EXHIBIT 2.2(A)
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MERGER AGREEMENT
DATED AS OF JULY 9, 1998
BY AND AMONG
INNOVATIVE VALVE TECHNOLOGIES, INC.,
XXXXXXX ACQUISITION, INC.,
AND
XXXXXXX EQUIPMENT CORPORATION
AND
THE STOCKHOLDERS NAMED HEREIN
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MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of the
9th day of July, 1998, by and among INNOVATIVE VALVE TECHNOLOGIES, INC., a
Delaware corporation ("Invatec"), XXXXXXX ACQUISITION, INC., a Delaware
corporation and a wholly-owned subsidiary of Invatec ("Invatec Sub"), XXXXXX X.
XXXXXXX, XX., an individual whose address is 00000 Xxxxx Xxxxxx, Xxxxxx Xxxxxxx,
Xxxxx 00000 ("Xx. Xxxxxxx"), XXXXX X. XXXX, an individual whose address is 00000
Xxxxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxxx 00000 ("Xx. Xxxx"), (Xx. Xxxxxxx and Xx.
Xxxx being sometimes hereinafter referred to collectively as the "Stockholders"
and individually as a "Stockholder"), and XXXXXXX EQUIPMENT CORPORATION, a Texas
corporation whose address is 1150 Southern Minerals Road, Corpus Christi, Texas
78409 (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, (a) Xx. Xxxxxxx is the legal and beneficial owner and
holder of two thousand five hundred fifty (2,550) shares of the Common Stock of
the Company, and (b) Xx. Xxxx is the legal and beneficial owner and holder of
two thousand four hundred fifty (2,450) shares of the 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"); and
WHEREAS, the Parties intend for the Acquisition to qualify as a
tax-free reorganization under Section 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended; and
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 5. 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 LLP, in Houston,
Texas.
"ACQUIRED BUSINESS" means the business conducted by the
Company. For purposes of ARTICLE VIII of the Uniform Provisions, the
term "Acquired Business" shall include any business conducted by the
Company during the twelve (12) months preceding the Closing Date.
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"ACQUISITION CONSIDERATION" has the meaning specified in
SUBPARAGRAPH 2(A)(IV).
"AGREED CLOSING VALUE OF INVATEC STOCK" means Ten Dollars
($10.00) per share.
"CEILING AMOUNT" means Seven Million Two Hundred Thousand and
No/100 Dollars ($7,200,000).
"CLOSING" has the meaning specified in PARAGRAPH 3.
"CLOSING DATE" means the date of this Agreement.
"COMPANY" has the meaning specified in the preamble of this
Agreement.
"COMPANY CAPITAL STOCK" means the Common Stock, no par value,
of the Company.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDER" means Law Office
of Xxxxx X. Xxxxx, a professional corporation, of Corpus Christi,
Texas.
"COUNSEL FOR INVATEC" means Xxxxx, Xxxxx & Xxxxxx Incorporated
of Houston, Texas.
"CURRENT BALANCE SHEET" means the balance sheet of the Company
as of the Current Balance Sheet Date.
"CURRENT BALANCE SHEET DATE" means May 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. The Current Market Price as of
the Closing Date is $7.313.
"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. The content of the
Disclosure Statement is incorporated into the Uniform Provisions in
accordance with the references in the Uniform Provisions, which are
incorporated herein as hereinafter set forth.
"EFFECTIVE TIME" means the Effective Time of the Merger, as
such term is defined in SUBPARAGRAPH 2(A)(II).
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"EMPLOYMENT AGREEMENT" means the Employment Agreement to be
entered into as of the Effective Time between Invatec and Xx. Xxxx.
"ENVIRONMENTAL CLAIMS" shall mean all Damage Claims and all
Third Party Claims which relate expressly or by necessary
implication to the environment or Environmental Laws.
"GENERAL CLAIMS" shall mean all Damage Claims and all Third
Party Claims which are not Environmental Claims.
"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 balance sheet of the Company 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 Company did not have any Indebtedness at the Current
Balance Sheet Date, other than the Indebtedness to Stockholders
described in SCHEDULE II.
"INITIAL FINANCIAL STATEMENTS" means (a) the balance sheets of
the Company as of December 31, 1997, 1996 and 1995, and the related
statements of operations and retained earnings for each of the
Company's fiscal years in the three-year period ended December 31,
1997, and (b) the Current Balance Sheet and the related statements
of operations for the five (5) months ended on the Current Balance
Sheet Date, which the Company has delivered to Invatec. The
Company's financial statements for the five-month period ended May
31, 1998, and the one-year periods ended December 31, 1997 and
December 31, 1996, 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, consistent with past customs and practice
(including with respect to quantity and frequency).
"PRO RATA SHARE" of a Stockholder means: fifty-one percent
(51.0%) in the case of Xx. Xxxxxxx, and forty-nine percent (49.0%)
in the case of Xx. Xxxx.
"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.
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"THRESHOLD AMOUNT" means (a) Fifty Thousand Dollars ($50,000)
for Environmental Claims and (b) Seventy-Two Thousand Dollars
($72,000) for General Claims.
"UNIFORM PROVISIONS" means the Uniform Provisions 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 I attached hereto). Current
liabilities shall expressly EXCLUDE current debt, 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 One Million Two Hundred Seventeen Thousand Dollars
($1,217,000), determined as provided in SCHEDULE I attached hereto.
PARAGRAPH 6. THE ACQUISITION. (A) THE MERGER. (i) CERTIFICATES OF
MERGER. Subject to the terms and conditions hereof, Invatec Sub will cause a
Certificate 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
Delaware, and the Company will cause a Certificate 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 Texas.
(ii) THE EFFECTIVE TIME. The "Effective Time" will be upon (a)
the filing of the Certificates of Merger with the Secretaries of State of
Delaware and Texas, and (b) issuance by the Secretaries of State of Delaware and
Texas of Certificates 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 Delaware General Corporation Law, (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
Delaware General Corporation Law (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
"CECORP, 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 Delaware 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:
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OFFICE: NAME:
Chairman of the Board & Chief Executive Officer. Xxxxxxx X. Xxxxxx
President....................................... Xxxxx X. Xxxx
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
(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,
without interest, on surrender of the certificates evidencing those
shares, the following (the "Acquisition Consideration"):
(i) in cash or other immediately available funds, the
aggregate amount of Three Million Eleven Thousand Five Hundred
Seventy-Four and 77/100 Dollars ($3,011,574.77), determined in the
manner set forth in SCHEDULE II attached hereto; and
(ii) Three Hundred Sixty Thousand (360,000) shares of Invatec
Common Stock, determined in the manner set forth in SCHEDULE II
attached hereto;
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 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;
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however, such Stockholder shall be treated for all purposes as having been the
record holder of such shares as of the Effective Time.
SCHEDULE II attached hereto sets forth the manner in which the amount of
the Acquisition Consideration has been determined.
(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 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. Notwithstanding any provisions of this Agreement to the
contrary, the Threshold Amount shall not apply to any Damage Claims arising from
the failure to pay the Acquisition Consideration, or the failure to make any of
the payments due under PARAGRAPH 5 or PARAGRAPH 6.
(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 nor the Company shall be responsible for
any business, occupation, income, withholding or similar tax, or any taxes of
any kind, of any Stockholder. 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.
(C) COMPANY DEBT LIMITATION; STOCKHOLDER DEBT. Immediately prior to
Closing the Stockholders shall cause the Company to pay all of its Indebtedness,
other than the Indebtedness in the amount of Five Hundred Eighty-Eight Thousand
Four Hundred Twenty-Five and 23/100 Dollars ($588,425.23) owed to the
Stockholders, which Invatec shall pay or cause the Company to pay
contemporaneously with the Acquisition Consideration. Except for salary accrued
in the Ordinary Course of Business and the Indebtedness described in the
immediately preceding sentence, on the Closing Date there will not be any
Indebtedness owed by the Company to any Stockholder or any affiliate of any
Stockholder, and each Stockholder and each affiliate of each Stockholder shall
repay to the Company at Closing the Indebtedness owed by such Stockholder or
such affiliate, as applicable, to the Company.
(D) FORWARD SUBSIDIARY MERGER TAX REPRESENTATIONS OF THE COMPANY AND
STOCKHOLDERS. The Company and the Stockholders hereby represent and warrant the
following to be true and correct as of the Effective Time:
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(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 either 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 (a) the value
at the Effective Time of all the Company Capital Stock held immediately
prior to the Acquisition by the Stockholders and (b) 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 and the representation set forth in
PARAGRAPH 2(E)(II) below, 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 and the
representation set forth in PARAGRAPH 2(E) below, 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.
(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.
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(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 or
agreements not to compete, 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.
(E) FORWARD SUBSIDIARY MERGER TAX REPRESENTATIONS OF INVATEC. Invatec
hereby represents and warrants the following to be true and correct as of the
Effective Time:
(i) Invatec Sub is a wholly-owned subsidiary of Invatec;
(ii) 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.
(iii) There is no plan or intention of Invatec to 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 (a) the value at the Effective Time of all the
Company Capital Stock held immediately prior to the Acquisition by the
Stockholders and (b) the value at the Effective Time of any Shares, as
defined in PARAGRAPH 2(D), which are held immediately prior to the
Acquisition by the Stockholder.
(iv) 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.
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(v) 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 or
agreements not to compete, 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.
(F) TAX-FREE REORGANIZATION. The Parties hereby acknowledge and agree that
they are entering into this Agreement with the intention that the Acquisition
qualify as a tax-free reorganization for federal income tax purposes, although
the cash received by the Stockholders will be taxable. Each Party hereby
represents and warrants that it will not take any action which would disqualify
the Acquisition from such treatment; provided however, that in the event that
the Acquisition fails to qualify as a tax-free reorganization for any reason,
other than the breach of an express representation or warranty by a Party, then
the Stockholders shall pay and be solely responsible for any income taxes
assessed against Stockholders which result from such failure, and Invatec shall
pay and be solely responsible for all income taxes assessed against the Company
or the Surviving Company which result from such failure.
PARAGRAPH 7. 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, located at Nine Xxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, 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) STOCKHOLDER' 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 Sub, Invatec and
Invatec's third party lender, each of which 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;
(ii) An Affiliate Letter duly executed by each 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 Texas;
(iv) The Certificate of Merger to be filed in Delaware;
(v) The Employment Agreement;
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(vi) Resignations of all directors and officers of the Company,
effective as of the Effective Time;
(vii) Such subordination or other agreements in such form as
Invatec's lender may require with respect to subordination of any landlord
liens or similar liens for each of the Company's leased locations;
(viii)All original promissory notes or other debt instruments
executed by the Company to any Stockholder or any affiliate of any
Stockholder, marked "Paid in Full;"
(ix) Payment of any outstanding amounts owed by any Stockholder or
any affiliate of any Stockholder to the Company, as expressly set forth in
PARAGRAPH 2(C) hereof;
(x) An opinion of counsel issued by Counsel for the Company and the
Stockholders;
(xi) No Withholding Certificate duly executed by the Stockholders;
(xii) Certificate of the Secretary or Assistant Secretary of the
Company, certifying as to copies of the Articles of Incorporation and
Bylaws of the Company, and 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;
(xiii)A Waiver and Termination Agreement terminating any existing
shareholder, voting or similar agreement between or among the Stockholders
and the Company, or any of them, relating to the Company Capital Stock,
and waiving the rights of the parties thereunder, in form and content
reasonably acceptable to Invatec;
(xiv) 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 (including without limitation Dresser
Industries, Inc.), in form and content reasonably acceptable to Invatec;
and
(xv) 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, each of which shall be in form and content
acceptable to the Parties:
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(i) The cash portion of the Acquisition Consideration;
(ii) Payment by the Company to the Stockholders of the Indebtedness
in the amount of Five Hundred Eighty-Eight Thousand Four Hundred
Twenty-Five and 23/100 Dollars ($588,425.23), as contemplated in SCHEDULE
II;
(iii) The shares of Invatec Common Stock to be delivered hereunder
as a portion of the Acquisition Consideration;
(iv) The Certificate of Merger to be filed in Texas;
(v) The Certificate of Merger to be filed in Delaware;
(vi) The Employment Agreement;
(vii) An opinion of counsel issued by Counsel for Invatec;
(viii)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;
(ix) 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
(x) 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. 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 8. 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 2.17 is hereby deleting the reference to "SECTION 2.17
OF THE DISCLOSURE STATEMENT" and substituting therefor a reference to
"SECTIONS 2.13 AND 2.17 OF THE DISCLOSURE STATEMENT" and by inserting at
the end of Section 2.17 the following:
Notwithstanding any provision of this Section 2.17 to the contrary,
the Stockholders shall not have any liability for any Damage Claims
or Third Party Claims which arise from claims against the Company
for goods sold or services provided, provided that such goods or
services were sold and provided by the Company in a good and
workmanlike manner in the Ordinary Course of Business and in
compliance with applicable law and with the standards of ASME, the
relevant manufacturers (when provided), and all of the Company's
applicable professional certificates;
(ii) Sections 2.28 is hereby amended by adding a new Subsection to
the end thereof as follows:
(h) Notwithstanding any provision of Section 2.27(d) or this Section
2.28 to the contrary, the Parties hereby acknowledge and agree that
the Stockholders shall not be liable for any breaches of the
representations set forth in Subsections 2.27(d) and 2.28, to the
extent of any Damage Claims or Third Party Claims resulting solely
from a failure to comply with the provisions of ERISA, if (i) such
failure to comply is caused by an error or omission of an
independent third party service provider in connection with the
implementation or administration of any Company ERISA Benefit Plan,
and (ii) the Stockholders are unaware of the failure to comply as of
the Closing Date;
(iii) Article III is hereby amended by inserting a new Section 3.07
at the end thereof as follows:
Section 3.07 SEC FILINGS; DISCLOSURE. Invatec has filed with
the Securities and Exchange Commission all material forms,
statements, reports and documents required to be filed by it under
each of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder, all of which, as amended, if applicable,
complied when filed in all material respects with all applicable
requirements of the appropriate Act and the rules and regulations
thereunder.
(iv) Articles IV, V and XI are hereby deleted in their entirety;
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(v) Section 6.04(a) is hereby deleted in its entirety, and
substituted therefore is the following:
Section 6.04 LIMITATIONS ON DAMAGE CLAIMS. (a) In the event
Invatec should have any Damage Claim hereunder following the
Effective Time against any Stockholder which does not involve an
Invatec Indemnified Loss (each such Damage Claim not involving an
Invatec Indemnified Loss being an "Invatec Unindemnified Loss"),
that Stockholder will not be liable to Invatec on account of that
Invatec Unindemnified Loss unless the liability of that Stockholder
in respect of that Invatec Unindemnified Loss, when aggregated with
the liability of all Stockholders in respect of the sum of (i) all
Invatec Unindemnified Losses and (ii) all Invatec Indemnified Losses
under SECTION 7.02, exceeds, and only to the extent the aggregate
amount of all those Invatec Unindemnified Losses and Invatec
Indemnified Losses does exceed, the Threshold Amount. With respect
to General Claims, after there have occurred aggregate Invatec
Unindemnified Losses and Invatec Indemnified Losses in the amount of
the Threshold Amount, the Stockholders will be obligated to
indemnify the Invatec Indemnified Parties from and against further
such Invatec Unindemnified Losses and Invatec Indemnified Losses up
to the Ceiling Amount. With respect to Environmental Claims, after
there have occurred aggregate Invatec Unindemnified Losses and
Invatec Indemnified Losses in the amount of the Threshold Amount,
the Stockholders will be obligated to indemnify the Invatec
Indemnified Parties from and against further such Invatec
Unindemnified Losses and Invatec Indemnified Losses up to an
aggregate amount of One Hundred Thousand and No/100 Dollars
($100,000.00)); thereafter, the Stockholders will not be obligated
to indemnify the Invatec Indemnified Parties from and against any
further such Invatec Unindemnified Losses and Invatec Indemnified
Losses until there have occurred additional aggregate Invatec
Unindemnified Losses and Invatec Indemnified Losses in the amount of
One Hundred Thousand and No/100 Dollars ($100,000.00), after which
the Stockholders will once again be obligated to indemnify the
Invatec Indemnified Parties from and against further such Invatec
Unindemnified Losses and Invatec Indemnified Losses up to the
Ceiling Amount. In no event shall (i) the aggregate liability of the
Stockholders under this Agreement, including SECTION 7.02, exceed
the Ceiling Amount or (ii) the aggregate liability of each
Stockholder under this Agreement, including SECTION 7.02, exceed
that Stockholder's Pro Rata Share of the Ceiling Amount. For
purposes of determining the amount of Invatec Unindemnified Losses
and Invatec Indemnified Losses, no effect will be given to any
resulting Tax benefit to Invatec or any other Invatec Indemnified
Party nor any insurance proceeds received by any Invatec Indemnified
Party as compensation for any claim except to the extent of any
insurance proceeds actually received by Invatec or the Surviving
Company, and to the extent permitted by applicable law without
impacting the insurance coverage of Invatec or the Surviving
Company, their respective rights to such proceeds, or the
subrogation rights of any insurer. If an Invatec Indemnified Party
receives payment from a Stockholder hereunder with respect to a
claim for which the Invatec Indemnified Party has or may have
insurance, then the Invatec Indemnified Party shall assign to
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such Stockholder, without recourse, representation or warranty, any
claims the Invatec Indemnified Party has under such insurance, and
shall cooperate with such Stockholder, at such Stockholder's sole
cost and expense, to the extent reasonably requested by such
Stockholder in pursuing such claim.
(vi) Article VI is hereby amended by adding a new Section 6.05,
which shall provide as follows:
Section 6.05 CREDIT FOR YEARS OF SERVICE. For purposes of
providing benefits to employees of the Company after the Effective
Time, Invatec shall, to the extent permitted by applicable law,
credit such employees for years of service at the Company prior to
the Effective Time for purposes of eligibility and benefit amounts
or privileges paid or provided.
(vii) Section 7.02(a) is hereby amended by inserting at the end
thereof prior to parenthetical definition of "Invatec Indemnified Loss"
the following:
or (iii) notwithstanding any provision to the contrary contained
herein, or any disclosure or disclaimer set forth in the Disclosure
Statement, or any analysis, data or information contained in any
environmental investigations, studies, audits, reviews and other
analyses conducted by or on behalf of Invatec or any Subsidiary of
Invatec, any Environmental Claim, regardless of whether such
Environmental Claim is a breach of any representation or warranty
hereunder.
(viii)Section 7.06(a) is hereby deleted in its entirety, and
substituted therefore is the following:
Section 7.06 LIMITATIONS ON INDEMNIFICATION. (a)
Notwithstanding the provisions of SECTION 7.02, no Stockholder shall
be required to indemnify or hold harmless any of the Invatec
Indemnified Parties on account of any Invatec Indemnified Loss under
SECTION 7.02 unless the liability of the Stockholders in respect of
that Invatec Indemnified Loss, when aggregated with the liability of
all Stockholders in respect of the sum of (i) all Invatec
Unindemnified Losses and (ii) all Invatec Indemnified Losses under
SECTION 7.02, exceeds, and only to the extent the aggregate amount
of all those Invatec Unindemnified Losses and Invatec Indemnified
Losses does exceed, the Threshold Amount. With respect to General
Claims, after there have occurred aggregate Invatec Unindemnified
Losses and Invatec Indemnified Losses in the amount of the Threshold
Amount, the Stockholders will be obligated to indemnify the Invatec
Indemnified Parties from and against further such Invatec
Unindemnified Losses and Invatec Indemnified Losses up to the
Ceiling Amount. With respect to Environmental Claims, after there
have occurred aggregate Invatec Unindemnified Losses and Invatec
Indemnified Losses in the amount of the Threshold Amount, the
Stockholders will be obligated to indemnify the Invatec Indemnified
Parties from and against further
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such Invatec Unindemnified Losses and Invatec Indemnified Losses up
to an aggregate amount of One Hundred Thousand and No/100 Dollars
($100,000.00); thereafter, the Stockholders will not be obligated to
indemnify the Invatec Indemnified Parties from and against any
further such Invatec Unindemnified Losses and Invatec Indemnified
Losses until there have occurred additional aggregate Invatec
Unindemnified Losses and Invatec Indemnified Losses in the amount of
One Hundred Thousand and No/100 Dollars ($100,000.00), after which
the Stockholders will once again be obligated to indemnify the
Invatec Indemnified Parties from and against further such Invatec
Unindemnified Losses and Invatec Indemnified Losses up to the
Ceiling Amount. In no event shall (i) the aggregate liability of the
Stockholders under this Agreement, including SECTION 7.02, exceed
the Ceiling Amount, or (ii) the aggregate liability of each
Stockholder under this Agreement, including SECTION 7.02, exceed
that Stockholder's Pro Rata Share of the Ceiling Amount. For
purposes of determining the amount of Invatec Indemnified Losses, no
effect will be given to any resulting Tax benefit to any Invatec
Indemnified Party nor any insurance proceeds received by any Invatec
Indemnified Party as compensation for any claim except to the extent
of any insurance proceeds actually received by Invatec or the
Surviving Company, and to the extent permitted by applicable law
without impacting the insurance coverage of Invatec or the Surviving
Company, their respective rights to such proceeds, or the
subrogation rights of any insurer. If an Invatec Indemnified Party
receives payment from a Stockholder hereunder with respect to a
claim for which the Invatec Indemnified Party has or may have
insurance, then the Invatec Indemnified Party shall assign to such
Stockholder, without recourse, representation or warranty, any
claims the Invatec Indemnified Party has under such insurance, and
shall cooperate with such Stockholder, at such Stockholder's sole
cost and expense, to the extent reasonably requested by such
Stockholder in pursuing such claim.
(ix) Section 10.07 is hereby amended by (A) deleting therefrom all
references to "Southern District of Texas, Houston Division" and
substituting therefor the phrase "Southern District of Texas, Corpus
Christi Division" and (B) deleting therefrom all remaining references
to"Texas, County of Xxxxxx" and substituting therefor references to
"Nueces County, Texas."
PARAGRAPH 9. POST-CLOSING ADJUSTMENT TO PURCHASE PRICE. Within
ninety (90) days after the Closing Date, Invatec shall deliver to the
Stockholders an unaudited balance sheet of the Company, 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 Stockholder 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
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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." 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 One
Million Two Hundred Seventeen Thousand Dollars ($1,217,000) exceeds the Working
Capital, as set forth in the Final Post-Closing Financial Statements, it being
hereby agreed that up to one-half (1/2) of the amount paid to Invatec by each
Stockholder may be paid in shares of Invatec Common Stock (valued at the Agreed
Closing Value of Invatec Stock). 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, such
Stockholder's Pro Rata Share of the amount, if any, by which the Working
Capital, as set forth in the Final Post-Closing Financial Statements, exceeds
One Million Two Hundred Seventeen Thousand Dollars ($1,217,000), it being hereby
agreed that at least one-half (1/2) of the amount paid to each Stockholders
shall be paid in shares of Invatec Common Stock (valued at the Agreed Closing
Value of Invatec Stock). The Final Post-Closing Financial Statements shall also
set forth the amount of Indebtedness of the Company as of the Effective Time,
and the amount of cash delivered pursuant to SUBPARAGRAPH 2(A)(IV) hereof shall
be decreased by the amount of any Indebtedness other than the Indebtedness to
Stockholders described in SCHEDULE II. Payment of the appropriate amount shall
be made simultaneously with the payment based on Working Capital Adjustment
described above. Determinations hereunder shall be consistent with the
methodology reflected in SCHEDULES I and II.
PARAGRAPH 10. POST-CLOSING ADJUSTMENT OF VALUE OF INVATEC COMMON STOCK.
Notwithstanding the foregoing or any provision hereof to the contrary, 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 in the
Acquisition (after giving effect to any adjustment pursuant to PARAGRAPH 5) and
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still owned by such 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 $2.687 per share of Invatec Common Stock. At least one-half (1/2)
of the payment, if any, to be made by Invatec pursuant to this PARAGRAPH 6,
shall be made by Invatec issuing to each Stockholder Invatec Common Stock at a
per share price equal to the Current Market Price as of the Subsequent
Measurement Date. The Parties acknowledge and agree that no payment shall be due
from Invatec with respect to any shares of Invatec Common Stock sold prior to
the expiration of one year from the date hereof.
PARAGRAPH 11. 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 or any document, instrument, or agreement executed by any Stockholder
in connection herewith, 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 12. 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.
(B) TRANSFER RESTRICTIONS. Xx. Xxxx 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, Xx. Xxxx will not sell, assign, exchange, transfer,
appoint, or otherwise dispose of the shares of Invatec Common Stock received by
Xx. Xxxx pursuant to this Agreement. The certificates evidencing the Invatec
Common Stock delivered to Xx. Xxxx pursuant to this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as Invatec may deem necessary or appropriate:
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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.
Invatec represents and warrants to Xx. Xxxxxxx that the shares of Invatec Common
Stock delivered to Xx. Xxxxxxx in payment of the Acquisition Consideration will
be fully registered stock with the SEC, freely transferable by Xx. Xxxxxxx at
any time without limitation, except as otherwise restricted under Rule 145
promulgated under the Securities Act and other applicable securities laws.
PARAGRAPH 13. 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: _______________________________________
Xxxx X. Xxxx, Vice President
INVATEC SUB:
XXXXXXX ACQUISITION, INC.
By: _______________________________________
Xxxx X. Xxxx, Vice President
STOCKHOLDERS:
___________________________________
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XXXXXX X. XXXXXXX, XX.
___________________________________
XXXXX X. XXXX
THE COMPANY:
XXXXXXX EQUIPMENT CORPORATION
By:_____________________________
Xxxxxx X. Xxxxxxx, Xx., President
The undersigned, the spouses of each of Xx. Xxxxxxx and Xx. Xxxx,
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. Xxxxxxx and Xx. Xxxx), and their awareness, understanding, consent
and agreement are evidenced by their execution hereof.
_______________________________
NAME:_________________________,
SPOUSE OF XXXXXX X. XXXXXXX, XX.
_______________________________
NAME:_________________________,
SPOUSE OF XXXXX X. XXXX
Schedule I - Working Capital
Schedule II - Transaction Economics
Schedule 3.04 - Capital Stock of Invatec
Schedule 3.05 - Subsidiaries of Invatec
Exhibit A - Initial Financial Statements
