1
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of November 18, 1999 (this "Agreement"),
among Xxxxxxx Acquisition Sub, Inc., a Delaware corporation ("Purchaser"), and
each of the persons listed on Schedule I hereto (each a "Stockholder" and
collectively, the "Stockholders").
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, as an inducement and a condition to entering into the Merger
Agreement, Parent and Purchaser have required that the Stockholders agree, and
the Stockholders have 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;
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.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, each Stockholder hereby agrees to 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, the number of shares set forth opposite such
Stockholder's name on Schedule I hereto (the "Existing Shares" and, together
with any Shares acquired by such 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 such Stockholder. If a Stockholder acquires beneficial
ownership of Shares after the date hereof and prior to termination of this
Agreement, such Stockholder shall tender such Shares on such tenth business day
or, if later, on the second business day after such acquisition.
(b) Purchaser shall be entitled to deduct and withhold from the
consideration otherwise payable hereunder to each 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 such Stockholder.
(c) Each 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.
2
3. Option.
(a) In order to induce Parent and Purchaser to enter into the Merger
Agreement, each Stockholder hereby grants to Purchaser an irrevocable option
(the "Option") to purchase the Stockholder Shares at a price equal to $1.62 per
Share. The Option may be exercised in whole or in part at any time prior to the
termination of this Agreement and after (i) the occurrence of any event as a
result of which Parent is entitled to receive a Termination Fee under the Merger
Agreement or (ii) such time as such Stockholder shall have breached in any
material respect any of its agreements in Section 2(a), 4(a), 4(b) or 4(d).
(b) If the Option becomes exercisable under Section 3(a), the Option shall
remain exercisable until the later of (i) the date that is 90 days after the
date the Option becomes exercisable and (ii) the date that is ten days after the
date that all waiting periods under the HSR Act required for the purchase of the
Stockholder Shares upon such exercise shall have expired or been terminated;
provided, that if at the expiration of such period there shall be in effect any
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Option, the exercise period shall be extended until ten days
after the date that no such injunction or order is in effect. In the event
Purchaser wishes to exercise the Option, Purchaser shall send a written notice
to each Stockholder identifying the place and date (not less than two (2) nor
more than ten (10) business days from the date of the notice) for the closing of
such purchase.
4. Additional Agreements.
(a) Each 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 such 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) Each 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) Each Stockholder hereby irrevocably grants to, and appoints, Purchaser
and any designee of Purchaser, and each of them individually, such Stockholder's
proxy and attorney-in-fact with full power of substitution), for and in the
name, place and stead of such Stockholder, to vote the Stockholder Shares, or
grant a consent or approval in respect of the Stockholder Shares, in the manner
specified in Section 4(a). Each Stockholder represents that any proxies
heretofore given in respect of the Stockholder Shares are not irrevocable and
that any such proxies are hereby revoked. Each Stockholder hereby affirms that
the irrevocable proxy set forth in this Section 4(c) 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 such Stockholder under this
Agreement. Each Stockholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof.
2
3
(d) Subject to Section 8, each Stockholder hereby agrees that such
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, each Stockholder will immediately
cease any existing activities, discussions or negotiations conducted heretofore
with respect to any Acquisition Proposal. Each 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) 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.
(f) Each Stockholder hereby waives any rights of appraisal or rights to
dissent from the Merger that it may have.
5. Representations and Warranties of each Stockholder. Each Stockholder, as
to itself and no other 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, 3 and 4
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
applicable securities laws and the terms of this Agreement.
(b) The Stockholder has the power and authority to enter into and perform
all of the Stockholder's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by the Stockholder and 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.
(c) Except for filings under the HSR Act and the Exchange Act (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.
3
4
(d) Except as permitted by this Agreement, the Existing Shares beneficially
owned by the Stockholder and the certificates representing such shares are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such liens or proxies arising
hereunder. 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.
(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.
6. Stop Transfer. Each 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.
7. 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 receive a Termination
Fee under the Merger Agreement following such termination or prior to such
termination any of the Stockholders has breached in any material respect Section
2(a), 4(a), 4(b) or 4(d)).
8. No Limitation. Notwithstanding any other provision hereof, nothing in
this Agreement shall be construed to prohibit the Stockholders, or any officer
or affiliate of any of the Stockholders 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.
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 each of the Stockholders (in the case of
any assignment by Purchaser) or Purchaser (in the case of an assignment by a
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, each 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 a 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 a Stockholder:
At the address and facsimile number set forth on Schedule I hereto.
4
5
With a copy to:
Xxxxx, Xxxxx & Xxxxxx
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxx
If to Parent or Purchaser:
Flowserve Corporation
000 X. Xxx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxx
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax: (000) 000-0000
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
5
6
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 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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
6
7
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
----------------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary and Treasurer
STOCKHOLDERS
/s/ XXXXX X. XXXXXX
------------------------------------
Xxxxx X. Xxxxxx
/s/ XXXXXXX X. XXXXXX
------------------------------------
Xxxxxxx X. Xxxxxx
/s/ XXXXXXX X. XXXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ XXXXXXX X. XXXXXXXXXX, XX.
------------------------------------
Xxxxxxx X. Xxxxxxxxxx, Xx.
8
SCHEDULE I
NAME, FACSIMILE NUMBER AND NUMBER OF SHARES OF COMMON STOCK
ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
-------------------------- --------------------------------
Xxxxx X. Xxxxxx 563,219
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxx 146,665
000 Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
Home Fax: (000) 000-0000
Xxxxxxx X. Xxxxxxxx 57,800
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Business Fax: (000) 000-0000
Xxxxxxx X. Xxxxxxxxxx, Xx. 17,000
00000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxx 00000
Home Fax: (000) 000-0000