EXHIBIT 2.1(a)
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MERGER AGREEMENT
DATED AS OF JUNE 29, 1998
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
PLANT ACQUISITION, INC.,
AND
PLANT MAINTENANCE, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of the 29th day
of June, 1998, by and among INNOVATIVE VALVE TECHNOLOGIES, INC., a Delaware
corporation ("Invatec"), PLANT ACQUISITION, INC, a Delaware corporation
("Invatec Sub"),XXXXXXX X. XXXXXX, an individual whose address is 0000
Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 ("Xx. Xxxxxx"), XXXXXXX X. XXXXXX, an
individual whose address is 00000 Xxxx 000xx Xxxxx Xxxxx, Xxxxxx Xxxxxxxx 00000
("Xx. Xxxxxx"), XXXX X. XXXXXX, XX., an individual whose address is 00000 Xxxxxx
Xxxx, Xxxxx, Xxxxx 00000 ("Xx. Xxxxxx") (Xx. Xxxxxx, Xx. Xxxxxx and Xx. Xxxxxx
being sometimes hereinafter referred to collectively as the "Stockholders" and
individually as a "Stockholder"), and PLANT MAINTENANCE, INC., an Oklahoma
corporation whose address is 0000 X. 00xx Xx. Xxxx, Xxxxxxxx, Xxxxxxxx 00000
(the "Company") (the "Company"). Invatec, Invatec Sub, the Stockholders and the
Company are sometimes hereinafter referred to collectively as the "Parties" or
individually as a "Party."
PRELIMINARY STATEMENT
WHEREAS, Xx. Xxxxxx is the legal and beneficial owner and holder of One
Hundred Sixty-Eight (168) shares of Common Stock of the Company, Xx. Xxxxxx is
the legal and beneficial owner and holder of One Hundred Sixty-Eight (168)
shares of Common Stock of the Company, and Xx. Xxxxxx is the legal and
beneficial owner and holder of Sixty-Four (64) shares of Common Stock of the
Company, which constitutes all of the issued and outstanding Company Capital
Stock; and
WHEREAS, the Parties have determined that it is in their best interests to
effect a merger pursuant to which the Company will merge with and into Invatec
Sub on the terms and conditions set forth herein (such merger being the
"Acquisition");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations, warranties and undertakings contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties 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 preamble of this Agreement, the
Preliminary Statement or ARTICLE IX of the Uniform Provisions, as the case may
be.
"ACCOUNTING FIRM" means KPMG Peat Marwick, in Houston, Texas.
"ACQUIRED BUSINESS" means the business conducted by the Company and
the Company Subsidiaries. For purposes of ARTICLE VIII of the Uniform
Provisions, the term "Acquired Business" shall include any business
conducted by the Company or any Company Subsidiary during the twelve (12)
months preceding the Effective Time.
"ACQUISITION CONSIDERATION" has the meaning specified in
SUBPARAGRAPH 2(A)(IV).
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"AGREED CLOSING VALUE OF INVATEC STOCK" means Nine and 35/100
Dollars ($9.35), calculated as the sum of the Current Market Price as of
the Closing Date plus two dollars ($2.00).
"CEILING AMOUNT" means Five Million one Hundred Seventy-Six Thousand
Five Hundred Thirty and No/100 Dollars ($5,176,530.00).
"CLOSING" has the meaning specified in PARAGRAPH 3.
"CLOSING DATE" means June 30, 1998, or such other date as to which
Invatec and the Stockholders may agree.
"COMPANY" has the meaning specified in the preamble of this
Agreement.
"COMPANY CAPITAL STOCK" means the Common Stock, $100 par value per
share, of the Company.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Xxxxx, Xxxx &
Xxxxxxxx, X.X. of St. Louis, Missouri.
"COUNSEL FOR INVATEC" means Xxxxx, Xxxxx & Xxxxxx Incorporated of
Houston, Texas.
"CURRENT BALANCE SHEET" means the combined balance sheet of the
Company and the Company Subsidiaries as of the Current Balance Sheet Date.
"CURRENT BALANCE SHEET DATE" means March 31, 1998.
"CURRENT MARKET PRICE" means the average closing price per share of
Invatec Common Stock (as reported by the principal securities exchange or
trading market, as the case may be, on which the Invatec Common Stock is
then traded) during the five consecutive trading days immediately
preceding the date as of which the "Current Market Price" is to be
determined.
"DISCLOSURE STATEMENT" means the written statement executed by the
Company and the Stockholders and delivered to Invatec prior to the
execution and delivery of this Agreement by Invatec in which either (a)
exceptions are taken to any of certain of the representations and
warranties made by the Company or the Stockholders herein or (b) it is
confirmed that no exception is taken to that representation and warranty.
"EFFECTIVE TIME" means the Effective Time of the Merger, as such
term is defined in SUBPARAGRAPH 2(A)(II).
"EMPLOYMENT AGREEMENTS" means the Employment Agreements to be
entered into as of the Effective Time between (a) Invatec and Xx. Xxxxxx,
and (b) Invatec and Xx. Xxxxxx, and (c) Invatec and Xx. Xxxxxx, each in
form and content acceptable to the Parties.
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"INDEBTEDNESS" means all items, except for items of capital stock,
surplus, general contingency, or deferred tax liabilities, which in
accordance with GAAP would be included on the liability side of the
combined balance sheet of the Company and the Company Subsidiaries at such
time, other than accounts payable incurred in the Ordinary Course of
Business and other expenses and trade payables incurred in the Ordinary
Course of Business. The Indebtedness of the Company and the Company
Subsidiaries at the Current Balance Sheet Date (exclusive of any
consideration of the factored accounts receivable) is $912,134.97, as
provided in SCHEDULE I hereto.
"INITIAL FINANCIAL STATEMENTS" means the combined balance sheets of
the Company and the Company Subsidiaries as of March 31, 1998, 1997 and
1996, and the related combined statements of operations and retained
earnings for each of the Company's fiscal years in the three-year period
ended March 31, 1998, and the one-year periods ended March 31, 1998 and
March 31, 1997, are attached hereto as EXHIBIT A.
"INVATEC SUB" has the meaning set forth in the preamble of this
Agreement.
"MERGER" means a transaction as a result of which the Acquisition is
effected and in which the Company is merged with and into Invatec Sub.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of the
business of the Company and the Company Subsidiaries, consistent with past
customs and practice (including with respect to quantity and frequency).
"PRO RATA SHARE" of a Stockholder means: Forty-Two percent (42%) in
the case of Xx. Xxxxxx, Forty-Two percent (42%) in the case of Xx. Xxxxxx,
and Sixteen percent (16%) in the case of Xx. Xxxxxx.
"SUBSEQUENT MEASUREMENT DATE" means the one-year anniversary of the
Effective Time.
"SURVIVING COMPANY" means Invatec Sub, which is to be designated in
the Certificates of Merger as the Surviving Company.
"THRESHOLD AMOUNT" means One Hundred Fifteen Thousand Thirty-Four
Dollars ($115,034).
"UNIFORM PROVISIONS" means the Uniform Provisions for Stock
Acquisitions By Subsidiary Merger attached hereto as ANNEX 1.
"WORKING CAPITAL" means the current assets minus the current
liabilities of the Company determined in accordance with GAAP (calculated
as provided in SCHEDULE II attached hereto). Current liabilities shall
expressly EXCLUDE current maturities of long-term Indebtedness, and the
current portion of obligations under capital leases. The Working Capital
at the Current Balance Sheet Date is Eighty-One Thousand Seven Hundred
Forty-Four and No/100 ($81,744.00) determined as provided in SCHEDULE II
attached hereto.
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PARAGRAPH 2. THE ACQUISITION. (A) THE MERGER. (i) CERTIFICATES OF
MERGER. Subject to the terms and conditions hereof, the Company will cause the
Certificates of Merger to be duly executed and delivered on the Closing Date and
filed on or promptly after the Closing Date with the Secretary of State of
Oklahoma and the Secretary of State of Delaware.
(ii) THE EFFECTIVE TIME. The "Effective Time" will be upon (a) the
filing of the Certificate of Merger with the Secretary of State of Oklahoma, and
issuance by the Secretary of State of Oklahoma of a Certificate of Merger with
respect thereto, and (b) the filing of the Certificate of Merger with the
Secretary of State of Delaware, and issuance by the Secretary of State of
Delaware of a Certificate of Merger with respect thereto, and in any event, on
or as promptly as practicable after the Closing Date.
(iii) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time
(1) the Company will be merged with and into Invatec Sub in accordance with the
provisions of the General Corporation Law of the State of Delaware, (2) the
Company will cease to exist as a separate legal entity, (3) Invatec Sub will be
the Surviving Company and, as such, will, all with the effect provided by the
General Corporation Law of the State of Delaware (a) possess all the properties
and rights, and be subject to all the restrictions, duties and obligations, of
the Company and Invatec Sub and (b) be governed by the laws of the State of
Delaware, (4) the Charter Documents of Invatec Sub then in effect will become
and thereafter remain (until changed in accordance with (a) applicable law (in
the case of the Certificate of Incorporation) or (b) their terms (in the case of
the Bylaws)) the Charter Documents of the Surviving Company, except that the
Certificate of Incorporation shall be amended to change the name of the
Surviving Company to "Plant Maintenance, Inc." (5) the initial member of the
Board of Directors of the Surviving Company will be Xxxxxxx X. Xxxxxx, and he
will hold the office of director of the Surviving Company, subject to the
provisions of the applicable laws of the State of Oklahoma and the Charter
Documents of the Surviving Company, and (6) the initial officers of the
Surviving Company will be as set forth below, and each of those persons will
serve in each office specified for that person below, subject to the provisions
of the Charter Documents of the Surviving Company, until that person's successor
is duly elected to, and, if necessary, qualified for, that office:
OFFICE: NAME:
Chairman of the Board & Chief Executive Officer. Xxxxxxx X. Xxxxxx
President....................................... Xxxxxxx X. Xxxxxx
Chief Financial Officer, Senior Vice President,
Treasurer and Secretary......................... Xxxxxxx X. Xxxxxxxx
Vice President & Assistant Secretary............ Xxxxxxx X. Xxxxxxxxxx, Xx.
Vice President & Assistant Secretary............ Xxxxx X. Xxxxxxx
Vice President & Assistant Secretary............ Xxxx X. Xxxx
Vice President ................................. Xxxxxxx X. Xxxxxx
Vice President ................................. Xxxx X. Xxxxxx, Xx.
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(iv) EFFECT OF THE MERGER ON COMPANY 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 be converted into the right
to receive, subject to the provisions of PARAGRAPH 5 and PARAGRAPH 6, on
surrender of the certificates evidencing those shares, shares of Invatec
Common Stock in an aggregate amount equal to (a) Five Million Seven
Hundred Fifty-One Thousand Seven Hundred and No/100 Dollars
($5,751,700.00) minus (i) Nine Hundred Twelve Thousand One Hundred
Thirty-Four and 97/100 Dollars ($912,134.97) (which is an estimate of the
Company's Indebtedness as of the Closing Date), and also minus (ii) One
Hundred Sixty-Two Thousand Six Hundred Fifty-One and 78/100 Dollars
($162,651.78) (which amount is one-half (1/2) of the amount of factored
receivables, calculated as of the close of business on Friday June 26,
1998, in the manner described in SCHEDULE III) divided by (b) the Agreed
Closing Value of Invatec Stock (the "Acquisition Consideration");
whereupon all such shares of Company Capital Stock shall cease to be
outstanding and to exist, and shall be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company shall cease to be outstanding and to exist and shall be canceled
and retired; and
(3) each share of capital stock of Invatec Sub issued and
outstanding immediately prior to the Effective Time will be converted into
one share of common stock of the Surviving Company and the common stock of
the Surviving Company issued on that conversion will constitute all the
issued and capital stock of the Surviving Company.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time (which Stockholders hereby covenant and
agree shall only be the Stockholders) 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 5 and PARAGRAPH 6, such
holder's pro rata share of the Acquisition Consideration.
Invatec will cause its transfer agent to deliver to each Stockholder the
certificate evidencing such Stockholder's shares of Invatec Common Stock as
promptly as practicable after Closing; however, such Stockholder shall be
treated for all purposes as having been the record holder of such shares as of
the Effective Time.
(v) DELIVERY, EXCHANGE AND PAYMENT. On the Closing Date, the
Stockholders, as the holders of the certificates representing all of the
outstanding shares of Company Capital Stock, will receive, on surrender of those
certificates (duly endorsed in blank, or accompanied by stock powers in blank
duly executed by Stockholders, and with all necessary transfer tax and other
revenue stamps, acquired at Stockholders' expense, affixed and canceled) to
Invatec, free and clear of any restrictions or conditions to transfer or
assignment, rights of first refusal, mortgages, liens, pledges, charges,
encumbrances, equities, claims, covenants, conditions, restrictions, options or
agreements, subject to the provisions of PARAGRAPH 5 and PARAGRAPH 6, the
Acquisition Consideration. Until any certificate representing Company Capital
Stock has been surrendered and replaced pursuant to this SUBPARAGRAPH 2(A)(V),
that certificate will, for all purposes, be deemed to evidence only the
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right to receive the pro rata share of the Acquisition Consideration evidenced
thereby. 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 surrendered by
such Stockholder.
(B) INCOME AND OTHER TAXES; TRANSACTION EXPENSES. Stockholders shall pay
all income, documentary, transfer, stamp, revenue or other taxes arising out of
the transfer, surrender or cancellation of the Company Capital Stock or receipt
of payments therefor, or any consideration delivered in connection therewith.
Neither Invatec, the Surviving Company, the Company nor any Company Subsidiary
shall be responsible for any business, occupation, income, withholding or
similar tax, or any taxes of any kind, of any Stockholder, including without
limitation any income taxes assessed against any Stockholder which result from
the failure of the Acquisition to qualify as a tax-free reorganization. Invatec,
on the one hand, and the Stockholders, on the other hand, will each pay their
respective legal, accounting, tax, broker's or other advisors' expenses incurred
in pursuing and consummating the Acquisition. Invatec shall pay all income taxes
assessed against the Company or the Surviving Company which result from the
failure of the Acquisition to qualify as a tax-free reorganization.
(C) COMPANY DEBT LIMITATION; STOCKHOLDER DEBT. The Stockholders shall
cause the total Indebtedness of the Company and the Company Subsidiaries to be,
immediately prior to Closing, equal to or less than Nine Hundred Twelve Thousand
One Hundred Thirty-Four and 97/100 Dollars ($912,134.97), (exclusive of any
consideration of the factored accounts receivable) after giving effect to (i)
the repayment by the Company and/or the Company Subsidiaries of the net
Indebtedness owed to the Stockholders, and (ii) the release of the Company for
all liabilities and obligations relating to any non-core assets of the Company
or any Company Subsidiary Distributed to the Stockholders, or any of them, prior
to the Closing Date, as contemplated in SUBPARAGRAPH 2(D) below but exclusive of
any prepayment penalties resulting from or arising out of the prepayment of the
Company's Indebtedness in connection with or as a result of the Acquisition, all
of which shall be paid by Stockholders. Except for salary accrued in the
Ordinary Course of Business, on the Closing Date there will not be any
Indebtedness owed by the Company or any Company Subsidiary to any Stockholder or
any affiliate of any Stockholder, and each Stockholder and each affiliate of
each Stockholder shall repay to the Company or the appropriate Company
Subsidiary at Closing the Indebtedness owed by such Stockholder or such
affiliate, as applicable, to the Company or such Company Subsidiary. On the date
of execution hereof, the only Indebtedness of the Company or any Company
Subsidiary to any Stockholder or any affiliate of any Stockholder is Seventeen
Thousand Five Hundred Dollars ($17,500.00) owed to the wife of Xx. Xxxxxx, which
shall be paid in full at Closing.
(D) TRANSFER OF REAL ESTATE AFTER TO CLOSING. The Parties hereby
acknowledge and agree that the Company will transfer to the Stockholders, and
the Stockholders will purchase, after Closing, that certain unimproved real
estate owned by the Company in Muskogee, Oklahoma, provided that such
distribution does not adversely impact the intended tax treatment of the
Acquisition. The purchase price of the real estate shall be the transaction
costs related to the transfer. Such transfer shall be on an "as-is, where-is"
basis, with all faults, and without representation or warranty express or
implied, except that the Company shall warrant that it has not taken any action
which adversely impacts title to the real estate after the Closing Date.
Stockholders hereby
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acknowledge and agree that the distribution of real estate may be a taxable
event for the Stockholders.
(E) FORWARD SUBSIDIARY MERGER TAX REPRESENTATIONS. The Company and the
Stockholders hereby represent and warrant the following to be true and correct
as of the Effective Time:
(i) The fair market value of the Invatec Common Stock and other
consideration received by the Stockholders will be approximately equal to
the fair market value of the Company Capital Stock surrendered in the
Acquisition.
(ii) There is no plan or intention of any Stockholder to have
Invatec redeem, or have a party related to Invatec acquire, shares of
Invatec Common Stock received in the Acquisition which would reduce the
Stockholder's ownership of a number of shares of Invatec Common Stock
received in the Acquisition to a number of shares having a value, as of
the date of the Acquisition, of less than 50% of the sum of (i) the value
at the Effective Time of all the Company Capital Stock held immediately
prior to the Acquisition by the Stockholders and (ii) the value at the
Effective Time of any other instruments (such as debt of the Company which
is guaranteed by the Stockholder) which are classified for federal income
tax purposes as stock of the Company (collectively, "Shares") and which
are held immediately prior to the Acquisition by the Stockholder. For
purposes of this representation, shares of Company Capital Stock
outstanding immediately prior to the Acquisition include shares redeemed
prior to the Acquisition by reason of this Agreement or otherwise as part
of the Acquisition, and the value of all shares of Company Capital Stock
outstanding immediately prior to the Acquisition shall be determined with
regard to any extraordinary distributions (i.e., distributions with
respect to shares of Company Capital Stock other than regular, normal
dividends) by the Company by reason of this Agreement or otherwise as part
of the Acquisition. For purposes of this representation, a party is
related to Invatec if such party and Invatec would be treated as related
parties within the meaning of Treasury Regulations Section 1.368-1(e)(3).
(iii) Invatec Sub will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Company immediately prior to the
Acquisition. For purposes of this representation, amounts paid by the
Company to dissenters, amounts paid by the Company to Stockholders who
receive cash or other property, amounts used by the Company to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends, if any) made by the Company immediately
preceding the Acquisition, will be included as assets of the Company held
immediately prior to the Acquisition.
(iv) The liabilities of the Company assumed by Invatec Sub and the
liabilities to which the transferred assets of the Company are subject
were incurred by the Company in the Ordinary Course of Business.
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(v) The Company and the Stockholders will pay their respective
expenses, if any, incurred in connection with the Acquisition.
(vi) There is no intercorporate indebtedness existing between
Invatec and the Company or between Invatec Sub and the Company that was
issued, acquired or will be settled at a discount.
(vii) The Company is not an investment company. For purposes of this
representation, an investment company means a regulated investment company
(as defined in the Code), a real estate investment trust (as defined in
the Code), or a corporation, 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value
of whose total assets are assets held for investment within the meaning of
Section 368(a)(2)(F)(iii) of the Code.
(viii)The Company is not under the jurisdiction of a court in a case
under Title 11 of the United States Code, or a receivership, foreclosure,
or similar proceeding in a federal or state court.
(ix) At the Effective Time, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which its assets are subject.
(x) None of the compensation received by any stockholder-employees
of the Company will be separate consideration for, or allocable to, any of
their shares of Company Capital Stock. None of the shares of Invatec
Common Stock to be received by any stockholder-employee will be separate
consideration for, or allocable to, any employment agreements, and the
compensation paid to any stockholder-employee will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services.
PARAGRAPH 3. THE CLOSING. (A) TIME AND PLACE. On or before the
Closing Date, the Parties will take all actions necessary to effect the
Acquisition (all those actions collectively being the "Closing"). The Closing
will take place at the offices of Counsel for Invatec at 10:00 a.m., local time,
or at such later time on the Closing Date as Invatec shall specify by written
notice to Stockholders.
(B) STOCKHOLDERS' DELIVERIES. At or before the Closing, Stockholders shall
deliver or cause to be delivered to Invatec the following, all of which shall be
duly executed by all of the parties thereto, other than Invatec, Invatec Sub and
Invatec's third party lender, and shall be in form and content acceptable to the
Parties:
(i) All of the stock certificates evidencing the Company Capital
Stock, with all necessary transfer tax and other revenue stamps acquired
and attached at the expense of the holder of such certificate, together
with irrevocable stock powers in form and content acceptable to Invatec,
duly authorized and executed by the record holder of each such stock
certificate;
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(ii) An Affiliate Letter from each Stockholder, duly executed by
such Stockholder with respect to such Stockholder's acquisition of Invatec
Common Stock as part of the Acquisition Consideration;
(iii) The Certificate of Merger to be filed in Oklahoma;
(iv) The Certificate of Merger to be filed in Delaware;
(v) The Employment Agreements;
(vi) A Xxxx of Sale from the Stockholders to the Company
transferring a milling machine acquired from Fenix Equipment;
(vii) A Release and Covenant Not to Xxx executed by Xxxxx X.
Xxxxxxx;
(viii)A Release and Covenant Not to Xxx executed by Xxxxxx Xxxxxxx;
(ix) Resignations of all directors and officers of the Company and
the Company Subsidiaries, effective as of the Effective Time;
(x) All original promissory notes or other debt instruments executed
by the Company or any Company Subsidiary to any Stockholder or to any
affiliate of any Stockholder, marked "Paid in Full;"
(xi) Payment of any outstanding amounts owed by any Stockholder to
the Company or any Company Subsidiary, as expressly set forth in PARAGRAPH
2(C) hereof;
(xii) An opinion of counsel issued by Counsel for the Company and
the Stockholders;
(xiii)No Withholding Certificates duly executed by the Stockholders;
(xiv) Certificates of the Secretary or Assistant Secretary of the
Company and each Company Subsidiary, certifying as to copies of the
Articles of Incorporation and Bylaws of the Company, and in the case of
the Certificate for the Company, the resolutions of the Board of Directors
of the Company and the Stockholders, in form and content reasonably
acceptable to Invatec, authorizing the transactions contemplated herein;
(xv) A Termination Agreement terminating any existing shareholder,
voting or similar agreement among the Stockholders and the Company, or any
of them, relating to the Company Capital Stock, and waiving the rights of
the parties thereunder;
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(xvi) Termination Agreement terminating the existing Disability
Insurance Agreement among the Company and the Stockholders, and waiving
the rights of the parties thereunder;
(xvii)All governmental, lender or other third party approvals to be
delivered by Stockholders as a condition to closing pursuant to ARTICLE V
of the Uniform Provisions, in form and content reasonably acceptable to
Invatec; and
(xviii) All other items required to be delivered hereunder or as may
be requested or which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby, including such
certificates as are necessary from third parties to establish the truth
and accuracy of Invatec's representations and warranties set forth herein.
(C) INVATEC'S OBLIGATIONS. At the Closing, Invatec will deliver or cause
to be delivered to the Stockholders the following, all of which shall be duly
executed by Invatec and Invatec Sub, and shall be in form and content acceptable
to the Parties:
(i) The shares of Invatec Common Stock to be delivered hereunder as
a portion of the Acquisition Consideration (provided that the certificates
evidencing such shares shall be delivered as promptly as practicable after
Closing);
(ii) The Certificate of Merger to be filed in Oklahoma;
(iii) The Certificate of Merger to be filed in Delaware;
(iv) The Employment Agreements;
(v) Certificate of the Secretary or Assistant Secretary of Invatec
certifying as to copies of the Certificate of Incorporation and Bylaws of
Invatec attached thereto, and the resolutions of the members of the
Executive Committee of the Board of Directors of Invatec, in form and
content reasonably acceptable to Counsel for the Company and the
Stockholders, authorizing the transactions contemplated herein;
(vi) Certificate of the Secretary or Assistant Secretary of Invatec
Sub certifying as to copies of the Certificate of Incorporation and Bylaws
of Invatec Sub attached thereto, and the resolutions of the sole director
and sole shareholder of Invatec Sub, in form and content reasonably
acceptable to Counsel for the Company and the Stockholders, authorizing
the transactions contemplated herein; and
(vii) All other items required to be delivered hereunder or as may
be requested or which are necessary or would reasonably facilitate
consummation of the transactions contemplated hereby, including such
certificates as are necessary from third parties to establish the truth
and accuracy of Invatec's representations and warranties set forth herein.
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(D) PROPRIETARY RIGHTS OF THE STOCKHOLDERS. In SECTION 2.21 OF THE
DISCLOSURE STATEMENT, the Company and the Stockholders have disclosed the
existence of certain proprietary rights developed by the Stockholders (the
"Proprietary Rights"). The Stockholders hereby represent and warrant that the
Proprietary Rights and the ownership thereof do not materially impact the
Acquired Business, and that the technology and equipment relating to the
Proprietary Rights have not been used to any material degree to date in the
Acquired Business. Further, the Stockholders hereby grant to the Company, the
Company Subsidiaries and the Surviving Company a perpetual non-exclusive right
and license to use the Proprietary Rights and the technology remanufacture and
use all equipment relating to the Proprietary Rights, and to otherwise take full
advantage of the Proprietary Rights and all further developments thereof as
fully as if the Company, the Company Subsidiaries and the Surviving Company were
the owners thereof, EXCEPT that the Company, the Company Subsidiaries and the
Surviving Company may not license or sublicense any rights arising hereunder to
any third party which is not a wholly-owned subsidiary of Invatec. Stockholders
shall deliver to the Surviving Company all of the technology and related
know-how which are reasonably required by or useful to the Surviving Company and
its affiliates in the use or exploitation of the Proprietary Rights. The Parties
hereby acknowledge and agree that the rights granted hereby include the
non-exclusive right to exploit all information, including secret processes,
secret formulae, or other secret information (including trade secrets), relating
to the Proprietary Rights. Each Stockholder hereby acknowledges the restrictions
on the Stockholders under their respective Employment Agreements and this
Agreement, and each hereby covenants and agrees that in addition to the
provisions hereof and thereof, for a period commencing on the date hereof and
terminating upon the expiration of two (2) years after the termination of such
Stockholder's employment with Invatec, he will not use nor permit any third
party to use the Proprietary Rights in competition with Invatec or any of its
subsidiaries within a fifty-mile radius of any location owned or leased by
Invatec or any subsidiary of Invatec (as of the date in question for so long as
such Stockholder is an employee of Invatec, and as of the date of termination
thereafter). Finally, Stockholders covenant and agree that neither the Surviving
Company nor any of its affiliates shall bear any costs or expenses relating to
the research or development of the Proprietary Rights.
(E) INDEMNIFICATION FOR CERTAIN CLAIMS. Stockholders hereby agree, jointly
and severally, without regard to the Threshold Amount, to indemnify, defend and
hold harmless the Company, the Surviving Company, the Company Subsidiaries, and
each Invatec Indemnified Party against, all Third Party Claims that arise from,
are based on or relate or otherwise are attributable to (i) any debt, liability
or obligation to Xxxxx X. Xxxxxxx existing as of the date hereof, or (ii) any
claim of Xxxxx X. Xxxxxxx or Xxxxxx Xxxxxxx to any stock or other equity
ownership interest in, or any right of first refusal, option or similar right to
acquire any stock or other equity ownership interest in, the Company, the
Company Subsidiaries or the Surviving Company, or any of their respective assets
or divisions.
(F) FURTHER ASSURANCES. At and after the Closing, each of the Parties
shall take all appropriate action and execute all documents of any kind which
may be reasonably necessary or desirable to carry out the transactions
contemplated hereby. Each Stockholder, at any time at or after the Closing, will
execute, acknowledge and deliver any further stock powers, deeds, bills of sale,
assignments and other assurances, documents and instruments of transfer
reasonably requested by Invatec, and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by Invatec, for the
purpose of effecting the Acquisition.
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PARAGRAPH 4. INCORPORATION OF UNIFORM PROVISIONS. 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, subject to the following revisions:
(i) Section 1.05 is hereby amended by deleting therefrom the phrase
"or to acquire Invatec Common Stock pursuant to the Convertible Notes, if
any, or any written option granted by Invatec to the Stockholder";
(ii) Section 2.14(b)(i) and (b)(ii) are hereby deleted in their
entirety, and substituted therefor is the following:
(b) DISCLOSURE. As of the date hereof, all Information that
has been furnished to Invatec by or on behalf of the Company prior
to the date of this Agreement in connection with the transactions
contemplated hereby is, taken together, true and correct in all
material respects and does not contain any untrue statement of a
material fact or omit to state any fact which is material to the
Company, and which is necessary in order to make the statements
contained therein not materially misleading in light of the
circumstances under which those statements were made.
(iii) Section 2.19(c) is hereby amended by inserting prior to "(i)"
the phrase "or as otherwise disclosed in writing to Invatec";
(iv) The second sentence of Section 2.20 is amended by inserting
prior to "(i)" the phrase "or as otherwise disclosed in writing to
Invatec";
(v) Section 2.21 is hereby deleted in its entirety, and substituted
therefore is the following:
Section 2.21. PROPRIETARY RIGHTS. Except as set forth in
SECTION 2.21 OF THE DISCLOSURE STATEMENT or otherwise disclosed to
Invatec in writing, each of the Company and the Company Subsidiaries
owns, free and clear of all Liens other than Permitted Liens, or has
the legal right to use all Proprietary Rights that are necessary to
the conduct of its business as now conducted, in each case free of
any claims or infringements known to the Company or any Stockholder.
SECTION 2.21 OF THE DISCLOSURE STATEMENT (a) lists these Proprietary
Rights and (b) indicates those owned by the Company or any Company
Subsidiary and, for those not listed as so owned, the agreement or
other arrangement pursuant to which they are possessed. Except as
set forth in SECTION 2.21 OF THE DISCLOSURE STATEMENT or otherwise
disclosed to Invatec in writing (a) no consent of any Person will be
required for the use of any of these Proprietary Rights by Invatec
or any Subsidiary of Invatec following the Effective Time and (b) no
governmental registration
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of any of these Proprietary Rights has lapsed or expired or been
canceled, abandoned, opposed or the subject of any reexamination
request.
(vi) The third sentence of Section 2.23(a) is hereby amended by
inserting after the phrase "Except as set forth in Section 2.23 of the
Disclosure Statement" the phrase "or otherwise disclosed to Invatec in
writing";
(vii) The first sentence of Section 2.26 is hereby amended by
inserting prior to "(A)" the phrase ",unless otherwise disclosed to
Invatec in writing";
(viii)The first sentence of Section 2.31 is hereby amended by
inserting after the phrase "except as set forth in Section 2.31 of the
Disclosure Statement" the phrase "or otherwise disclosed to Invatec in
writing";
(ix) Article III is hereby amended by inserting the following:
Section 3.06. SEC FILINGS. (a) Invatec has filed with the
Securities and Exchange Commission ("SEC") all material forms,
statements, reports and documents (the "INVATEC SEC FILINGS")
required to be filed by it under the 1934 Act and the rules and
regulations thereunder.
(b) As of its filing date, each Invatec SEC Filing complied as
to form in all material respects with the applicable requirements of
the 1934 Act.
(c) As of its filing date, each Invatec SEC Filing filed
pursuant to the 1934 Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Invatec has previously delivered to the Stockholders
copies of Invatec's prospectus, dated June 10, 1998, as supplemented
(the "PROSPECTUS"). As of its date, the Prospectus did not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(e) Invatec's Financial Statements included in the Prospectus
present fairly, in all material respects, the financial position of
Invatec as of the date thereof and the results of operations and
cash flows of Invatec and stockholders' or other owners' equity for
the periods set forth therein and have been prepared in accordance
with GAAP.
(x) Article IV, Article V and Article XI are hereby deleted in their
entirety;
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(xi) Section 6.03(a)(ii) is hereby amended by deleting therefrom the
word "indefinitely," and substituting therefore the words "for eight
years";
(xii) Section 10.07 is hereby amended by (A) deleting therefrom all
references to "Southern District of Texas, Houston Division" and
substituting therefor the phrase "District of Oklahoma" and (B) deleting
therefrom all remaining references to "Texas" and "Texas, County of
Xxxxxx" and substituting therefor the phrase "Oklahoma";
(xiii)The first sentence of Section 10.07 is hereby amended by
inserting at the end thereof the phrase "; provided that it is understood
that no claims arising out of this Agreement are released";
PARAGRAPH 5. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. Within
ninety (90) days after the Closing Date, Invatec shall deliver to the
Stockholders an unaudited combined balance sheet of the Company and the Company
Subsidiaries, prepared as of the Closing Date (the "Post-Closing Financial
Statements"). These Post-Closing Financial Statements shall become final and
binding on the Parties on the 15th day following receipt thereof by the
Stockholders unless a Stockholder furnishes written notice of his disagreement
("Notice of Disagreement") to Invatec prior to such date. Any Notice of
Disagreement shall specify in detail the nature of any disagreement so asserted.
If a Notice of Disagreement is sent by a Stockholder to Invatec in accordance
with this PARAGRAPH 5, then the Post-Closing Financial Statements shall become
final and binding upon the Parties on the earlier to occur of: (i) the date the
Parties resolve in writing any differences they have with respect to any matter
specified in the Notice of Disagreement, or (ii) the date any disputed matters
are finally resolved in writing by the Accounting Firm. During the 10-day period
following the delivery of a Notice of Disagreement, the Parties shall seek in
good faith to resolve in writing any differences which they may have with
respect to any matter specified in the Notice of Disagreement. If, at the end of
such 10-day period (or such longer period of time as the Parties may agree upon
in writing), the Parties have not reached agreement on such matters, the matters
which remain in dispute, together with copies of this Agreement, the
Post-Closing Financial Statements, and the Notice of Disagreement, shall be
submitted, within five (5) days following the expiration of such 10-day period
(or any agreed upon extension thereof), to the Accounting Firm for review and
resolution. In connection with such submission, Invatec and each Stockholder
shall promptly execute any waivers, releases, indemnification agreements or fee
agreements requested by the Accounting Firm. All proceedings conducted by the
Accounting Firm shall be conducted at the offices of the Accounting Firm in
Houston, Texas. The Accounting Firm shall render a decision resolving the
matters in dispute as soon as practicable following the date of the submission
to the Accounting Firm. The cost of any proceeding (including the fees of the
Accounting Firm but excluding the fees and disbursements of each Party's
independent auditors and counsel) pursuant to this PARAGRAPH 5 shall be borne
one-half by Invatec and one-half, jointly and severally, by the Stockholders.
The fees and disbursements of Stockholders' independent auditors and counsel
incurred in connection with this PARAGRAPH 5 shall be borne, jointly and
severally, by Stockholders, and the fees and disbursements of Invatec's
independent auditors and counsel incurred in connection with this PARAGRAPH 5
shall be borne by Invatec. The final determination as described in any of the
procedures set forth hereinabove shall constitute the "Final Post-Closing
Financial Statements."
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(A) WORKING CAPITAL ADJUSTMENT. Stockholders hereby agree, jointly and
severally, to deliver to Invatec within ten (10) business days of delivery of
the Final Post-Closing Financial Statements to Invatec and to Stockholders, at
the option of Stockholders either (a) an aggregate number of shares of Invatec
Common Stock equal to (i) the amount, if any, by which Eighty-One Thousand Seven
Hundred Forty-Four and No/100 Dollars ($81,744.00) exceeds the Working Capital,
as set forth in the Final Post-Closing Financial Statements, divided by (ii) the
Agreed Closing Value of Invatec Stock, or (b) cash in an amount equal to the
amount, if any, by which Eighty-One Thousand Seven Hundred Forty-Four and No/100
Dollars (81,744.00) exceeds the Working Capital, as set forth in the Final
Post-Closing Financial Statements. Conversely, Invatec hereby agrees to deliver
to each Stockholder, within ten (10) business days of delivery of the Final
Post-Closing Financial Statements to Invatec and to Stockholders, at the option
of Invatec, such Stockholder's Pro Rata Share of either (a) a number of shares
of Invatec Common Stock equal to (i) the amount, if any, by which the Working
Capital, as set forth in the Final Post-Closing Financial Statements, exceeds
Eighty-One Thousand Seven Hundred Forty-Four and No/100 Dollars ($81,744.00),
divided by (ii) the Agreed Closing Value of Invatec Stock, or (b) cash in an
amount equal to the amount, if any, by which the Working Capital, as set forth
in the Final Post-Closing Financial Statements, exceeds Eighty-One Thousand
Seven Hundred Forty-Four and No/100 Dollars ($81,744.00).
(B) INDEBTEDNESS ADJUSTMENT. The Final Post-Closing Financial Statements
shall also set forth the amount of the Company's Indebtedness as of the
Effective Time. Stockholders hereby agree, jointly and severally, to deliver to
Invatec within ten (10) business days of delivery of the Final Post-Closing
Financial Statements to Invatec and to Stockholders, an aggregate amount equal
to the amount, if any, by which the Company's Indebtedness as of the Effective
Time, as set forth in the Final Post-Closing Financial Statements, exceeds the
Indebtedness as of the Effective Time estimated at Closing under PARAGRAPH
2(A)(IV), payable at the option of Stockholders either in cash or shares of
Invatec Common Stock (valued at the Agreed Closing Value of Invatec Stock), or a
combination thereof. Conversely, Invatec hereby agrees to deliver to each
Stockholder, within ten (10) business days of delivery of the Final Post-Closing
Financial Statements to Invatec and to Stockholders, an aggregate amount equal
to the amount, if any, by which the Indebtedness as of the Effective Time
estimated at Closing under PARAGRAPH 2(A)(IV) exceeds the Company's Indebtedness
as of the Effective Time, as set forth in the Final Post-Closing Financial
Statements, payable at the option of Invatec either in cash or shares of Invatec
Common Stock (valued at the Agreed Closing Value of Invatec Stock), or a
combination thereof.
Determinations under this PARAGRAPH 5 shall be consistent with the
methodology reflected in SCHEDULES I, II AND III.
PARAGRAPH 6. POST-CLOSING ADJUSTMENT OF VALUE OF INVATEC COMMON
STOCK.
(A) SALES OF INVATEC COMMON STOCK WITHIN SIX MONTHS. Invatec shall not
have any obligation to any Stockholder with respect to the price at which any
Invatec Stock which is received as part of the Acquisition Consideration is
sold, if the sale occurs prior to the expiration of six (6) months from the date
hereof.
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(B) SALES OF INVATEC COMMON STOCK SOLD AFTER SIX BUT BEFORE TWELVE MONTHS.
For each share of Invatec Common Stock received as part of the Acquisition
Consideration which is not subject to the restrictions set forth in PARAGRAPH 8
which is sold more than six (6) but less than twelve (12) months after the date
hereof, Invatec will pay the selling Stockholder the amount by which the sum of
the Current Market Price as of the Closing Date plus One Dollar ($1.00) exceeds
the greater of (a) the Current Market Price as of the date on which such share
is sold or (b) the Current Market Price as of the Closing Date. The Parties
acknowledge and agree that the foregoing calculation cannot result in a payment
to Stockholders greater than One Dollar ($1.00) per share of Invatec Common
Stock.
(C) SHARES OF INVATEC COMMON STOCK NOT SOLD WITHIN TWELVE MONTHS. If the
Current Market Price as of the Subsequent Measurement Date is less than the
Agreed Closing Value of Invatec Stock, then Invatec will pay each Stockholder
for each share of Invatec Common Stock issued to such Stockholder as part of the
Acquisition Consideration (after giving effect to any adjustment pursuant to
PARAGRAPH 5) which is still owned by the Stockholder as of the Subsequent
Measurement Date, the amount by which the Agreed Closing Value of Invatec Stock
exceeds the greater of (a) the Current Market Price as of the Subsequent
Measurement Date or (b) the Current Market Price as of the Closing Date. The
Parties acknowledge and agree that the foregoing calculation cannot result in a
payment to Stockholders greater than Two Dollars ($2.00) per share of Invatec
Common Stock. The payment, if any, to be made by Invatec pursuant to this
PARAGRAPH 6, may be made by Invatec, at Invatec's option, either in cash, or by
issuing to each Stockholder Invatec Common Stock at a per share price equal to
the Current Market Price as of the Subsequent Measurement Date.
PARAGRAPH 7. OFFSET. To the extent permitted by applicable law, and
subject to the limits on Damage Claims and on indemnification claims in SECTION
6.04 and SECTION 7.06 of the Uniform Provisions, all amounts due and owing to a
Stockholder under this Agreement shall be subject to offset by Invatec to the
extent of any damages incurred as a result of any Stockholder's breach of this
Agreement, commencing on the tenth (10th) day after Invatec sends written notice
to the Stockholders of the alleged breach, unless Stockholders cure same within
such 10-day period. Each Stockholder hereby acknowledges and agrees that but for
the right of offset contained in this PARAGRAPH 7, Invatec would not have
entered into this Agreement or any of the transactions contemplated herein.
PARAGRAPH 8. SECURITIES LAWS.
(A) EACH STOCKHOLDER'S REPRESENTATIONS AND WARRANTIES CONCERNING
SECURITIES. As of the date hereof, each Stockholder hereby makes the following
representations and warranties to and for the benefit of Invatec: (i) that such
Stockholder has been provided with copies of Invatec's Prospectus dated June 10,
1998, as supplemented (the " Prospectus"), and has been provided as much time
and opportunity as he deemed appropriate to review and study such materials, and
to consult with Invatec regarding the merits and risks of the transactions
contemplated by this Agreement; (ii) that such Stockholder has had adequate
opportunity to ask questions of and receive answers from the officers of Invatec
pertaining to the purchase of the Invatec Common Stock pursuant to this
Agreement, and (iii) all such questions have been answered to the satisfaction
of such Stockholder.
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(B) TRANSFER RESTRICTIONS. Each Stockholder hereby agrees that except for
transfers to immediate family members who agree to be bound by the restrictions
set forth in this PARAGRAPH 8(B) (or trusts for the benefit of a Stockholder or
family members, or trusts in which a Stockholder is both the grantor and the
beneficiary, the trustees of which so agree), for a period of twelve (12) months
from the Closing Date, such Stockholder will not sell, assign, exchange,
transfer, appoint, or otherwise dispose of one-half (1/2) of the shares of
Invatec Common Stock received by such Stockholder pursuant to this Agreement.
The certificates evidencing the Invatec Common Stock delivered to each
Stockholder pursuant to this Agreement which are subject to this restriction
will bear a legend substantially in the form set forth below and containing such
other information as Invatec may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
EXCHANGED, TRANSFERRED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF
WITHOUT THE WRITTEN CONSENT OF INVATEC, AND INVATEC SHALL NOT BE REQUIRED
TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO THE EXPIRATION OF
TWELVE (12) MONTHS FROM THE DATE OF THIS CERTIFICATE. UPON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, INVATEC AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
PARAGRAPH 9.MULTIPLE COUNTERPARTS; FACSIMILE SIGNATURES. 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. For purposes
of the Agreement and all documents, instruments and agreements executed in
connection herewith, facsimile signatures shall be deemed to be original
signatures. In addition, if any Party executes facsimile copies of this
Agreement or any documents , instruments of agreements executed in connection
herewith, such copies shall be deemed originals.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first above written.
INVATEC:
INNOVATIVE VALVE TECHNOLOGIES, INC.
By: _______________________________________
XXXXXXX X. XXXXXXXX,
Senior Vice President
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INVATEC SUB:
PLANT ACQUISITION, INC.
By: _______________________________________
XXXXXXX X. XXXXXXXX,
Senior Vice President
STOCKHOLDERS:
__________________________________________
XXXXXXX X. XXXXXX
__________________________________________
XXXXXXX X. XXXXXX
__________________________________________
XXXX X. XXXXXX, XX.
THE COMPANY:
PLANT MAINTENANCE, INC.
By:_______________________________________
XXXXXXX X. XXXXXX, PRESIDENT
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The undersigned, the spouses of each of Xx. Xxxxxx, Xx. Xxxxxx, and
Xx. Xxxxxx, Jr., are fully aware of, understand, and fully consent and agree to
the provisions of this Merger Agreement, and its binding effect upon any
community or other property interests that they may own in the Company Capital
Stock (or alternatively, in order to confirm that they have no right, title or
interest, legal or beneficial, in the shares of Company Capital Stock standing
in the names of Xx. Xxxxxx, Xx. Xxxxxx, and Xx. Xxxxxx) and their awareness,
understanding, consent and agreement are evidenced by their execution hereof.
__________________________________________
NAME:_________________________,
SPOUSE OF XXXXXXX X. XXXXXX
__________________________________________
NAME:_________________________,
SPOUSE OF XXXXXXX X. XXXXX
__________________________________________
NAME:_________________________,
SPOUSE OF XXXX X. XXXXXX, XX.
Schedule I - Indebtedness
Schedule II - Working Capital
Schedule III - Factored Receivables
Schedule 3.04 - Capital Stock of Invatec
Schedule 3.05 - Subsidiaries of Invatec
Exhibit A - Certain Company Financial Statements
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