6,650 - -
--------- -------- -------- --------
Total cost of sales 102,042 36,245 - 65,797
--------- -------- -------- --------
Gross profit 66,151 19,516 - 46,635
Expenses:
Marketing 27,173 8,249 18,924
Research and engineering 8,749 1,043 7,706
General and administrative 16,432 5,631 10,801
Restructuring 8,951 - (8,951)(4) -
--------- -------- -------- --------
61,305 14,923 (8,951) 37,431
Operating income 4,846 4,593 8,951 9,204
Interest and other expense, net (3,883) (965) 1,569 (5) (1,349)
--------- -------- -------- --------
Income before provision
for income taxes 963 3,628 10,520 7,855
Provision for income taxes 238 897 2,600 (6) 1,941
--------- -------- -------- --------
Net income $ 725 $ 2,731 $ 7,920 $ 5,914
Earnings per share $ .05 $ .39
Weighted average shares outstanding 15,054 15,054
</TABLE>
7
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NOTES TO PRO FORMA CONSOLIDATED INFORMATION
The unaudited pro forma consolidated financial statements reflect the
elimination of the assets and liabilities included in the disposition as well as
the results of the operations of the Access and Services businesses.
Additionally, the pro forma adjustments column includes entries to reflect the
use of the cash proceeds and adjustments to interest expense. The pro forma
financial statements do not take into consideration anticipated reductions in
corporate expenses. These expenses are included in the pro forma amounts.
1) Represent the assets, liabilities and results of operations of the
Company's wholly owned subsidiaries: Spider Staging Corporation, Power Climber,
Inc. and affiliated companies and Rampart Waterblast, Inc. Also included is the
Flow Services division.
2) Represents the net inter-company payable of the Access and Services
businesses to the remaining UHP entities. The inter-company payable includes
the cumulative translation adjustment ("CTA") related to the subsidiaries being
disposed of. The proceeds from the disposition are used to reduce outstanding
bank debt.
3) Represents the impact of the CTA related to the assets and liabilities
being disposed of.
4) Represents expense related to the write down of Access and Services assets
to net realizable value in accordance with Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets to Be
Disposed Of", as well as costs associated with the disposition.
5) Represents reduction of interest expense assuming a debt reduction of $31.7
million at the Companys borrow rate of 7.1% less interest expense previously
allocated to the Access and Services businesses.
6) Represents tax effect of the adjustments based upon the consolidated tax
rate of 35% and 25% for the three months ended July 31, 1997 and year ended
April 30, 1997, respectively.
8
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(c) Exhibits
Exhibit 2.1 Asset Purchase and Sale Agreement Dated as of August 25,
1997
Exhibit 20.1 Press release dated October 1, 1997
9
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 10, 1997 FLOW INTERNATIONAL CORPORATION
By: /s/ Stephen D. Reichenbach
--------------------------
Stephen D. Reichenbach
Executive Vice President and
Chief Financial Officer
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of
August 25, 1997, is entered into by and among FLOW INTERNATIONAL CORPORATION, a
Delaware corporation ("Flow"), SPIDER STAGING CORPORATION, a Washington
corporation ("Spider WA"), SPIDER STAGING CORPORATION, a British Columbia
corporation ("Spider BC"), POWER CLIMBER NV, a Belgium corporation ("Power
Climber Belgium"), PCNV HOLDINGS, a Belgium corporation ("Holdings Belgium"),
POWER CLIMBER, INC., a California Corporation ("Power Climber CA"), SUSPENDED
SCAFFOLD SYSTEMS, INC., a California Corporation ("Suspended Scaffold"),
SCAFFOLD CLIMBER, INC., a California Corporation ("Scaffold Climber"), POWER
OPERATED STAGING, INC., a California Corporation ("Power Staging"), ASTRO HOIST,
INC., a California Corporation ("Astro Hoist"), RAMPART WATERBLAST, INC., a
Florida corporation ("Rampart"), and SAFEWORKS, L.L.C., a Washington limited
liability company ("Spider Acquisition"). Flow, Spider WA, Spider BC, Power
Climber Belgium, Holdings Belgium, Power Climber CA, Suspended Scaffold,
Scaffold Climber, Power Staging, Astro Hoist, and Rampart are each referred to
herein as a "Seller" and collectively as the "Sellers". Spider Acquisition,
Belgium Acquisition (defined below), and Canada Acquisition (defined below) are
each referred to herein as a "Purchaser" and collectively as the "Purchasers".
BACKGROUND
A. The Sellers own or lease, and use in the business known as Flow's
Access and Services Group, certain assets.
B. The Purchasers desire to acquire substantially all of the assets used
in the Access and Services Group business, and the Sellers desire to sell such
assets and such business as a going concern, pursuant to the terms and
conditions set forth in this Agreement.
AGREEMENT
1. DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement, the following
terms, when used in this Agreement (including the Schedules and Exhibits
attached hereto), shall have the following meanings:
"Accounts" has the meaning assigned in SECTION 2.1.1.
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"Ancillary Agreements" has the meaning assigned in SECTION 7.7.1.
"ARK" means the division of Spider WA that is responsible for the
manufacture and distribution of ARK Systems.
"Assets" has the meaning assigned in SECTION 2.1.
"Assigned Contracts" has the meaning assigned in SECTION 2.1.7.
"Assumed Liabilities" has the meaning assigned in SECTION 2.3.
"Belgium Acquisition" means the Belgium limited liability corporation
(SPRL) to be formed by Spider Acquisition prior to Closing.
"Books and Records" has the meaning assigned in SECTION 2.1.9.
"Business" means the business conducted by Flow's Access and Services
Group, including all business conducted by: (i) Spider WA, including the
division of Spider WA known as the Power Climber U.S. Division, but excluding
ARK; (ii) Power Climber CA; (iii) Suspended Scaffold; (iv) Scaffold Climber; (v)
Power Staging; (vi) Astro Hoist; (vii) Spider BC; (viii) Holdings Belgium; (ix)
Power Climber Belgium, except for CEM Flow; (x) the division of Flow known as
the Flow Services Division; and (xi) Rampart, except for Hydrodynamic.
"Canada Acquisition" means the Nova Scotia unlimited liability company to
be formed by Spider Acquisition prior to Closing.
"CEM Flow" means CEM Flow, SA, a French corporation and partially owned
subsidiary of Power Climber Belgium.
"Chicago Real Property" has the meaning assigned in SECTION 2.2.8.
"Detroit Real Property" means that certain Leased Property located in
Detroit, Michigan.
"Closing" has the meaning assigned in SECTION 2.10.1.
"Closing Date" has the meaning assigned in SECTION 2.10.1.
"Code" has the meaning assigned in SECTION 2.6.
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"Commitment Letter" has the meaning assigned in SECTION 3.2.9.
"Company 10 Inventory" shall have the meaning given such term in the
Interim Manufacturing Agreement attached hereto as EXHIBIT 2.10.2.8.
"Competitors" has the meaning assigned in SECTION 2.5.
"Employee Benefit Plan" means an employee benefit plan, within the meaning
of Section 3(3) of ERISA, or any other similar employee benefit or pension plan
under applicable foreign Law, to which any Seller is a party or otherwise bound
or which has been established and maintained by any Seller.
"Environmental Laws" means the federal, state, local and foreign
environmental or health or safety laws, regulations and ordinances as such laws
may be amended or modified through the Closing Date.
"Equipment" has the meaning assigned in SECTION 2.1.5.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" has the meaning assigned in SECTION 2.2.
"Exhibits" has the meaning assigned in SECTION 7.16.
"Financial Statements" has the meaning assigned in SECTION 3.1.6.
"GAAP" means generally accepted accounting principles applicable to
companies doing business in the United States, consistently applied.
"Governmental Authority" means the federal government, any state, county,
municipal, local or foreign government and any governmental agency, bureau,
commission, court, authority or body.
"Hazardous Substance" means any substance or material defined or designated
as (i) hazardous, dangerous or toxic waste, (ii) hazardous or toxic material,
(iii) a hazardous, toxic or radioactive substance, or (iv) a hazardous or toxic
chemical, by any federal, state, local or foreign statute, regulation or
ordinance in effect as of the Closing Date.
"Hydrodynamic" means Hydrodynamic Cutting Services Joint Venture, a general
partnership partially owned by Rampart.
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"Immediately Available Funds" means a bank cashier's check or checks or
electronic wire transfer to an account or accounts designated by the payee.
"Indemnification Ceiling" has the meaning assigned in SECTION 6.5.
"Indemnification Floor" has the meaning assigned in SECTION 6.5.
"Insurance Policies" has the meaning assigned in SECTION 3.1.19.
"Inventory" has the meaning assigned in SECTION 2.1.4.
"July Balance Sheet" has the meaning given such term in SECTION 3.1.6.
"Knowledge" with respect to the Sellers means, when modifying a
representation, warranty or other statement of the Sellers, that the fact or
situation described therein is actually known by any of the individuals listed
on SCHEDULE 1(a).
"Knowledge" with respect to the Purchasers means, when modifying a
representation, warranty or other statement of the Purchasers, that the fact or
situation described therein is actually known by any of the individuals listed
on Schedule 1(b).
"Law" means the common law and any statute, ordinance, code or other law,
rule, regulation, order, standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
"Leased Property" means all of the property used in connection with the
Business in which any of the Sellers holds a leasehold interest, such property
listed on Schedule 1(c) attached hereto.
"Leases" has the meaning assigned in SECTION 2.10.2.3.
"Letter of Intent" has the meaning assigned in SECTION 4.6.
"Licenses" has the meaning assigned in SECTION 3.1.5.4.
"Liens" has the meaning assigned in SECTION 3.1.5.1.
"Management Date" has the meaning assigned in SECTION 4.4.
"Net Cash Position" means the amount computed in accordance with the
formula set forth on SCHEDULE 2.4.2.
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"New Jersey PAC Contract" means that certain Agreement Between Owner and
Design/Builder dated July ___, 1996 by and between Flow and New Jersey
Performing Arts Center, and all currently approved change orders and reasonably
anticipated change orders necessary to complete such contract as currently
contemplated.
"New Jersey PAC Receivable" means the total of the contract receivables
under the New Jersey PAC Contract, billed and unbilled, as reflected on the July
Balance Sheet, plus an amount equal to the direct costs incurred by the
Purchasers after July 31, 1997 to complete the New Jersey PAC Contract, provided
that such receivables and direct costs have been or shall be determined in
accordance with GAAP.
"Nihon Bisoh Agreement" means the Exclusive Distributorship Agreement dated
July 30, 1996 by and between Flow and Nihon Bisoh Company Limited.
"Person" means an individual, corporation, partnership, unincorporated
association, trust, joint venture, limited liability company, or other
organization or entity, including a governmental entity or any department,
agency or political subdivision of such entities.
"Proposed Final Schedules" has the meaning assigned in SECTION 4.1.4.
"Purchase Price" has the meaning assigned in SECTION 2.4.1.
"Purchase Price Adjustment" has the meaning assigned in SECTION 2.4.1.
"Reserve for Uncollectible Accounts" means the agreed to reserve for
uncollectible accounts on the July Balance Sheet and included in the calculation
of the Purchase Price.
"Schedules" has the meaning assigned in SECTION 7.16.
"Services Assets" has the meaning assigned in SECTION 2.9.1.
"Services LLC" has the meaning assigned in SECTION 2.9.
"Subsidiary" means, with respect to each party, any corporation,
association or other business entity of which more than fifty percent (50%) of
the issued and outstanding capital stock or equivalent thereof is owned or
controlled by such party, by one or more Subsidiaries of such party or by such
party and one or more Subsidiaries.
"Taxes" has the meaning assigned in SECTION 3.1.8.
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"Uncollectible Accounts Receivable" means Accounts that remain unpaid 365
days after the Closing Date, other than the New Jersey PAC Receivable.
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions set forth in this Agreement, and except as provided in SECTION 2.2 as
to Excluded Assets, at the Closing, the Sellers shall sell, assign, transfer,
convey, set over and deliver to the Purchasers, and the Purchasers shall
purchase, acquire and accept from the Sellers all of the following assets,
properties and rights of each of the Sellers (collectively, the "Assets"):
2.1.1 ACCOUNTS. All of each Seller's right, title and interest
to receive the payment of money or other consideration arising out of the
Business, including, but not limited to, all such rights that arise from the
sale, lease, exchange or other disposition of raw materials, works-in-progress
and finished goods, and the furnishing of services, and including without
limitation (i) all accounts receivable, (ii) all rights to receive payments
arising under contracts, (iii) all chattel paper, (iv) all general intangibles
evidencing a right to receive payment, (v) all documents of title, receipts,
draft checks, acceptances, bonds, notes or other negotiable and nonnegotiable
instruments, documents, bills of exchange, securities, deposits, certificates of
deposit, or other writings evidencing or comprising a monetary obligation
(collectively, the "Accounts");
2.1.2 INSURANCE CLAIMS. All uncollected proceeds from any first
party insurance claims to the extent they arise from or relate to the Assets or
the Business;
2.1.3 LEASED PROPERTY AND LEASEHOLD IMPROVEMENTS. Each Seller's
leasehold interests in any of the Leased Property and any leasehold improvements
located on any of the Leased Property;
2.1.4 INVENTORY. The entire stock of inventory of the Business
on hand as of the Closing Date, wherever located, including raw materials, work-
in-progress, and finished goods ("Inventory");
2.1.5 EQUIPMENT. All equipment owned, used or held for use
primarily in the Business including, without limitation, all machinery,
equipment (including all jigs, fixtures, saws, welding machines, punches and
other equipment used for fabrication, work tables, test benches, and other
equipment used for hoist assembly, and all equipment used for
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production of parts), tools, supplies, computers (both hardware and software),
vehicles and other rolling stock, furniture, appliances, fixtures, and all other
items of personal property primarily used by or in connection with the Business,
including those items more particularly described on the attached SCHEDULE 2.1.5
("Equipment");
2.1.6 INTANGIBLES. All intangible assets, rights and claims of
each Seller of every kind and nature primarily used, owned or held in connection
with the Business, including, without limitation, patents, trade names
(including all rights in the names "Spider", "Spider Staging", "Power Climber",
"Rampart", "Astro", and "Astro Hoist"), trademarks, copyrights, design drawings,
product specifications, prototypes and all applications for any of the
foregoing, licenses, customer lists, price schedules, advertising and marketing
programs and plans, referral relationships, business information and software
currently used by any Seller, Licenses (to the extent assignable), and any
goodwill associated with the Business; provided, that any intangibles owned by
any Seller and used, but not primarily, in the Business, including, but not
limited to, the ultra high pressure patent and technology will not be
transferred to the Purchasers, but will be licensed to the Purchasers pursuant
to a perpetual, assignable, worldwide non-exclusive license provided for in
SECTION 2.10.2.9;
2.1.7 ASSIGNED CONTRACTS. All of each Seller's rights under
contracts, leases, licenses, software license agreements, contracts with
customers and suppliers, and other agreements relating to any of the Assets or
the Business, including without limitation those that are listed and described
on the attached SCHEDULE 2.1.7, and further including, without limitation, all
rights, claims and privileges of each Seller arising under all warranties,
representations and guarantees (express, implied or otherwise) made by suppliers
or others in connection with any of the Assets or the Business (collectively,
the "Assigned Contracts");
2.1.8 PREPAID EXPENSES. All prepaid expenses and advances paid
in connection with the Business, including all deposits paid on the Leased
Property and all other prepaid expenses that accrued during any period prior to
Closing; and
2.1.9 BOOKS AND RECORDS. All relevant books, paper and records
relating to any of the Assets or the operation of the Business (the "Books and
Records"); provided, that with respect to Books and Records not pertaining
exclusively to the Assets or the Business, the Sellers shall be entitled to
retain the originals and shall provide the Purchasers with reasonable
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access to such Books and Records and, at the request of the Purchasers, copies
thereof.
2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary
contained in SECTION 2.1, the following properties, assets and rights used in,
or related to the Business (the "Excluded Assets") are excluded from the Assets
and shall not be purchased by the Purchasers:
2.2.1 Subject to SECTION 2.4.2, all cash on hand, bank accounts,
cash equivalents or instruments of each Seller (but not including any Accounts,
except as provided in SECTION 2.2.5);
2.2.2 All Company 10 Inventory;
2.2.3 All assets of CEM Flow;
2.2.4 All assets of Hydrodynamic;
2.2.5 All accounts receivable of each Seller as of the Closing
Date that are generated in the ordinary course of such Seller's business and
that are owed by Flow or any of its subsidiaries, it being hereby agreed and
acknowledged that all such accounts receivable (i.e., the intercompany accounts)
shall be forgiven and deemed discharged;
2.2.6 All assets of ARK, except those accounts receivable of ARK
that are owed by any Person other than Flow or a Flow Subsidiary, such third-
party accounts receivable being included among the Assets being acquired by the
Purchasers hereunder;
2.2.7 Subject to the provisions of SECTION 4.7, all receivables
and any other rights to the JFK Performing Arts Center receivable as reflected
on the July Balance Sheet prior to adjustment;
2.2.8 The real property owned by Spider WA and located at 1550
North Mannheim Road in Stone Park, Illinois (the "Chicago Real Property"); and
2.2.9 The items listed on SCHEDULE 2.2.9.
2.3 ASSUMPTION OF LIABILITIES. Contemporaneously with the purchase
of the Assets, the Purchasers shall assume the liabilities and perform the
obligations of the Sellers as of the Closing Date that are identified on the
attached SCHEDULE 2.3 (the "Assumed Liabilities"). The Purchasers are not
assuming,
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and the Sellers agree and acknowledge that the Purchasers will not assume, any
other debts, liabilities or obligations of the Sellers, whether related to or
arising from the Business or otherwise. Without limiting the foregoing, the
parties agree and acknowledge that the Purchasers are not assuming any accounts
payable of any of the Sellers owed to Flow or any of Flow's subsidiaries (such
accounts payable to be forgiven and deemed discharged prior to Closing), any
liabilities related to ARK, CEM Flow or Hydrodynamic, or any loans, lines of
credit, debt, income and other taxes payable, deferred income taxes payable, or
any other liabilities of any of the Sellers not expressly set forth on SCHEDULE
2.3.
2.4 ASSET PURCHASE PRICE.
2.4.1 PURCHASE PRICE. The Purchase Price to be paid at Closing
for the Assets shall be Thirty Million Five Hundred Thousand Dollars
($30,500,000), adjusted pursuant to the procedure set forth in the example on
SCHEDULE 2.4.1 (the "Purchase Price Adjustment"). The Purchase Price shall be
(i) increased or decreased based on the difference between April 30, 1997 and
July 31, 1997 in current trade receivables (after allowances for uncollectible
accounts) plus inventory (less allowances for obsolescence, the Company 10
inventory and Nihon Bisoh traction hoists) and changes in prepaid expenses and
other current assets less current liabilities and (ii) increased by the sum of
(a) $30,500,000 plus (b) the amount determined under (i) above multiplied by the
product of (c) 0.000253425 and (d) the number of days from and including August
1, 1997 through the Closing Date. Not less than five (5) days prior to Closing,
the parties will, by mutual agreement determine the Purchase Price Adjustment
based on the April 30, 1997 Balance Sheet and the July 31, 1997 Balance Sheet
prepared in accordance with GAAP. As used in this Agreement, the term "Purchase
Price" means the sum of $30,500,000 and the Purchase Price Adjustment.
2.4.2 INTERIM OPERATIONS CASH ADJUSTMENT. No later than five
(5) days after the Closing, the parties shall, by mutual agreement, determine
the change in the Net Cash Position as of the Closing Date following the
procedure in the example on SCHEDULE 2.4.2. If the Net Cash Position as of the
Closing Date has been (i) reduced compared to the Net Cash Position at July 31,
1997, the reduction shall be paid to the Sellers or (ii) increased compared to
the net cash position at July 31, 1997, the increase shall be refunded to the
Purchasers. Any payments required pursuant to this SECTION 2.4.2 shall be paid
in Immediately Available Funds no later than ten (10) days following the Closing
Date.
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2.4.3 DISPUTE RESOLUTION. In the event of any dispute
regarding the computation of amounts required to be computed under Sections
2.4.1 AND 2.4.2, the disputed item or items will be submitted to a nationally
recognized independent certified public accounting firm for resolution. The
determination of the independent certified public accountant shall be final and
binding on the parties. In the event the parties are unable to agree on an
independent certified public accountant, either party may require the selection
to be submitted to an arbitrator selected pursuant to SECTION 7.7. The
selection of an independent certified public accountant by the arbitrator shall
be binding on the parties. The cost of any proceedings under this SECTION 2.4.3
shall be borne equally by the Sellers and the Purchasers.
2.4.4 PAYMENT. The Purchase Price shall be paid at Closing in
Immediately Available Funds in accordance with SCHEDULE 2.4.4.
2.5 NONCOMPETE CONSIDERATION. As an inducement to the Purchasers to
enter into this Agreement, Flow shall use commercially reasonable efforts to
secure from each of the following Persons (the "Competitors") a noncompetition
agreement in the form attached hereto as EXHIBIT 2.5 (the "Noncompetition
Agreement"): Flow on behalf of itself and on behalf of each of its Subsidiaries
(including all of the other Sellers); David Huang; Keenan Potter; and, Mark
Willardson.
2.6 ALLOCATION OF THE PURCHASE PRICE. The parties agree that the
total consideration to be paid by the Purchasers under this Agreement shall be
allocated among the Assets and the Noncompetition Agreement(s) in accordance
with the terms and conditions of this Agreement and that said allocation shall
be set forth in the form of the attached SCHEDULE 2.6, to be prepared at Closing
in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"), and, to the extent applicable, foreign tax laws. Each of the
parties agrees to report this transaction for state, federal and foreign tax
purposes in a manner consistent with the allocation set forth in SCHEDULE 2.6,
including the filing of a form 8594 with the Internal Revenue Service reflecting
such allocation in accordance with Treasury Regulation Section 1.1060-1T. If
any state, federal or foreign taxing authority challenges such allocation, the
party being challenged shall give prompt written notice of the challenge to the
other parties. The party being challenged shall have the option to elect,
within thirty (30) days of being notified by said taxing authority of such
challenge, to assume the defense of the challenge. If such party is a Seller
and it does not elect to assume such defense, the Purchasers may assume the
defense of the challenge and shall have the authority to
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settle such challenge. If the party being challenged is a Purchaser and it does
not elect to assume such defense, the Sellers may assume the defense of the
challenge and shall have the authority to settle such challenge.
2.7 EMPLOYEE MATTERS.
2.7.1 CERTAIN RESPONSIBILITIES OF THE SELLERS. Each Seller
shall terminate the employment of all of its employees engaged in the Business
and identified on SCHEDULE 2.7.1(a) (the "Available Employees"), except those
employees listed on SCHEDULE 2.7.1(b) (the "Retained Employees") which represent
employees working for CEM Flow or Hydrodynamic and those contemplated by the
Interim Manufacturing Agreement described in SECTION 2.10.2.9, by no later than
11:59 p.m. on the day prior to Closing, and covenants to perform all obligations
in connection therewith or contemplated by this Agreement, including without
limitation giving required notices; providing COBRA health plan continuation
coverage to all employees or former employees and their dependents until such
coverage expires, whether or not such coverage is after Closing; and performing
any obligations required by the Fair Labor Standards Act of 1938, the Equal Pay
Act, applicable wage and hour Laws, or any other applicable Laws. The
Purchasers will make offers of employment, upon comparable compensation
arrangements as those enjoyed with Sellers, to the Available Employees. With
respect to all employees of the Sellers that are hired by any Purchaser, such
hiring Purchaser shall assume all accrued payroll liabilities and accrued
vacation. No Purchaser shall have any liability for (if any exist) severance
benefits, termination pay or benefits, pension and profit sharing contributions,
other forms of benefits of any type or nature on account of said employees'
employment by any Seller that are not reflected on the July Balance Sheet or
incurred in the ordinary course of business prior to the Closing Date, or any
COBRA health plan continuation coverage to employees or former employees of any
Seller or their dependents.
2.7.2 NON-SOLICITATION BY THE PURCHASERS. No Purchaser or any
Person affiliated with any Purchaser may, whether for its own account or for the
account of any other Person, directly or indirectly solicit the employment or
services of, or cause or attempt to cause to leave the employment or service of
any Seller, or a Seller's Subsidiary or successor, or otherwise interfere with
the relationship of any Seller, or a Seller's Subsidiary or successor with, any
Person who is or was, within six (6) months of the date of solicitation by a
Purchaser, employed by, or otherwise engaged to perform services for any Seller,
or a Seller's Subsidiary or successor (whether in the capacity of employee,
full-time consultant, full-time independent contractor or otherwise); PROVIDED,
however, that the Purchasers
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may make offers of employment to those employees of the Sellers listed on
SCHEDULE 2.7.2.
2.8 TAXES; CLOSING COSTS.
2.8.1 TRANSFER AND OTHER TAXES. Each party shall pay those
transfer, sales, use and other taxes arising from the transactions contemplated
by this Agreement for which such party has primary statutory liability.
Accordingly, any sales or use tax relating to the transfer of the Assets from
the Sellers to the Purchasers, including the transfer of the Assets to Services
LLC or the transfer of Services LLC to Spider Acquisition, shall be borne by the
Purchasers.
2.8.2 CANADA ACCOUNTS RECEIVABLE ELECTION. The parties shall,
with respect to the accounts receivable of Spider BC included among the
Accounts, jointly execute and file an election under Section 22 of the Income
Tax Act of Canada, and shall designate therein the portion of the Purchase Price
allocated thereto under SECTION 2.6 of this Agreement as the consideration paid
by the Purchasers to the Sellers therefor. The parties shall file all necessary
elections or filings under all corresponding provincial tax legislation to make
the transfer provided for herein effective on the same basis as contemplated by
Section 22 of the Income Tax Act of Canada, making such adjustments to the
elected values calculated under the Income Tax Act of Canada as are necessary
for the purposes of the applicable provincial legislation.
2.8.3 CANADA TAX CLEARANCE CERTIFICATE. Spider BC shall have
obtained from the Commissioner of the Consumer Taxation Branch of the Ministry
of Finance and Consumer Relations of the Province of British Columbia (the
"Commissioner") and delivered to the Purchasers, on or prior to the Closing
Date, a clearance certificate pursuant to Section 99(2) of the Social Service
Tax Act of British Columbia, confirming that all applicable taxes collected by
Spider BC have been paid to the Commissioner.
2.8.4 CANADA GST ELECTION. The Sellers and the Purchasers shall
jointly elect under Subsection 167(1) of Part IX of the Excise Tax Act of Canada
and any provincial legislation imposing a similar value added or multi-staged
tax, that no tax be payable in Canada with respect to the sale and purchase of
the Assets pursuant to this Agreement. The parties shall make such election in
the prescribed form containing prescribed information pursuant to Part IX of the
Excise Tax Act of Canada and the Purchasers shall file the joint election in
compliance with the requirements of said Part IX.
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2.8.5 BELGIUM TAX MATTERS. Within three (3) business days of
signing this Agreement, the Sellers shall request from the Belgium tax collector
competent for Power Climber Belgium and Holdings Belgium the certificate
identified in article 442 bis of the Belgium Income Tax Code. The parties
acknowledge that the transfer of the Assets of Power Climber Belgium and
Holdings Belgium from such Sellers to Belgium Acquisition pursuant to this
Agreement is exempt from Belgium VAT under application of article 11 of the
Belgium VAT Code.
2.8.6 CLOSING COSTS. Each party shall pay their own respective
closing costs incurred in carrying out the transactions contemplated by this
Agreement.
2.9 FORMATION OF NEW ENTITY. In order to consummate the transactions
contemplated by this Agreement, Flow agrees to form, not less than three (3)
days prior to the Closing Date, a new Washington limited liability company.
Such company shall be known for purposes of this Agreement as "Services LLC".
The Purchasers shall prepare the certificate of formation, operating agreement,
and other organizational documents of Services LLC. The Purchasers shall
reimburse Flow for the reasonable third-party costs of Flow's formation of
Services LLC, with the understanding that Flow's costs shall include reasonable
attorney fees in respect of such matters. Prior to Closing, Flow and Rampart
shall be the only members of Services LLC and shall hold all ownership interests
in Services LLC. Flow shall deliver to the Purchasers, on the Closing Date,
copies of the certificate of formation and operating agreement of Services LLC,
certified by Flow as true, complete and correct and in effect on the Closing
Date.
2.9.1 TRANSFER OF ASSETS TO NEW ENTITY. Flow and Rampart shall
each, just prior to Closing and in conjunction with the transfer of Assets
contemplated in SECTION 2.1, transfer all of their respective rights, title and
interest in and to the Assets held by Flow and Rampart, respectively
(collectively, the "Services Assets"), to Services LLC. Services LLC shall hold
all of the Services Assets free and clear of all liabilities, obligations and
Liens, except for those permitted encumbrances set forth on SCHEDULE 3.1.5.1 to
which the Services Assets may be subject, and Services LLC shall not undertake
or assume any obligations or liabilities and shall not agree to make any payment
in respect thereof. Services LLC shall not have any assets other than the
Services Assets and shall not have any liabilities other than the Assumed
Liabilities to which the Services Assets may be subject. The transfer of the
Services Assets to Services LLC shall be accomplished by Flow and Rampart each
executing, as applicable, a Bill of Sale, Assignment and Assumption Agreement,
Assignments of Lease, Assignment
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of Trademark Rights, and Assignment of Patent Rights, in substantially the forms
attached hereto as EXHIBITS 2.10.2.1, 2.10.2.2, 2.10.2.3(a),(b), 2.10.2.5, and
2.10.2.6, respectively, each such transfer to be effective just prior to
Closing; provided, that with respect to any patents or trademarks registered in
Canada, Flow and Rampart shall execute assignment agreements effective under
Canadian law to transfer all rights in such patents and trademarks to Services
LLC.
2.9.2 TRANSFER OF NEW ENTITY TO PURCHASERS. At Closing, subject
to the terms and conditions of this Agreement, each of Flow and Rampart shall
transfer all of their respective ownership interest in Services LLC, free and
clear of any Liens, to Spider Acquisition. Such transfer shall be accomplished
by Flow and Rampart each executing the Transfer of LLC Interest in substantially
the form attached hereto as EXHIBIT 2.9.2, such transfer to be effective at
Closing. The consideration for such transfer is included in the Purchase Price,
as set forth on SCHEDULE 2.6. Upon such transfer, Spider Acquisition shall be
the sole member of Services LLC and shall hold all of the ownership rights and
interest in Services LLC.
2.10 THE CLOSING.
2.10.1 CLOSING. The closing of the purchase and sale of the
Business (the "Closing") shall take place on a date mutually agreed by the
parties (the "Closing Date"), such date to occur no later than September 29,
1997; provided, that Closing shall not occur until, and shall be contingent
upon, satisfaction (or the Purchasers' or the Sellers' waiver, as the case may
be) of the conditions described in SECTION 5.1 and SECTION 5.2, respectively.
Closing shall occur at the offices of Davis Wright Tremaine LLP, 2600 Century
Square Building, 1501 Fourth Avenue, Seattle, Washington 98101, or such other
place mutually agreed upon by the parties.
2.10.2 CLOSING DELIVERIES BY THE SELLERS. At the Closing, the
Sellers shall deliver or cause to be delivered to the Purchasers:
2.10.2.1 Bills of Sale in substantially the form attached
to this Agreement as EXHIBIT 2.10.2.1, one Bill of Sale executed by each of the
Sellers, conveying the Assets of such Seller free and clear of any liens,
encumbrances or defects except as specifically set forth on SCHEDULE 3.1.5.1.
The Bills of Sale shall convey the Assets to the Purchasers as follows:
(a) Each of Spider WA, Power Climber CA, Suspended
Scaffold, Scaffold Climber, Power Staging, and Astro Hoist shall convey their
respective Assets to Spider
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Acquisition, except as set forth in subparagraphs (c) and (d) below;
(b) Rampart and Flow shall convey their respective
Assets to Services LLC, such conveyances deemed effective just prior to Closing;
(c) Spider BC shall convey its Assets to Canada
Acquisition; and
(d) Power Climber Belgium and Holdings Belgium shall
convey their respective Assets to Belgium Acquisition;
2.10.2.2 Assignment and Assumption Agreements in
substantially the form attached to this Agreement as EXHIBIT 2.10.2.2, one
Assignment and Assumption Agreement executed by each of the Sellers, pursuant to
which the Sellers shall assign and the Purchasers shall assume the Assigned
Contracts (except for the Leases and the Nihon Bisoh Agreement, which shall be
assigned and assumed pursuant to SECTIONS 2.10.2.3 and 2.10.2.4, respectively)
as follows:
(a) Spider WA, Power Climber CA, Suspended Scaffold,
Scaffold Climber, Power Staging, and Astro Hoist shall each assign the Assigned
Contracts to which they are a party to Spider Acquisition, except as set forth
in subparagraphs (c) and (d) below;
(b) Flow and Rampart shall each assign the Assigned
Contracts to which they are a party to Services LLC, such assignments deemed
effective just prior to Closing;
(c) Spider BC shall assign the Assigned Contracts to
which it is a party to Canada Acquisition; and
(d) Power Climber Belgium and Holdings Belgium shall
each assign the Assigned Contracts to which they are a party to Belgium
Acquisition;
2.10.2.3 Assignments of Lease in substantially the form
attached to this Agreement as EXHIBIT 2.10.2.3(a), one Assignment of Lease
executed by the applicable Seller (tenant) for each real property lease included
among the Assigned Contracts (the "Leases"), assigning all of the Sellers'
leasehold interests in the Leased Property (except for the Detroit Real
Property, which shall be subject to a sublease agreement pursuant to SECTION
2.10.2.13 below) as follows:
(a) Each of Spider WA, Power Climber CA, Suspended
Scaffold, Scaffold Climber, Power Staging, and
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Astro Hoist shall assign their respective leasehold interests to Spider
Acquisition, except as set forth in subparagraphs (c) and (d) below;
(b) Flow and Rampart shall assign their respective
leasehold interests to Spider Acquisition, such assignments deemed effective
just prior to Closing; provided, that with respect to the Lease for the Leased
Property at 23307 - 66th Avenue South in Kent, Washington, Flow shall assign its
leasehold interest to Spider Acquisition by executing an Assignment of Lease in
substantially the form attached hereto as EXHIBIT 2.10.2.3(b);
(c) Spider BC shall assign its leasehold interests to
Canada Acquisition; and
(d) Power Climber Belgium and Holdings Belgium shall
assign their respective leasehold interests to Belgium Acquisition;
2.10.2.4 The Nihon Bisoh Assignment and Assumption
Agreement in substantially the form attached to this Agreement as
EXHIBIT 2.10.2.4, executed by Flow, pursuant to which Flow shall assign and
Spider Acquisition shall assume the Nihon Bisoh Agreement;
2.10.2.5 Assignment of Trademark Rights in substantially
the form attached to this Agreement as EXHIBIT 2.10.2.5 (or a similar form with
respect to state or foreign trademarks, in accordance with applicable state or
foreign Law), one Assignment of Trademark executed by each of the Sellers
holding a registered trademark, pursuant to which the Sellers shall assign all
rights in any such registered trademarks to the Purchasers as follows:
(a) Each of Spider WA, Power Climber CA, Suspended
Scaffold, Scaffold Climber, Power Staging, and Astro Hoist shall each assign
their respective registered trademarks to Spider Acquisition, except as set
forth in subparagraphs (c) and (d) below;
(b) Flow and Rampart shall assign their respective
registered trademarks to Services LLC, such assignments deemed effective just
prior to Closing;
(c) Spider BC shall assign its registered trademarks
to Canada Acquisition; and
(d) Power Climber Belgium and Holdings Belgium shall
assign their respective registered trademarks to Belgium Acquisition;
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2.10.2.6 Assignment of Patent Rights in substantially the
form attached to this Agreement as EXHIBIT 2.10.2.6 (or a similar form with
respect to foreign patents, in accordance with applicable foreign Law), one
Assignment of Patent executed by each of the Sellers holding a patent, pursuant
to which the Sellers shall assign all rights in any such patents to the
Purchasers as follows:
(a) Each of Spider WA, Power Climber CA, Suspended
Scaffold, Scaffold Climber, Power Staging, and Astro Hoist shall each assign
their respective patents to Spider Acquisition, except as set forth in
subparagraphs (c) and (d) below;
(b) Flow and Rampart shall assign their respective
patents to Services LLC, such assignments deemed effective just prior to
Closing;
(c) Spider BC shall assign its patents to Canada
Acquisition; and
(d) Power Climber Belgium and Holdings Belgium shall
assign their respective patents to Belgium Acquisition;
2.10.2.7 A Noncompetition Agreement in substantially the
form attached hereto as EXHIBIT 2.5, executed by Flow (on its behalf and its
Subsidiaries) and the other Competitors that agree to deliver such agreement,
pursuant to which each Competitor agrees not to compete with any Purchaser for
five (5) years;
2.10.2.8 The Interim Manufacturing Agreement in
substantially the form attached hereto as EXHIBIT 2.10.2.8, executed by Flow,
pursuant to which Flow agrees to manufacture certain products used in the
Business, to sell certain Company 10 Inventory to the Purchasers, and addresses
the Purchasers' hiring of certain Flow employees engaged in the Business;
2.10.2.9 The License and Parts Purchase Agreement in
substantially the form attached hereto as EXHIBIT 2.10.2.9, executed by Flow,
pursuant to which Flow (i) grants Services LLC a perpetual, assignable, non-
exclusive worldwide license to use Flow's X-pump technology and the ultra high
pressure patent and technology, and (ii) agrees to sell to Services LLC
replacement parts and additional X-pump high pressure components;
2.10.2.10 The Lease Agreement in substantially the form
attached hereto as EXHIBIT 2.10.2.10,
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executed by Spider WA, pursuant to which Flow agrees to lease to Spider
Acquisition the Chicago Real Property;
2.10.2.11 The ARK Agreement in substantially the form
attached hereto as EXHIBIT 2.10.2.11, executed by Flow and Spider WA, concerning
R.J. Wildner and the manufacture of ARK products; and
2.10.2.12 The Transfer of LLC Interest in substantially the
form attached hereto as EXHIBIT 2.9.2, executed by Flow and Rampart, pursuant to
which Flow and Rampart transfer all of their respective interests in Services
LLC to Spider Acquisition in accordance with SECTION 2.9;
2.10.2.13 A Sublease Agreement, executed by Flow, pursuant
to which Flow agrees to sublease that portion of the Detroit Real Property
currently used primarily by the Business to Spider Acquisition on the following
terms: (i) the sublease shall be for a period of one (1) year from the Closing
Date; (ii) Spider Acquisition shall pay the following amounts for the sublease:
rent -- $6,262 per month; utilities -- $900 per month; taxes -- $450 per month;
and (iii) other terms consistent with Flow's underlying lease of the Detroit
Real Property; and
2.10.2.14 All documents required to be delivered at Closing
by the Sellers pursuant to SECTION 5.1.
2.10.3 CLOSING DELIVERIES BY THE PURCHASERS. At the Closing,
the Purchasers shall deliver or cause to be delivered to Flow:
2.10.3.1 The payments of Immediately Available Funds
pursuant to SECTION 2.4.4;
2.10.3.2 The Assignment and Assumption Agreements described
in SECTION 2.10.2.2, one each executed by Spider Acquisition, Canada
Acquisition, and Belgium Acquisition, as applicable;
2.10.3.3 The Assignments of Lease described in SECTION
2.10.2.3, executed by either Spider Acquisition, Canada Acquisition, or Belgium
Acquisition, as applicable;
2.10.3.4 The Nihon Bisoh Assignment and Assumption
Agreement described in SECTION 2.10.2.4, executed by Spider Acquisition;
2.10.3.5 The Assignments of Trademark Rights described in
SECTION 2.10.2.5, executed by either Spider
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Acquisition, Canada Acquisition, or Belgium Acquisition, as applicable;
2.10.3.6 The Assignments of Patent Rights described in
SECTION 2.10.2.6, executed by either Spider Acquisition, Canada Acquisition, or
Belgium Acquisition, as applicable;
2.10.3.7 The Interim Manufacturing Agreement described in
SECTION 2.10.2.8, executed by Spider Acquisition;
2.10.3.8 The Lease Agreement described in SECTION
2.10.2.10, executed by Spider Acquisition;
2.10.3.9 The ARK Agreement described in SECTION 2.10.2.11,
executed by Spider Acquisition;
2.10.3.10 The Transfer of LLC Interest described in SECTION
2.9.2, executed by Spider Acquisition;
2.10.3.11 A Sublease Agreement, as described in SECTION
2.10.2.13, executed by Spider Acquisition; and
2.10.3.12 All documents required to be delivered at Closing
by the Purchasers pursuant to SECTION 5.2.
2.11 EFFECTIVE TIME OF TRANSFER. The transfer of the Assets from the
Sellers to the Purchasers shall be deemed to have occurred at 11:59 p.m. Pacific
Daylight Time on the Closing Date. This Agreement shall not be construed as
effecting a transfer of the Assets prior to the Closing Date. The date of July
31, 1997 shall be used to determine the adjustment to the purchase price
pursuant to SECTION 2.4; no Assets shall be deemed transferred on such date.
2.12 FURTHER DOCUMENTS OR NECESSARY ACTION. The Sellers and the
Purchasers, respectively, shall take all actions that may be necessary or
appropriate to effectuate the transactions contemplated by this Agreement,
including without limitation the modification of the document forms referenced
in SECTION 2.10.2 as may be required by federal, state or foreign Laws to
effectuate the transactions contemplated hereby. On or after the Closing Date,
if any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Purchasers with full title to the Assets, the
Sellers shall take all such necessary or appropriate action.
3. REPRESENTATIONS AND WARRANTIES.
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3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
Sellers, jointly and severally, represent and warrant to each of the Purchasers
that the following statements are true and correct on the date of this Agreement
and will be true and correct on the Closing Date as though made on such date:
3.1.1 CORPORATE ORGANIZATION AND STANDING OF THE SELLERS; POWER
AND AUTHORITY. Flow, Spider WA, and Rampart are corporations duly organized,
validly existing and in good standing under the Laws of the States of Delaware,
Washington and Florida, respectively. Power Climber CA, Suspended Scaffold,
Scaffold Climber, Power Staging and Astro Hoist are corporations duly organized,
validly existing and in good standing under the Laws of the State of California.
Except as set forth on SCHEDULE 3.1.1, Spider BC is a corporation duly
organized, validly existing and in good standing under the Laws of British
Columbia, Canada. Power Climber Belgium and Holdings Belgium are corporations
duly organized, validly existing and in good standing under the Laws of Belgium.
Each Seller has the corporate power and corporate authority to own or lease its
respective assets and to carry on its business as presently conducted.
3.1.2 CORPORATE AUTHORIZATION. All corporate action on the part
of each Seller and their respective directors and shareholders necessary for the
authorization, execution, delivery and performance by such Seller of this
Agreement and the consummation of the transactions contemplated by this
Agreement has been taken or will be taken prior to Closing. This Agreement has
been duly executed and delivered by the Sellers and is a valid and binding
obligation of the Sellers, enforceable in accordance with its terms.
3.1.3 NO CONFLICT. Neither the execution and delivery of this
Agreement by the Sellers nor the consummation of the transactions contemplated
by this Agreement will (a) conflict with or result in a breach of any provision
of the articles of incorporation, bylaws, or other charter or organizational
documents of any Seller, (b) conflict with any existing provision of applicable
Law, including any existing order, rule, regulation, judgment or decree of any
court, arbitrator or agency of government, (c) violate, be in conflict with,
result in a breach of, or constitute (with or without notice or lapse of time or
both) a default under (or give rise to any right of termination, cancellation or
acceleration) any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which any Seller is a party, or by which any of them or any of the Assets may be
bound, except for such default (or right of termination, cancellation or
acceleration) which will be cured by satisfaction
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of the underlying obligations on or before the Closing Date or as to which
requisite waivers or consents, as disclosed on SCHEDULE 3.1.4, shall either have
been obtained by the Sellers prior to Closing or the obtaining of which shall
have been waived by the Purchasers, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any Seller or any of the
Assets or the Business; except as to conflicts, breaches or violations which
will not have a material adverse effect on the Assets or the Business.
3.1.4 CONSENTS. Except as disclosed on SCHEDULE 3.1.4, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority is required in connection with the execution
and delivery by the Sellers of this Agreement or the consummation by the Sellers
of the transactions contemplated by this Agreement. Except as disclosed in
SCHEDULE 3.1.4, no consent, approval or authorization of or notification to any
party to any agreement or other instrument to which any Seller is a party
(including any Assigned Contract) is required for the execution, delivery and
performance of this Agreement by the Sellers and the consummation of the
transactions contemplated by this Agreement.
3.1.5 TITLE TO AND CONDITION OF ASSETS.
3.1.5.1 The Sellers have valid title to all of the Assets,
free and clear of all liens, security interests, mortgages, deeds of trust,
encumbrances, reservations, charges, equity, leases, licenses, encroachments,
permits, easements, claims of any kind or character whatsoever, including
inchoate, contingent or statutory, or restrictions or other title exceptions
("Liens"), other than those disclosed on SCHEDULE 3.1.5.1.
3.1.5.2 THE EQUIPMENT AND INVENTORY IS BEING TRANSFERRED
TO THE PURCHASERS ON AN AS IS, WHERE IS BASIS.
3.1.5.3 The Sellers have valid leasehold interests in the
Leased Property, free and clear of all Liens. To the Knowledge of the Sellers,
the Leased Property and the operation of each Seller's business on any portion
thereof is, and, when leased by the Purchasers immediately after Closing, will
be (i) in compliance with applicable Laws, including without limitation zoning
and land use Laws, building and fire codes, and fire insurance rating
associations, having jurisdiction over the Assets, Business or any Leased
Property, and (ii) not subject to any other leases, tenancies or rights of
persons in possession, except for the Leases. No Seller and, to the Knowledge
of the Sellers, no landlord or other third party is in default under any of the
Leases.
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3.1.5.4 To the Knowledge of the Sellers, the Sellers
possess and are in compliance with all material licenses, permits,
authorizations and approvals, easements and rights of way (including any
conditional use permits, certificates of occupancy, and any certificates,
licenses and permits relating to zoning, building, housing, safety,
Environmental Laws, fire or health) required from any Governmental Authorities
having jurisdiction over the Assets or the Business necessary for the use of the
Assets and the operation of the Business (the "Licenses"). To the Knowledge of
the Sellers, all of the Licenses are in good standing, valid and in full force
and effect, except for deficiencies in Licenses that, in the aggregate, would
not have a material adverse effect on the Business. To the Knowledge of the
Sellers, all Licenses material to the Business are listed on SCHEDULE 3.1.5.4.
3.1.5.5 Except as set forth on SCHEDULE 3.1.5.5, to the
Knowledge of the Sellers, there is no action, suit, proceeding, investigation or
litigation pending or threatened that (i) arises out of the ownership or use of
any of the Assets or any of the Leased Property, (ii) will materially and
detrimentally affect the use or operation of any of the Assets or any of the
Leased Property or the value of any of the Assets or Leased Property or the
Business, or (iii) will adversely affect the ability of any Seller to perform
its obligations under this Agreement. There are no condemnation proceedings
pending or, to the Knowledge of the Sellers, threatened in respect of any of the
Leased Property. The Sellers agree and acknowledge that all liabilities arising
from the matters listed on SCHEDULE 3.1.5.5 shall be liabilities of the Sellers
and shall not be assumed by the Purchasers.
3.1.6 FINANCIAL STATEMENTS. The Sellers have furnished the
Purchasers with the following: (i) unaudited balance sheets and related
statements of income of the Business for the fiscal years ended April 30, 1995,
1996 and 1997, attached hereto as SCHEDULE 3.1.6(a), and (ii) an unaudited
balance sheet and related statement of income of the Business for the quarter
ended July 31, 1997, attached hereto as SCHEDULE 3.1.6(b) (the "July Balance
Sheet"). The foregoing balance sheets, together with the related statements of
income of Flow or the Business, as applicable, for the time periods specified
are referred to herein as the "Financial Statements". Each of the Financial
Statements, including the notes thereto, are in accordance with the books and
records of each Seller, fairly present the financial position and results of
operation of each Seller with respect to the Business as of the given date and
for the period then ended, and, except as set forth on SCHEDULE 3.1.6(c), were
prepared in accordance with GAAP.
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3.1.7 UNDISCLOSED LIABILITIES. With respect to the July Balance
Sheet, (i) no Seller had any material liability of any nature (whether accrued,
absolute, contingent or otherwise) relating to the Business or the Assets of the
type which should be reflected in balance sheets (including the notes thereto)
prepared in accordance with GAAP which was not fully disclosed, reflected or
reserved against in the July Balance Sheet, except as disclosed on SCHEDULE
3.1.7, and (ii) except for liabilities which have been incurred since July 31,
1997 in the ordinary course of business and except as disclosed on SCHEDULE
3.1.7, since July 31, 1997, no Seller has incurred any material liability of any
nature (whether accrued, absolute, contingent or otherwise); except for
liabilities covered by (i) or (ii) which do not adversely effect the Business or
the Assets.
3.1.8 TAXES. Each Seller has, or on or before the Closing Date
will have, filed (or taken steps to extend any filing requirement) all federal,
provincial, municipal, state, local, and foreign tax returns required to be
filed and paid and discharged all federal, provincial, municipal, state, local,
foreign, and other income, gross receipts, excise, business and occupation,
franchise, real, property, capital and personal property, sales and use,
withholding, social security, unemployment, health, worker compensation or
governmental pension premium or assessment, disability, and other taxes or
governmental fees, assessments, duties or charges (collectively, "Taxes"),
including any interest, penalties, fines or additions to taxes reflected on the
foregoing returns, and has no outstanding waivers of any statutes of limitations
relating to the payment of such Taxes.
3.1.9 CONTRACTS. Accurate and complete copies of all Assigned
Contracts (excepting certain rental contracts which are described by category
only on SCHEDULE 2.1.7) have been delivered to the Purchasers. To the Knowledge
of the Sellers, each Assigned Contract is valid and in full force and effect, is
enforceable in accordance with its terms, and constitutes the legal, valid and
binding obligation of the Seller that is a party to such Assigned Contract and
the other party or parties to such contracts. Such Seller has complied and, to
such Seller's Knowledge, the other party or parties to such contracts have
complied, in all material respects with the terms of each such Assigned
Contract. Except for the Assigned Contracts, no Seller is a party to any
material contracts relating to the Business or the Assets.
3.1.10 ACCOUNTS RECEIVABLE. Subject to recorded allowances for
doubtful and uncollectible Accounts, to the Knowledge of the Sellers, the
Accounts reflected on the July Balance Sheet: (a) were acquired by the Sellers
in the ordinary
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course of the Business; (b) represent valid obligations owing to a Seller by
account debtors that are not affiliates of any Seller; and (c) are owned by the
Sellers free and clear of all Liens.
3.1.11 INTELLECTUAL PROPERTY. SCHEDULE 3.1.11 contains a true
and complete list of all patents, trademarks, service marks, trade names, and
copyrights and their registrations or applications, if any, owned by any Seller,
or in which any Seller has any rights or licenses, in connection with the
Business, together with a brief description of each. To the Knowledge of the
Sellers, there is no infringement or alleged infringement by any Person of any
such patent, trademark, service mark, trade name or copyright. No Seller has
infringed, or is now infringing on, any patent, trademark, service mark, trade
name or copyright belonging to any other Person. The Sellers own or hold
adequate licenses or other rights to use all patents, trademarks, service marks,
trade names and copyrights necessary to conduct the Business as now conducted.
3.1.12 EMPLOYEES. Copies of each employment contract to which a
Seller is a party or is bound, and to which an employee engaged primarily in the
Business is a party or is bound, have been delivered to the Purchasers. Each
Seller has complied with all material and applicable federal, provincial,
municipal, state and foreign Laws relating to the employment of labor, including
but not limited to the provisions of such Laws relating to equal employment
opportunity, wages, hours and the payment of social security taxes, and is not
liable for any arrears of wages or any tax or penalties for failure to comply
with any of the foregoing.
3.1.13 PERSONNEL IDENTIFICATION AND COMPENSATION. Except with
respect to the Retained Employees, SCHEDULE 2.7.1(a) contains a list of the
names and titles of each Seller's current employees engaged in the Business and
their rate of compensation payable (or paid, as the case may be). No non-
employee agents or representatives are material to the Business as now
conducted.
3.1.14 EXISTING EMPLOYMENT CONTRACTS. SCHEDULE 3.1.14 contains a
list of all employment contracts and collective bargaining agreements to which
any Seller is a party or by which any Seller is bound. All these contracts and
arrangements are in full force and effect and no Seller nor, to the Knowledge of
the Sellers, any other Person is in default under any such contract or
arrangement. To the Knowledge of the Sellers, there have been no claims of
default and there are no facts or conditions which if continued, or on notice,
will result in a default under these contracts or arrangements. There is no
pending or, to the Knowledge of the Sellers, threatened labor
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dispute, strike, or work stoppage affecting any Seller or the Business.
3.1.15 BROKERS AND FINDERS. Except as set forth on SCHEDULE
3.1.15, no Seller, nor any Person acting on behalf of any Seller, has employed
any broker, agent or finder or incurred or agreed to incur any liability for any
brokerage fees, agents' commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
3.1.16 ABSENCE OF CERTAIN CHANGES. To the Knowledge of the
Sellers, since April 30, 1997 the Business has been operated only in the
ordinary course and each Seller has not, with respect to the Business, had any
material adverse change in its condition (financial or otherwise), assets,
properties or liabilities.
3.1.17 COMPLIANCE WITH LAWS. To the Knowledge of the Sellers,
each Seller has complied with all, and is not in violation of any, applicable
Laws (including, without limitation, any applicable maritime, building, zoning,
environmental protection, water use, occupational health and safety, employment,
disability rights or food service facilities Law) affecting its properties or
the operation of the Business.
3.1.18 OCCUPATIONAL SAFETY AND HEALTH. To the Knowledge of the
Sellers, no Seller has received any notice, citation, claim, assessment or
proposed assessment as to or alleging any violation of any federal, state,
provincial, municipal, local or foreign occupational safety and health Laws by
any Seller nor has any Seller been subject to any investigation relating to the
Business by any federal, state, local or foreign occupational safety and health
agency within the three (3) years preceding the date hereof, and no such
violation exists. To the Knowledge of the Sellers, no Seller is a party to any
pending dispute with respect to compliance with any federal, state, local or
foreign occupational safety and health Law.
3.1.19 INSURANCE. All insurance policies that the Sellers
currently maintain with respect to the Business (the "Insurance Policies") are
in full force and effect.
3.1.20 ASSETS OF BUSINESS. To the Knowledge of the Sellers,
except for the Excluded Assets, the Assets constitute all of the material assets
owned, used or held for use primarily in connection with the Business. To the
Knowledge of the Sellers, except for the Excluded Assets, the sale of the Assets
pursuant to this Agreement will effectively convey the Business (and the right
to operate the Business) to the Purchasers, including, without limitation, all
material tangible
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and intangible assets and all goodwill relating to the Business. For purposes
of this SECTION 3.1.20 only, "Knowledge of the Sellers" shall be limited to the
actual knowledge of Ronald W. Tarrant, John S. Leness, and Stephen D.
Reichenbach.
3.1.21 EMPLOYEE BENEFIT PLANS. Except as otherwise permitted by
Law, no Seller is a party to any Employee Benefit Plan with unfunded
liabilities. To the Knowledge of the Sellers, each Employee Benefit Plan
complies, and has from its inception complied, in all material respects with all
applicable requirements of: (a) ERISA, (b) other applicable Laws, (c) any
lawful requirements imposed by applicable Governmental Authority, including
reporting requirements, and all qualification requirements of the Code, and (d)
the agreements, instruments or other documents which govern the Employee Benefit
Plan (the "Plan Documents"). No Employee Benefit Plan has any material amount
of unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of
ERISA or similar provisions under other Laws). Each Employee Benefit Plan: (i)
has complied in all material respects with all notification and continuation
coverage requirements of COBRA, Section 4980B of the Code and regulations
thereunder; (ii) has not engaged in any material nonexempt prohibited
transactions; (iii) has not experienced any material reportable event as defined
in ERISA; (iv) has not terminated and, to the Knowledge of the Sellers, there
are no facts or any basis which exists that would reasonably entitle any person
to take any proceedings, or action to wind-up or terminate any Employee Benefit
Plan in whole or in part; (v) no Seller has taken any contribution holidays or
otherwise omitted to make any contributions which are payable under the terms of
any Employee Benefit Plan, and to the extent any contribution holidays or
suspension of contributions has occurred, it has been in accordance with
applicable Laws and the terms of the Plan Documents; (vi) no Employee Benefit
Plan permits or requires (without a Seller's consent) a retroactive increase in
premiums or payments or contributions, and the level of reserves, if any, under
any self-insured or funded Employee Benefit Plan is reasonable and sufficient to
provide for all incurred but unreported claims; (vii) no Seller is in material
non-compliance with any Laws applicable to any Employee Benefit Plan and no
Seller is in material default or breach of any of the terms, conditions or
provisions of any of the Plan Documents; (viii) there are no going concern
unfunded actuarial liabilities, past service unfunded liabilities or solvency
deficiencies respecting any of the Employee Benefit Plans; (ix) no material
changes have occurred in respect of any Employee Benefit Plan since the date of
the most recent financial, accounting or actuarial report, as applicable, issued
in connection with any Employee Benefit Plan, which could reasonably be expected
to adversely affect the relevant report (including rendering it misleading in
any material respect); (x) no Seller has received, or applied for any
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payment of surplus out of any Employee Benefit Plan; and (xi) there have been no
improper withdrawals or transfers of assets from any Employee Benefit Plan. No
Seller has any nonqualified deferred compensation, severance pay, or other
employee pension plans that is an obligation or liability of the Business.
3.1.22 ENVIRONMENTAL MATTERS. To the Knowledge of the Sellers,
except as disclosed on the attached SCHEDULE 3.1.22:
3.1.22.1 Each Seller is currently in compliance with all
Environmental Laws relating to its ownership, possession and/or operation of the
Assets, the Leased Property and the Business;
3.1.22.2 There have been no releases of any Hazardous
Substances on the Leased Property during the lease and/or occupancy thereof by
any Seller;
3.1.22.3 All releases listed on SCHEDULE 3.1.22 have been
properly reported to the appropriate regulating agency and cleaned up to its
satisfaction;
3.1.22.4 With respect to all known potential environmental
hazards and releases of Hazardous Substances, the Sellers have made all
notifications required under Environmental Laws, including but not limited to
underground tank registration, and notification of the burning of any hazardous
waste fuel or used oil;
3.1.22.5 Except in the ordinary course of business and in
compliance with Environmental Laws, there are no on-site locations on the Leased
Property where Hazardous Substances have been stored, treated, recycled, or
disposed of;
3.1.22.6 Except in the ordinary course of business and in
compliance with Environmental Laws, no Seller has disposed of any Hazardous
Substances off-site;
3.1.22.7 There is no ongoing or threatened litigation with
any Persons relating to any Seller's failure to comply with any Environmental
Laws;
3.1.22.8 No Seller has received any notice that it or any
Leased Property is the subject of any investigation pertaining to the release of
any Hazardous Substance; and
3.1.22.9 No Seller has, and no other Person has, performed
environmental investigations, studies, audits,
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tests, reviews or other analyses, the purpose of which was to discover, identify
or otherwise characterize the condition of the soil, groundwater, air, or
presence of asbestos on any of the Leased Property.
3.1.23 SERVICES LLC. Immediately prior to Closing, (i) Services
LLC shall hold all of the Services Assets, free and clear of all Liens except
those permitted encumbrances set forth on SCHEDULE 3.1.5.1 to which may the
Services Assets may be subject, and (ii) Flow and Rampart shall be the only
members of Services LLC and shall hold all of the ownership rights and interests
in Services LLC, free and clear of any Liens.
3.1.24 ACCURACY AND COMPLETENESS OF REPRESENTATIONS AND
WARRANTIES. No representation or warranty made by the Sellers in this Agreement
and no statement contained in any schedule delivered or to be delivered to the
Purchasers pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits to state a material fact, necessary to
make the statements contained herein or therein, not misleading.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Except as
disclosed on Purchasers' Disclosure Schedule attached as SCHEDULE 3.2, each of
the Purchasers, jointly and severally, represent and warrant to each of the
Sellers that the following statements are true and correct on the date of this
Agreement and will be true and correct on the Closing Date as though made on
such date:
3.2.1 ORGANIZATION AND STANDING. Spider Acquisition is a
limited liability company duly organized, validly existing and in good standing
under the Laws of the state of Washington. Canada Acquisition is an unlimited
liability company duly organized, validly existing and in good standing under
the Laws of Nova Scotia, Canada. Belgium Acquisition is a limited liability
company duly organized, validly existing and in good standing under the Laws of
Belgium.
3.2.2 POWER AND AUTHORITY. Each Purchaser has the power and
authority to enter into, execute and deliver this Agreement and to consummate
the transactions contemplated by this Agreement.
3.2.3 COMPANY AUTHORIZATION. All company action on the part of
each Purchaser, and its directors, shareholders, members and managers, as
applicable, necessary for the authorization, execution, delivery and performance
by such Purchaser of this Agreement and the consummation of the
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transactions contemplated by this Agreement has been taken or will be taken
prior to Closing.
3.2.4 BINDING AND ENFORCEABLE AGREEMENT. This Agreement has
been duly executed and delivered by the Purchasers and is a valid and binding
agreement of the Purchasers, enforceable in accordance with its terms.
3.2.5 CONSENTS. All consents, approvals, qualifications,
licenses, orders or authorizations of, or filings with, any Governmental
Authority required in connection with the Purchasers' valid execution, delivery
or performance of this Agreement have been obtained, given or made or will, as
of the Closing Date, have been obtained, given or made.
3.2.6 NO CONFLICT. Neither the execution and delivery of this
Agreement by the Purchasers nor the consummation of the transactions
contemplated by this Agreement will (a) conflict with or result in a breach of
any provision of the articles of incorporation, bylaws, certificate of
formation, or operating agreement, as applicable, of any Purchaser, (b) conflict
with any existing provision of applicable Law, including any existing order,
rule, regulation, judgment or decree of any court, arbitrator or agency of
government, (c) violate, be in conflict with, result in a breach of, or
constitute (with or without notice or lapse of time or both) a default under (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which any Purchaser is a
party, or by which any Purchaser may be bound, except for such default (or right
of termination, cancellation or acceleration) as to which requisite waivers or
consents shall either have been obtained by the Purchasers prior to Closing or
the obtaining of which shall have been waived by Flow, or (d) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to any
Purchaser.
3.2.7 ACCURACY AND COMPLETENESS OF REPRESENTATIONS AND
WARRANTIES. No representation or warranty made by the Purchasers in this
Agreement and no statement contained in any schedule delivered or to be
delivered to the Sellers pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits to state a material fact, necessary
to make the statements contained herein or therein, not misleading.
3.2.8 BROKERS AND FINDERS. No Purchaser, nor any Person acting
on behalf of any Purchaser, has employed any broker, agent or finder or incurred
or agreed to incur any liability for any brokerage fees, agents' commissions or
finders'
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fees in connection with the transactions contemplated by this Agreement.
3.2.9 FINANCING. The Purchasers have delivered to the Sellers a
letter from Key Bank (the "Bank") dated as of August 6, 1997 (the "Commitment
Letter") providing for a credit facility of $34,000,000 available to the
Purchasers to consummate the transactions contemplated hereby. The Commitment
Letter remains in full force and effect and has not been amended or rescinded
and the Purchasers have not received any notice or indication from the Bank that
it intends to amend or terminate the Commitment Letter. The funding available
under the Commitment Letter, together with other funding sources available to
the Purchasers, are sufficient to enable the Purchasers to satisfy all of their
financial obligations to the Sellers under this Agreement. The Purchasers
covenant and agree to use their reasonable best efforts to cause the conditions
precedent to Closing set forth in the Commitment Letter to be satisfied at or
prior to the Closing hereunder.
3.2.10 HART-SCOTT-RODINO ACT. Spider Acquisition is the
"ultimate parent entity," as that term is defined in 16 C.F.R. Section
801.1(a)(3), of the "acquiring person," as that term is defined in 16 C.F.R.
Section 801.2, with respect to the purchase of the Assets, and Spider
Acquisition does not have any "net sales" and has less than $10 million of
"total assets" as calculated according to 16 C.F.R. Section 801.11.
3.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
otherwise provided in this Agreement or the Ancillary Agreements, all
representations, warranties and covenants contained in this Agreement shall
survive Closing until April 30, 1999.
4. COVENANTS.
4.1 CONDUCT OF THE SELLERS.
4.1.1 PRESERVATION OF BUSINESS. Each Seller shall take until
Closing, and, since April 30, 1997, has taken, commercially reasonable efforts
to effect the following actions with respect to the Business:
4.1.1.1 Preserve intact the present business organization
of such Seller;
4.1.1.2 Maintain the Assets in their present state of
repair, order and condition, reasonable wear and tear excepted;
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4.1.1.3 Preserve and protect the goodwill and advantageous
relationships of the Sellers with their respective customers, suppliers and all
other Persons having business dealings with any Seller;
4.1.1.4 Maintain its books, accounts and records in the
usual and regular manner, in accordance with past accounting practices
consistently applied;
4.1.1.5 Maintain all of its Insurance Policies in full
force and effect;
4.1.1.6 Preserve and maintain in force all of its licenses,
permits, registrations, franchises, and bonds; and
4.1.1.7 Comply with all Laws applicable to the conduct of
the Business.
4.1.2 ORDINARY COURSE. Except as set forth on SCHEDULE 4.1.2,
the Sellers have conducted the Business, since July 31, 1997, and shall conduct
the Business, until Closing, only in the usual, regular and ordinary course, in
substantially the same manner as previously conducted, and has not made and
shall not make any substantial change to their respective methods of management,
purchase, sale, accounting or operation in respect of the Business, nor engaged
nor will engage in any transaction or activity, nor entered into or amended nor
will enter into or amend any agreement, nor made nor will make any commitment,
except in the ordinary course of business and consistent with past practice.
Without limiting the foregoing and without the prior written consent of the
Purchasers, no Seller has, since April 30, 1997, nor shall, prior to Closing:
4.1.2.1 Become a party to any material plan, contract,
guaranty, or agreement affecting the Business;
4.1.2.2 Sell, mortgage, pledge or encumber or agree to
sell, mortgage, pledge or encumber any of the Assets, other than Inventory sold
in the ordinary course of the Business;
4.1.2.3 Incur any obligation (contingent or otherwise) or
purchase, acquire, transfer, or convey, any material assets or property or enter
into any transaction or make or enter into any contract or commitment except in
the ordinary course of business;
4.1.2.4 Make any economic concessions to vendors or
customers or other Persons;
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4.1.2.5 Except with respect to employees not engaged in the
Business and except as otherwise required in this Agreement, announce or
institute any personnel changes or employee commitments or contracts, including
granting any increase in the compensation of any employees or independent
contractors;
4.1.2.6 Do any act or omit to do any act, or permit any act
or omission to occur, which will cause a breach of any contract or commitment of
such Seller, or modify or amend any Assigned Contract; or
4.1.2.7 Except as approved by the Purchasers, make any
changes to any computer, electronic, or other systems or software used in the
conduct of the Business, including but not limited to accounting, billing,
recordkeeping or other systems and software.
Notwithstanding anything contained herein to the contrary, nothing
contained herein shall restrict or prevent Flow from making any necessary
announcements to the public or any employees of any Seller concerning the
transactions contemplated by this Agreement, in accordance with SECTION 4.5.
4.1.3 ACTIONS AFFECTING REPRESENTATIONS AND WARRANTIES. The
Sellers shall use commercially reasonable efforts to cause the representations
and warranties of the Sellers contained in this Agreement to be true and
accurate on and as of the Closing Date.
4.1.4 SCHEDULES AND SUPPLEMENTAL DISCLOSURES. The parties
acknowledge and agree that the Schedules attached hereto as of the date of this
Agreement may not be complete and are subject to change prior to Closing. The
Sellers shall prepare and deliver to the Purchasers the complete Schedules to
this Agreement on or before the 21st day after the date of this Agreement (the
"Proposed Final Schedules"). In the event that the Purchasers determine within
five (5) business days after the date of delivery of all of the Proposed Final
Schedules that such Proposed Final Schedules are not reasonably acceptable to
the Purchasers because such Proposed Final Schedules reflect a material adverse
change in the condition of the Business or Assets from the condition thereof on
the Closing Date, the Purchasers shall have the right to terminate this
Agreement as provided in SECTION 7.4 without penalty or cost. The Sellers shall
have the continuing obligations to supplement promptly and amend the Proposed
Final Schedules as necessary or appropriate with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this Agreement
or thereafter, would have been required to be set forth or described in the
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Schedules; PROVIDED, HOWEVER, that for the purpose of the rights and obligations
of the parties hereunder, any such supplemental or amended disclosure shall not,
except as the Purchasers may otherwise agree in writing, be deemed to have cured
any breach of any representation or warranty made in this Agreement unless the
Purchasers determine to proceed with the Closing.
4.1.5 ACCESS TO INFORMATION. The Sellers shall, until Closing,
give to the Purchasers and to the Purchasers' accountants, counsel and other
representatives (who the Purchasers shall inform of the confidentiality
obligations under SECTION 4.2.1) reasonable access during normal business hours
to the properties, books, records, and employees of the Sellers and shall
furnish promptly to the Purchasers, upon reasonable prior written request, (a) a
copy of each report, notice, return or other document filed or received by, or
on behalf of, any Seller relating to the Assets or the Business and, (b) all
other information pertaining to the Business or the Assets.
4.1.6 CONSENTS AND NOTICES. The Sellers shall use commercially
reasonable efforts to obtain prior to the Closing Date all consents,
authorizations, waivers, approvals of, or exemptions by, any Person, including,
without limitation, any governmental body or agency or instrumentality thereof,
required to be obtained in connection with the transactions contemplated by this
Agreement.
4.1.7 CONFIDENTIAL INFORMATION. No Seller shall disclose to any
third party any confidential or proprietary information of the Purchasers
obtained by any Seller in the course of negotiating this Agreement or
consummating the transactions contemplated hereby, unless such information is
generally known, becomes lawfully obtainable from another source, or as required
by law. If Closing does not occur, the Sellers shall return to the Purchasers
all documents of any kind (originals and copies) obtained from the Purchasers in
connection with this Agreement.
4.1.8 ACCESS TO RECORDS. For a period of seven (7) years
following Closing, the Sellers shall preserve all books and records in their
respective possession relating to the Assets or the Business. During such
period, the Sellers shall grant to the Purchasers access to such records during
normal business hours on reasonable prior notice.
4.2 CONDUCT OF THE PURCHASERS.
4.2.1 CONFIDENTIAL INFORMATION. The Purchasers shall not
disclose to any third party any confidential or proprietary information of the
Sellers obtained by the Purchasers
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in the course of negotiating and performing this Agreement, unless such
information is generally known, becomes lawfully obtainable from another source,
as required by law, or as necessary to carry out the transactions contemplated
by this Agreement. If Closing does not occur, the Purchasers shall return to
the Sellers all documents of any kind (originals and copies) obtained from the
Sellers in connection with this Agreement.
4.2.2 ACCESS TO RECORDS. For a period of seven (7) years
following Closing, the Purchasers shall preserve all Books and Records
identified in SECTION 2.1.9. During such period, the Purchasers shall grant to
the Sellers access to such records during normal business hours on reasonable
prior notice.
4.2.3 ORDINARY COURSE. The Purchasers shall conduct the
Business on and after the Management Date until Closing only in the usual,
regular and ordinary course, in substantially the same manner as previously
conducted, and the Purchasers will not (i) make any substantial change to their
respective methods of management, purchase, sale, accounting or operation in
respect of the Business, (ii) engage in any transaction or activity, (iii) enter
into or amend any agreement, or (iv) make any commitment, except in the ordinary
course of business and consistent with past practice.
4.2.4 ACTIONS AFFECTING REPRESENTATIONS AND WARRANTIES. The
Purchasers shall use commercially reasonable efforts to cause the
representations and warranties of the Purchasers contained in this Agreement to
be true and accurate on and as of the Closing Date. In addition, in the event
that any Purchaser has knowledge that any representation or warranty made by any
Seller in this Agreement or any statement contained in any schedule delivered to
the Purchasers pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact, necessary to make the
statements contained herein or therein, not misleading, such Purchaser will
provide written notice thereof to the Sellers which specifically refers to this
SECTION 4.2.4 and sets forth the nature and extent of such untrue statement or
omission.
4.2.5 ACCESS TO INFORMATION. To the extent that the Purchasers
control any aspects of the Business or Assets on and after the Management Date,
the Purchasers shall, until Closing, give to the Sellers and to the Sellers'
accountants, counsel and other representatives (whom the Sellers shall inform of
the confidentiality obligations under SECTION 4.1.7) reasonable access during
normal business hours to the properties, books, records, officers, directors and
employees of the Sellers and shall furnish promptly to the Purchasers, upon
reasonable
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prior written request, (a) a copy of each report, notice, return or other
document filed or received by, or on behalf of, any Purchaser relating to the
Assets or the Business and, (b) all other information pertaining to the Business
or the Assets, other than proprietary information, reports and projections
prepared by the Purchasers in connection with the transactions contemplated by
this Agreement.
4.2.6 CONSENTS AND NOTICES. The Purchasers shall use
commercially reasonable efforts to obtain prior to the Closing Date all
consents, authorizations, waivers, approvals of, or exemptions by, any Person
including, without limitation, any governmental body or agency or
instrumentality thereof, required to be obtained in connection with the
transactions contemplated by this Agreement.
4.2.7 FORMATION OF BELGIUM ACQUISITION AND CANADA ACQUISITION.
Prior to Closing, Spider Acquisition shall form Belgium Acquisition and Canada
Acquisition. After formation of Belgium Acquisition and Canada Acquisition,
Spider Acquisition shall cause both such entities to become parties to this
Agreement and, together with Spider Acquisition, such entities shall constitute
the "Purchasers" as defined herein.
4.3 OPERATIONS PRIOR TO THE CLOSING DATE. Effective as of the close
of business on July 31, 1997, (the "Management Date"), the Purchasers agree, as
Sellers' agent, to manage and operate the Business between the Management Date
and the Closing Date. As consideration for the Purchasers' agreement to manage
and operate the Business, the Sellers agree that all changes in assets and
liabilities to the Business between the Management Date and the Closing Date
which are solely attributable to operation of the Business during this interim
period shall be for the benefit of the Purchasers. It is the intent of the
parties to this Agreement that the Sellers will retain ownership of the Business
until the Closing Date.
4.3.1 EMPLOYEES. During the period between the Management Date
and the Closing date, all employees of the Business shall remain the
responsibility of and employed by Sellers, but will report to and take direction
from representatives of the Purchasers operating the Business.
4.3.2 TERMINATION. In the event the transaction contemplated by
this Agreement does not close, by reason of a failure of the conditions
precedent set forth herein or for any other reason (including termination
pursuant to SECTION 7.4), on or before September 29, 1997, this Agreement shall
be deemed canceled and terminated, the Purchasers shall surrender their
management and operation of the Business to the Sellers and, except as otherwise
provided for in this Agreement, no party
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shall have any further liability or obligation to any other party under this
Agreement, except as provided in Sections 15 and 17 of the Letter of Intent.
4.3.3 RISK OF LOSS. Notwithstanding the foregoing, the parties
hereto agree that, other than the risk of operating loss during this interim
period and other than any loss, damage and/or injury which results as a result
of the intentional misconduct or gross negligence of any Purchaser, all risk of
loss, damage and/or injury with respect to the Business and Assets during the
period between the Management Date and the Closing Date shall remain with the
Sellers, and the Sellers shall maintain adequate insurance (including without
limitation liability, casualty and workers compensation policies) with respect
to the operations and assets of the Business during this period.
4.4 PUBLICITY. The parties shall mutually agree as to any public
disclosure or announcement that is made regarding the purchase and sale
contemplated by this Agreement or the existence of negotiations leading up to
this Agreement; provided, that nothing shall prohibit a public disclosure by a
party regarding this Agreement and the transactions contemplated hereby if, in
the opinion of legal counsel to such party, such disclosure is required under
applicable Laws.
4.5 EXCLUSIVITY AND OTHER PROVISIONS OF LETTER OF INTENT. Unless
this Agreement has been terminated in accordance with SECTION 7.4, the parties
agree that the provisions of Section 14 of the Letter of Intent dated July 17,
1997 addressing the matters covered by this Agreement (the "Letter of Intent")
shall be binding on the parties hereto as if set forth herein but shall be
modified to change references to August 25, 1997 therein to the Closing Date.
In addition, the parties agree that the provisions of Sections 15 and 17 of the
Letter of Intent shall be binding on the parties hereto as if set forth herein.
4.6 REPURCHASE OF UNCOLLECTIBLE ACCOUNTS. On the 366th day after
the Closing Date (or the first business day thereafter if such 366th day is on a
weekend or holiday), the Sellers, through Flow, agree to repurchase from the
Purchasers, and the Purchasers agree to assign to Flow all its right, title and
interest in the Uncollectible Accounts, in exchange for Immediately Available
Funds in an amount equal to (i) the face amount of the Uncollectible Accounts
less the Reserve for Uncollectible Accounts multiplied by (ii) 66 2/3%, provided
however that the maximum amount to be paid by Flow for the Uncollectible
Accounts shall not exceed $666,666.67.
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4.7 JFK RECEIVABLE. The Purchasers shall use their commercially
reasonable best efforts to assist the Sellers in the prosecution of the JFK
Performing Arts Center receivable reflected on the July Balance Sheet prior to
adjustment (the "JFK Receivable"). Any amounts recovered with respect to the
JFK Receivable over and above the July 31, 1997 book value thereof (prior to
adjustment), and after payments of legal fees and related costs and expenses and
applicable bonus payment to Patrick Winkler pursuant to arrangements with
respect thereto, shall be shared equally by the Purchasers and Sellers. The
Sellers shall fund all legal costs and expenses with respect to the prosecution
of the JFK Receivable. The Purchasers acknowledge that bonus arrangements with
Patrick Winkler with respect to the JFK Receivable provide for the payment of a
bonus by the Sellers to Patrick Winkler only to the extent that recovery exceeds
all legal fees and related costs and expenses.
4.8 POST CLOSING COLLECTION OF ACCOUNTS. The Sellers and the
Purchasers agree to remit, within three (3) business days after collection, to
the other any payments received, which payments are on accounts of (or otherwise
payable to) the other, provided, however, that the Sellers agree to take all
commercially reasonable actions required to cause all payments received on the
Accounts that are collected pursuant to a lockbox arrangement maintained by the
Sellers to be directly deposited in such bank accounts as the Purchasers may
direct from time to time.
4.9 REGISTRATION OF AGREEMENT IN BELGIUM. The parties shall prepare
and execute a transfer agreement (the "Belgium Agreement") with respect to the
Assets of Power Climber Belgium and Holdings Belgium which are being transferred
to Belgium Acquisition hereunder. The Belgium Agreement, which shall be in
Dutch pursuant to Belgian Law, shall identify the transferring and receiving
parties hereunder of the Belgian Assets, the Belgian Assets being transferred,
and the purchase price to be paid for said Assets. The Purchasers shall
register the Belgium Agreement, together if possible with the certificate
identified in SECTION 2.8.5 of this Agreement, with the competent Belgian tax
collector for registration duties within the statutorily provided time frame of
article 32, 9 of the Belgian Registration Duties Code. The Sellers and the
Purchasers shall each bear one-half the costs of such registration.
4.10 401(k) PLAN. Those Available Employees who are hired by the
Purchasers no later than two months after Closing ("Continuing Employees") shall
be credited with all service with which they are credited under Flow's 401(k)
Plan and Trust for purposes of eligibility and vesting under Spider
Acquisition's 401(k) Plan and Trust.
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Spider Acquisition shall, prior to Closing or as soon as practicable
thereafter, establish a tax-qualified 401(k) plan and trust ("Spider
Acquisition's 401(k) Plan and Trust") which shall cover some or all of its
employees. As soon as practicable after Closing and the establishment of Spider
Acquisition's 401(k) Plan and Trust, assets and liabilities representing the
account balances of the Continuing Employees in Flow's 401(k) Plan and Trust
shall be transferred to Spider Acquisition's 401(k) Plan and Trust in a trust-
to-trust transfer that satisfies Code Section 414(l) and ERISA Section 208 and
the regulations thereunder (the "Transfer"). Prior to the Transfer, Spider
Acquisition shall provide the Sellers with a representation from an officer of
Spider Acquisition that Spider Acquisition's 401(k) Plan and Trust is tax-
qualified, and that it contains language which properly permits the Transfer,
including any provisions necessary to maintain the Code Section 411(d)(6)
protected benefits with respect to the accounts of Continuing Employees. To
effect the Transfer, Flow shall cause the Continuing Employees' accounts in
Flow's 401(k) Plan and Trust (except for investments in participant Plan loans)
to be converted to cash and the resulting cash and outstanding Plan loans to be
transferred to Spider Acquisition's 401(k) Plan and Trust. Notwithstanding the
foregoing, prior to the transfer, Spider Acquisition and Flow may agree to have
other assets in addition to Plan loans which are allocated to the Continuing
Employees' accounts transferred in-kind to Spider Acquisition's 401(k) Plan and
Trust.
Upon the Transfer, the Continuing Employees shall be 100% vested in their
entire interest in Flow's 401(k) Plan and Trust (including employer matching
contributions). Upon transfer of the Continuing Employees' vested account
balances to Spider Acquisition's 401(k) Plan and Trust, Spider Acquisition's
401(k) Plan and Trust shall be liable to the Continuing Employees for the vested
benefits which they had accrued in and were transferred from Flow's 401(k) Plan
and Trust. The Purchasers hereby agree to pay, indemnify and hold harmless
Sellers, their directors, officers, employees, and agents and Flow's 401(k) Plan
and Trust and fiduciaries thereto from and against any and all costs, losses,
liabilities, damages, claims or expenses incurred by Sellers or Flow's 401(k)
Plan and Trust arising out of the failure of Spider Acquisition's 401(k) Plan
and Trust to satisfy the requirements of the Code and ERISA as a tax-qualified
plan with a cash or deferred arrangement under Code Sections 401(a) and (k) and
501(a), as of the date assets and liabilities are transferred to Spider
Acquisition's 401(k) Plan and Trust from Flow's 401(k) Plan and Trust. This
agreement to indemnify and hold harmless shall not limit or supersede any other
such agreements by the Purchasers under this Agreement, and shall be subject to
the limits of indemnification (that is, the
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Indemnification Floor and Indemnification Ceiling) set forth in SECTION 6.5 of
this Agreement.
4.11 NEW JERSEY PAC CONTRACT. The Purchasers shall use commercially
reasonable best efforts to bill and collect any and all amounts due under the
New Jersey PAC Contract, including without limitation the New Jersey PAC
Receivable and amounts due pursuant to change orders. The Purchasers shall not
write off, settle or otherwise compromise any receivables or other amounts due
under the New Jersey PAC Contract. If the Purchasers make a claim for
indemnification under SECTION 6.4 of this Agreement, the Purchasers shall assign
to Flow the rights in the uncollected New Jersey PAC receivables for no
additional consideration.
5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS AND OF THE SELLERS.
5.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS. Notwithstanding
any other provision of this Agreement, the obligation of the Purchasers to
purchase the Assets is subject to the satisfaction or waiver in writing, on or
before the Closing Date, of the following conditions:
5.1.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. All
representations and warranties of the Sellers contained in this Agreement and in
the certificates and other instruments delivered by the Sellers to Purchaser in
connection with this Agreement shall be true and correct in all material
respects at and as of the Closing Date as though made at and as of such time,
except (i) as otherwise contemplated by this Agreement, or (ii) in respects that
do not have a material adverse effect on the transactions provided for in this
Agreement, and the Sellers shall have performed and complied with all material
covenants, obligations and conditions required by this Agreement to be performed
or complied with prior to or on the Closing Date, except for breaches thereof
that do not have a material adverse effect on the benefits of the transactions
provided for in this Agreement, and the Purchasers shall have received a signed
certificate to that effect from officers of each Seller on behalf of each
Seller, respectively, dated the Closing Date.
5.1.2 CONSENTS AND APPROVALS. The Purchasers shall have
received duly executed copies of all third-party consents, approvals,
assignments, waivers, authorizations or other certificates specified in SECTION
3.1.4 to this Agreement, in each case except for such thereof as the Sellers and
the Purchasers shall have agreed in writing shall not be obtained.
5.1.3 LITIGATION. There shall be no pending or threatened
litigation against the Business, the Assets, the
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Leased Property or any Seller that, in the opinion of counsel for any party,
has or is likely to have any material adverse effect on the Business, the
Assets, or the Leased Property, taken as a whole, or the enjoyment of the
benefits of them by the Purchasers.
5.1.4 AUTHORIZATIONS. All actions necessary to authorize the
execution, delivery and performance of this Agreement by the Sellers and the
consummation of the transactions contemplated by this Agreement shall have been
duly and validly taken by the Sellers.
5.1.5 LEGAL OPINION. The Purchasers shall have received the
opinion of counsel to the Sellers in substantially the form attached to this
Agreement as EXHIBIT 5.1.6, dated as of the Closing Date.
5.1.6 DAMAGE TO OR DESTRUCTION OF THE ASSETS. In the event of
any destruction or condemnation of the Assets, the Leased Property or any
material portion of the Assets or Leased Property prior to Closing, the
Purchasers may elect, at their sole discretion, to (a) proceed to Closing and
pay the purchase price pursuant to the terms of this Agreement and receive any
insurance proceeds or condemnation award with respect to the Assets so destroyed
or condemned, free and clear of all Liens or interests of any third persons, or
(b) terminate this Agreement, the purchase of the Assets and lease of the Leased
Property contemplated by this Agreement if, in the Purchasers' opinion, (i)
there has been a material dissipation of the Assets or the Leased Property or
(ii) the Assets or the Leased Property are no longer suitable for the
Purchasers' intended use. The Sellers shall provide the Purchasers with written
notice of any destruction or condemnation of the Assets or the Leased Property
or any portion thereof as soon as practicable after the occurrence of such
destruction or condemnation, and, pending election by the Purchasers, any
insurance proceeds or condemnation award shall be deposited in escrow.
5.1.7 DOCUMENTS OF TRANSFER. The Sellers shall have provided to
the Purchasers the Closing deliveries set forth in SECTION 2.10.2 and any
documents necessary to transfer ownership of the Assets to the Purchasers, free
and clear of all Liens except liens listed on SCHEDULES 3.1.5.1.
5.2 CONDITIONS TO OBLIGATIONS OF THE SELLERS. Notwithstanding any
other provision of this Agreement, the obligation of the Sellers to consummate
the transactions contemplated by this Agreement is subject to the satisfaction
or waiver in writing, on or before the Closing Date, of the following
conditions:
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5.2.1 REPRESENTATIONS AND WARRANTIES; COVENANTS. All
representations and warranties of the Purchasers contained in this Agreement and
in the certificates and other instruments delivered by the Purchasers to the
Sellers in connection with this Agreement shall be true and correct in all
material respects at and as of the Closing Date as though made at and as of such
time, except (i) as otherwise contemplated by this Agreement, or (ii) in
respects that do not have a material adverse effect on the transactions provided
for in this Agreement, and the Purchasers shall have performed and complied with
all material covenants, obligations and conditions required by this Agreement to
be performed or complied with by the Purchasers prior to or on the Closing Date,
except for breaches thereof that do not have a material adverse effect on the
benefits of the transactions provided for in this Agreement, and Flow shall have
received a certificate signed by an officer of each Purchaser, dated the Closing
Date, to that effect.
5.2.2 AUTHORIZATIONS. All actions necessary to authorize the
execution, delivery and performance of this Agreement by the Purchasers and the
consummation of the transactions contemplated by this Agreement shall have been
duly and validly taken by the Purchasers.
5.2.3 CONSENTS AND APPROVALS. The Purchasers shall have
received duly executed copies of all third-party consents, approvals,
assignments, waivers, authorizations or other certificates specified in SECTION
3.1.4 to this Agreement, in each case except for such thereof as the Sellers and
the Purchasers shall have agreed in writing shall not be obtained.
5.2.4 LEGAL OPINION. Flow shall have received the opinion of
counsel to the Purchasers in substantially the form attached to this Agreement
as EXHIBIT 5.2.4, dated as of the Closing Date.
5.2.5 DOCUMENTS OF TRANSFER. The Purchasers shall have provided
to Flow the Closing deliveries set forth in SECTION 2.10.3.
5.3 WAIVER OF CONDITIONS. In the event the conditions precedent to
the Purchasers' obligation to close this transaction have not been satisfied on
or prior to the date thirty (30) days from the date hereof, the Purchasers may,
at their discretion, (i) elect to waive such conditions and to close the
transaction on the terms and conditions set forth herein, without any abatement
of the purchase price, or (ii) terminate this Agreement. In the event the
conditions precedent to the Sellers' obligations to close this transaction have
not been satisfied on or prior to the date thirty (30) days from the date
hereof, the
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Sellers may, at their discretion, (i) elect to waive such conditions and close
the transaction on the terms and conditions set forth herein without any
abatement of the purchase price, or (ii) terminate this Agreement.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY THE SELLERS. Each Seller, jointly and
severally, shall be responsible to each Purchaser for, and shall defend,
indemnify, and hold each Purchaser harmless from and against loss, damage,
liability, cost or expense (including, without limitation, reasonable attorneys'
fees, legal expenses and consultant's fees), that shall be suffered by such
Purchaser, resulting from or relating to (i) claims or demands made by third
parties against such Purchaser with regard to any Seller's ownership,
management, or conduct of the Business or use of the Assets prior to and
including the Management Date, including without limitation any liabilities for
personal injury, property damage, or other harm relating to services provided or
products of the Business sold by any Seller prior to and including the
Management Date, or any other liability, obligation or commitment of any Seller
(whether known or unknown, fixed or contingent, due or to become due) not
expressly assumed by the Purchasers under this Agreement; (ii) any breach of any
of the representations or warranties of the Sellers contained in this Agreement
(including, without limitation, any schedule, certificate, exhibit or other
instrument delivered or to be delivered by the Sellers pursuant to this
Agreement) or failure of any Seller to perform or observe any term of or
covenant in this Agreement; (iii) any response costs, costs of remediation or
cleanup, arising out of or related to the presence, as of July 31, 1997, of
Hazardous Substances in, on, or under any of the Leased Property; or (iv) any
failure by any Seller to satisfy the debts of the Business on or prior to the
Closing Date, unless such debts are expressly assumed by the Purchasers
hereunder.
6.2 INDEMNIFICATION BY THE PURCHASERS. The Purchasers shall be
responsible to each Seller for, and shall defend, indemnify and hold each Seller
harmless from and against loss, damage, liability, cost or expense (including,
without limitation, reasonable attorneys' fees, legal expenses and consultant's
fees) that shall be suffered or incurred by them, resulting or relating to (i)
uninsured claims or demands made by third parties arising solely as a result of
the Purchasers' management or conduct of the Business for the period beginning
on the Management Date and ending on the Closing Date, including, without
limitation, any liability for personal injury, property damage or other harm
relating to services provided by or products of the Business sold by the
Purchasers during such period,
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PROVIDED, HOWEVER, that the Purchasers will not indemnify any Seller for any
claims or demands arising from or relating to Hazardous Substances in, on or
under any of the Leased Property as of the Management Date; (ii) claims or
demands made by third parties arising solely as a result of the Purchasers'
ownership, management, or conduct of the Business after the Closing Date,
including, without limitation, any liability for personal injury, property
damage or other harm relating to services provided by or products of the
Business sold by the Purchasers after the Closing Date, PROVIDED, HOWEVER, that
the Purchasers will not indemnify any Seller for any claims or demands arising
from or relating to Hazardous Substances in, on or under any of the Leased
Property as of the Management Date; (iii) any breach by the Purchasers of the
representations or warranties of the Purchasers contained in this Agreement or
failure of the Purchasers to observe or perform any term of or covenant in this
Agreement; or (iv) any Assumed Liabilities.
6.3 SURVIVAL. The indemnity obligations set forth in Section 6.1(ii)
and Section 6.2(iii) shall survive Closing until April 30, 1999, except as
otherwise provided in this Agreement. All other indemnity obligations set forth
in this SECTION 6 shall survive Closing and shall not expire.
6.4 SPECIAL INDEMNIFICATION OF COLLECTION OF NEW JERSEY PAC.
Notwithstanding any other provision of this Agreement, the Sellers, through
Flow, shall be responsible to each Purchaser for, and shall defend, indemnify,
and hold each Purchaser harmless from and against loss, damage, liability, cost
or expense (including, without limitation, reasonable attorneys' fees, legal
expenses and consultants' fees), that shall be suffered by such Purchaser,
resulting from or relating to the Purchaser's inability to collect all or a
portion of the New Jersey PAC Receivable within six (6) months of the Closing
Date; provided, however that the maximum amount to be paid by Flow pursuant to
this SECTION 6.4 shall not exceed Two Hundred Thousand Dollars ($200,000). The
Indemnification Floor set forth in SECTION 6.5 shall not apply to any amounts
owing under this SECTION 6.4. Any amounts paid under this SECTION 6.4 shall,
however, be counted as payments made pursuant to SECTION 6.5 for purposes of
calculating the maximum aggregate amount (i.e., the Indemnification Ceiling) to
which the Purchasers are entitled to be indemnified pursuant to SECTION 6.5.
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6.5 LIMITS OF INDEMNIFICATION. Notwithstanding any other provision
in this ARTICLE 6, the Sellers on one hand and the Purchasers on the other hand
(the "Indemnifying Parties") shall not have any obligation to indemnify or to
reimburse the other (the "Indemnified Parties") pursuant to SECTION 6.1(ii) and
Section 6.2(iii) except to the extent that the obligations of the Indemnifying
Parties hereunder in the aggregate exceed Two Hundred Fifty Thousand Dollars
($250,000) (the "Indemnification Floor"), in which event the Indemnifying
Parties shall reimburse the Indemnified Parties for all losses exceeding the
Indemnification Floor; provided, however, that the aggregate amount to which the
Sellers or the Purchasers shall be entitled to be indemnified hereunder will not
exceed Six Million Five Hundred Thousand Dollars ($6,500,000) (the
"Indemnification Ceiling").
7. MISCELLANEOUS.
7.1 FURTHER ASSURANCES. Each of the Sellers and the Purchasers will,
from time to time on or after the Closing Date, execute and deliver to the other
parties all such further assignments, endorsements and other documents as the
Purchasers or the Sellers, as the case may be, reasonably request in order to
complete the transactions contemplated by this Agreement.
7.2 AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended only by the written agreement of Flow and the Purchasers, it being
hereby agreed and acknowledged that the consent of the Sellers other than Flow
shall not be required to amend this Agreement. Subject to the foregoing, any
waiver, permit, consent or approval of any kind or character on the part of any
party of any provisions or conditions of this Agreement must be made in writing
and shall be effective only to the extent specifically set forth in such
writing.
7.3 SUCCESSORS AND ASSIGNS. This Agreement will bind and inure to
the benefit of the respective successors and assigns of the parties to this
Agreement. This Agreement and the rights hereunder may not be assigned by (i)
the Purchasers without the prior consent of Flow and (ii) any Seller without the
prior consent of Flow and the Purchasers.
7.4 TERMINATION. This Agreement may be terminated at any time prior
to Closing: (a) by the mutual written agreement of Flow and the Purchasers; (b)
by any party if the transactions contemplated hereby have not been consummated
by September 29, 1997; provided, that a party may not terminate the Agreement
pursuant to this SECTION 7.4(b) if such party failed to act in good faith to
consummate the transactions contemplated hereby by September 29, 1997; or (c) by
the Purchasers in the event the
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Purchasers determine, pursuant to SECTION 4.1.4, that the Proposed Final
Schedules, as amended and supplemented, are not acceptable. In the event of the
termination of this Agreement, this Agreement shall thereafter become void and
of no effect and no party shall have any liability to any other party, except as
provided in Sections 15 and 17 of the Letter of Intent and except that nothing
in this SECTION 7.4 shall release any party from liability for a willful failure
to carry out its or his obligations under this Agreement.
7.5 DEFAULT. Time is of the essence of this Agreement. If any party
defaults under this Agreement, the other parties may seek specific performance
of this Agreement, damages, or rescission. In any suit, action or appeal to
enforce this Agreement or any term or provision of this Agreement, or to
interpret this Agreement, the prevailing party shall be entitled to recover its
costs incurred, including reasonable attorneys' fees at trial or on appeal.
7.6 RELEASE OF MANAGEMENT GROUP. The Sellers acknowledge that each
of Thomas A. Cross, Jeffry A. Levy and Mark F. Mitchell (together, the
"Management Group") were given the express consent of the Sellers to present an
offer and negotiate for the purchase of the Assets, apart from their respective
roles as employees or officers of any Seller. In recognition thereof, the
Sellers release each member of the Management Group from any of their respective
management or other duties (as officers, employees or otherwise) to any of the
Sellers in connection herewith and with the transactions contemplated hereunder,
and the Sellers shall defend, indemnify and hold harmless each member of the
Management Group in the event the transactions contemplated by this Agreement
are challenged by any third party on the basis of fairness.
7.7 DISPUTE RESOLUTION.
7.7.1 AAA RULES. Any dispute between the Purchasers and Sellers
under this Agreement or any of the agreements constituting the executed Exhibits
to this Agreement (the "Ancillary Agreements") shall be submitted to final and
binding arbitration in King County, Seattle, Washington, which arbitration
shall, except as herein specifically stated, be conducted in accordance with the
commercial arbitration rules of the American Arbitration Association (the "AAA")
then in effect; provided, however, that the parties agree first to try in good
faith to resolve any dispute that does not exceed One Hundred Thousand Dollars
($100,000) by mediation under the Commercial Mediation Rules of the American
Arbitration Association, before resorting to arbitration; provided, further,
that in the event of an arbitration, the arbitration provisions of this
Agreement
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shall govern over any conflicting rules which may now or hereafter be contained
in the AAA rules.
7.7.2 BINDING EFFECT. The final decision of the arbitrator
shall be a reasoned opinion based on applicable law and furnished in writing to
the Purchasers and Sellers and will constitute a conclusive determination of the
issue in question, binding upon the Purchasers and Sellers. The arbitrator
shall have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve such dispute. Any
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction over the subject matter thereof.
7.7.3 COMPENSATION OF ARBITRATOR. Any such arbitration shall be
conducted before a single arbitrator who will be compensated for his or her
services, as provided below in SECTION 7.7.5, at a rate to be determined by the
parties or by the AAA, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the Sellers and Purchasers are not able to
agree upon his or her rate of compensation.
7.7.4 SELECTION OF ARBITRATOR. The AAA shall have the authority
to select an arbitrator from a list of arbitrators who are partners in a
nationally recognized firm of independent certified public accountants from the
management advisory services department (or comparable department or group) of
such firm or who are partners in a major law firm; provided, however, that such
accounting firm or law firm cannot be a firm that has within the last three
years rendered, or is then rendering, services to any party hereto or, in the
case of a law firm, appeared, or is then appearing, as counsel of record in
opposition to any party hereto. Any arbitrator selected to serve shall be
qualified by training and experience for the matters for which such arbitrator
is designated to serve.
7.7.5 PAYMENT OF COSTS. The prevailing party in any arbitration
shall be entitled to an award of attorneys' fees and costs, and all costs of
arbitration, including those provided for above, will be paid by the losing
party, subject in each case to a determination by the arbitrator as to which
party is the prevailing party and the amount of such fees and costs to be
allocated to such party
7.7.6 TERMS OF ARBITRATION. The arbitrator chosen in accordance
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Agreement, the Ancillary Agreements or any other documents that are executed in
connection therewith.
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7.7.7 EXCLUSIVE REMEDY. Arbitration or mediation under this
SECTION 7.7 shall be the sole and exclusive remedy of the parties for any
dispute arising out of this Agreement or the Ancillary Agreements; provided that
nothing in this Agreement shall preclude the adoption of other alternative
dispute resolution procedures by mutual consent of the parties.
7.8 ATTORNEYS' FEES. If it shall be necessary for any party to this
Agreement to employ an attorney to enforce their rights pursuant to this
Agreement because of the default of another party(s), the defaulting party(s)
shall reimburse the prevailing party for reasonable attorneys' fees and
expenses.
7.9 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7.10 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
this Agreement.
7.11 NOTICES. Any notices, requests, demands or other communications
required or permitted to be sent under this Agreement shall be delivered
personally, sent by overnight courier or mailed by registered or certified mail,
return receipt requested, to the following addresses, and shall be deemed to
have been received on the day of personal delivery, one business day after
deposit with an overnight courier or three business days after deposit in the
mail:
If to any Purchaser, SafeWorks, L.L.C.
to: 23307 - 66th Avenue South
Kent, Washington 98032
Attention: Thomas A. Cross
with a copy to: Davis Wright Tremaine LLP
10500 NE 8th Street
1800 Bellevue Place
Bellevue, Washington 98004-4300
Attention: Steven J. Hopp
If to any Seller, Flow International Corporation
to: 23500 - 64th Avenue South
Kent, Washington 98032
Attention: Ronald W. Tarrant
47
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with a copy to: Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104-7078
Attention: Robert Jaffe and
Richard Dodd
7.12 GOVERNING LAW. The validity, meaning and effect of this
Agreement shall be determined in accordance with the laws of the State of
Washington applicable to contracts made and to be performed in that state.
7.13 ENTIRE AGREEMENT. This Agreement, together with those documents
expressly referred to in this Agreement, constitutes the final agreement of the
parties concerning the matters referred to in this Agreement, and supersedes all
prior agreements and understandings.
7.14 CONSTRUCTION. This Agreement has been drafted with the joint
participation of each of the parties hereto and shall be construed to be neither
against nor in favor of any party hereto, but rather in accordance with the fair
meaning thereof.
7.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
7.16 SCHEDULES. The following schedules (the "Schedules") and
exhibits (the "Exhibits") are attached to and form an integral part of this
Agreement:
Schedule 1(a) Sellers' Management
Schedule 1(b) Purchasers' Management
Schedule 1(c) Leases
Schedule 2.1.5 Equipment
Schedule 2.1.7 Assigned Contracts
Schedule 2.2.9 Additional Excluded Assets
Schedule 2.3 Assumed Liabilities
Schedule 2.4.1 Preliminary Purchase Price Adjustment
Schedule 2.4.2 Net Cash Position
Schedule 2.4.4 Payment
Schedule 2.6 Allocation of Purchase Price
Schedule 2.7.1(a) Available Employees
Schedule 2.7.1(b) Retained Employees
Schedule 2.7.2 Unrestricted Employees
Schedule 3.1.1 Spider BC Power and Authority
Schedule 3.1.4 Required Consents
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Schedule 3.1.5.1 Permitted Encumbrances
Schedule 3.1.5.4 Licenses
Schedule 3.1.5.5 Litigation
Schedule 3.1.6(a) Balance Sheets (FYE 4/30/94-97)
Schedule 3.1.6(b) Balance Sheets (QtrYE 7/31/97)
Schedule 3.1.6(c) Exceptions to Financial Statements
Schedule 3.1.7 Undisclosed Liabilities
Schedule 3.1.11 Intellectual Property
Schedule 3.1.14 Existing Employment Contracts
Schedule 3.1.15 Seller's Brokers and Finders
Schedule 3.1.22 Environmental Exceptions
Schedule 3.2 Purchasers' Disclosure Schedule
Schedule 4.1.2 Ordinary Course Exceptions
Exhibit 2.5 Noncompetition Agreement
Exhibit 2.9.2 Transfer of LLC Interest
Exhibit 2.10.2.1 Bill of Sale
Exhibit 2.10.2.2 Assignment and Assumption Agreement
Exhibit 2.10.2.3(a) Assignment of Lease
Exhibit 2.10.2.3(b) Assignment of Kent Lease
Exhibit 2.10.2.4 Nihon Bisoh Assignment and Assumption
Exhibit 2.10.2.5 Assignment of Trademark Rights
Exhibit 2.10.2.6 Assignment of Patent Rights
Exhibit 2.10.2.8 Interim Manufacturing Agreement
Exhibit 2.10.2.9 License and Parts Purchase Agreement
Exhibit 2.10.2.10 Lease Agreement
Exhibit 2.10.2.11 ARK Agreement
Exhibit 5.1.6 Legal Opinion of Sellers' Counsel
Exhibit 5.2.4 Legal Opinion of Purchasers' Counsel
The parties to this Agreement have executed this Agreement as of the date
first set forth above.
FLOW INTERNATIONAL CORPORATION, a
Delaware corporation
-------------------------------------------
Ronald W. Tarrant, President
SPIDER STAGING CORPORATION, a
Washington corporation
-------------------------------------------
49
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Ronald W. Tarrant, President
SPIDER STAGING CORPORATION,
a British Columbia corporation
-------------------------------------------
Ronald W. Tarrant, President
POWER CLIMBER NV, a Belgium corporation
-------------------------------------------
Ronald W. Tarrant, President
PCNV HOLDINGS, a Belgium corporation
-------------------------------------------
Ronald W. Tarrant, President
POWER CLIMBER, INC., a California
corporation
-------------------------------------------
Ronald W. Tarrant, President
SUSPENDED SCAFFOLD SYSTEMS, INC., a
California corporation
-------------------------------------------
Ronald W. Tarrant, President
SCAFFOLD CLIMBER, INC., a California
corporation
-------------------------------------------
Ronald W. Tarrant, President
POWER OPERATED STAGING, INC., a California
corporation
-------------------------------------------
Ronald W. Tarrant, President
50
<PAGE>
ASTRO HOIST, INC., a California
corporation
-------------------------------------------
Ronald W. Tarrant, President
RAMPART WATERBLAST, INC., a Florida
corporation
-------------------------------------------
Ronald W. Tarrant, President
SAFEWORKS, L.L.C., a Washington limited
liability company
-------------------------------------------
Thomas A. Cross, President
51
<PAGE>
EXHIBIT 20.1
PRESS RELEASE
(Dated October 1, 1997)
<PAGE>
FLOW INTERNATIONAL COMPLETES SALE OF ACCESS AND SERVICES UNITS
KENT, WA - October 1, 1997 -- Flow International Corporation (NASDAQ:FLOW)
today announced it has closed the sale of its Access and Services divisions to
SafeWorks, LLC.
"The sale of the Access and Services businesses refocuses FLOW on its core
technology, ultrahigh-pressure systems," said Ronald W. Tarrant, FLOW's
chairman, president and CEO. "We believe our core technology has the greatest
potential for growth, and we are pursuing new applications for UHP technology
aggressively.
"Under the terms of the agreement, FLOW will receive total consideration of
approximately $40 million in cash and the assumption of liabilities. FLOW also
will continue to manufacture product for SafeWorks for up to two years," Tarrant
said. "In addition, we believe we can reduce annual corporate expenses by
approximately $1.8 million." In fiscal 1997, the Access and Services businesses
contributed 33% of FLOW's total revenue and 30% of total gross profit.
"The investment banking firm of Dain Bosworth served as financial advisor
to Flow in connection with the transaction, developed the valuation for the
businesses, and helped structure the sale. The agreement meets all of our
criteria," Tarrant continued.
"During the fourth quarter of fiscal 1997, the company recorded a $9
million restructuring charge associated with the divestiture. However, based
upon further review of the assets and liabilities of the Access and Services
businesses, and potential future obligations, we believe an additional $4.9
million charge related to the sale of the businesses is warranted. Prior
analysis did not reveal this requirement. The company expects to record this
charge as an adjustment to first quarter earnings," said Stephen D. Reichenbach,
executive vice president and CFO.
Flow International Corporation is the world leader in the development and
manufacture of ultrahigh-pressure waterjet technology for advanced commercial
applications, and a leading provider of robotics and assembly equipment.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Statements in this news release looking forward in time involve risks and
uncertainties, including risks associated with finalizing the transactions,
regulatory changes, and other risk factors detailed in the Company's Securities
and Exchange Commission filings.
