EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into the day of
July, 1997, by and among INNOVATIVE VALVE TECHNOLOGIES, INC.
("INVATEC"), a Delaware corporation, X. XXXXX XXXX, an individual ("Xx. Xxxx"),
X.X. XXXX, an individual ("Xx. Xxxx"), (Xx. Xxxx and Xx. Xxxx being sometimes
hereinafter referred to collectively as the "Stockholders" and individually as a
"Stockholder"), PUGET INVESTMENTS, INC., a Washington corporation ("PII"), and
XXXXXXXXXX-BENICIA INC., a Washington corporation ("FBI") (PII and FBI being
hereinafter referred to individually and collectively as the "Company").
INVATEC, Stockholders and the Company are sometimes hereinafter referred to
collectively as the "Parties" or individually as a "Party."
PRELIMINARY STATEMENT
WHEREAS, Stockholders are the legal and beneficial owners and holders of
one hundred seventy-three (173) shares of the Common Stock of PII, and twenty
thousand (20,000) shares of the Common Stock of FBI (the "Subject Shares"), the
Subject Shares constituting all of the issued and outstanding common stock of
the Company; and
WHEREAS, INVATEC desires to acquire from Stockholders, and Stockholders
desire to sell to INVATEC, all of the Subject Shares, on the terms and
conditions and for the consideration set forth in this Agreement (the
"Acquisition");
WHEREAS, 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/or subsidiaries of INVATEC.
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, 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 Standard Provisions, as the case may
be.
"ACCOUNTING FIRM" means KPMG Peat Marwick in Seattle, Washington.
"ACQUIRED BUSINESS" means the business conducted by the Company
and/or Subsidiaries.
"ACQUISITION CONSIDERATION" has the meaning specified in Paragraph
2.
"CEILING AMOUNT" means $4,500,000.
"CLOSING" has the meaning specified in Paragraph 3.
"CLOSING DATE" means the effective date of the Escrow Agreement.
"COMPANY" has the meaning set forth in the preamble of this
Agreement.
"COMPANY CAPITAL STOCK" means the Common Stock, par value $1.00 per
share, of PII, and the Common Stock, no par value, of FBI.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Xxxxxx
Xxxxxxxxx Xxxxxx & Xxxxxxxx PLLC, of Seattle, Washington.
"COUNSEL FOR INVATEC" means Xxxxx, Xxxxx & Xxxxxx Incorporated, of
Houston, Texas.
"CURRENT BALANCE SHEET" means the balance sheet of the Company as of
March 31, 1997.
"CURRENT BALANCE SHEET DATE" means March 31, 1997.
"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 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 exception is taken to that representation and warranty.
"EFFECTIVE DATE" means the date of this Agreement.
"EFFECTIVE TIME" means 12:01 a.m. on the Effective Date.
"ESCROW AGREEMENT" means that certain Option to Purchase and Escrow
Agreement executed in connection herewith by INVATEC, the Stockholders and
the Company.
"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) the Current Balance
Sheet and the related statement of operations for the five (5) months
ended on the Current Balance Sheet Date, which the Company has delivered
to INVATEC
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"LONG BEACH FACILITY" means the property on which Steam Supply &
Rubber Co., Inc. currently conducts its business, located at 0000
Xxxxxxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxxxxxxx 00000.
"NOTE REDUCTION SUM" means the sum of (i) the amount, if any, by
which the total Indebtedness of the Company and the Subsidiaries at the
Effective Time, after giving effect to the payment of the net indebtedness of
the Stockholders to the Company and/or the Subsidiaries (but exclusive of any
prepayment penalties resulting from or arising out of the prepayment of such
indebtedness in connection with or as a result of this transaction, all of which
shall be paid by PII on behalf of the Stockholders), exceeds $3,899,000, plus
(ii)the amount of the redemption premium paid or to be paid by PII in connection
with the redemption of the preferred stock of PII described in Subparagraph 2(E)
hereof, plus (iii) the amount of any prepayment penalties paid or payable by PII
on behalf of the Stockholders, as contemplated in clause (i) above. The Note
Reduction Sum is to be applied to each Convertible Note in accordance with the
Pro Rata Share of the Stockholder to whom such Convertible Note was issued.
"PORTLAND LEASE" has the meaning specified in Paragraph 3.
"SEATTLE FACILITY" means the property on which Steam Supply & Rubber
Co., Inc. currently conducts its business, located at 000 Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx.
"PRO RATA SHARE" of a Stockholder means: (a) 65.2% in the case of
Xx. Xxxx; and (b) 34.8 % in the case of Xx. Xxxx.
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in
Paragraph 3.
"RESPONSIBLE OFFICER" means Xx. Xxxx.
"XXXX EMPLOYMENT AGREEMENT" has the meaning specified in Paragraph
3.
"SUBSIDIARIES" means all of the Company Subsidiaries set forth in
Section 2.01 of the Disclosure Statement.
"THRESHOLD AMOUNT" means 2.0% of the Ceiling Amount.
"UNIFORM PROVISIONS" has the meaning specified in Paragraph 4.
"WORKING CAPITAL" means current assets minus current liabilities of
the Company and the Subsidiaries, on a consolidated basis determined in
accordance with GAAP (except for certain footnote items normally required
by GAAP, the omission of which does not render the calculation materially
inaccurate or misleading). Current liabilities shall include (i) all
accrued and unpaid tax liability (other than as expressly set forth
below), (ii) accruals for taxes on operations of FBI through the Effective
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Time, and (iii) current maturities of long term debt . Current liabilities
shall not include (i) accruals for the real estate excise taxes imposed on
the Company as a result of the Acquisition, for which the Company has
agreed to indemnify Stockholders pursuant to Subparagraph 2(B) hereof, nor
(ii) the Company's liability for payment of transaction expenses as
contemplated in Subparagraph 2(B), nor (iii) the liability to the
Stockholders for a $44,000 loan to pay 1996 income taxes relative to FBI,
which has been or will be repaid to the Stockholders at or prior to
Closing, nor (iv) the liability of the Company for up to $15,000 of
environmental liability, as contemplated in Paragraph 9(A) hereof.
PARAGRAPH 2.PURCHASE AND SALE OF SUBJECT SHARES; REDEMPTION OF PREFERRED
SHARES. (A) Subject to the term and conditions set forth in this Agreement, the
Stockholders hereby agree to sell, convey, transfer, assign and deliver to
INVATEC, and INVATEC hereby agrees to purchase, as of the Effective Time, the
Subject Shares, 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. As consideration for the purchase of the Subject Shares and upon
delivery thereof to INVATEC as of the Effective Time, INVATEC shall deliver to
each Stockholder his Pro Rata Share of the following (the "Acquisition
Consideration"):
(i) in cash or other immediately available funds, the aggregate
amount of Three Million and No/100 Dollars ($3,000,000.00) (inclusive of
the $2,000,000 Option Price under the Escrow Agreement) ; and
(ii) Convertible Subordinated Promissory Notes (the "Convertible
Notes") in form and content acceptable to the Parties, in the aggregate
principal amount of Three Million and No/100 Dollars ($3,000,000.00), less
the Note Reduction Sum.
(B) INCOME AND OTHER TAXES; TRANSACTION EXPENSES. Stockholders shall pay
all income, documentary, transfer, stamp, revenue or other taxes arising out of
the transfer of the Subject Shares or receipt of payments therefor, or any
consideration delivered in connection therewith. Except as hereinafter expressly
set forth in SUBPARAGRAPH 2(C), neither INVATEC nor the Company shall be
responsible for any business, occupation, income, withholding or similar tax, or
any taxes of any kind, of the Stockholders; however, the Company hereby agrees
to indemnify Stockholders for any real estate excise transfer tax imposed on the
Company as a result of the Acquisition. 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; however, the Stockholders may pass one-half (1/2)
of such costs, up to an aggregate maximum of thirty thousand dollars ($30,000),
on to the Company and the Subsidiaries for payment (the liability for which
shall not reduce the Working Capital for purposes of Paragraph 5 below).
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(C) SECTION 338 ELECTION. At INVATEC's option, Stockholders will join with
INVATEC in making an election under Section 338(h)(10) of the Internal Revenue
Code (and any corresponding elections under state or local tax law) with respect
to the purchase and sale of the Company. The Stockholders will have the
opportunity to review any election forms prior to filing. To the extent that by
reason of such election the Stockholders will realize any tax liability that
would not have been realized but for such election, the Company shall pay such
tax (the liability for which shall not reduce the Working Capital for purposes
of Paragraph 5 below).
(D) COMPANY DEBT LIMITATION. The Stockholders shall cause the total
Indebtedness of the Company and the Subsidiaries to be, immediately prior to the
Effective Time, equal to or less than three million eight hundred ninety-nine
thousand dollars ($3,899,000), after giving effect to the repayment to the
Company and/or Subsidiaries of the net Indebtedness owed by the Stockholders and
the Xxxx-Xxxx Partnership to the Company and/or Subsidiaries, but exclusive of
any prepayment penalties resulting from or arising out of the prepayment of such
indebtedness in connection with or as a result of the Acquisition, all of which
are to be paid by Stockholders. At the Effective Time there will not be any
indebtedness owed by the Company or either Subsidiary to any Stockholder (other
than salary accrued in the ordinary course of business), and each Stockholder
shall repay to the Company or either Subsidiary at Closing, the indebtedness
owed by him to the Company or such Subsidiary.
(E) PREFERRED SHARES. If the Stockholders are able to negotiate
successfully a discount in the applicable redemption premium, then the
Stockholders shall cause PII to redeem, as of the Effective Time, all of the
outstanding shares of preferred stock issued by PII, in accordance with the
terms thereof, for aggregate consideration equal to seven hundred ten thousand
five hundred twenty-eight dollars ($710,528), plus accrued dividends, as set
forth in the Company's financial statements through the dates thereof, plus the
redemption premium included in Note Reduction Sum. If the Stockholders are
unable to negotiate successfully a discount in the redemption premium, then such
preferred stock shall not be redeemed, and the entire amount of the redemption
premium payable in accordance with the terms of the preferred stock shall be
included in the Note Reduction Sum.
PARAGRAPH 3. THE CLOSING. (A) Delivery of the items set forth below shall
be made to Counsel for the Company and the Stockholders, as Escrow Agent, under
the Escrow Agreement, on the Closing Date.
(B) STOCKHOLDERS' DELIVERIES. At or before the Closing, Stockholders shall
deliver or cause to be delivered to counsel for Company and the Stockholders, as
Escrow Agent under the Escrow Agreement, the following, in form and content
acceptable to INVATEC:
(i) The Disclosure Statement;
(ii) All of the stock certificates evidencing the Subject Shares,
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
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content acceptable to INVATEC, duly authorized and executed by the record
holder of each such stock certificate;
(iii) An Investor Representation Letter in form and content
acceptable to the Parties, executed by each of the Stockholders with
respect to each Stockholder's acquisition of a Convertible Note as part of
the Acquisition Consideration as of Effective Time;
(iv) Resignations of all directors and officers of the Company and
the Subsidiaries, effective as of the Effective Time;
(v) Employment Agreement in form and content acceptable to INVATEC
and Xx. Xxxx, duly executed by Xx. Xxxx (the "Xxxx Employment Agreement");
(vi) Registration Rights Agreement in form and content acceptable to
the Parties, duly executed by the Stockholders (the "Registration Rights
Agreement");
(vii) All original promissory notes or other debt instruments
executed by the Company or either Subsidiary to any Stockholder, marked
"Paid in Full;"
(viii) Payment of any outstanding amounts owed by any Stockholder to
the Company or either Subsidiary, as expressly set forth in Subparagraph
2(D) hereof;
(ix) Such subordination or other agreements as INVATEC's lender may
require with respect to payment of the Convertible Notes, in form and
content acceptable to the Parties and such lender (which obligation shall
include the obligation to execute hereafter from time to time any
subordination agreements requested by a holder of Senior Indebtedness, as
such term is defined in the Convertible Notes, provided any such
subordination agreement is substantially in the form attached hereto as
Exhibit A);
(x) All of the stock certificates evidencing the preferred stock of
PII, 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
executed by the record holder of each such stock certificate in connection
with the redemption of the preferred stock contemplated in Subparagraph
2(E);
(xi) Lease Agreement in form and content acceptable to the Parties,
covering the business premises of the Company located at 0000 XX 00xx
Xxxxx, Xxxxxxxx, Xxxxxx 00000 (the "Portland Lease"), duly executed by the
Xxxx-Xxxx Limited Partnership, as lessor ("Lessor"), and Steam Supply &
Rubber Co., Inc., as lessee ("Lessee");
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(xii) An opinion of counsel issued by Counsel for the Company and
the Stockholders, in form and content reasonably satisfactory to INVATEC
and INVATEC's counsel;
(xiii)Certified resolutions of the Boards of Directors of the
Company, in form and content reasonably acceptable to INVATEC, authorizing the
transactions contemplated herein; and
(xiv) All other items required to be delivered hereunder or as may
be reasonably requested 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 Stockholders' representations and warranties set forth
herein.
(C) INVATEC'S OBLIGATIONS. At the Closing, INVATEC will deliver or cause
to be delivered to Counsel for the Company and the Stockholders, as Escrow
Agent, the following in form and content acceptable to the Stockholders:
(i) Certified checks or wire transfers of funds in the aggregate
amount of Two Million and No/100 Dollars ($2,000,000.00), as payment of
the Option Payment under the Escrow Agreement (the unpaid balance of the
Acquisition Consideration in the amount of $1,000,000, subject to
adjustment pursuant to Paragraph 2D hereof, being payable as contemplated
in the Escrow Agreement);
(ii) The Convertible Notes (subject to substitution at the Effective
Time for adjustments to the principal amounts thereof pursuant to the terms of
this Agreement);
(iii) Guaranty in form and content acceptable to the Parties, duly
executed by Allwaste, Inc., a Delaware corporation and a significant
shareholder of INVATEC, guaranteeing repayment of the Convertible Notes;
(iv) The Xxxx Employment Agreement, duly executed by INVATEC;
(v) The Portland Lease, duly executed by Lessor and Lessee;
(vi) The Registration Rights Agreement, duly executed by INVATEC;
(vii) An opinion of counsel issued by Counsel for INVATEC, in form
and content reasonably satisfactory to Stockholders and Counsel for the
Company and the Stockholders;
(viii)Certified resolutions of the Board of Directors of INVATEC, in
form and content reasonably acceptable to Stockholders, authorizing the
transactions contemplated herein; and
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(ix) 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.
(D) 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, including any subordination agreements requested by any
holder of Senior Indebtedness, as such term is defined in the Convertible Notes,
provided any such subordination agreement is substantially in the form attached
hereto as Exhibit A. 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 assigning and confirming to INVATEC, all of the Subject Shares, or if
necessary, any of the assets of the Company or either Subsidiary.
(E) DRESSER INDUSTRIES. The Parties acknowledge that Dresser Industries,
Inc. ("Dresser") has not consented to the Acquisition, nor waived any of its
rights with respect to any breach or default under, or violation of, any
agreement of Dresser with the Company or either of the Subsidiaries (hereafter,
a "Dresser Agreement"), caused by the failure to obtain the consent of Dresser
in accordance with the terms of any Dresser Agreement; however, the
Stockholders, the Company and the Subsidiaries hereby represent and warrant that
as of the Effective Time (i) each Dresser Agreement is in full force and effect,
is valid and enforceable, and has not been altered, modified or amended in any
manner, except as described in the Disclosure Statement, and (ii) neither
Dresser nor such Company or Subsidiary is in default under the terms of any
Dresser Agreement (except for any default caused by the failure to obtain the
consent of Dresser to the Acquisition in accordance with the terms of a Dresser
Agreement). The Stockholders hereby covenant and agree to use their best
efforts, as reasonably requested by the Company, at the Company's expense, for
one hundred twenty (120) days after the Closing Date (i) to obtain the consent
of Dresser to the Acquisition, and (ii) to convince Dresser not to terminate or
modify any Dresser Agreement.
PARAGRAPH 4. INCORPORATION OF UNIFORM PROVISIONS. (A) The Uniform
Provisions for Business Combinations attached hereto as Annex 1 (the "Uniform
Provisions"), are hereby 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) The Table of Contents of the Uniform Provisions is hereby
amended by deleting therefrom all references to "and Newco".
(ii) The first paragraph of each of Article I and Article II is
hereby amended by deleting therefrom the phrase "date of this Agreement,
and will be, as amended or supplemented pursuant to Section 4.07, on the
Closing Date and immediately prior to".
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(iii) Sections 2.03(d) and 3.02(d) are hereby amended by deleting
therefrom the phrase "Except for (i) the filing of the Certificates of
Merger, if any, with the applicable Governmental Authorities, (ii) filings
of the Registration Statement under the Securities Act and the SEC order
declaring the Registration Statement effective under the Securities Act
and (iii) as may be required by the HSR ACT or the applicable state
securities or blue sky laws".
(iv) Subsection 2.14(a)(i) is hereby deleted in its entirety and
substituted therefor is the following:
(i) The Company's Financial Statements prepared as of the
Company's fiscal years ending in 1994, 1995, and 1996, each year-end
and as of March 31, 1997 (including in each case the related
schedules and notes) present fairly, in all material respects, the
financial position of the Acquired Business at the respective dates
of the balance sheets included therein and the results of operations
and cash flows of the Acquired Business and stockholders' or other
owners' equity for the respective periods set forth therein and have
been prepared in accordance with GAAP. As of the date of any balance
sheet included in those Financial Statements, neither the Company
nor any Company Subsidiary then had any outstanding Indebtedness to
any Person or any liabilities of any kind (including contingent
obligations, tax assessments or unusual forward or long-term
commitments), or any unrealized or anticipated loss, which in the
aggregate then were Material to the Acquired Business and required
to be reflected in such Financial Statements or in the notes related
thereto in accordance with GAAP which were not so reflected. All of
the other Financial Statements of the Company (including in each
case any related schedules or notes) delivered to INVATEC present
fairly, in all material respects, the financial position of the
Acquired Business at the respective dates of the balance sheets
included therein and the results of operations and cash flows of the
Acquired Business and stockholders' or other owners' equity for the
respective periods set forth therein and have been prepared in
accordance with GAAP (except for certain footnote disclosures
normally required by GAAP, the omission of which did not cause such
Financial Statements to be materially misleading). As of the date of
any balance sheet included in those Financial Statements, neither
the Company nor any Company Subsidiary then had any outstanding
Indebtedness to any Person or any liabilities of any kind (including
contingent obligations, tax assessments or unusual forward or
long-term commitments), or any unrealized or anticipated loss, which
in the aggregate then were Material to the Acquired Business and
required to be reflected in such Financial Statements which were not
so reflected (except for certain footnote disclosures normally
required by GAAP, the omission of which did not cause such Financial
Statements to be materially misleading).
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(v) The phrase "To the knowledge of the Stockholders" is hereby
inserted in the following locations:
(A) Before the word "except" in the third line of Subsection
2.19(d);
(B) Before the word "Except" at the beginning of Subsection 2.20(b);
(C) Before the word "Except" at the beginning of the first and third
sentences of Section 2.21; and
(D) At the beginning of each of the last two sentences of Section
2.23;
(vi) The fourth line of Subsection 2.25 is hereby amended by
inserting the phrase "and the Stockholders" after the phrase "knowledge of
the Company".
(vii) Section 2.26 is hereby amended by deleting therefrom the
phrase "the IPO Closing Date" and substituting therefor the phrase "the
Effective Time."
(viii) The last sentence of Section 2.27(b) is hereby deleted.
(ix) Article III, Section 7.03 and Section 10.04 are hereby amended
by deleting therefrom the phrases "each of INVATEC and Newco", "Either of
INVATEC or Newco", "INVATEC and Newco" and "INVATEC or Newco", and
substituting therefor the word "INVATEC".
(x) The first paragraph of Article III is hereby amended by deleting
therefrom the phrases "jointly and severally" and "the date of this
Agreement, and will be on the Closing Date and immediately prior to".
(xi) Section 3.02(c) is hereby amended by deleting therefrom the
phrase "negative pledge covenants of INVATEC respecting its assets" and
substituting therefor the phrase "those in favor of INVATEC's third party
lender".
(xii) Section 3.04 is hereby deleted in its entirety and substituted
therefor is the following:
Section 3.04 CAPITAL STOCK OF INVATEC. (a) At the Effective Time,
(i) the authorized Capital Stock of INVATEC is comprised of (A)
30,000,000 shares of INVATEC Common Stock, $.001 par value per
share, and (B) 5,000,000 shares of preferred stock, $.001 par value
per share, and (ii) there are (A) Three Hundred Fifty-Seven Thousand
One Hundred Fourteen (357,114) shares of INVATEC Common Stock,
issued and outstanding and (B) no shares of INVATEC preferred stock
issued and outstanding.
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(b) All shares of INVATEC Common Stock to be issued pursuant
to the Convertible Notes, when issued (i) will have been duly
authorized and validly issued in accordance with the DGCL and
INVATEC's Charter Documents and (ii) will be fully paid and
nonassessable. None of the shares of INVATEC Common Stock to be
issued pursuant to the Convertible Notes 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.
(xiii)Section 3.05 is hereby deleted in its entirety and substituted
therefor is the following:
Section 3.05 SUBSIDIARIES. (a) At the Effective Time, INVATEC will
have no subsidiaries.
(xiv) Article III is hereby amended by inserting the following:
Section 3.08. DUE DILIGENCE. Prior to the Closing Date, INVATEC
investigated and reviewed such of the books, records and operations of the
Acquired Business as INVATEC considered necessary to satisfy itself as to
the condition of the Acquired Business as of the Closing Date. INVATEC has
notified the Stockholders of any ACTUAL knowledge it has obtained that any
of the Stockholders' representations or warranties contained herein are
untrue or materially misleading as of the Closing Date. To the extent that
INVATEC has ACTUAL knowledge that any of the Stockholders' representations
or warranties contained herein are untrue or materially misleading as of
the Closing Date, the applicable representation or warranty KNOWN to be
untrue or misleading shall be unenforceable, with respect and to the
extent of such knowledge; however, based on the investigation and review
conducted by Invatec, it has no actual knowledge as of the Closing Date
that any of the Stockholders' representation or warranties are untrue as
of the Closing Date. IN ALL OTHER RESPECTS THE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS SHALL REMAIN UNAFFECTED BY
THE PROVISIONS OF THIS SECTION 3.08.
Section 3.09. FUTURE PERFORMANCE. INVATEC acknowledges that it has
had the opportunity to inspect the business and properties of the Company
and the Subsidiaries, and understands that irrespective of the provision
to INVATEC of financial forecasts, future budgets and other future looking
documents, that no representations or warranties as to the future
performance of the business of the Company or the Subsidiaries have been
or are being made by the Stockholders or the Company.
(xv) Articles IV, V and XI are hereby deleted in their entirety.
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(xvi) Sections 6.01, 6.03 and 6.04 are hereby deleted in their
entirety, and substituted therefor is the following:
Section 6.04 REMOVAL OF GUARANTIES. INVATEC will cause (a) the
Stockholder Guaranties in favor of the Union Bank of California,
listed in Section 6.04 of the Disclosure Statement, to be terminated
in conjunction with the release of the documents from escrow, and
(b) all other Stockholder Guaranties listed in Section 6.04 of the
Disclosure Statement to be terminated as promptly as practicable
thereafter.
(xvii) Subsection 7.02(a)(iii) is hereby deleted in its entirety,
and substituted therefor is the following:
(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 to INVATEC or its counsel by
the Company prior to the Effective Time or by 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, 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, for the period
prior to the Effective Time, 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 and the Stockholders have been given
a reasonable opportunity to review such preliminary prospectus or or
other documentation or furnish such information (each Third Party
Claim described in Section 7.02(a) and each Third Party Claim
described in 7.02(b) being an "INVATEC Indemnified Loss").
(xviii) Section 7.06 is hereby amended by adding Subsection (c) as
follows:
(C) To the extent the Indemnifying Party indemnifies the Indemnified
Party for claims upon which third parties, including insurance
companies, may be liable, the Indemnifying Party shall be fully
subrogated to all of the rights and remedies of the Indemnified
Party with respect to such claims.
(xix) With respect to Xx. Xxxx only, Section 8.01 is hereby amended
by (i) deleting from the third line thereof the phrase "third anniversary"
and substituting therefor the phrase "second anniversary".
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(xx) The last sentence of Section 10.12 is hereby deleted in its
entirety, and substituted therefor is the following:
This Section 10.12 shall not affect the indemnification, subrogation
or other contractual rights of the Stockholders under this Agreement
or any other Transaction Document.
(xxi) Subsection 10.05(b) is hereby amended by inserting at the
commencement thereof the phrase "except as set forth in Subparagraphs 2(B)
and 2 (C) of the Agreement".
(xxii) Section 10.07 is hereby deleted in its entirety, and
substituted therefore is the following:
SECTION 10.07. JURISDICTION AND VENUE. THE PARTIES AGREE THAT AS TO
ANY DISPUTE HEREUNDER WHICH RESULTS IN LITIGATION, JURISDICTION AND
VENUE WILL BE IN BOTH THE FEDERAL AND STATE COURTS LOCATED IN XXXXXX
COUNTY, TEXAS , AND THE FEDERAL AND STATE COURTS LOCATED IN KING
COUNTY, WASHINGTON.
PARAGRAPH 5.POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. Within forty-five
(45) days after the Effective Time, the Stockholders shall deliver to INVATEC an
unaudited balance sheet and income statement of the Business, prepared as of
11:59 p.m. on the day preceding the Effective Date (the "Post-Closing Financial
Statements"), which shall be true, complete and correct in all respects and
prepared in accordance with generally accepted accounting principles,
consistently applied, (except for certain footnote disclosures normally required
by GAAP, the omission of which will not cause the Post-Closing Financial
Statements to be materially misleading), and certified as true, complete and
correct by Stockholders. These Post-Closing Financial Statements shall become
final and binding on the Parties on the 15th day following receipt thereof by
INVATEC unless INVATEC furnishes written notice of INVATEC's disagreement
("Notice of Disagreement") to Xx. Xxxx 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 INVATEC to Xx. Xxxx 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. All proceedings conducted by the Accounting Firm shall be conducted
at the offices of the Accounting Firm in Seattle, Washington. 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.
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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 by Stockholders. The fees and disbursements of Stockholders'
independent auditors and counsel incurred in connection with this Paragraph 5
shall be borne 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 the
procedures set forth hereinabove shall constitute the "Final PostClosing
Financial Statements." To the extent that the Working Capital of the Company, as
set forth in the Final Post-Closing Financial Statements, is less than or
greater than five hundred seventy-four thousand dollars ($574,000), the
deficiency will be paid in cash by Stockholders to INVATEC, or the excess will
be paid in cash by INVATEC to the Stockholders, as applicable, within five
business days of delivery of the Final Post-Closing Financial Statements to
INVATEC and to Xx. Xxxx. The Purchase Price shall also be decreased by the
amount of the Note Reduction Sum, to the extent of any adjustments to the
principal amounts of the Convertible Notes which were not made previously, which
decrease shall be effected by reducing the original principal amount of each
Convertible Note, according to the Pro Rata Share of the Stockholder to whom
such Convertible Note was issued, and each Stockholder hereby covenants and
agrees to execute and deliver to INVATEC, within three (3) business days after
receipt of an execution counterpart thereof from INVATEC, a note modification
agreement reflecting this modification of the Acquisition Consideration and of
the original principal amount of such Stockholder's Convertible Note.
PARAGRAPH 6.OFFSET; ATTORNEYS' FEES. To the extent permitted by applicable
law, all amounts due and owing to a Stockholder under this Agreement or a
Convertible Note shall be subject to offset by the INVATEC to the extent of any
damages incurred as a result of any Stockholder's breach of this Agreement or
any document, instrument, or agreement executed by any Stockholder in connection
herewith after thirty (30) days prior written notice to the Stockholders of the
alleged breach, and the failure of the Stockholders to cure same within such
30-day period. Any offset against a Convertible Note shall be against (i) the
payments next coming due under such Convertible Note, or (ii) the then
outstanding principal balance of the Note, at the election of INVATEC. Each
Stockholder hereby acknowledges and agrees that but for the right of offset
contained in this Paragraph 6, INVATEC would not have entered into this
Agreement or any of the transactions contemplated herein. If any legal action or
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing Party or
Parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding in addition to any other remedies to which
such Party or Parties may be entitled at law or equity. The rights and remedies
granted herein are cumulative and not exclusive of any other right or remedy
granted herein or provided by law.
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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(A) if to a Stockholder, addressed to him at:
Xx. X. Xxxxx King
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000; or
Xx. X.X. Xxxx
00000 000xx Xxxxxx XX
Xxxxxxxxxxx, XX 00000;
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xx. Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx Xxxxxx & Xxxxxxxx PLLC
0000 Xxx Xxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
PARAGRAPH 8.IPO HOLDBACK. Each Stockholder hereby covenants and agrees
that (i) he will not dispose of any of the INVATEC's common stock issued upon
conversion of the Convertible Notes for a period of two (2) years after the IPO
Closing Date without the prior written consent of the Company, and (ii) he will
execute such agreements as may be required by the Company in order to evidence
this covenant and agreement.
PARAGRAPH 9. ENVIRONMENTAL INDEMNITY.
A. SEATTLE FACILITY. The Parties acknowledge that there has occurred
surface staining of the soil within a certain area which is approximately ten
feet (10') by twenty-five feet (25') at the Seattle Facility, and agree that it
is in the best interests of the Parties to remove the stained soil. The Parties
contemplate that (i) the stained soil will be removed based on a visual
inspection, to depths of up to six (6) or eight (8) feet in certain areas, (ii)
testing will be done to confirm the removal of all contaminated soil, and (iii)
the area will be backfilled with appropriate materials. In addition to any other
liabilities and obligations of the Stockholders hereunder, and without regard to
any Threshold Amount except as expressly set forth in this Xxxxxxxxx 0,
Xxxxxxxxxxxx hereby agree to indemnify, defend and hold harmless INVATEC, the
Company and the Subsidiaries from and against any loss, cost, expense, liability
or damages caused by, arising out of or resulting from any clean-up costs or
remedial work relating to the foregoing, to the extent, but only to the extent,
that such losses, costs, expenses, liabilities and damages exceed Fifteen
Thousand Dollars ($15,000) in the aggregate.
B. LONG BEACH FACILITY. In addition to any other liabilities and
obligations of the Stockholders hereunder, and without regard to any Threshold
Amount, Stockholders hereby agree to indemnify, defend and hold harmless
INVATEC, the Company and the Subsidiaries from and against any loss, cost,
expense, liability or damages caused by, arising out of or resulting from (a)
any release (as defined in the Environmental Laws) at, from, in or on the Long
Beach Facility which occurred at any
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time prior to the Effective Time (including the time prior to the date on which
Steam Supply & Rubber Co., Inc. took possession of the Long Beach Facility)
which, if all relevant facts were known to the relevant Governmental
Authorities, reasonably could be expected to require remediation to avoid deed
record notices, restrictions, liabilities or other consequences that would not
be applicable if that release had not occurred; (b) the presence of any Solid
Wastes, Hazardous Wastes or Hazardous Substances in, on or about the Long Beach
Facility as of the Effective Time; (c) any storage tanks on or under the Long
Beach Facility, and any materials released into the surrounding environment
therefrom; and (d) any clean-up costs, remedial work, damage to natural
resources, personal injury or property damage, including any claim under CERCLA,
relating to any of the foregoing. To the extent the Stockholders indemnify
Invatec, Xxxxxxxxxx Co. or their respective Affiliates for claims under this
Xxxxxxxxx 0, Xxxxxxxxxxxx shall be subrogated to all of the rights and remedies
of Invatec, Xxxxxxxxxx Co. and their respective Affiliates with respect thereto.
PARAGRAPH 10. MEDIATION AND ARBITRATION OF DISPUTES. Except for disputes
to be resolved by the Accounting Firm as contemplated in Paragraph 5 hereof, in
the event that any disputes arise regarding the interpretation or enforcement of
this Agreement, such disputes shall be resolved as follows:
The Parties shall first attempt to resolve them by good faith
negotiations. If any disputes cannot be resolved by direct negotiations within
fifteen (15) days or such longer time as is mutually agreed by the Parties, then
the Parties shall submit such disputes to mediation, which shall focus on the
needs of all concerned Parties and seek to solve problems cooperatively, with an
emphasis on dialogue and accommodation. The goal of the mediation shall be to
fairly resolve each dispute in a manner which preserves and enhances the
Parties' relationships. Any Party desiring mediation may begin the process by
giving the other Parties a written request to mediate which describes the issues
involved and invites such other Parties to join in naming a mutually agreeable
mediator and setting a time frame for the mediation meeting. The Parties and
mediator may adopt any procedural format that seems appropriate for the
particular dispute. The contents of all discussions during the mediation shall
be confidential and non-discoverable in subsequent arbitration or litigation, if
any. If the Parties can agree upon a mutually acceptable resolution to the
disagreement, it shall be reduced to writing, signed by the Parties, and the
dispute shall be deemed resolved. The costs of mediation shall be divided
equally among the Parties to the dispute.
If any dispute cannot be resolved through mediation, or if any Party
refuses to mediate or to name a mutually acceptable mediator or establish a time
frame for mediation within a period of time that is reasonable considering the
urgency of the disputed matter, or fails to agree to procedures for the
mediation, then any Party who desires dispute resolution shall seek binding
arbitration as hereinafter provided.
All disputes among the Parties arising out of or related to this Agreement
which have not been settled by mediation shall be resolved by binding
arbitration within the State of Washington. Within twenty (20) days of receiving
written demand for arbitration, the Parties involved in the dispute shall
attempt to reach agreement upon the selection of a qualified impartial
arbitrator. If
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the Parties cannot agree upon an arbitrator within twenty (20) days from the
date written demand for arbitration is served, the Party demanding arbitration
may commence an action for the limited purpose of obtaining appointment of an
arbitrator by the Presiding Judge of the Superior Court of the State of
Washington for King County. Any arbitration shall be conducted in accordance
with the rules of the American Arbitration Association then in effect, although
the arbitration need not be conducted under the auspices of the Association. Any
arbitration award may be enforced by judgment entered in the Superior Court of
the State of Washington for King County.
PARAGRAPH 11. MULTIPLE COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed in multiple counterparts, each of which shall have the force and
effect of an original, and all of which together shall constitute but one and
the same agreement. For purposes of the Agreement and all documents, instruments
and agreements executed in connection herewith other than the Convertible Notes,
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 other than the
Convertible Notes, such copies shall be deemed originals.
EXECUTED AND DELIVERED EFFECTIVE as of the date first written above.
INVATEC:
INNOVATIVE VALVE TECHNOLOGIES,
INC., a Delaware corporation
By:
XXXXXXX X. XXXXXXXX
Senior Vice President
STOCKHOLDERS:
X. XXXXX KING, Individually
X.X. XXXX, Individually
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The undersigned, the spouses of each of Xx. Xxxx and Xx. Xxxx, are
fully aware of, understand, and fully consent and agree to the provisions of
this Stock Purchase Agreement, and its binding effect upon any community or
other property interests that they may own in the Subject Shares, and their
awareness, understanding, consent and agreement are evidenced by their execution
hereof. The undersigned spouses of each of Xx. Xxxx and Xx. Xxxx additionally
join in the execution hereof in order to sell, assign and transfer unto INVATEC
all of their respective rights, titles and interests, legal or beneficial, if
any, in the Subject Shares.
---------------------------------------
NAME: XXXXX XXXX,
SPOUSE OF X. XXXXX XXXX
---------------------------------------
NAME: XXXXXX X. XXXX
SPOUSE OF X.X. XXXX
THE COMPANY:
PUGET INVESTMENTS, INC.
a Washington corporation
By:
Name:
Title:
XXXXXXXXXX-BENICIA INC.
a Washington corporation
By:
Name:
Title:
Exhibit A -- Form of Subordination Agreement
Annex 1 - Uniform Provisions
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