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STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 18, 1999 (this "Agreement"),
among Xxxxxxx Acquisition Sub, Inc., a Delaware corporation ("Purchaser"), and
Xxxxxx Industrial Services Group, Inc. (the "Stockholder").
RECITALS:
WHEREAS, concurrently, with the execution and delivery of this Agreement,
Purchaser, Flowserve Corporation, a New York corporation ("Parent"), and
Innovative Valve Technologies, Inc., a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (the "Merger Agreement"), which
provides, among other things, for the acquisition of the Company by Parent by
means of a cash tender offer (the "Offer") by Purchaser for all outstanding
shares of Common Stock, par value $0.001 per share, of the Company (the "Common
Stock"), including the associated preferred share purchase rights (the "Rights,"
and together with the Common Stock, the "Shares") and for the subsequent merger
of Purchaser with and into the Company (the "Merger"), all on the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Stockholder has filed a voluntary petition under Chapter 11 of
the U.S. Bankruptcy Code with the Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that the Stockholder agree, and
the Stockholder has agreed, to enter into this Agreement; and
WHEREAS, the Board of Directors of the Company has approved this Agreement
and the transactions contemplated hereby prior to the date hereof; and
WHEREAS, the current board of directors of the Stockholder has approved
this Agreement and the transactions contemplated hereby prior to the date
hereof;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. Terms used and not defined herein, but defined in the
Merger Agreement, shall have the respective meanings ascribed to them in the
Merger Agreement.
2. Tender of Shares; Agreement to Sell; Consideration.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, the Stockholder hereby agrees that, unless the Company shall
have terminated the Merger Agreement to accept a Superior Proposal and
subject to the approval of the Bankruptcy Court to the extent necessary, it
shall validly tender (or cause the record owner of such shares to validly
tender), and not to withdraw, pursuant to and in accordance with the terms
of the Offer, not later than the tenth business day after commencement of
the Offer (or if Bankruptcy Court approval of this Agreement pursuant to
Section 3(e) is received or the Stockholder's plan of reorganization is
confirmed by the Bankruptcy Court after such tenth business day, not later
than the first business day after the earlier to occur of such approval or
confirmation), the number of shares set forth opposite the Stockholder's
name on Schedule I hereto (the "Existing Shares" and, together with any
Shares acquired by the Stockholder in any capacity after the date hereof
and prior to the termination of this Agreement by means of purchase,
dividend, distribution, exercise of options, warrants or other rights to
acquire Shares or in any other way, the "Stockholder Shares"), all of which
are beneficially owned by the Stockholder. Unless the Company shall have
terminated the Merger Agreement to accept a Superior Proposal and subject
to the approval of the Bankruptcy Court to the extent necessary, if the
Stockholder acquires beneficial ownership of Shares after the date hereof
and prior to termination of this Agreement, the Stockholder shall tender
such Shares on such tenth business day or, if later, on the second business
day after such acquisition (or if Bankruptcy
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Court approval of this Agreement pursuant to Section 3(e) is received or
the Stockholder's plan of reorganization is confirmed after such tenth
business day or such later date, not later than the first business day
after the earlier to occur of such approval or confirmation).
(b) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable hereunder to the Stockholder such amounts
as are required to be withheld under the Internal Revenue Code of 1986, as
amended (the "Code"), or any applicable provision of state, local or
foreign tax law, as specified in the Offer Documents. To the extent that
amounts are so withheld by Purchaser, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Stockholder.
(c) The Stockholder hereby permits Parent and Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement
(including all documents and schedules filed with the SEC) the
Stockholder's identity and ownership of the Stockholder Shares and the
nature of the Stockholder's commitments, arrangements and understandings
under this Agreement.
(d) Subject to paragraph 2(b) hereof, Purchaser shall purchase the
Stockholder Shares for an aggregate price equal to the Offer Price
multiplied by the number of Stockholder Shares and shall pay such amount as
directed by Bankers Trust Company; provided, however, that this Agreement
shall not be binding on the Stockholder unless the Offer Price shall equal
or exceed $1.50 per share.
3. Additional Agreements.
(a) Except as otherwise contemplated by this Agreement, the
Stockholder shall, at any meeting of the stockholders of the Company,
however called, or in connection with any written consent of the
stockholders of the Company, vote (or cause to be voted) all Shares then
held of record or beneficially owned by the Stockholder, (i) in favor of
the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any
actions required in furtherance thereof and hereof and (ii) against any
proposal relating to an Acquisition Proposal and against any action or
agreement that would impede, frustrate, prevent or nullify this Agreement,
or result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the
Merger Agreement or which would result in any of the conditions set forth
in Annex A to the Merger Agreement or set forth in Article VI of the Merger
Agreement not being fulfilled.
(b) The Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement and the Merger Agreement, it shall not (i)
offer to transfer (which term shall include, without limitation, any sale,
tender, gift, pledge, assignment or other disposition), transfer or consent
to any transfer of, any or all of the Stockholder Shares or any interest
therein without the prior written consent of Purchaser, (ii) enter into any
contract, option or other agreement or understanding with respect to any
transfer or any or all of the Stockholder Shares or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization or consent
in or with respect to the Stockholder Shares, (iv) deposit the Stockholder
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Stockholder Shares or (v) take any other action that
would make any representation or warranty of the Stockholder contained
herein untrue or incorrect in any material respect or in any way restrict,
limit or interfere in any material respect with the performance of its
obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Except as otherwise contemplated by this Agreement, the
Stockholder hereby irrevocably grants to, and appoints, Purchaser and any
designee of Purchaser, and each of them individually, the Stockholder's
proxy and attorney-in-fact with full power of substitution, for and in the
name, place and stead of the Stockholder, to vote the Stockholder Shares,
or grant a consent or approval in respect of the Stockholder Shares, in the
manner specified in Section 3(a). The Stockholder represents that any
proxies heretofore given in respect of the Stockholder Shares are not
irrevocable and that any such proxies are hereby revoked. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section 3(c)
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is given in connection with the execution of the Merger Agreement and that
such irrevocable proxy is given to secure the performance of the duties of
the Stockholder under this Agreement. The Stockholder hereby further
affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, unless this Agreement is terminated
under Section 6. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
(d) Subject to Section 7, the Stockholder hereby agrees that the
Stockholder shall not, directly or indirectly, encourage, solicit, initiate
or participate in any way in any discussions or negotiations with, or
provide any information to, or afford any access to the properties, books
or records of the Company or any of its Subsidiaries to, or otherwise take
any other action to assist or facilitate, any Person or group (other than
Parent or Purchaser or any affiliate or associate of Parent or Purchaser)
concerning any Acquisition Proposal. Upon execution of this Agreement, the
Stockholder will immediately cease any existing activities, discussions or
negotiations conducted heretofore with respect to any Acquisition Proposal.
The Stockholder will immediately communicate to Purchaser the terms of any
Acquisition Proposal (or any discussion, negotiation or inquiry with
respect thereto) and the identity of the Person making such Proposal or
inquiry which it may receive.
(e) The Stockholder hereby covenants and agrees that as soon as
practicable following public announcement by Parent of the execution of the
Merger Agreement, it will file, or cause to be filed, a petition with the
Bankruptcy Court requesting the approval of this Agreement and the
transactions contemplated hereby. The Stockholder shall deliver a copy of
such petition to Purchaser's counsel for review at least two business days
prior to such filing and shall promptly notify Purchaser of any action
taken by the Bankruptcy Court with respect to the approval of this
Agreement or the confirmation of a plan of reorganization regarding the
Stockholder.
(f) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws to consummate and make effective
the transactions contemplated by this Agreement. Each party shall promptly
consult with the other and provide any necessary information and material
with respect to all filings made by such party with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby.
(g) The Stockholder hereby waives any rights of appraisal or rights to
dissent from the Merger that it may have.
(h) The Stockholder shall use its best efforts to secure the Agent's
Consent (as defined) as soon as practicable and, upon receipt thereof,
shall deliver a copy of same to Purchaser.
4. Representations and Warranties of each Stockholder. The Stockholder
hereby represents and warrants to Purchaser as follows:
(a) The Stockholder is the record and beneficial owner of the Existing
Shares set forth opposite its name on Schedule I. The Existing Shares
constitute all of the Shares owned of record or beneficially owned by the
Stockholder on the date hereof. The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power to demand
and waive appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, in each case with respect to all of the
Existing Shares with no limitations, qualifications or restrictions on such
rights, subject to (i) applicable securities laws, (ii) the terms of this
Agreement, and (iii) the earlier to occur of the approval of this Agreement
and the transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(b) The Stockholder has the power and authority to enter into and
perform all of the Stockholder's obligations under this Agreement, subject
to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of a
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consent from the agent bank on behalf of the lending banks to the
Stockholder under the Stockholder's principal bank credit arrangement (the
"Agent's Consent"). This Agreement has been duly and validly executed and
delivered by the Stockholder and, subject to the earlier to occur of the
approval of this Agreement and the transactions contemplated hereby by the
Bankruptcy Court and the confirmation of the Stockholder's plan or
reorganization by the Bankruptcy Court and further subject to the receipt
by the Stockholder of the Agent's Consent, constitutes a legal, valid and
binding agreement of the Stockholder, enforceable against the Stockholder
in accordance with its terms. There is no beneficiary or holder of a voting
trust certificate or other interest of any trust of which the Stockholder
is a trustee, or any party to any other agreement or arrangement, whose
consent is required for the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby,
other than the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court.
(c) Except for filings under the HSR Act and the Exchange Act, and
subject to the earlier to occur of the approval of this Agreement and the
transactions contemplated hereby by the Bankruptcy Court and the
confirmation of the Stockholder's plan of reorganization by the Bankruptcy
Court and further subject to the receipt by the Stockholder of the Agent's
Consent, (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity is necessary for the execution and
delivery of this Agreement by the Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby and the compliance by
the Stockholder with the provisions hereof, and (ii) none of the execution
and delivery of this Agreement by the Stockholder, the consummation by the
Stockholder of the transactions contemplated hereby or compliance by the
Stockholder with any of the provisions hereof, shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, modification or
acceleration) under, any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind, including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust, to which the Stockholder is a party or by which it or any of
its properties or assets may be bound or (C) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation applicable
to the Stockholder or any of its properties or assets.
(d) Upon the payment by Purchaser of the Offer Price per share for the
Stockholder Shares as directed by Bankers Trust Company, the transfer by
the Stockholder of the Stockholder Shares to Purchaser in the Offer or
hereunder shall pass to and unconditionally vest in Purchaser good and
valid title to all Stockholder Shares, free and clear of all liens,
proxies, voting trusts or agreements, understandings or arrangements or any
other rights whatsoever, subject to the earlier to occur of the approval of
this Agreement and the transactions contemplated hereby by the Bankruptcy
Court and the confirmation of the Stockholder's plan of reorganization by
the Bankruptcy Court.
(e) No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Stockholder.
(f) The required number of the Stockholder's lenders have executed a
resolution authorizing the Stockholder to enter into the transactions
contemplated by this Agreement.
5. Stop Transfer. The Stockholder shall request that the Company not
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Stockholder Shares, unless such
transfer is made in compliance with this Agreement.
6. Termination. This Agreement shall terminate upon the earlier of (a) the
Effective Time and (b) the termination of the Merger Agreement (unless, in the
case of this clause (b), Parent is or may be entitled to
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receive a Termination Fee under the Merger Agreement following such termination
or prior to such termination the Stockholder has breached in any material
respect Section 2(a), 3(a), 3(b) or 3(d)).
7. No Limitation. Notwithstanding any other provision hereof, nothing in
this Agreement shall be construed to prohibit the Stockholder, or any officer or
affiliate of the Stockholder who is or has designated a member of the Board of
Directors of the Company, from taking any action solely in his or her capacity
as a member of the Board of Directors of the Company or from exercising his or
her fiduciary duties as a member of such Board of Directors to the extent
specifically permitted by the Merger Agreement.
8. Stockholder's Fiduciary Obligation. Notwithstanding anything contained
herein to the contrary, Stockholder shall have the right to take or refrain from
taking any such acts as it shall have reasonably determined are necessary to
fulfill its fiduciary obligations as a debtor and debtor in possession,
including, but not limited to, the right to withdraw the Shares tendered
pursuant to the Offer and to entertain and, if appropriate, accept any higher
and better offers to purchase the Shares, and Stockholder shall not be deemed to
be in breach of any provision of this Agreement as a result of taking any such
action or refraining from taking any such action, provided that Stockholder
shall furnish Purchaser with written notice of the terms of any competing offer
to purchase the Shares and shall provide Purchaser a reasonable opportunity to
match any such competing offer.
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the Stockholder (in the case
of any assignment by Purchaser) or Purchaser (in the case of an assignment
by the Stockholder), provided that Purchaser may assign its rights and
obligations hereunder to Parent or any direct or indirect Subsidiary of
Parent, but no such assignment shall relieve Purchaser of its obligations
hereunder.
(c) Without limiting any other rights Purchaser may have hereunder in
respect of any transfer of Shares, the Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Stockholder
Shares and shall be binding upon any Person to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs,
guardians, administrators or successors.
(d) This Agreement may not be amended, changed, supplemented or
otherwise modified with respect to the Stockholder except by an instrument
in writing signed on behalf of such Stockholder and Purchaser.
(e) All notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly received if
given) by hand delivery or by facsimile transmission with confirmation of
receipt, as follows:
If to the Stockholder:
At the address and facsimile number set forth on Schedule I hereto.
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000 (facsimile)
Attn: X. Xxxxxxx St. Clair
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If to Parent or Purchaser:
Flowserve Corporation
000 X. Xxx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
(000) 000-0000 (facsimile)
Attention: Xxxxxx Xxxxx
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
(000) 000-0000 (facsimile)
Attention: Xxxx Xxxx, P.C.
or to such other address or facsimile number as the person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
(f) Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(g) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(h) The failure of any party hereto to exercise any rights, power or
remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or
remedy to demand such compliance.
(i) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
(j) This Agreement shall be governed and construed in accordance with
the laws of the State of Delaware.
(k) The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any state or
Federal court located in the State of Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (A) consents to submit itself to the
personal jurisdiction of any state or Federal court located in the state of
Delaware in the event any dispute arises out of this Agreement or any
transaction contemplated by this Agreement, (B) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (C) agrees that it will not bring
any action relating to this Agreement or any transaction contemplated by
this Agreement in any court other than any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue
of any action, suit or proceeding arising out of
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this Agreement or the transactions contemplated hereby in any state or
Federal court located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
(l) The descriptive headings used herein are inserted for convenience
of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
(m) This Agreement may be executed in counterparts (by fax or
otherwise), each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same agreement.
(n) Except as otherwise provide herein, each party shall pay its, his
or her own expenses incurred in connection with this Agreement.
(o) The obligations of the Stockholder hereunder are subject to the
Stockholder's receipt of the Agent's Consent.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Purchaser and the Stockholders have caused this
Agreement to be duly executed in multiple counterparts as of the day and year
first above written.
XXXXXXX ACQUISITION SUB, INC.
By: /s/ XXXXXX X. XXXXX
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Name: Xxxxxx X. Xxxxx
Title: Secretary and Treasurer
STOCKHOLDER
XXXXXX INDUSTRIAL SERVICES GROUP, INC.
By: /s/ XXXXX XXXXX
------------------------------------
Name: Xxxxx Xxxxx
Title: Secretary
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SCHEDULE I
NAME, FACSIMILE NUMBER AND NUMBER OF SHARES OF COMMON STOCK
ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
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Xxxxxx Industrial Services Group, Inc. 2,185,758
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
