EXHIBIT 2.7
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JUNE 27, 1997
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
SVSI ACQUISITION INC.,
SOUTHERN VALVE SERVICE, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of June 27, 1997, by and among Innovative Valve Technologies, Inc., a
Delaware corporation ("INVATEC"), SVSI Acquisition Inc., an Alabama corporation
and a wholly owned subsidiary of INVATEC ("INVATEC Sub"), Southern Valve
Service, Inc., an Alabama corporation (the "Company"), and the persons listed on
the signature page hereof under the caption "Stockholders" (collectively, the
"Stockholders," and each of those persons, individually, a "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination by means of a plan of
reorganization providing for a Merger pursuant to which INVATEC Sub will merge
with and into the Company on the terms and subject to the conditions set forth
herein (that Merger being the "Acquisition"), which Acquisition will be
consummated substantially concurrently with a public offering of shares of
common stock of INVATEC;
The parties understand that INVATEC may enter into other
agreements similar to this Agreement (the "Other Agreements") for the
acquisition by INVATEC of other entities (collectively, the "Other Acquired
Businesses," and each of those entities, individually, an "Other Acquired
Business"), which Other Agreements will be among those entities and their equity
owners, INVATEC and subsidiaries of INVATEC;
The parties further understand that the concurrent public
offering of shares of INVATEC and the Acquisition will qualify as a Section 351
transaction in accordance with the Internal Revenue Code of 1986, as amended;
and
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement,
Article IX of the Uniform Provisions or the Special Provisions, as the case may
be.
"ABCA" means the Alabama Business Corporation Act.
"ACQUIRED BUSINESS" means the Company.
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"ACQUISITION CONSIDERATION" has the meaning specified in
Paragraph 2(D).
"CALCULATED VALUE" has the meaning specified in Schedule 2(D).
"CEILING AMOUNT" means $3,000,000.
"CLOSING" has the meaning specified in Paragraph 3.
"CLOSING DATE" means the IPO Pricing Date or such other date as
to which INVATEC and the Company may agree.
"CLOSING MEMORANDUM" means the form of closing memorandum to be
prepared by INVATEC and approved by the Company and the Stockholders
(which approval will not be unreasonably withheld) for the Closing under
this Agreement in which are included the forms of certificates of
officers, opinions of counsel and certain other documents to be
delivered at the Closing as provided in Article V of the Uniform
Provisions.
"COMPANY" means Southern Valve Service, Inc., an Alabama
corporation.
"COMPANY CAPITAL STOCK" means the Common Stock, par value $10.00
per share, of the Company.
"CONTINGENT PAYMENT" has the meaning specified in Section 6.07 of
the Uniform Provisions.
"CONTINGENT PAYMENT DATE" means the date of the payment of the
Contingent Payment, which date shall be determined by INVATEC and shall
be within 60 days after the first anniversary of the Effective Time,
subject to extension as set forth in Paragraph C(2) of Schedule 2(D).
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Jenkens &
▇▇▇▇▇▇▇▇▇, Dallas, Texas.
"COUNSEL FOR INVATEC AND INVATEC SUB" means ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇
Incorporated, Houston, Texas.
"CURRENT BALANCE SHEET" means the balance sheet of the Company as
of January 31, 1997.
"CURRENT BALANCE SHEET DATE" means January 31, 1997.
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"DISCLOSURE STATEMENT" means the written statement executed by
the Company and each of the Stockholders and delivered to INVATEC prior
to the execution and delivery of this Agreement by INVATEC and INVATEC
Sub in which either (a) exceptions are taken to any of certain of the
representations and warranties made by the Company and the Stockholders
herein or (b) it is confirmed that no exceptions are taken to the
representations and warranties made by the Company and the Stockholders.
"EBIT" means, for purposes of determining the EBIT Excess
hereunder, the Company's earnings before interest, income taxes and
extraordinary items, as determined in accordance with GAAP at the time
EBIT is to be determined; provided, however, that EBIT is to be
calculated only with respect to the business lines engaged in by the
Company immediately prior to the IPO Closing Date to the extent it is
generated by the business acquired by INVATEC in the Acquisition,
notwithstanding the fact that the Company may, after the Merger (and
subject to the limitations set forth in Section 6.07 of the Uniform
Provisions) from time to time in the future be modified or changed
through the addition of other businesses through merger, reorganization,
restructuring or otherwise.
"EBIT EXCESS" means an amount, to be determined in accordance
with GAAP, equal to the product of (a) four multiplied by (b) the
amount, if any, by which EBIT for the 12 month period commencing with
the first full month following the IPO Closing Date exceeds $880,000.
"EFFECTIVE DATE" means the IPO Closing Date.
"EXECUTIVE EMPLOYMENT AGREEMENTS" means the Employment Agreements
to be delivered at the Closing and entered into effective as of the
Effective Date between the INVATEC Sub and each of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ substantially in the form of
Exhibits ▇-▇- ▇-▇, respectively.
"EXTENSION PAYMENT" means the cash payment of $100,000 payable by
INVATEC to the Stockholders (to be allocated between the Stockholders in
accordance with their Pro Rata Share) on or prior to August 31, 1997 in
the event that the IPO Closing Date does not occur on or prior to August
31, 1997 and INVATEC desires to extend the IPO Closing Date Deadline as
permitted under Section 11.01(a)(ii) of the Uniform Provisions, which
Extension Payment will be applied to the cash consideration payable to
the Stockholders under Schedule 2(D) in the event the IPO Closing Date
occurs on or prior to October 31, 1997 or retained by the Stockholders
as liquidated damages in the event the IPO Closing Date has not occurred
on or prior to such date.
"INITIAL FINANCIAL STATEMENTS" means (a) the balance sheets of
the Company as of October 31, 1995 and 1996 and the related statements
of operations and retained earnings for each of the Company's fiscal
years in the three-year period ended October 31, 1996, and (b)
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the Current Balance Sheet and the related statement of operations for
the three months ended on the Current Balance Sheet Date, which the
Company has delivered to INVATEC.
"PRO RATA SHARE" of a Stockholder means: (a) 76% in the case of
▇▇▇ ▇▇▇ ▇▇▇▇▇▇; and (b) 24% in the case of the ▇▇▇▇ ▇. ▇▇▇▇▇▇
Irrevocable Trust (the "Jordan Trust").
"PUBLICLY TRADED" means, with respect to the INVATEC Common
Stock, that such security is (a) listed on a domestic securities
exchange or (b) quoted on the Nasdaq National Market.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement evidencing the Registration Rights of the Stockholders, to be
delivered at the Closing in substantially the form of Exhibit B.
"RESPONSIBLE OFFICER" means ▇▇▇ ▇▇▇ ▇▇▇▇▇▇.
"SPECIAL PROVISIONS" has the meaning specified in Paragraph 5.
"SURVIVING CORPORATION" means the Company, which is to be
designated in the Certificate of Merger as the surviving corporation of
the Merger.
"THRESHOLD AMOUNT" means $100,000.
"UNIFORM PROVISIONS" has the meaning specified in Paragraph 4.
Paragraph 2. THE MERGER.
(A) CERTIFICATE OF MERGER. Subject to the terms and conditions
hereof, the Company will cause the Certificate of Merger to be duly executed and
delivered on or promptly after the Closing Date and filed with the Secretary of
State of the State of Alabama.
(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective
Time, (1) INVATEC Sub will be merged with and into the Company in accordance
with the provisions of the ABCA, (2) INVATEC Sub will cease to exist as a
separate legal entity, (3) the articles of incorporation of the Company will be
amended to change the Company's authorized shares of capital stock to 1,000
shares, par value $1.00 per share, of Common Stock, (4) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
ABCA, (a) possess all the properties and rights, and be subject to all the
restrictions, duties and obligations, of the Company
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and INVATEC Sub and (b) be governed by the laws of the State of Alabama, (5) the
Charter Documents of the Company then in effect (after giving effect to the
amendment to the Company's articles of incorporation specified in clause (3) of
this sentence) will become and thereafter remain (until changed in accordance
with (a) applicable law (in the case of the articles of incorporation) or (b)
their terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (6) the initial board of directors of the Surviving Corporation
will be the persons named in Schedule 2(C), and those persons will hold the
office of director of the Surviving Corporation, subject to the provisions of
the applicable laws of the State of Alabama and the Charter Documents of the
Surviving Corporation, and (7) the initial officers of the Surviving Corporation
will be as set forth in Schedule 2(C), and each of those persons will serve in
each office specified for that person in Schedule 2(C), subject to the
provisions of the Charter Documents of the Surviving Corporation, until that
person's successor is duly elected to, and, if necessary, qualified for, that
office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) be converted into the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, on surrender of the certificates evidencing those shares, the
amount of cash and the number of whole and fractional shares of INVATEC
Common Stock determined as provided in Schedule 2(D) (the "Acquisition
Consideration"), (b) cease to be outstanding and to exist and (c) be
canceled and retired;
(2) each share of Company Capital Stock held in the treasury of
the Company or any Company Subsidiary will (a) cease to be outstanding
and to exist and (b) be canceled and retired; and
(3) each share of the Common Stock, par value $1.00 per share, of
INVATEC Sub issued and outstanding immediately prior to the Effective
Time will be converted into one share of Common Stock, par value $1.00
per share, of the Surviving Corporation and the shares of Common Stock
of the Surviving Corporation issued on that conversion will constitute
all the issued and outstanding shares of Capital Stock of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without interest,
the Acquisition Consideration and the additional cash, if any, owing with
respect to those shares as provided in Paragraph 2(F).
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(E) DELIVERY, EXCHANGE AND PAYMENT.
(1) At or after the Effective Time: (a) the Stockholders, as
holders of certificates representing shares of Company Capital Stock,
will, on surrender of those certificates to INVATEC (or any agent that
may be appointed by INVATEC for purposes of this Paragraph 2(E)),
receive, subject to the provisions of this Paragraph 2(E) and Paragraph
2(F), the Acquisition Consideration; and (b) until any certificate
representing Company Capital Stock has been surrendered and replaced
pursuant to this Paragraph 2(E), that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares
of INVATEC Common Stock included in the Acquisition Consideration
payable in respect of that certificate pursuant to Paragraph 2(D). All
shares of INVATEC Common Stock issuable in the Merger will be deemed for
all purposes to have been issued by INVATEC at the Effective Time.
(2) Each Stockholder will deliver to INVATEC (or any agent that
may be appointed by INVATEC for purposes of this Paragraph 2(E)) on the
Effective Date the certificates representing all the Company Capital
Stock owned by that Stockholder, duly endorsed in blank, or accompanied
by stock powers in blank duly executed, by that Person, and with all
necessary transfer tax and other revenue stamps, acquired at that
Person's expense, affixed and canceled. Each Stockholder shall cure any
deficiencies in the endorsement of the certificates or other documents
of conveyance respecting, or in the stock powers accompanying, the
certificates representing Company Capital Stock delivered by that
Person.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to INVATEC Common Stock and
payable to the holders of record thereof after the Effective Time will
be paid to the holder of any unsurrendered certificates representing
shares of Company Capital Stock for which shares of INVATEC Common Stock
have been issued in the Merger until those certificates are surrendered
as provided herein, but (a) on that surrender INVATEC will cause to be
paid, to the Person in whose name the certificates representing such
shares of INVATEC Common Stock shall then be issued, the amount of
dividends or other distributions previously paid with respect to such
whole shares of INVATEC Common Stock with a record date, or which have
accrued, subsequent to the Effective Time, but prior to surrender, and
the amount of any cash payable to such Person for and in lieu of
fractional shares pursuant to Paragraph 2(F) and (b) at the appropriate
payment date or as soon as practicable thereafter, INVATEC will cause to
be paid to that Person the amount of dividends or other distributions
with a record date, or which have been accrued, subsequent to the
Effective Time, but which are not payable until a date subsequent to
surrender, which are payable with respect to such whole shares of
INVATEC Common Stock, subject in all cases to any applicable escheat
laws. No interest will be payable with respect to the payment of such
dividends or other distributions or cash for and in lieu of fractional
shares on surrender of outstanding certificates.
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(F) NO FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of INVATEC Common Stock will be issued, and if any
Stockholder would be entitled hereunder to receive a fractional share of INVATEC
Common Stock but for this Paragraph 2(F), that Stockholder will be entitled
hereunder to receive a cash payment for and in lieu thereof in the amount
(rounded upward to the nearest whole cent) equal to that Stockholder's
fractional interest in a share of INVATEC Common Stock multiplied by the IPO
Price.
(G) COMPANY DEBT LIMITATION. The Stockholders shall cause the
Company's total Indebtedness to be, immediately prior to the Closing Date and at
the Effective Time (and after giving effect to the repayment by the Company of
the net Indebtedness owed to the Stockholders by the Company, which net
Indebtedness owed to the Stockholders will be $185,000), not more than
$1,860,000. INVATEC may, at its sole option, waive the foregoing limitation on
Indebtedness by using all or a portion of the cash portion of the Acquisition
Consideration to repay any Company Indebtedness that is, immediately prior to
the Effective Time, in excess of $1,860,000, and the cash portion of the
Acquisition Consideration to be paid hereunder shall be reduced by the amount of
such repayment.
Paragraph 3. THE CLOSING. On or before the Closing Date, the
parties hereto will take all actions (other than those actions required or
contemplated to take place on the IPO Closing Date) necessary to (A) effect the
Acquisition (including, as permitted by the ABCA, (i) the execution of
Certificates of Merger, which will be subject to approval of counsel to the
Company, which approval will not be unreasonably withheld, (a) meeting the
requirements of the ABCA, (b) providing that the Merger will become effective on
the Effective Date and (ii) the transmitting for filing of those Certificates of
Merger with the Secretary of State of the State of Alabama), (B) verify the
existence and ownership of the certificates evidencing the Company Capital Stock
to be exchanged for the Acquisition Consideration pursuant to Paragraph 2(E) and
(C) satisfy the document delivery requirements on which the obligations of the
parties to effect the Acquisition and the other transactions contemplated hereby
are conditioned by the provisions of Article V of the Uniform Provisions (all
those actions collectively being the "Closing"). The Closing will take place at
the offices of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated, Nine ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., Houston time, or at such later time on the
Closing Date as INVATEC shall specify by written notice to ▇▇▇ ▇▇▇ ▇▇▇▇▇▇. The
actions taken at the Closing will not include the delivery of the Company
Capital Stock to INVATEC Sub or the payment of the Acquisition Consideration to
the Stockholders. Instead, on the IPO Closing Date, the Company Capital Stock
will be surrendered in exchange for the Acquisition Consideration (with the cash
portion of the Acquisition Consideration being paid by wire transfer pursuant to
instructions delivered to INVATEC by the Stockholders prior to Closing or, in
the absence of such instructions, an INVATEC check), and all transactions
contemplated by this Agreement to be closed, delivered or completed on or before
the IPO Closing Date, including the delivery of Executive Employment Agreements
and the grant of options to purchase an aggregate of 50,000 shares of INVATEC
Common Stock at the IPO Price, will be closed, delivered and completed, as the
case may be. At the IPO Closing Date, INVATEC shall also purchase all of the
stock of 55 Leasing & Sales, Inc. ("Leasing Company"),
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under the terms of the Agreement attached as Exhibit C hereto, for aggregate
consideration consisting of the assumption of approximately $248,000 in Leasing
Company debt and the transfer of three motor vehicles and $30,000 in cash to the
stockholders of Leasing Company.
Paragraph 4. INCORPORATION OF UNIFORM PROVISIONS. (A) The
Innovative Valve Technologies, Inc. Uniform Provisions for Business Combinations
attached hereto as Annex 1 (the "Uniform Provisions") hereby are incorporated in
this Agreement by this reference and constitute a part of this Agreement with
the same force and effect as if set forth at length herein (except as otherwise
expressly set forth in this Paragraph 4).
(B) The introductory paragraphs to Articles I and II shall be
amended hereby to provide that the representations and warranties made by the
Stockholders are made severally by each Stockholder and not jointly.
Additionally, the representations and warranties made by the Stockholders in
Sections 1.03(a), 2.03(c)(i)(B), 2.03(c)(iv) and (d), Sections 2.15, 2.25 and
2.27(g) of the Uniform Provisions shall be deemed to be made solely to the
knowledge of the Stockholders. For purposes of such representations and
warranties "knowledge" shall mean any matters of which the Person making such
representation or warranty has actual knowledge and, in the case of an officer
or director of the Company, such Person shall also be imputed to have knowledge
of such things of which he would reasonably be expected to have knowledge based
upon his position and responsibilities with the Company. For purposes of such
representations and warranties "knowledge of the Company" shall mean only
matters of which any of the executive officers and directors of the Company have
knowledge. In addition, to the extent that a factual disclosure is made in the
Disclosure Statement with respect to one or more specified representations or
warranties (the "Specified Representations and Warranties") set forth in the
Uniform Provisions or this Agreement and the factual disclosure set forth
therein is relevant to one or more other representations and warranties in the
Uniform Provisions or this Agreement (the "Other Representations and
Warranties") such factual disclosure shall not be required to be repeated by the
Stockholders or the Company and shall be deemed to have been made with respect
to such Other Representations and Warranties to the extent that the facts set
forth in the Disclosure Statement with respect to the Specified Representations
and Warranties would reasonably alert INVATEC as to the potential applicability
or relevance of such factual disclosure to the Other Representations and
Warranties.
(C) The Parties also acknowledge that the Company does not have
any subsidiaries or multi-employer pension plans and that any references thereto
in the Uniform Provisions are inapplicable.
(D) Paragraph (c) of Section 3.04 of the Uniform Provisions is
hereby amended in its entirety to read as follows:
(c) All shares of INVATEC Common Stock and Newco Common Stock
outstanding immediately prior to the Effective Time, and all shares of
INVATEC Common Stock to be issued pursuant to Paragraph 2 (whether
issued at the Effective
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Date or as Contingent Consideration), when issued, (i) will have been
duly authorized and validly issued in accordance with the DGCL and their
issuer's Charter Documents and (ii) will be fully paid and
nonassessable. None of the shares of INVATEC Common Stock to be issued
pursuant to Paragraph 2 (whether issued at the Effective Date or as
Contingent Consideration) or Newco Common Stock will, when issued, have
been issued in breach or violation of (i) any applicable statutory or
contractual preemptive rights, or any other rights of any kind
(including any rights of first offer or refusal), of any Person or (ii)
the terms of any of its Derivative Securities then outstanding.
(E) Article III of the Uniform Provisions hereby is amended by
adding thereto the following Section 3.08.
3.08. DISCLOSURE TO STOCKHOLDERS. INVATEC has furnished the
Stockholders with a draft dated June 23, 1997 of the Registration
Statement (the "Draft Registration Statement"). The Draft Registration
Statement has been and the Registration Statement will be prepared in
substantial compliance with the Requirements of Form S-1 promulgated by
the SEC under the Securities Act (as such terms are defined in the
Uniform Provisions). As of the date of this Agreement and subject to
completion of the blank information to be completed therein, the Draft
Registration Statement does not, and as of the Closing Date and IPO
Closing Date the Registration Statement will not, contain an untrue
statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(F) INVATEC acknowledges that it has as of the date of this
Agreement completed the due diligence upon which it has determined the
Acquisition Consideration and determined to consummate the Acquisition. INVATEC
acknowledges that the obligations of the Company under Section 4.01 are to
enable INVATEC to fulfill its disclosure obligations under the Securities Act
and the Exchange Act in connection with the IPO and that, absent a material
breach of the representations or warranties or covenants or agreements set forth
in the Agreement, INVATEC shall have no right to terminate the Agreement based
upon information provided under Section 4.01.
(G) The following sentence is added to the end of Paragraph (a)
of Section 4.01:
INVATEC hereby indemnifies, holds harmless and agrees to defend the
Company for all losses, costs or expenses, including but not limited to
attorneys' fees, relating to physical damage or injury to any persons or
property caused by INVATEC's or its
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Representatives' inspections of, or access to, such sites and properties
and any costs and expenses incurred by INVATEC in conducting such
inspections.
(H) Paragraph (b) of Section 4.01 and Paragraphs (b), (c), (d),
(f) and (g) of Section 4.02 of the Uniform Provisions are modified to provide
that the Company and the Stockholders will use "reasonable commercial efforts"
to fulfill their obligations set forth in such Paragraphs instead of any other
standard set forth in those Paragraphs.
(I) Section 4.07 is hereby amended in its entirety to read as
follows:
Section 4.07. SUPPLEMENTAL INFORMATION. (a)Each of the Company
and the Stockholders agrees that, with respect to the representations
and warranties of that party contained in this Agreement, that party
will have the continuing obligation (except to the extent otherwise
provided in Section 4.07) until the Effective Time to provide INVATEC
promptly with such additional supplemental Information (collectively,
the "Supplemental Information"), in the form of (a) amendments to then
existing Schedules or Sections of the Disclosure Statement or (b)
additional Schedules or Sections of the Disclosure Statement, as would
be necessary, in the light of the circumstances, conditions, events and
states of facts then known to the Company or any Stockholder, to make
each of those representations and warranties true and correct as of the
Closing and on the IPO Closing Date. For purposes only of determining
whether the conditions to the obligations of INVATEC and Newco which are
specified in Section 5.03 have been satisfied, the Schedules and the
Disclosure Statement as of the Closing and on the IPO Closing Date shall
be deemed to be the Schedules and the Disclosure Statement as of the
date hereof as amended or supplemented by the Supplemental Information
provided to INVATEC prior to the Effective Time pursuant to this Section
4.07; provided, however, that if the Supplemental Information so
provided discloses the existence of circumstances, conditions, events or
states of facts which, in any combination thereof, have had, are having
or will have a Material Adverse Effect, INVATEC will be entitled to
terminate this Agreement pursuant to Section 11.01(a)(iv); and provided,
further, that if INVATEC is entitled to terminate this Agreement
pursuant to Section 11.01(a)(iv), but elects not to do so, it will be
entitled to treat as INVATEC Unindemnified Losses or INVATEC Indemnified
Losses (which treatment will not prejudice the right of any Stockholder
under Section 6.05 or Article VII, as applicable, to contest Damage
Claims made by INVATEC in respect of those INVATEC Unindemnified Losses
or INVATEC Indemnified Losses), as applicable, all Damages to the
Acquired Business which are attributable to the circumstances,
conditions, events and states of facts first disclosed herein after the
date hereof in the Supplemental Information.
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(b) INVATEC agrees that, with respect to the representations and
warranties of INVATEC contained in this Agreement, that INVATEC will
have the continuing obligation (except to the extent otherwise provided
in Section 4.07) until the Effective Time to provide the Company and the
Stockholders with such additional supplemental Information
(collectively, the "INVATEC Supplemental Information"), in the form of
all pre-effective and post effective amendments to the Registration
Statement promptly after filing thereof with the SEC. If the Company or
the Stockholders are entitled to terminate this Agreement or not close
pursuant to Sections 5.02 or 11.01(a)(iii), but elect not to do so, or
if there is a breach of INVATEC's representations or warranties
occurring at or after the Closing and prior to the IPO Closing, the
Stockholders will be entitled to treat as Stockholder Unindemnified
Losses or Stockholder Indemnified Losses (which treatment will not
prejudice the right of INVATEC under Section 6.05 or Article VII, as
applicable, to contest Damage Claims made by the Company or the
Stockholders respect of those Stockholder Unindemnified Losses or
Stockholder Indemnified Losses), as applicable, all Damages which are
attributable to the circumstances, conditions, events and states of
facts first disclosed herein after the date hereof in the INVATEC
Supplemental Information.
(J) Sections 4.10, 4.11 and 6.04 of the Uniform Provisions are
hereby deleted.
(K) A new Section 4.13 is hereby added to Article IV of the
Uniform Provisions which shall read as follows:
Section 4.13. Removal of Guaranties. No later than five business
days after the IPO Closing Date, INVATEC will cause the Stockholder
Guaranties, if any, listed in Section 4.13 of the Disclosure Statement,
to be terminated. INVATEC will indemnify and hold harmless each
Stockholder from and against any liabilities, claims, demands,
judgments, losses, costs, damages or expenses whatsoever (including
reasonable attorneys' fees) that such Stockholder may sustain, suffer or
incur and that result from or arise out of or relate to such Stockholder
Guaranties.
(L) Subparagraph (ii)(B)(4) of Section 5.02 of the Uniform
Provisions is hereby amended in its entirety to read as follows:
(4) the Registration Rights Agreement duly executed and delivered
by INVATEC and the Executive Employment Agreements duly executed by
INVATEC Sub; and
(M) Section 5.03 of the Uniform Provisions is hereby amended as
follows:
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(1) Subparagraph (a)(ii)(A) of Section 5.03 of the Uniform
Provisions is amended in its entirety to read as follows:
(A) REPRESENTATIONS AND WARRANTIES. All the
representations and warranties of the stockholders and the
Company in Articles I and II and in the Special Provisions, if
any, shall be true and correct in all material respects as of the
Closing as though made at that time.
(2) Subparagraph (a)(ii)(B)(1) of Section 5.03 of the Uniform
Provisions is amended in its entirety to read as follows:
(1) a Company officer's certificate, signed by a
Responsible Officer, respecting (i) the representations and
warranties of the Stockholders and the Company in Articles I and
II and in the Special Provisions, if any, (ii) compliance with
the covenants of the Stockholders and the Company in Article IV,
and (iii) for the period beginning on the last date for which the
Company's financial information was provided by the Company to
INVATEC prior to the execution of this Agreement and ending on
the Closing Date, the material conformity of operations of the
Company with all the budgets and projections furnished to INVATEC
by the Company or the Stockholders, and in the form thereof
attached as an exhibit to the Closing Memorandum;
(3) A new Paragraph (C) is added to Section 5.03(a)(ii) of the
Uniform Provisions which shall read as follows:
(C) At least fifteen days prior to Closing unaudited
financial statements (the "Interim Financial Statements") dated
as of June 30, 1997, subject to review and approval by INVATEC,
which shall reflect net book value of at least the amount set
forth in the Current Balance Sheet.
(4) Paragraph (b) of Section 5.03 is hereby amended in its
entirety to read as follows:
(b) The obligations of INVATEC and Newco with respect to
the actions to be taken on the IPO Closing Date are subject to
(i) the satisfaction on that date of all the conditions set forth
in Section 5.01(b), if any, and (ii) the condition that all the
representations and warranties of the Stockholders and the
Company in Articles I and II and the Special Provisions, if any,
shall be true and correct in all material respects as of the IPO
Closing Date as though made on that date.
-12-
(N) Sections 6.05 and Subsection 6.06(a) of the Uniform
Provisions shall be amended in their entirety to read as follows:
Section 6.05. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Notwithstanding any investigation at any time made by or on behalf of
any party hereto, the representations and warranties set forth in
Articles I and II and in any certificate delivered in connection
herewith with respect to any of those representations and warranties
will survive the Effective Time until the day that is eighteen months
from the Effective Time, whereupon they will terminate and expire,
except as follows (i) the representations and warranties of the
Stockholders which relate expressly or by necessary implication to the
environment or Environmental Laws will survive for three years from the
Effective Time and then terminate and expire, (ii) the representations
and warranties of the Stockholders with respect to Taxes, ERISA or the
Governmental Requirements referred to in clause (iii) of Section 7.02(a)
shall survive for the duration of the applicable statute of limitations
(including all periods of extension and tolling) and then terminate and
expire, and (iii) the representations and warranties of the Company will
terminate and expire at the Effective Time. The representations and
warranties of INVATEC set forth in Article III shall survive for two
years following the Effective Date and thereafter terminate or expire,
except that any representations and warranties that would relate to a
claim by any of the Stockholders against INVATEC under Section 3.08
shall survive for the duration of the applicable statute of limitations
(including all periods of extension and tolling) relating to claims made
under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and
then terminate and expire.
Section 6.06. LIMITATIONS ON DAMAGE CLAIMS. (a) In the event
INVATEC should have any Damage Claim hereunder following the Effective
Time against any Stockholder which does not involve an INVATEC
Indemnified Loss (each such Damage Claim not involving an INVATEC
Indemnified Loss being an "INVATEC Unindemnified Loss"), that
Stockholder will not be liable to INVATEC on account of that INVATEC
Unindemnified Loss unless the liability of that Stockholder in respect
of that INVATEC Unindemnified Loss, when aggregated with the liability
of that Stockholder in respect of the sum of (i) his Pro Rata Share of
all INVATEC Unindemnified Losses and (ii) his Pro Rata Share of all
INVATEC Indemnified Losses under Sections 7.02(a) and 7.02(b), exceeds,
and only to the extent the aggregate amount of all those INVATEC
Unindemnified Losses and INVATEC Indemnified Losses does exceed, his Pro
Rata Share of the Threshold Amount. In no event shall the aggregate
liability of the Stockholders under this Agreement, including Sections
7.02(a) and 7.02(b), exceed the Ceiling Amount or the aggregate
liability of each Stockholder under this Agreement, including Sections
7.02(a) and
-13-
7.02(b), exceed that Stockholder's Pro Rata Share of the Ceiling Amount.
Also, notwithstanding any other provisions of this Agreement or the
Uniform Provisions, the beneficiaries of the Jordan Trust shall not have
any liability under this Agreement beyond the amount of any Acquisition
Consideration distributed to such beneficiaries. For purposes of
determining the amount of INVATEC Unindemnified Losses and INVATEC
Indemnified Losses, no effect will be given to any resulting Tax benefit
to INVATEC or any other INVATEC Indemnified Party.
(O) Article VI of the Uniform Provisions hereby is amended by
adding thereto the following Section 6.07, which will read in its entirety as
follows:
Section 6.07. CONTINGENT PAYMENT. Subject to the terms and
conditions of this Agreement, on the Contingent Payment Date, each
Stockholder will receive his Pro Rata Share of the number of whole
shares of INVATEC Common Stock and/or cash determined as provided in
Schedule 2(D) of this Agreement (the "Contingent Payment"). INVATEC
agrees that during the twelve months following the Effective Date it
will not make, or allow to be made, any material change in the Acquired
Business which could reasonably be expected to reduce the amount of the
Contingent Payment (including, without limitation, incorporation of an
acquisition or other material operations into the Acquired Business, a
change in key management, or diversion of key management of the Company
to other INVATEC projects), without prior consultation with the
Stockholders and the mutual agreement of the Stockholders and INVATEC
and as to an equitable adjustment of the threshold for determination of
EBIT Excess of the Acquired Business, so as to ensure that the
Contingent Payment is not reduced by any such material change in the
Acquired Business without the express agreement of the Stockholders.
(P) Section 7.01 of the Uniform Provisions is hereby amended in
its entirety to read as follows:
Section 7.01. IN RESPECT OF REPRESENTATIONS AND WARRANTIES. After
a representation and warranty has terminated and expired as provided in
Section 6.05, no indemnification will or may be sought pursuant to this
Article VII on the basis of that representation and warranty by any
Person who would have been entitled pursuant to this Article VII to
indemnification on the basis of that representation and warranty prior
to its termination and expiration. In the case of each representation
and warranty that will terminate and expire as provided in Section 6.05,
no claim presented in writing for indemnification pursuant to this
Article VII on the basis of that representation and warranty prior to
its termination and expiration will be affected in any way by that
termination and expiration.
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(Q) Section 7.02 of the Uniform Provisions is hereby amended in
its entirety to read as follows:
Section 7.02. INDEMNIFICATION OF INVATEC INDEMNIFIED PARTIES. (a)
Subject to the applicable provisions of Sections 7.01 and 7.06, the
Stockholders covenant and agree that they, severally and not jointly,
will indemnify each INVATEC Indemnified Party against, and hold each
INVATEC Indemnified Party harmless from and in respect of, all Third
Party Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of
the Stockholders or the Company set forth herein (other than in Article
I) or in certificates delivered in connection herewith (other than in
respect of certificates relating only to the representations and
warranties in Article I), (ii) any nonfulfillment of any covenant or
agreement on the part of the Stockholders or the Company under this
Agreement or (iii) any liability under the Securities Act, the Exchange
Act or other applicable Governmental Requirement which arises out of or
is based on (A) any untrue statement or alleged untrue statement of a
material fact relating to the Company and the Company Subsidiaries, or
any of them, which is (1) provided in writing to INVATEC or its counsel
by the Company or the Stockholders and (2) contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or
supplement thereto, and not corrected by the Stockholder or the Company
after the Company or such Stockholder has been given a reasonable
opportunity to review such preliminary prospectus or other
documentation, or (B) any omission or alleged omission to state therein
a material fact relating to the Company and the Company Subsidiaries, or
any of them, required to be stated therein or necessary to make the
statements therein not misleading, and not provided to INVATEC or its
counsel by the Company or the Stockholders after the Company or the
Stockholders have been given a reasonable opportunity to review such
preliminary prospectus or other documentation or furnish such
information (each such Third Party Claim and each Third Party Claim
described in Section 7.02(b) being an "INVATEC Indemnified Loss").
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each INVATEC
Indemnified Party against, and hold each INVATEC Indemnified Party
harmless from and in respect of, all Third Party Claims that arise from,
are based on or relate or otherwise are attributable to (i) any breach
of the representations and warranties of that Stockholder solely as to
that Stockholder set forth in Article I or in certificates delivered by
that Stockholder and relating to those representations and warranties,
(ii) any nonfulfillment of any several, and not joint and several,
agreement on the part of that Stockholder under this Agreement or (iii)
any liability under the Securities Act, the
-15-
Exchange Act or other applicable Governmental Requirement which arises
out of or is based on (A) any untrue statement or alleged untrue
statement of a material fact relating solely to that Stockholder which
is (1) provided in writing to INVATEC or its counsel by that Stockholder
and (2) contained in any preliminary prospectus relating to the IPO, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto and not corrected by the
Stockholder or the Company after the Company or such Stockholder has
been given a reasonable opportunity to review such preliminary
prospectus or other documentation, or (B) any omission or alleged
omission to state therein a material fact relating solely to that
Stockholder required to be stated therein or necessary to make the
statements therein not misleading, and not provided to INVATEC or its
counsel by that Stockholder after the Company or such Stockholder has
been given a reasonable opportunity to review such preliminary
prospectus or other documentation or furnish such information.
(R) Section 7.05 and Paragraph (a) of Section 7.06 of the Uniform
Provisions are hereby amended in their entirety to read as follows:
Section 7.05. REMEDIES NOT EXCLUSIVE. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies
available to one party against any other party, either at law or in
equity, provided that any damages by reason of such remedies shall be
limited as provided in Sections 6.05, 6.06, 7.01, 7.02 and 7.06 of the
Uniform Provisions.
Section 7.06. LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding
the provisions of Sections 7.02(a) and (b), no Stockholder shall be
required to indemnify or hold harmless any of the INVATEC Indemnified
Parties on account of any INVATEC Indemnified Loss under Sections
7.02(a) and (b) unless the Pro Rata Share of liability of that
Stockholder in respect of that INVATEC Indemnified Loss, when aggregated
with the liability of that Stockholder in respect of the sum of his Pro
Rata Share of (i) all INVATEC Unindemnified Losses and (ii) all INVATEC
Indemnified Losses under Sections 7.02(a) and 7.02(b), exceeds, and only
to the extent the aggregate amount of his Pro Rata Share of all those
INVATEC Unindemnified Losses and INVATEC Indemnified Losses does exceed,
his Pro Rata Share of the Threshold Amount. In no event shall (i) the
aggregate liability of the Stockholders under this Agreement, including
Sections 7.02(a) and 7.02(b), exceed the Ceiling Amount or (ii) the
aggregate liability of each Stockholder under this Agreement, including
Sections 7.02(a) and 7.02(b), exceed that Stockholder's Pro Rata Share
of the Ceiling Amount. In addition, to the extent that INVATEC is
entitled to any indemnity hereunder from the Stockholders, the
Stockholders shall be entitled to surrender to INVATEC shares of INVATEC
Common Stock in lieu of
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cash, such INVATEC Common Stock to be valued at the Calculated Value
determined on the last trading day immediately prior to the date of
surrender of such shares to INVATEC. For purposes of determining the
amount of INVATEC Indemnified Losses, no effect will be given to any
resulting Tax benefit to any INVATEC Indemnified Party.
(S) Sections 10.01 and 10.02 are hereby amended in their entirety
to read as follows:
Section 10.01. TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each of
the Company and the Stockholders, severally and not jointly with any
other Person, acknowledges that it has or may have had in the past,
currently has had access to Confidential Information of the Company, the
Other Acquired Businesses and their Subsidiaries and INVATEC and its
Subsidiaries. Each of the Company and the Stockholders, severally and
not jointly with any other Person, agrees that it will keep confidential
all such Confidential Information furnished to it and, except with the
specific prior written consent of INVATEC, will not disclose such
Confidential Information to any Person except (a) Representatives of
INVATEC and (b) its own Representatives, provided that these
Representatives (other than counsel) agree to the confidentiality
provisions of this Section 10.01. Each of INVATEC and INVATEC Sub
acknowledges that in connection with its investigation of the Company
and the Stockholders and the negotiation of this Agreement that it has
had access to Confidential Information of the Company. INVATEC and
INVATEC Sub agree that they will keep confidential all such Confidential
Information of the Company furnished to either of them and will not
disclose such Confidential Information to any Person, except that such
Confidential Information may be disclosed (a) to Representatives of the
Stockholders, (b) to Representatives of INVATEC OR INVATEC Sub, provided
that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 10.01, (c) with the specific
prior written consent of the Company or the Stockholders, (d) following
the Closing or (e) to the extent reasonably customary or necessary in
connection with the "Road Show" to be conducted with respect to the IPO.
"Confidential Information" shall not include such information as (i)
becomes known to the public generally through no fault of any person
subject to a confidentiality obligations with respect to such
Confidential Information, (ii) is required to be disclosed by law or the
order of any Governmental Authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), the
Person required to disclose such information shall, if possible, give
prior written notice thereof to the Person for whose benefit the
Confidential Information is subject to protection and provide such
person with the opportunity to contest such disclosure, or (iii) the
disclosing party reasonably
-17-
believes is required to be disclosed in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Person of the provisions of this Section 10.01
with respect to any Confidential Information, the Person or Persons
entitled to protection of such Confidential Information shall be
entitled to an injunction restraining such Person from disclosing, in
whole or in part, that Confidential Information. Nothing herein shall be
construed as prohibiting a Person from pursuing any other available
remedy for such breach or threatened breach, including the recovery of
damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 10.01(a), and
because of the immediate and irreparable damage that would be caused to
any Person for which it would have no other adequate remedy, each of
INVATEC, the Company and the Stockholders agrees that INVATEC, the
Company or the Stockholders, as the case may be, may enforce the
provisions of Section 10.01(a) by injunctions and restraining orders
against any Person who breaches any of those provisions.
(c) The obligations of the parties under this Section 10.01 shall
survive the termination of this Agreement.
Section 10.02. BROKERS AND AGENTS. The Stockholders jointly and
severally represent and warrant to INVATEC that the Company has not
directly or indirectly employed or become obligated to pay any broker or
similar agent in connection with the transactions contemplated hereby
and agree, without regard to the Threshold Amount limitations set forth
in Article VII, to indemnify INVATEC against all Damage Claims arising
out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company. INVATEC represents
and warrants to the Stockholders that INVATEC has not directly or
indirectly employed or become obligated to pay any broker or similar
agent in connection with the transactions contemplated hereby and
agrees, without regard to the Threshold Amount limitations set forth in
Article VII, to indemnify the Stockholders and the Company against all
Damage Claims arising out of claims for any and all fees and commissions
of brokers or similar agents employed or promised payment by INVATEC.
(T) Section 10.12 is amended to read in its entirety as follows:
Section 10.12 RELEASES. (a) Subject to the limitations set forth
in the last sentence in this Section 10.12(a), each Stockholder hereby
unconditionally and irrevocably releases and forever discharges,
effective as of and forever after the Effective Time, to the fullest
extent permitted by applicable law, all past, present and
-18-
future INVATEC Indemnified Parties (including, after the Effective Time,
each of the Company and the Company Subsidiaries which is a Subsidiary
of INVATEC immediately after the Effective Time) (collectively, the
"Released Parties") from any and all debts, liabilities, obligations,
claims, demands, actions or causes of action, suits, judgments or
controversies of any kind whatsoever (collectively, "Pre-Acquisition
Claims") against the Company or any of them that arises out of or is
based on any agreement or understanding or act or failure to act
(INCLUDING ANY ACT OR FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS
NEGLIGENCE OR RECKLESS OR WILLFUL, WANTON MISCONDUCT),
misrepresentation, omission, transaction, fact, event or other matter
occurring prior to the Effective Time (whether based at law or in equity
or otherwise, foreseen or unforeseen, matured or unmatured, known or
unknown, accrued or not accrued) (collectively, "Pre-Acquisition
Matters"), including: (a) claims by the Stockholder with respect to
repayment of loans or indebtedness; (b) any rights, titles and interests
in, to or under any agreements, arrangements or understandings to which
the Stockholder is a party, including any stockholder agreement,
shareholder agreement, buy-sell agreement or other agreement offering
the shareholder rights or imposing restrictions as to the Company Common
Stock; and (c) claims by the Stockholder with respect to dividends,
violation of preemptive rights, or payment of salaries or other
compensation or in any way arising out of or in connection with the
Stockholder's employment with the Company, the cessation of that
employment, the Stockholder's status as an officer, director or
stockholder of the Company or otherwise (but excluding any and all
claims in respect of (i) accrued and unpaid amounts owing to the
Stockholder pursuant to each Employment Agreement disclosed in Section
2.27 to the Disclosure Statement to which the Stockholder is a party,
(ii) accrued and unpaid cash compensation owing to the Stockholder in
the normal and ordinary course of business and consistent with past
practices, (iii) benefits accrued under each Company ERISA Benefit Plan
or Other Compensation Plan, the existence of which has been disclosed in
Section 2.27 to the Disclosure Statement, and (iv) amounts or other
obligations owing to the Stockholder, directly or indirectly, pursuant
to each Retained Related Party Agreement, if any, which is disclosed in
Section 2.12 to the Disclosure Statement and to which the Stockholder,
directly or indirectly, is a party). The Stockholder further agrees not
to file or bring any Litigation before any Governmental Authority on the
basis of or respecting any Pre-Acquisition Claim concerning any
Pre-Acquisition Matter against any Related Party. Each Stockholder (a)
acknowledges that he or she fully comprehends and understands all the
terms of this Section 10.12(a) and their legal effects and (b) expressly
represents and warrants that (i) he or she is competent to effect the
release made in this Section 10.12(a) knowingly and voluntarily and
without reliance on any statement or representation of any Released
Party or its Representatives and (ii) he or she had the opportunity to
consult with an attorney of his or her choice regarding this Section
10.12(a). This
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Section 10.12(a) shall not affect the rights of the Stockholders under
this Agreement or any other Transaction Document.
(b) Subject to the limitations set forth in the last sentence in
this Section 10.12(b) INVATEC hereby on behalf of itself, its Affiliates
and, after the Effective Time, the Company unconditionally and
irrevocably releases and forever discharges, effective as of and forever
after the Effective Time, to the fullest extent permitted by applicable
law, each of the Stockholders from any and all debts, liabilities,
obligations, claims, demands, actions or causes of action, suits,
judgments or controversies of any kind whatsoever against the
Stockholders that arise out of or are based on any agreement or
understanding or act or failure to act (INCLUDING ANY ACT OR FAILURE TO
ACT THAT CONSTITUTES ORDINARY OR GROSS NEGLIGENCE AND EXCLUDING ANY
FRAUD OR CRIMINAL ACTIVITIES), misrepresentation, omission, transaction,
fact, event or other matter occurring prior to the Effective Time
(whether based at law or in equity or otherwise, foreseen or unforeseen,
matured or unmatured, known or unknown, accrued or not accrued and
whether related to their capacity as officers, directors or stockholders
of the Company) (collectively, "Pre-Acquisition Stockholder Matters").
The Company further agrees not to file or bring any Litigation before
any Governmental Authority on the basis of or respecting any
Pre-Acquisition Claim against Stockholders concerning any
Pre-Acquisition Stockholder Matter against any Related Party. This
Section 10.12(b) shall not affect the rights of INVATEC or any INVATEC
Indemnified Parties under this Agreement or any other Transaction
Document.
(U) Section 11.01(a)(ii) of the Uniform Provisions shall be
amended in its entirety to read as follows:
(ii) by the Stockholders or the Company, on the one hand, or by
INVATEC, on the other hand, if the transactions contemplated by this
Agreement to take place at the IPO Closing Date shall not have occurred
by August 31, 1997 (the "IPO Closing Date Deadline"), unless the failure
of such transactions to be consummated results from the willful failure
of the party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by it prior to
or at the Closing or thereafter on the IPO Closing Date; provided
however, that the IPO Closing Date Deadline may be unilaterally extended
by INVATEC to October 31, 1997 upon payment by INVATEC to the
Stockholders of the Extension Payment on or prior to August 31, 1997;
(V) Section 11.02 of the Uniform Provisions shall be amended to
read in its entirety as follows:
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Section 11.02. LIABILITIES IN EVENT OF TERMINATION. If this
Agreement is terminated pursuant to Section 11.01, there shall be no
liability or obligation on the part of any party hereto except to the
extent that such liability is based on the breach by that party of any
of its representations, warranties or covenants set forth in this
Agreement; provided, however, that, without regard to the Threshold
Amount, (i) if INVATEC terminates this Agreement pursuant to Section
11.01(iii), then the Company and the Stockholders shall be jointly and
severally obligated to pay INVATEC, within 10 days of such termination,
an amount in cash (up to a maximum of $25,000) equal to one-half of the
reasonable out-of-pocket costs and expenses incurred by or on behalf of
INVATEC or INVATEC Sub in connection with their due diligence with
respect to the aborted Acquisition, (ii) if the Stockholders or the
Company terminate this Agreement pursuant to Section 11.01(iii), then
INVATEC and INVATEC Sub shall be jointly and severally obligated to pay
the Company, within 10 days of such termination, an amount in cash (up
to a maximum of $25,000) equal to one-half of the reasonable
out-of-pocket costs and expenses incurred by or on behalf of the Company
or the Stockholders in connection with the negotiation of the
transaction and their due diligence with respect to the aborted
Acquisition and (iii) in the event that INVATEC pays the Stockholders
the Extension Payment, and the Closing does not occur on or prior to
October 31, 1997 the Stockholders shall, in addition to any other
amounts payable in accordance with this sentence, be entitled to retain
such Extension Payment as liquidated damages for failure of INVATEC and
INVATEC Sub to effect the Closing on or prior to such date.
Paragraph 5. INCORPORATION OF SPECIAL PROVISIONS. Addendum U --
"Special Provisions Relating to the Unregistered INVATEC Common Stock Included
in the Acquisition Consideration" attached hereto as an Addendum (the "Special
Provisions") hereby is incorporated in this Agreement by this reference and
constitutes a part of this Agreement with the same force and effect as if set
forth at length herein.
Paragraph 6. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument. THE PARTIES SPECIFICALLY
CONTEMPLATE THAT THIS AGREEMENT SHALL BECOME BINDING UPON THE EXECUTION OF ONE
OR MORE COUNTERPARTS OF THIS AGREEMENT BY EACH PARTY AND THE DELIVERY BY OF SUCH
COUNTERPART OR COUNTERPARTS BY FACSIMILE COPY TO THE OTHER PARTIES HERETO.
Paragraph 7. NOTICES. For purposes of Section 10.06, notices
shall be addressed to the Stockholders and the Company, as follows:
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if to the Company or a Stockholder, addressed to:
Mr. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ Irrevocable Trust
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies (which shall not constitute notice for purposes of
this Agreement) to:
Jenkens & ▇▇▇▇▇▇▇▇▇
Fountain Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.:(▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INNOVATIVE VALVE TECHNOLOGIES, INC.
By: ___________________________
Name:
Title:
SVSI ACQUISITION INC.
By: ___________________________
Name:
Title:
SOUTHERN VALVE SERVICE, INC.
By: ___________________________
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
President
Stockholders:
___________________________
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
IRREVOCABLE TRUST
By:__________________________
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, Co-Trustee
By:__________________________
▇▇▇▇▇ ▇▇▇▇▇▇, Co-Trustee
-23-
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
Innovative Valve Technologies, Inc.
and
Southern Valve Service, Inc.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. The sole director of the Surviving Corporation immediately
after the Effective Time will be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
C. The officers of the Surviving Corporation immediately after
the Effective Time are as follows:
Chief Executive Officer............................. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President........................................... ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
Senior Vice President, Treasurer and Secretary...... ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President...................................... ▇▇▇▇ ▇. ▇▇▇▇
Vice President and Controller....................... ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
End of Schedule
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
Innovative Valve Technologies, Inc.
and
Southern Valve Service, Inc.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. Subject to reduction by the application of the provisions of
Paragraph 2 of this Agreement, the aggregate Acquisition Consideration will be
comprised of (1) $2,197,000 in cash, (2) such number of whole shares of INVATEC
Common Stock on the IPO Closing Date as, when multiplied by the IPO Price, will
most nearly approximate, but not exceed, $1,500,000 and (3) cash in the amount
equal to the excess of $1,500,000 over the product of that number of shares of
INVATEC Common Stock multiplied by the IPO Price. In addition, INVATEC shall at
the IPO Closing Date pay ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ and the Jordan Trust, $2,280 and $720,
respectively and in cash, in consideration of their respective obligations set
forth under Article VIII of the Uniform Provisions.
C. (1) The aggregate Contingent Payment will be comprised of (1)
such number of whole shares of INVATEC Common Stock as, when multiplied by the
Calculated Value on the Contingent Payment Date (the "Determination Date"), will
most nearly approximate, but not exceed, any sixty percent (60%) of the EBIT
Excess and (2) cash in an amount equal to (x) forty percent of such EBIT Excess
and (y) the excess of such EBIT Excess over the product of that number of shares
of INVATEC Common Stock multiplied by that Calculated Value (or, if agreed by
the parties, some other combination of INVATEC Common Stock (valued as described
in this sentence) and cash equal to the amount of such EBIT Excess); provided,
however, that unless the parties agree otherwise, if the shares of INVATEC
Common Stock are not Publicly Traded as of the Determination Date, then the
Contingent Payment shall be made solely in cash. As used in this Agreement,
"Calculated Value" means the average of the closing prices, regular way, of a
share of INVATEC Common Stock on all domestic securities exchanges on which the
INVATEC Common Stock is then listed, or, if there have been no sales on any such
exchange on such day, the average of the closing bid and asked prices on all
such exchanges on such day, or, if the INVATEC Common Stock is not so listed,
the closing price quoted on the Nasdaq National Market on such day, in each such
case averaged over the twenty consecutive trading days immediately preceding the
second trading day preceding the Determination Date. The Calculated Value of a
share of that stock may be higher or lower than the fair market value of that
share on the Contingent Payment Date. To the extent that any interest is imputed
by the Internal Revenue Service on the Contingent Payment or any
portion thereof, such interest will be paid or deemed to be paid out of the cash
portion of the Contingent payment and, to the extent such imputed interest
exceeds such cash portion, the parties will designate specific shares of the
INVATEC Common Stock that constitute part of the Contingent Payment as
representing interest.
(2) A calculation of the Contingent Payment (the "Initial
Contingent Payment Calculation") shall be prepared by INVATEC and delivered to
the Stockholders within 45 days of the first anniversary of the Effective Date.
The Stockholders or their Representatives shall review the Initial Contingent
Payment Calculation and report to Company in writing within fifteen days of
receipt thereof of any dispute with this calculation. If INVATEC and the
Stockholders cannot resolve the dispute, if any, INVATEC shall immediately pay
the Stockholders any of the Contingent Payment which is not in dispute (the
"Undisputed Contingent Payment") and INVATEC and the Stockholders within fifteen
(15) days thereafter, shall mutually select and retain an independent public
accounting firm which has no prior conflicts to review the Initial Contingent
Payment Calculation and determine the amount of the Contingent Payment which is
in dispute. Such firm's conclusion as to the amount of the Contingent Payment
shall be conclusive. INVATEC and the Stockholders shall share equally in the
expenses of retaining such accounting firm unless the final Contingent Payment
exceeds the Initial Continent Payment Calculation by more than 15%, in which
case the expenses of retaining such accounting firm shall be borne by INVATEC.
D. Each Stockholder will be entitled to receive his Pro Rata
Share of the Acquisition Consideration pursuant to this Schedule 2(D).
E. Each Stockholder will be entitled to receive his Pro Rata
Share of the Contingent Payment pursuant to Section 6.07 of Annex 1.
End of Schedule
